American Bankers Ins. Co. of Florida v. Inman

Decision Date11 January 2006
Docket NumberNo. 04-61131 Summary Calendar.,04-61131 Summary Calendar.
Citation436 F.3d 490
PartiesAMERICAN BANKERS INSURANCE COMPANY OF FLORIDA, Plaintiff-Counter Defendant-Appellant, v. Jack INMAN, Defendant-Counter Claimant-Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Walter D. Willson, Donald Stephen Brouillette, Jr., Wells, Marble & Hurst, Jackson, MS, for Appellant.

Michael J. Casano, Foxworth & Casano, Gulfport, MS, for Appellee.

Appeal from the United States District Court for the Southern District of Mississippi.

Before WIENER, BENAVIDES, and STEWART, Circuit Judges.

CARL E. STEWART, Circuit Judge:

American Bankers Insurance Company of Florida ("American Bankers") appeals the district court's denial of American Bankers' motion to compel arbitration. Because we find the district court properly concluded that MISS.CODE ANN. § 83-11-109 reverse preempts the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. pursuant to the McCarran-Ferguson Act, 15 U.S.C. § 1101 et seq., we affirm.

FACTUAL AND PROCEDURAL HISTORY

On March 28, 2003, Appellee Jack Inman was injured when the motorcycle that he was riding was struck from behind by another driver whose liability insurance coverage was only for $10,000. Because Inman's injuries were so extensive, he made a demand for $100,000 under the Underinsured Motorist Coverage provision of his insurance policy with American Bankers. American Bankers denied Inman's claim because he was not driving the vehicle covered by the policy when the accident occurred.

Inman's policy contained an arbitration provision requiring arbitration of any disputes or claims between the policyholder and the insurer. On October 14, 2003, American Bankers filed a motion to compel arbitration in accordance with the FAA in the district court for the Southern District of Mississippi. The central question before the district court was whether the MISS.CODE ANN. § 83-11-109 pursuant to the McCarran-Ferguson Act reverse preempts the FAA. The district court found that the FAA was reverse preempted and denied American Bankers' motion to compel arbitration, and in conjunction granted Inman's motion to dismiss pursuant to Rule 12(b)(6). American Bankers has since filed this timely appeal.

STANDARD OF REVIEW

We review a district court's denial of a motion to compel arbitration de novo. See Keytrade USA, Inc. v. Ain Temouchent M/V, 404 F.3d 891, 893 (5th Cir.2005). "The de novo standard of review applies when a motion to compel is denied as part of a motion to dismiss," Banc One Acceptance Corp. v. Hill, 367 F.3d 426, 429 (5th Cir.2004). This court also reviews a district court's interpretation of a state law de novo. See Concise Oil & Gas P'ship v. La. Intrastate Gas Corp., 986 F.2d 1463, 1471 (5th Cir.1993).

DISCUSSION

American Bankers argues that the district court erred in denying its motion to compel arbitration. Specifically, American Bankers contends that § 83-11-109 does not reverse preempt the FAA pursuant to the McCarran-Ferguson Act because the state law is not "regulating the business of insurance" as the Act requires. We disagree, and for the following reasons we affirm the district court's denial of American Bankers' motion to compel arbitration.

Congress enacted the FAA in order to "reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, and to place arbitration agreements upon the same footing as other contracts." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). The FAA permits an aggrieved party to file a motion to compel arbitration when an opposing "party has failed, neglected, or refused to comply with an arbitration agreement." Id. at 25, 111 S.Ct. 1647; see also 9 U.S.C. § 4. With regard to uninsured motorist coverage, § 83-11-109 provides that "[n]o such endorsement or provisions shall contain a provision requiring arbitration of any claim arising under any such endorsement or provisions." Although federal law ordinarily preempts conflicting state law, the McCarran-Ferguson Act provides a narrow exception to this rule for state laws governing the insurance industry. Munich Am. Reinsurance Co. v. Crawford, 141 F.3d 585, 590 (5th Cir.1998). The McCarran-Ferguson Act provides in pertinent part that "[n]o Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance ... unless such Act specifically relates to the business of insurance." 15 U.S.C. § 1012(b).

Under the McCarran-Ferguson Act, a state law reverse preempts federal law only if: (1) the federal statute does not specifically relate to the "business of insurance;" (2) the state law was enacted for the "purpose of regulating the business of insurance;" and (3) the federal statute operates to "invalidate, impair, or supercede" the state law. Munich, 141 F.3d at 590. The district court found that § 83-11-109 reverse preempted the FAA and invalidated the arbitration provision in Inman's insurance policy with American Bankers. We must decide whether § 83-11-109 satisfies the three requirements of the McCarran-Ferguson Act.

This court expressly stated that "[t]here is no question that the FAA does not relate specifically to the business of insurance," Munich, 141 F.3d at 590; thus, the first requirement of the McCarran-Ferguson Act is satisfied. Additionally, the application of the FAA to enforce the arbitration provision would invalidate § 83-11-109; accordingly, the third requirement of the Act is also satisfied. American Bankers specifically challenges the district court's conclusion that the state law was enacted to "regulate the business of insurance," the second requirement of the McCarran-Ferguson Act.

The Supreme Court has articulated three factors a court must consider in evaluating whether a state regulates the business of insurance: (1) "whether the practice in question has the effect of transferring or spreading a policyholder's risk;" (2) "whether the practice is an integral part of the policy relationship between the insurer and the insured;" and (3) "whether the practice is limited to entities within the insurance industry." Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129, 102 S.Ct. 3002, 73 L.Ed.2d 647 (1982). The Supreme Court noted that none of these factors is determinative, but examination of the factors may lead to the conclusion that a state law regulates the "business of insurance." Id. American Bankers contends that § 83-11-109 does not regulate the business of insurance because it does not meet the factors specified in Pireno. Therefore, American Bankers argues, § 83-11-109 does not satisfy the requirements of the McCarran-Ferguson Act and does not reverse preempt the FAA. American Bankers does not dispute that the state law is limited to entities within the insurance industry; accordingly, we address only the first two Pireno factors, i.e., whether the law has the effect of transferring or spreading a policyholder's risk and whether the law is an integral part of the relationship between insurer and insured. 458 U.S. at 129, 102 S.Ct. 3002.

American Bankers argues that § 83-11-109 does not have the effect of transferring or spreading a policyholder's risk and therefore does not meet the first Pireno factor. Section 83-11-109 is codified as part of the Mississippi Uninsured Motorist Coverage Act and "`[t]he terms and provisions of the Mississippi Uninsured Motorist Coverage Act are written into every automobile liability policy issued in the state.'" Lawler v. Gov't Employees Ins. Co., 569 So.2d 1151, 1153 (Miss.1990) (citations omitted). Section 83-11-109 prohibits required arbitration of disputes stemming from the uninsured motorist coverage provisions of personal automobile insurance policies. The statute regulates risk by subjecting all...

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