TWO RECENT CASES ADDRESS REVERSE-PREEMPTION UNDER THE MCCARRAN-FERGUSON ACT
On March 15, 2007, we reported on an Oklahoma district court’s denial of a motion to compel arbitration, finding that an Oklahoma statute prohibiting enforcement of arbitration clauses in insurance contracts controlled pursuant to the McCarran-Ferguson Act. Soon thereafter, the Oklahoma legislature amended the statute excepting reinsurance contracts from the prohibition. On appeal, despite the legislature not specifying whether the amendment would apply retroactively, the Tenth Circuit found that the statute itself was retroactive by its express terms and as interpreted by the Oklahoma Supreme Court, and, after acknowledging that arbitration agreements are contrary to Oklahoma public policy, the Tenth Circuit then found that specific legislative approval rendered the agreements valid and enforceable. Mid-Continent Cas. Co. v. Gen. Reins. Corp., No. 07-5050 (10th Cir. May 22, 2009).
Theodore L. Kessner (“Kessner”), appointed as the Special Deputy Liquidator of an insolvent insurer, filed an action in Nebraska state court seeking to recover on a reinsurance policy issued by One Beacon Insurance Company, which removed the action to federal court based on diversity jurisdiction. Kessner then moved to remand, arguing that the McCarran-Ferguson Act reverse-preempted the federal removal statute. In the Report and Recommendation, the Magistrate Judge concluded that the matters at issue related to the business of insurance and that a proceeding in the district court would likely invalidate, impair or supersede the Nebraska insurer liquidation statutes utilized in the state liquidation proceeding, requiring remand. A short, two paragraph opinion by the District Judge adopted the Magistrate Judge’s Report and Recommendation, with a colorful conclusion that “intervention by a federal court could screw up the comprehensive scheme Nebraska has set up to deal with matters like this one. Federal law has a bias against such meddling.” Kessner v. One Beacon Ins. Co., Case No. 09-3003 (USDC D. Neb. Apr. 20, 2009).
This post written by Dan Crisp.
