Fifth District Construes Policy’s Arbitration and Conformity Provisions
An insured sought declaratory judgment that its insurers breached a builder’s risk insurance policy and duty of good faith and fair dealing when they denied its claim. In reviewing dismissal of the case in favor of arbitration, the Fifth Circuit considered the following issue of contract interpretation as a matter of first impression, whether (1) an agreement to arbitrate (2) provided in an insurance policy (3) is voided by the policy’s conformity provision (4) when the conflicting state law prohibiting arbitration (5) has been preempted by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The court reasoned that because the state statute is preempted by the Convention, the statute does not and cannot apply to the insurance policy. Further, because the statute does not apply to the policy, there is no conflict between the policy and the state statute. Therefore, the conformity provision is not triggered and its inapplicability leads the court to the conclusion that the arbitration provision survives, undiminished by state law. So the case is headed for arbitration.