686 F.Supp.3d 470
E.D. La.2023Background
- ISIC issued a surplus-lines commercial property policy (Feb 10, 2021–Feb 10, 2022) to Monica and Roger Ramsey that included an arbitration clause.
- Hurricane Ida (Aug. 29, 2021) allegedly caused extensive damage; the Ramseys submitted claims, multiple inspections and damage/remediation reports were exchanged.
- The Ramseys sued ISIC and Sedgwick (Feb. 17, 2023) seeking policy benefits, statutory penalties, bad‑faith damages, and attorneys’ fees under Louisiana law.
- Defendants moved to compel arbitration and stay or dismiss the case, arguing the policy’s arbitration/forum‑selection clause is enforceable because the policy is surplus‑line and not subject to Department of Insurance approval.
- The court held the arbitration clause enforceable (treating arbitration as a forum/venue selection clause exempted for surplus‑line policies under La. Rev. Stat. § 22:868(D)), found the dispute falls within the clause’s scope, granted the motion to compel arbitration, and stayed and administratively closed the case.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether La. Rev. Stat. § 22:868 voids the arbitration clause | Ramsey: arbitration divests state courts of jurisdiction and is therefore unenforceable under § 22:868 and LA Constitution | ISIC: § 22:868’s prohibition does not bar forum/venue clauses in policy forms not subject to DOI approval (surplus‑line exception) | Court: arbitration is a forum/venue selection clause; surplus‑line exception applies; § 22:868 does not bar this arbitration clause |
| Whether the dispute falls within the arbitration clause’s scope | Ramsey: statutory/bad‑faith claims might not be arbitrable | ISIC: clause broadly covers “all matters in dispute,” including formation and validity | Court: ambiguity resolved for arbitration; claims fall within clause’s scope |
| Whether external legal constraints (state constitution/MFA) preclude arbitration | Ramsey: enforcement would waive state constitutional access to courts | ISIC: FAA governs and favors enforcing arbitration; MFA reverse‑preemption does not apply to surplus‑line clause here | Court: no external constraints foreclose arbitration; FAA/precedent control enforcement |
| Whether plaintiffs can attack surplus‑line status / signature formalities to avoid arbitration | Ramsey: policy may not meet surplus‑line statutory formalities, so clause invalid | ISIC: plaintiffs accepted and relied on the policy; estoppel bars inconsistent position | Court: plaintiffs estopped from denying surplus‑line status; argument rejected |
Key Cases Cited
- Texaco Exploration & Prod. Co. v. AmClyde Engineered Prod. Co., Inc., 243 F.3d 906 (5th Cir. 2001) (FAA creates a strong federal policy favoring arbitration)
- Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S. 1983) (federal policy favors arbitration and stays to allow arbitration to proceed)
- AT&T Tech., Inc. v. Communications Workers of Am., 475 U.S. 643 (U.S. 1986) (arbitration is a matter of contract; court enforces arbitration agreements per parties’ consent)
- Webb v. Investacorp, Inc., 89 F.3d 252 (5th Cir. 1996) (two‑step test: existence/validity and scope of arbitration agreement; then external constraints)
- Pers. Sec. & Safety Sys. Inc. v. Motorola Inc., 297 F.3d 388 (5th Cir. 2002) (ambiguities in scope resolved in favor of arbitration)
- McDonnel Grp., L.L.C. v. Great Lakes Ins. SE, UK Branch, 923 F.3d 427 (5th Cir. 2019) (La. Rev. Stat. § 22:868 can reverse‑preempt FAA for insurance contracts generally)
- Doucet v. Dental Health Plans Mgmt. Corp., 412 So. 2d 1383 (La. 1982) (Louisiana precedent finding arbitration provisions in insurance contracts unenforceable under state law)
- Creekstone Juban I, L.L.C. v. XL Ins. Am., Inc., 282 So. 3d 1042 (La. 2019) (distinguishing jurisdiction from venue; forum clauses analyzed under § 22:868)
- Donelon v. Shilling, 340 So. 3d 786 (La. 2020) (characterizes arbitration clauses as a type of venue selection clause)
- Viking River Cruises, Inc. v. Moriana, 142 S. Ct. 1906 (U.S. 2022) (describes arbitration agreement as a specialized forum‑selection clause governing both situs and procedure)