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In construing the McCarran-Ferguson Act, a federal court in Oklahoma held that the Federal Arbitration Act (FAA) does not preempt a provision of the Oklahoma Uniform Arbitration Act (OUAA) excluding its application to contracts which reference insurance. Since the OUAA did not apply, the Court applied an Oklahoma statute disallowing agreements that limit access to the courts in refusing to enforce an arbitration clause in a reinsurance contract.
In Mid-Continent Casualty Co. v. General Reinsurance Corp., No. 06-CV-0475-CVE-PJC, 2007 WL 539217 (N.D. Okla. Feb. 15, 2007), Mid-Continent sued General Reinsurance (GRC), claiming that GRC failed to reimburse Mid-Continent for costs as required by a reinsurance contract between the parties.
GRC filed a motion to compel arbitration pursuant to an arbitration clause in the contract. In opposing the motion, Mid-Continent argued that the arbitration clause was unenforceable because the OUAA "does not apply to . . . contracts which reference insurance." Okla. Stat. tit. 12, § 1855(D). In response, GRC argued that the FAA preempts the OUAA exclusion for contracts that reference insurance.
The Court held that the OUAA exclusion is not subject to FAA preemption because under the McCarran-Ferguson Act, 15 U.S.C. § 1012, federal law does not preempt state laws regulating the business of insurance.
In determining that the McCarran-Ferguson Act applied to the OUAA exclusion, the Court relied largely on a Tenth Circuit decision holding that a comparable Kansas statute constituted a statute regulating insurance within the meaning of the McCarran-Ferguson Act. See Mutual Reinsurance Bureau v. Great Plains Mutual Insurance Co., Inc., 969 F.2d 931 (10th Cir. 1992).
As with the Kansas statute at issue in Mutual Reinsurance, the OUAA exclusion is not located in the state's insurance code. In rejecting the significance of this placement, the Court agreed with the Tenth Circuit's view that "a state statute does not have to be codified in the state insurance code to regulate insurance."
Since the McCarran-Ferguson Act precluded FAA preemption of the OUAA exclusion, the parties' agreement was not governed by the OUAA but instead by an Oklahoma statute providing that "Oklahoma courts are not permitted to enforce any contract that would limit a person's access to the courts." Okla. Stat. tit. 15, § 216. Accordingly, the Court refused to enforce the arbitration agreement.
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