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In ordering arbitration of an insurance dispute, a federal court in Indiana held that there is no “reverse preemption” under the McCarran-Ferguson Act (MFA) where there is an international arbitration agreement governed by the Convention on Enforcement of Foreign Awards (the Convention). In other words, the Convention trumps the MFA.
In Certain Underwriters at Lloyd's, London v. Simon, No. 1:07-CV-0899-LJM-WTL, 2007 WL 3047128 (S.D. Ind. Oct. 18, 2007), Simon, a Virgin Islands resident, bought a health insurance policy issued by Lloyd’s, a company based in the United Kingdom. When Lloyd’s denied payment on a claim, Simon filed an arbitration claim in accordance with the policy, seeking a declaration from the arbitrator that the arbitration clause in the policy was unenforceable.
Lloyd’s responded by filing this lawsuit, seeking a determination by the Court that the arbitration clause was enforceable. In ruling on that issue, the Court first addressed whether it had jurisdiction to decide the arbitrability question and concluded that it did have jurisdiction because there was no “clear and unmistakable” evidence of intent to submit arbitrability questions to the arbitrator.
The Court next turned to the question of whether the Convention or the MFA governed the question of arbitrability. The Court held that “reverse preemption” under the MFA does not apply to international arbitration agreements governed by the Convention and, accordingly, that Simon could not defeat the Convention by relying on Virgin Islands law governing the resolution of insurance disputes.
In holding that the Convention trumped the MFA, the Court relied largely on Supreme Court precedent articulating “the strong policy of international comity and predictability in enforcing an international agreement.”
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