Galilea, LLC v. AGCS Marine Insurance Co.
879 F.3d 1052
| 9th Cir. | 2018Background
- Galilea, LLC (owned by Montana residents Taunia and Chris Kittler) purchased a 60-foot yacht and applied for yacht insurance through Pantaenius; the signed online application listed three Underwriters and included a New York choice-of-law and AAA arbitration clause.
- Pantaenius issued a binder and, the next day, a formal marine insurance policy signed for the three Underwriters; the policy adopted federal maritime law (with New York law as backup) and a broader AAA arbitration clause covering “any and all disputes arising under this policy.”
- About a month later the yacht grounded in Panama; Galilea filed an insurance claim that the Underwriters denied for travel outside the cruising area; Underwriters initiated AAA arbitration and Galilea sued in the District of Montana and moved to stay arbitration.
- The Montana district court held (inter alia) that the FAA applied to the policy, that arbitrability questions were for the court, and that only some of Galilea’s claims fell within the policy’s arbitration clause; parties brought interlocutory cross-appeals.
- On appeal, the Ninth Circuit held the signed application was not incorporated into the policy under New York law (so its arbitration clause did not bind), the policy is a maritime contract within the FAA, Montana’s anti-arbitration statute (via McCarran-Ferguson) and The Bremen public-policy arguments do not displace the FAA here, and arbitrability was delegated to the arbitrator via incorporation of AAA rules.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the signed insurance application is an enforceable contract/arbitration agreement | Kittler/Galilea: Application is binding and its arbitration clause applies | Underwriters: Application not incorporated into the issued policy; not binding | Held: Application was not attached/incorporated under New York law and is not a contract for FAA purposes |
| Whether the policy’s arbitration clause is enforceable despite Montana law and McCarran-Ferguson | Kittler/Galilea: Montana’s anti-arbitration rule for insurance (preserved by McCarran-Ferguson) bars enforcement | Underwriters: Policy is maritime; FAA applies as established federal maritime law, so Montana law cannot displace it | Held: FAA applies to this maritime insurance policy; Montana law/McCarran-Ferguson do not preclude FAA enforcement |
| Whether The Bremen’s public-policy doctrine invalidates the arbitration clause | Kittler/Galilea: Enforcing arbitration would contravene Montana’s strong public policy against arbitration in insurance | Underwriters: The Bremen concerns forum-selection and international comity; it cannot override a directly applicable federal maritime rule (FAA) | Held: The Bremen does not trump the FAA where FAA is an established federal maritime rule; Montana public policy cannot invalidate the clause |
| Who decides arbitrability (court or arbitrator)? | Kittler/Galilea: Ambiguous; court should decide gateway issues | Underwriters: Parties incorporated AAA rules, which delegate arbitrability to the arbitrator | Held: Incorporation of AAA rules—given parties’ sophistication—clearly and unmistakably delegates arbitrability to arbitrator; arbitrability questions belong in arbitration |
Key Cases Cited
- Wilburn Boat Co. v. Fireman’s Fund Ins. Co., 348 U.S. 310 (federal maritime law governs marine insurance unless a federal rule is lacking)
- M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (forum-selection clauses presumptively enforceable; public-policy exception)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (arbitrability/severability principles under FAA)
- Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63 (gateway arbitrability framework)
- Brennan v. Opus Bank, 796 F.3d 1125 (incorporation of AAA rules by sophisticated parties constitutes clear and unmistakable delegation of arbitrability)