Conformity to Statute Analysis Key to Policy Interpretation
An insured sought declaratory judgment that insurers breached a builder’s risk insurance policy and the duty of good faith and fair dealing when they denied its claim. The court dismissed the complaint in favor of arbitration. The issue on appeal was 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 held the policy provision requiring that any term that conflicted with a state statute would be conformed to such statute was not triggered. The state anti-arbitration statute was preempted by the Convention because a treaty is not a law passed by Congress and, therefore, is not reverse preempted by McCarran-Ferguson. However, new precedent was set in how a “conformity to statute” provision impacted the court’s analysis.