Speece v. Allied Professionals Ins. Co.
289 Neb. 75
Neb.2014Background
- Dr. Brett Speece purchased a professional liability policy from Allied Professionals Insurance Co. (APIC), a risk retention group (RRG) chartered in Arizona and registered in Nebraska as a foreign RRG.
- The policy contained a mandatory binding arbitration clause requiring arbitration in California under the AAA rules and applying California law.
- Nebraska sued/claimed issues arose after a Medicaid audit and state civil action; Speece sought declaratory and bad-faith relief against APIC for refusal to defend.
- APIC moved to compel arbitration; the Fillmore County district court denied the motion, relying on Neb. Rev. Stat. § 25-2602.01(f)(4), which invalidates mandatory arbitration provisions in insurance contracts.
- APIC appealed, arguing federal law preempts the Nebraska statute as applied to foreign RRGs. The Nebraska Supreme Court considered preemption under the FAA, the McCarran-Ferguson Act (MFA), and the Liability Risk Retention Act (LRRA).
Issues
| Issue | Plaintiff's Argument (Speece) | Defendant's Argument (APIC) | Held |
|---|---|---|---|
| Whether FAA preempts Neb. § 25-2602.01(f)(4) | FAA generally enforces arbitration clauses; FAA should preempt state anti‑arbitration law | FAA does not apply because MFA preserves state insurance regulation absent a federal statute that specifically relates to insurance | FAA does not preempt § 25‑2602.01(f)(4) (court follows Kremer) |
| Whether LRRA preempts application of § 25‑2602.01(f)(4) to foreign RRGs | Nebraska statute governs insurance contracts and should still apply; LRRA exceptions for generally applicable corporate laws and contract interpretation save the statute | LRRA expressly exempts RRGs from state laws that would regulate their operation, permitting domiciliary regulation and limiting nondomiciliary states’ power; applying Nebraska’s ban would impede uniform nationwide operation | LRRA preempts application of § 25‑2602.01(f)(4) to foreign RRGs; the arbitration clause is not barred |
| Whether § 25‑2602.01(f)(4) is a generally applicable corporate law under LRRA § 3902(a)(4) | The statute is generally applicable to persons/corporations and thus falls within an LRRA savings clause | The statute specifically targets insurance contracts (not general corporate law) and therefore regulates RRG operations contrary to LRRA § 3902 | § 25‑2602.01(f)(4) is not a generally applicable corporate law and is preempted as applied to foreign RRGs |
| Whether the arbitration clause is unconscionable | (Raised below but not decided) | (Raised below but not decided) | Court declined to address unconscionability because trial court never ruled; issue left for further proceedings |
Key Cases Cited
- Kremer v. Rural Community Ins. Co., 280 Neb. 591, 788 N.W.2d 538 (Neb. 2010) (MFA can bar FAA preemption of state insurance laws)
- Wadsworth v. Allied Professionals Ins. Co., 748 F.3d 100 (2d Cir. 2014) (LRRA preempts nondomiciliary state laws that regulate RRG operations; promotes nationwide uniformity)
- Sturgeon v. Allied Professionals Ins. Co., 344 S.W.3d 205 (Mo. Ct. App. 2011) (concluded LRRA did not preempt a Missouri anti‑arbitration statute)
- Webb v. American Employers Group, 268 Neb. 473, 684 N.W.2d 33 (Neb. 2004) (denial of motion to compel arbitration is a final, appealable order)