Hart v. Orion Insurance Company
| Decision Date | 30 December 1971 |
| Docket Number | No. 71-1100.,71-1100. |
| Citation | 453 F.2d 1358 |
| Parties | Fred M. HART, Plaintiff-Appellant, v. ORION INSURANCE COMPANY Limited, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Tenth Circuit |
John T. Maley, Denver, Colo. (Robert A. Schiff, Denver, Colo., on the brief), for plaintiff-appellant.
George E. Johnson of Blunk & Johnson, Denver, Colo., for defendant-appellee.
Before BREITENSTEIN, McWILLIAMS and DOYLE, Circuit Judges.
In 1967, while piloting an airplane as a captain for Frontier Airlines, plaintiff-appellant sustained injuries. Thereafter, he was unable to pass the required physical examination and the Federal Aviation Administration refused to renew his first class pilot's license. He had an occupational disability policy with the defendant-appellee. His demand for payment of the policy amount was denied. A dispute ensued over the arbitration provisions of the policy. In 1969, he brought the instant suit and the court stayed proceedings pending compliance with the arbitration provisions of the policy. The insured appealed from the stay order and we dismissed the appeal on the ground that the order was not appealable. Hart v. Orion Insurance Company, 10 Cir., 427 F.2d 528. On remand, arbitration proceeded and resulted in a decision adverse to insured. The court granted summary judgment for the insurer, D.C., 319 F.Supp. 1074.
Condition 1 of the policy allows recovery by a captain if "he is permanently prevented from carrying on his occupation as a Captain as a result of disability in the opinion of independent medical referees to be appointed as hereinafter provided." Condition 3 requires the referees to be medical practitioners and states the method of appointment. Condition 14 provides for suit in the event of the failure of the insurer to pay.
The first problem is the enforceability of the arbitration provisions. At the time of policy issuance the insured lived in Montana, where the policy was negotiated and delivered. The policy was accepted by the insurer in Illinois. The suit was brought in Colorado where the insured was then domiciled. We deem it unnecessary to decide where the contract was made, what state law governs, or what that state law is. The insured chose to bring this diversity action in federal court. If interstate commerce is involved, federal substantive law controls the issue of enforceability, Necchi Sewing Machine Sales Corp. v. Carl, S.D. N.Y., 260 F.Supp. 665, 667. See also Younker Brothers, Inc. v. Standard Construction Co., S.D.Iowa, 241 F.Supp. 17, 18.
The Federal Arbitration Act provides, 9 U.S.C. § 2, that:
"A written provision in * * * a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction * * * shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."
The situation presented involves commerce because of the Montana application, the Illinois acceptance, and the Montana delivery. The problem is the effect of the Arbitration Act in view of possible conflict with the McCarran-Ferguson Act, 15 U.S.C. § 1011 et seq. Prior to United States v. South-Eastern Underwriters Association, 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440, it was assumed that issuing an insurance policy was not a transaction of commerce. South-Eastern Underwriters held that interstate insurance transactions were subject to federal regulation under the Commerce Clause. In the McCarran-Ferguson Act, Congress declared that "the continued regulation and taxation by the several States of the business of insurance is in the public interest." 15 U.S.C. § 1011; see also Securities and Exchange Commission v. National Securities, Inc., 393 U.S. 453, 458, 89 S.Ct. 564, 21 L.Ed.2d 668, and Prudential Insurance Co. v. Benjamin, 328 U.S. 408, 429, 66 S.Ct. 1142, 90 L.Ed. 1342.
To avail himself of the McCarran-Ferguson Act, the insured must show that the Federal Arbitration Act invalidates, impairs, or supersedes a state law regulating the business of insurance. Hamilton Life Insurance Company of New York v. Republic National Life Insurance Company, 2 Cir., 408 F.2d 606, 611. None of the provisions of the Montana, Illinois, and Colorado statutes to which our attention has been called regulate the business of insurance. Instead, they are laws of general application pertaining to the method of handdling contract disputes. See Hamilton, supra, at 611. Accordingly, the McCarran-Ferguson Act does not bar the application of the Federal Arbitration Act and the arbitration provisions are enforceable in the case at bar.
The insured says that if the arbitration provisions are enforceable, the insurer waived its right thereto. In view of the overriding federal policy favoring arbitration, waiver is not lightly inferred. Carcich v. Rederi A/B Nordie, 2 Cir., 389 F.2d 692, 696. Reliance is first had on the insurer's appointment of a Rochester, Minnesota, doctor as its medical referee. The insurer offered to pay the insured's expenses to that city and the insured refused to go. An exchange of letters emphasized the desire of the doctor to make the examination at a point where the facilities of the Mayo clinic in Rochester were available. The court found that the appointment of the doctor was done in good faith by the insurer and that there was no waiver of arbitration. The finding is not clearly erroneous and is sustained by the record.
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