174 So. 3d 659
La. Ct. App.2015Background
- Ronald and Angela Courville sued Dr. Rathmann and his clinic for medical malpractice and named Dr. Rathmann’s insurer, Allied Professionals Insurance Company (APIC), an Arizona risk retention group (RRG), under Louisiana’s Direct Action Statute (La. Rev. Stat. § 22:1269).
- APIC refused to defend in court and moved to compel arbitration under an arbitration clause in the insurance policy between APIC and Dr. Rathmann (FAA-guaranteed arbitration, California seat and law).
- Trial court granted APIC’s motion and stayed proceedings; the Courvilles appealed and obtained a suspensive appeal.
- Central legal questions: whether federal law (the Federal Arbitration Act (FAA) or the Liability Risk Retention Act (LRRA)) preempts Louisiana statutes—(1) the anti-arbitration provision in La. Rev. Stat. § 22:868 and (2) the Louisiana Direct Action Statute (LDAS), La. Rev. Stat. § 22:1269—and whether claims against the insured (Dr. Rathmann/clinic) must be stayed.
- The majority held the arbitration agreement between APIC and Dr. Rathmann is valid and APIC’s disputes are arbitrable because the LRRA preempts Louisiana § 22:868; but the LDAS (direct action statute) does not apply to non-Louisiana-chartered RRGs under the LRRA, so claims against APIC must be arbitrated while claims against Dr. Rathmann/the clinic may proceed in court.
Issues
| Issue | Courvilles' Argument | APIC's Argument | Held |
|---|---|---|---|
| Whether FAA (via McCarran-Ferguson Act analysis) permits Louisiana to void arbitration clauses in insurance contracts (La. R.S. § 22:868) | MFA reverse-preempts FAA; § 22:868 regulates insurance and can void arbitration clauses | FAA generally preempts state laws invalidating arbitration clauses | Court: FAA is inapplicable by MFA to state insurance law issues here, but LRRA—rather than FAA—controls preemption analysis for RRGs; § 22:868 is preempted by LRRA as applied to non-chartered RRGs (affirmed that APIC’s arbitration clause is enforceable) |
| Whether LRRA preempts La. R.S. § 22:868 (anti-arbitration statute) as applied to an out-of-state RRG | § 22:868 does not regulate RRG operations and should apply | LRRA broadly preempts any state law that would regulate or impair operation of an RRG; voiding arbitration would alter RRG operations | Held: LRRA preempts § 22:868 as to APIC (arbitration enforceable) |
| Whether LRRA preempts LDAS (La. R.S. § 22:1269) and thus bars direct-action suits against out-of-state RRGs | LDAS is procedural/relates to insurance and should survive; LRRA does not expressly preempt LDAS | LRRA preempts state law that regulates or impairs RRG operations; allowing direct action would impose state regulation on RRGs | Held: LDAS is inapplicable to out-of-state RRGs under LRRA; claims against APIC subject to arbitration |
| Whether claims against the insured (Dr. Rathmann/clinic) must be stayed/arbitrated because of insurer-insured arbitration clause | Courvilles: no arbitration agreement with the Courvilles; claims against insured are not subject to arbitration and should proceed | APIC sought stay of whole case based on policy clause | Held: No arbitration agreement between Courvilles and insured; claims against Dr. Rathmann/clinic are not subject to arbitration and may proceed in court; stay lifted as to those claims |
Key Cases Cited
- Sturgeon v. Allied Professionals Ins. Co., 344 S.W.3d 205 (Mo. Ct. App. 2011) (applied McCarran-Ferguson Act to uphold state anti-arbitration insurance statute against FAA preemption)
- Wadsworth v. Allied Professionals Ins. Co., 748 F.3d 100 (2d Cir. 2014) (construed LRRA broadly and held LRRA preempted application of a state direct-action statute to out-of-state RRG)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (FAA preempts state rules that categorically prohibit arbitration or undermine its fundamental purposes)
- National Warranty Ins. Co. RRG v. Greenfield, 214 F.3d 1073 (9th Cir. 2000) (discusses RRG statutory framework and preemption principles under LRRA)
- Collins v. AAA Rent All, Inc., 812 F. Supp. 642 (M.D. La. 1993) (concluded LRRA did not preempt Louisiana direct-action statute in earlier context)