J.B. Hunt Transport, Inc. v. Steadfast Insurance Company and Certain Underwriters at Lloyd’s, London

At a glance

Parties

J.B. Hunt Transport, Inc. (plaintiff) v. Steadfast Insurance Company and Certain Underwriters at Lloyd's, London subscribing to Auto Terror and Malicious Attack Protect Contingent Insurance Policy No. TE1800238 (defendants)

Case no.

No. 5:20-CV-5049 (W.D. Ark., Fayetteville Division)

Court

U.S. District Court, Western District of Arkansas

Forum and rules

Court proceeding on a motion to compel arbitration. The arbitration clause provides for JAMS International Arbitration Rules, three arbitrators, seat in New York

Treaty

New York Convention (Article II(3)), implemented by Chapter II of the Federal Arbitration Act, 9 U.S.C. §§ 201–208

Sector

Insurance (auto terror and malicious attack excess coverage)

Outcome

Motion to compel arbitration granted. J.B. Hunt and Underwriters must arbitrate in New York, and the whole action, including the claims against Steadfast, is stayed (1 July 2020).

The dispute

J.B. Hunt sued two of its insurers, Underwriters at Lloyd's, London and Steadfast Insurance Company. It claimed they had breached their duty to defend and indemnify it in a wrongful-death suit over the killing of Evelyn S. Udell by an employee of XM Carriers, one of J.B. Hunt's contracted carriers. That suit ended in a confidential settlement. Underwriters said they were not liable for an overvalued settlement made without their consent. Underwriters moved to compel arbitration under Subsection 7.6 of their policy, which covered 31 December 2018 to 31 December 2019 and provided for JAMS International arbitration in New York. J.B. Hunt argued four points: Arkansas law bars arbitration clauses in insurance contracts and reverse-preempts the Convention through the McCarran-Ferguson Act; the clause applied only between reinsurers; the relationship was entirely domestic; and Underwriters had waived arbitration.

Key holdings

1. The McCarran-Ferguson Act is limited to domestic commerce. It does not reach the New York Convention or Chapter II of the FAA, so Arkansas law barring arbitration clauses in insurance contracts does not reverse-preempt them. The Court followed ESAB Group v. Zurich and Murphy Oil USA, and declined to follow Stephens v. American International Insurance Co. pp. 10–11
2. Article II(3) of the Convention is self-executing, because it directly tells national courts that they "shall" refer the parties to arbitration. It is therefore not an "Act of Congress" within the McCarran-Ferguson Act. The Court treated the contrary remark in Medellín v. Texas as dicta. pp. 11–13
3. All four requirements for applying the Convention are met. (1) There is a written agreement: the clause covers any dispute "relating to this contract", meaning the Policy to which J.B. Hunt is a party, and is not limited to disputes between reinsurers. (2) The seat, New York, is in a Convention State. (3) The insurer–insured relationship is commercial. (4) The relationship is not entirely domestic, because Underwriters are based in London and the Policy was obtained through the Lloyd's market. pp. 13–15
4. Underwriters did not waive their right to arbitrate. They had not substantially invoked the litigation process, and J.B. Hunt showed no prejudice beyond losing the Arkansas-law exception. pp. 15–16
5. Steadfast was not a party to the Policy and did not consent to arbitration, so it cannot be compelled to arbitrate. Even so, the claims against it are stayed: they share common questions of fact with the claims against Underwriters, namely J.B. Hunt's assessment of its exposure and whether consent to the settlement was reasonably withheld. The claims against Underwriters are stayed rather than dismissed. pp. 16–18
6. J.B. Hunt's motion to strike Underwriters' answer was denied, because the copies of the Policy were substantively identical. Its motion for leave to file a second amended complaint was denied as moot. pp. 4–5, 18

Procedural history

1. 22 May 2020J.B. Hunt moves for leave to file a second amended complaint.
2. 29 May 2020J.B. Hunt moves to strike Underwriters' answer to the amended complaint.
3. 8 June 2020Case management hearing. The Court orders the parties to agree on the true form of the Policy.
4. 19 June 2020J.B. Hunt and Underwriters file a stipulation on the correct copy of the Policy.
5. 1 July 2020Memorandum Opinion and Order: arbitration compelled, the whole action stayed, and the case administratively closed.

Keywords

• New York Convention Article II(3)
• motion to compel arbitration
• McCarran-Ferguson Act
• reverse preemption
• self-executing treaty
• insurance arbitration clause
• Arkansas Code § 23-79-203
• FAA Chapter II
• Lloyd's
• JAMS International Arbitration Rules
• waiver of arbitration
• non-signatory
• stay pending arbitration
• foreign nexus
• Medellín v. Texas
• ESAB Group v. Zurich
• surplus lines insurance

Summary generated with AI from the published documents — refer to the award for the authoritative text.