State v. James River Ins. Co.
| Decision Date | 17 January 2013 |
| Docket Number | No. 87644–4.,87644–4. |
| Citation | 292 P.3d 118,176 Wash.2d 390 |
| Court | Washington Supreme Court |
| Parties | STATE of Washington, DEPARTMENT OF TRANSPORTATION, Respondent, v. JAMES RIVER INSURANCE COMPANY, Appellant. |
OPINION TEXT STARTS HERE
Kara Renee Masters, Skellenger, Bender, PS, Joseph D. Hampton, Bridget Tomlinson Schuster, Betts, Patterson & Mines, P.S., Seattle, WA, for Appellant.
A. Richard Dykstra, Friedman Rubin, Richard Andrew Fraser III, Washington State Atty General, Seattle, WA, Robert Aloysius Hyde, Office of the City Attorney, Phoenix, AZ, for Respondent.
Laura Foggan, Theodore A. Howard, Wiley Rein LLP, Washington, DC, Thomas Martin Jones, Cozen O'Connor, Seattle, WA, for Amicus Curiae on behalf of American Insurance Association, Amicus Curiae on behalf of Complex Insurance Claims Litigation Assoc., Amicus Curiae on behalf of National Union Fire Insurance Co., Amicus Curiae on behalf of American Home Assurance Company.
[176 Wash.2d 392]¶ 1 This case involves a challenge to a trial court's order denying a motion to compel arbitration of an insurance coverage dispute. James River Insurance Company issued two “surplus line” insurance policies under which the Washington State Department of Transportation (WSDOT) claims coverage. James River sought to compel arbitration of the coverage dispute pursuant to the insurance policies' arbitration clauses. WSDOT opposed arbitration and filed a motion for declaratory judgment, arguing that the arbitration clauses are unenforceable under RCW 48.18.200(1)(b), which prohibits insurance contracts from “depriving the courts of this state of the jurisdiction of action against the insurer,” and under RCW 48.15.150(1), which requires that “an unauthorized insurer must be sued in the superior court of the county in which the cause of action arose.” In addition, WSDOT argued that the McCarran–Ferguson Act, 15 U.S.C. § 1012, shields the statutes from preemption by the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1–14. The trial court agreed with WSDOT and denied James River's motion to compel arbitration. James River appealed and we granted direct review. We affirm.
¶ 2 The facts in this case are largely uncontested. James River issued two insurance policies to Scarsella Brothers Inc. that provided coverage for certain liability related to Scarsella's work on a highway project for WSDOT, effective between 2008–2011. Scarsella requested that James River add WSDOT as an insured under the policies, which was done.
[176 Wash.2d 393]¶ 3 The underlying claims against WSDOT arose out of a traffic accident in 2009 that occurred at or near Scarsella's highway project. The representatives of those persons killed or injured in the accident filed suit in King County Superior Court. The plaintiffs later amended their complaint to include Scarsella as a defendant. WSDOT sent a letter to Scarsella tendering its request for a defense in response to the suit under the insurance policies. Scarsella forwarded the tender to James River. James River accepted WSDOT's tender under a reservation of all rights under the policies. James River also informed WSDOT that the policies contained mandatory arbitration provisions and demanded arbitration of the parties' coverage disputes. The arbitration clauses in the insurance policies state in part:
BINDING ARBITRATION
....
Should we and the insured disagree as to the rights and obligations owed by us under this policy, including the effect of any applicable statutes or common law upon the contractual obligations otherwise owed, either party may make a written demand that the dispute be subjected to binding arbitration.
¶ 4 On September 1, 2010, James River attempted to initiate arbitration pursuant to the binding arbitration provisions. WSDOT objected and filed a declaratory judgment action against James River, seeking a declaration that the arbitration clauses were void. James River asserted a counterclaim for declaratory judgment, requesting that the trial court find the arbitration provisions binding and enforceable. On January 28, 2011, James River filed a motion for summary judgment and for an order compelling arbitration. That same day, WSDOT filed a motion to bar initiation of arbitration proceedings.
¶ 5 On May 20, 2011, the trial court heard the parties' arguments and entered an order granting WSDOT's motion and denying James River's motion. In rendering its decision,the trial court held the arbitration clause was barred by RCW 48.18.200 and RCW 48.15.150. The trial court further held that these statutes were not preempted by the FAA based on “reverse preemption” under the McCarran–Ferguson Act. Because the court rendered the arbitration clauses void, it did not reach the argument raised by WSDOT that the arbitration clauses did not actually become part of the insurance contract between the parties.1 James River appealed and we granted direct review.
1. Do RCW 48.18.200 and RCW 48.15.150 prohibit binding arbitration clauses in surplus line insurance contracts?
2. If so, does the McCarran–Ferguson Act shield RCW 48.18.200 and RCW 48.15.150 from preemption by the FAA?
¶ 6 Statutory interpretation is a question of law that is reviewed de novo. Kruger Clinic Orthopaedics, LLC v. Regence BlueShield, 157 Wash.2d 290, 298, 138 P.3d 936 (2006).
¶ 7 James River argues that the trial court erred in determining that the arbitration clause is unenforceable under RCW 48.18.200(1)(b), which prohibits any agreement in insurance contracts “depriving the courts of this state of the jurisdiction of action against the insurer.” James River argues that an interpretation that arbitration agreements deprive the courts of jurisdiction is contrary to the modern view of arbitration, as well as the historical understanding of arbitration in Washington. It further argues that because the statute does not invalidate agreements to arbitrate, the FAA and the McCarran–Ferguson Act are not implicated. WSDOT responds that the binding arbitration clause in this insurance contract violates RCW 48.18.200 because the clause deprives the court of full jurisdiction to determine the merits of the parties' claims. WSDOT further argues that the federal policy in favor of arbitration expressed in the FAA does not preempt this statute because the McCarran–Ferguson Act protects state laws regulating “the business of insurance” from federal preemption. 15 U.S.C. § 1012(b).
¶ 8 We must first determine whether RCW 48.18.200 renders arbitration agreements in insurance contracts void. RCW 48.18.200 applies to insurance contracts generally and provides:
(1) No insurance contract delivered or issued for delivery in this state and covering subjects located, resident, or to be performed in this state, shall contain any condition, stipulation, or agreement
(a) requiring it to be construed according to the laws of any other state or country except as necessary to meet the requirements of the motor vehicle financial responsibility laws of such other state or country; or
(b) depriving the courts of this state of the jurisdiction of action against the insurer; or
(c) limiting right of action against the insurer to a period of less than one year from the time when the cause of action accrues in connection with all insurances other than property and marine and transportation insurances. In contracts of property insurance, or of marine and transportation insurance, such limitation shall not be to a period of less than one year from the date of the loss.
(2) Any such condition, stipulation, or agreement in violation of this section shall be void, but such voiding shall not affect the validity of the other provisions of the contract.
RCW 48.18.200 (emphasis added). This case primarily raises an issue of statutory interpretation. Our objective when interpreting a statute is to discern and implement the intent of the legislature. We first attempt to discern the plain meaning of the statute. If a statute is ambiguous, we resort to statutory construction, legislative history, and relevant case law in order to resolve the ambiguity. Anthis v. Copland, 173 Wash.2d 752, 756, 270 P.3d 574 (2012).
¶ 9 Here, both parties agree that the term “jurisdiction” is susceptible to multiple meanings. Also, as WSDOT points out, the term “action” is context sensitive where it relates to arbitration. Br. of Resp't at 10. Thus, the meaning of RCW 48.18.200(1)(b) prohibiting agreements “depriving the courts of this state of the jurisdiction of action against the insurer” is seemingly susceptible to multiple meanings. One meaning, as suggested by WSDOT, is that this is an antiarbitration provision. WSDOT suggests that the legislature intended to prohibit mandatory binding arbitration clauses in insurance contracts because such agreements deprive Washington policyholders of the right to bring an original action against the insurer in the courts of this state. Another meaning, as suggested by James River, is that this is a forum selection provision. James River suggests that the legislature intended to prohibit forum selection clauses in insurance contracts that designate a forum outside the state as the sole forum for actions against the insurer because such agreements deprive Washington policyholders of the right to bring an action against the insurer in the courts of this state.
¶ 10 A review of the case law surrounding the period when the statute was first enacted in 1911 and later revised in 1947 is not particularly helpful in determining the legislative intent.2 James River argues that the statutory provision is not an antiarbitration provision because the legislature did not view arbitration as depriving the courts of “jurisdiction” when it adopted RCW 48.18.200. Rather, James River contends that the notion that arbitration “deprives courts of jurisdiction” is rooted in judicial hostility to common law arbitration. It further argues that...
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