Washington Supreme Court Voids Arbitration Agreements for Insurance Contracts
Yesterday the Washington State Supreme Court held that arbitration clauses in insurance contracts violate state statute governing the business of insurance and are void as a matter of law. Dep’t of Transportation v. James River Ins. Co. The Court held that State statute provides that an insurance contract cannot divest the state courts of its jurisdiction in such matters. Moreover, the Court held, the McCarran-Ferguson Act, 15 U.S.C. sect. 1012(b) protects state laws regulating the business of insurance from federal preemption, so that the Federal Arbitration Act (FAA) is inapplicable in such a matter. Given that the US Supreme Court made repeated statements regarding the supremacy of the FAA throughout the 2011 term, the Supreme Court may well be willing to look at the decision. Unless and until that happens, insurance coverage and other disputes are not subject to arbitration clauses in this state.