Speece v. Allied Professionals Ins. Co.
| Decision Date | 19 September 2014 |
| Docket Number | No. S–13–700,S–13–700 |
| Citation | 853 N.W.2d 169 |
| Court | Nebraska Supreme Court |
| Parties | Dr. Brett Speece, D.C., appellee v. Allied Professionals Insurance Company, a Risk Retention Group, Inc., appellant. |
Joseph S. Daly and Mary M. Schott, of Sodoro, Daly, Shomaker & Selde, P.C., L.L.O., and Rick A. Cigel, of Cigel Law Group, P.C., for appellant.
Andrew D. Strotman, Jonathan J. Papik, and Cristin McGarry Berkhausen, of Cline, Williams, Wright, Johnson & Oldfather, L.L.P., for appellee.
Justin D. Eichmann, of Bradford & Coenen, L.L.C., for amicus curiae National Risk Retention Association.
1. Arbitration and Award.Arbitrability presents a question of law.
2. Judgments: Appeal and Error.On a question of law, an appellate court reaches a conclusion independent of the court below.
3. Pretrial Procedure: Arbitration and Award: Final Orders.The denial of a motion to compel arbitration is a final, appealable order because it affects a substantial right and is made in a special proceeding.
4. Federal Acts: Insurance: Contracts: Arbitration and Award.The Federal Arbitration Act does not preempt Neb.Rev.Stat. § 25–2602.01(f)(4) (Cum. Supp. 2012).
5. Federal Acts: Insurance.The Liability Risk Retention Act of 1986 is a federal act that specifically relates to the business of insurance.
6. Federal Acts: Insurance: States.The Liability Risk Retention Act of 1986 is the type of federal law excluded from the operation of 15 U.S.C. § 1012(b) (2012) of the McCarran–Ferguson Act, and therefore, the McCarran–Ferguson Act does not prevent the Liability Risk Retention Act of 1986 from being construed to preempt state law.
7. Constitutional Law: Federal Acts: States.Under the Supremacy Clause of the U.S. Constitution, state law that conflicts with federal law is invalid.
8. Federal Acts: States: Intent.Federal law preempts state law when state law conflicts with a federal statute or when the U.S. Congress, or an agency acting within the scope of its powers conferred by Congress, explicitly declares an intent to preempt state law. Preemption can also impliedly occur when Congress has occupied the entire field to the exclusion of state law claims.
9. Federal Acts: Insurance: States: Intent.In the Liability Risk Retention Act of 1986, Congress explicitly declared an intent to preempt state law regulating the operation of foreign risk retention groups except in certain enumerated instances.
10. Federal Acts: Insurance: States.The purpose of the Liability Risk Retention Act of 1986 is to permit risk retention groups to efficiently operate on a nationwide basis by providing that they are regulated by their domiciliary states with only limited variations in regulation in the other states in which they operate.
11. Federal Acts: Insurance: Contracts: Arbitration and Award.The prohibition of an arbitration clause in insurance policies pursuant to Neb.Rev.Stat. § 25–2602.01(f)(4) (Cum. Supp. 2012) regulates the operation of a risk retention group within the meaning of 15 U.S.C. § 3902 (2012) of the Liability Risk Retention Act of 1986.
12. Federal Acts: Insurance: States.The Liability Risk Retention Act of 1986, by its terms, preempts the application of Neb.Rev.Stat. § 25–2602.01(f)(4) (Cum. Supp. 2012) to foreign risk retention groups.
13. Appeal and Error.An appellate court will not consider an issue on appeal that the trial court has not decided.
Allied Professionals Insurance Company (APIC) appeals the order of the district court for Fillmore County in which the court determined that Neb.Rev.Stat. § 25–2602.01(f)(4) (Cum. Supp. 2012) prohibited enforcement of the mandatory arbitration clause in the parties' insurance contract and overruled APIC's motion to compel arbitration. Section 25–2602.01(f)(4) generally prohibits mandatory arbitration clauses in insurance contracts. At issue is whether federal law preempts § 25–2602.01(f)(4). We conclude that the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1 through 16 (2012), does not preempt the state statute, but that the Liability Risk Retention Act of 1986 (LRRA), 15 U.S.C. §§ 3901 through 3906 (2012), does preempt application of the Nebraska statute to foreign risk retention groups, and that therefore, the district court erred when it determined that § 25–2602.01(f)(4) prohibited enforcement of the arbitration clause in the parties' insurance contract. We reverse the district court's order overruling
APIC's motion to compel arbitration and remand the cause for further proceedings.
Dr. Brett Speece, D.C., a chiropractor practicing in Exeter, Nebraska, purchased a professional liability insurance policy from APIC. APIC is a risk retention group incorporated in Arizona and registered with the Nebraska Department of Insurance as a foreign risk retention group. In our analysis, we sometimes refer to Nebraska as the nonchartering or nondomiciliary state. As a general statement, a risk retention group is an entity formed by persons or businesses with similar or related exposure for the purpose of self-insuring. See LRRA, 15 U.S.C. § 3901(a)(4).
The policy included a provision requiring binding arbitration in California of any dispute concerning the policy. Paragraph V.C. of the policy stated as follows:
Arbitration . All disputes or claims involving [APIC] shall be resolved by binding arbitration, whether such dispute or claim arises between the parties to this Policy, or between [APIC] and any person or entity who is not a party to the Policy but is claiming rights either under the Policy or against [APIC]. This provision is intended to, and shall, encompass the widest possible scope of disputes or claims, including any issues a) with respect to any of the terms or provisions of this Policy, or b) with respect to the performance of any of the parties to the Policy, or c) with respect to any other issue or matter, whether in contract or tort, or in law or equity. Any person or entity asserting such dispute or claim must submit the matter to binding arbitration with the American Arbitration Association, under the Commercial Arbitration Rules of the American Arbitration Association then in effect, by a single arbitrator in good standing. If the person or entity asserting the dispute or claim refuses to arbitrate, then any other party may, by notice as herein provided, require that the dispute be submitted to arbitration within fifteen (15) days. All procedures, methods, and rights with respect to the right to compel arbitration pursuant to this Article shall be governed by the [FAA]. The arbitration shall occur in Orange County, California. The laws of the State of California shall apply to any substantive, evidentiary or discovery issues. Any questions as to the arbitrability of any dispute or claim shall be decided by the arbitrator. If any party seeks a court order compelling arbitration under this provision, the prevailing party in such motion, petition or other proceeding to compel arbitration shall recover all reasonable legal fees and costs incurred thereby and in any subsequent appeal, and in any action to collect the fees and costs. A judgment shall be entered upon the arbitration award in the U.S. District Court, Central District of California, or if that court lacks jurisdiction, then in the Superior Court of California, County of Orange.
In 2012, Speece was audited by the Nebraska Department of Health and Human Services with regard to his billing for Medicaid reimbursements, and in January 2013, the State of Nebraska filed a civil suit against Speece for violations of law regarding false Medicaid claims. Speece gave notice of the proceedings to APIC and demanded that APIC cover the expenses of his defense. A dispute arose between Speece and APIC regarding whether and to what extent the policy covered the costs of Speece's defense. Speece filed an action in the district court seeking a declaration that APIC was obligated to provide coverage for his defense in the Medicaid proceeding; he also sought damages for breach of contract and bad faith.
APIC filed a motion to compel arbitration. The district court overruled the motion. The court relied on § 25–2602.01. Subsection (b) of the statute generally provides that a provision in a written contract to submit controversies between the parties to arbitration is valid and enforceable. However, subsection (f) of the statute lists certain exceptions to this general rule. Section 25–2602.01(f)(4) provides that, with certain exceptions not relevant to the present case, an arbitration provision is not valid and enforceable in “any agreement concerning or relating to an insurance policy.”
The court considered and rejected APIC's argument that § 25–2602.01(f)(4) cannot be applied to Speece's insurance policy because that Nebraska statute is preempted by federal law at least as it applies to foreign risk retention groups. The federal laws that are relevant to this argument are: (1) the FAA, which generally provides that arbitration provisions in written contracts are valid and enforceable; (2) the McCarran–Ferguson Act (MFA), 15 U.S.C. §§ 1011 through 1015 (2012), which provides in relevant part at § 1012(b) that a federal statute does not preempt a state statute “regulating the business of insurance” unless the federal statute “specifically relates to the business of insurance”; and (3) the LRRA, which provides in relevant part at § 3902(a)(1) that a foreign risk retention group is exempt from any state law that would “regulate, directly or indirectly, the operation of a risk retention group.”
The district court determined that neither the FAA nor the LRRA preempted § 25–2602.01(f)(4). The court further determined that the Nebraska statute's prohibition of arbitration provisions in “any agreement concerning or relating to an insurance policy” applied to the professional liability policy issued by APIC to Speece in this case. The court...
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