Patton Boggs Reinsurance Newsletter- March 2013: Supreme Court of Washington State Holds That State Statute Prohibits Binding Arbitration Agreements in Insurance Contracts

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State of Washington, Dep't of Transp. v. James River Ins. Co., 87644-4, 2013 WL 174111 (Wash. Jan. 17, 2013).

The Supreme Court of the State of Washington, sitting en banc, unanimously affirmed a trial court's denial of an insurer's motion to compel arbitration, reasoning that a Washington State statute rendered an arbitration clause present in an insurance agreement unenforceable. The relevant statute, RCW 48.18.200(1)(b), provides that no insurance contract issued in Washington, and covering risks in that state, may contain a condition "depriving the courts of [Washington] of the jurisdiction of the action against the insurer." The insurer argued that the statute only prohibited forum selection clauses within insurance contracts that required an action to be brought outside of Washington, and did not disturb an insurer's ability to compel arbitration. The Supreme Court rejected this argument, stating that the statute was intended to preserve an insured's right to bring an "original action" in a Washington court, where the court would have jurisdiction over the "substance" of the dispute between the parties. Accordingly, the Supreme Court concluded that the statute "prohibits binding arbitration agreements in insurance contracts."

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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