Texas District Court Compels Arbitration Involving Hurricane Harvey Loss

Carlton Fields
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Carlton Fields

In opposing a motion to compel arbitration, Nueces County made two procedural arguments: first, that the carrier waived its right to arbitrate by virtue of the policy’s service-of-suit clause. The District Court for the Southern District of Texas rejected the County’s argument, as the policy contained no such express override of the arbitration agreement, and both the “service-of-suit and arbitration clauses can be construed harmoniously such that the service-of-suit clause allows the courts, including the federal courts, to enforce the policy’s arbitration rights.”

Second, the County argued that the McCarran-Ferguson Act eliminated the court’s jurisdiction under the Convention Act. The court rejected this argument, as the Fifth Circuit has held that McCarran-Ferguson did not reverse-preempt an insurance company’s invocation of arbitration under the Convention Act.

The court also rejected the County’s substantive arguments against arbitration. The County claimed there was no written agreement for arbitration because the County did not sign the arbitral clause – the insurance policy. The court rejected this argument, as the Fifth Circuit has already held that a signature is not required to enforce an arbitration agreement in an insurance policy. The County argued that an insurance policy does not represent a commercial relationship as required by 9 U.S.C. § 2, 202. The court rejected this argument as well, as the insurance policy containing the arbitration agreement arises out of a commercial relationship between the County and its carrier. The parties were directed to arbitration, and any questions as to arbitrability were referred to the arbitrator.

Nueces County, Texas v. Certain Underwriters at Lloyd’s of London, et al., 2:20-cv-00065 (U.S.D. Tex. August 31, 2020)

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