United Ins. v. Office of Ins. Regulation

• Decision Date: 30 June 2008
• Docket Number: No. 1D07-4059.,1D07-4059.
• Citation: 985 So.2d 665
• Parties: UNITED INSURANCE COMPANY OF AMERICA, Appellant, v. OFFICE OF INSURANCE REGULATION, State Of Florida, Appellee.
• Court: Florida District Court of Appeals

985 So.2d 665

UNITED INSURANCE COMPANY OF AMERICA, Appellant, v. OFFICE OF INSURANCE REGULATION, State Of Florida, Appellee.

No. 1D07-4059.

District Court of Appeal of Florida, First District.

June 30, 2008.

J. Riley Davis of Akerman Senterfitt, Tallahassee, for Appellant.

S. Marc Herskovitz, Division of Legal Services, Office of Insurance Regulation, Tallahassee, for Appellee.

BARFIELD, J.

United Insurance Company of America (United) appeals a final order of the Florida Office of Insurance Regulation denying its application to include a mandatory arbitration agreement within its life insurance contracts. We affirm.

United sells life insurance in Florida. On March 1, 2006, United sought to amend its approved life insurance contract by adding an arbitration provision. The request was disapproved by the Office of Insurance Regulation, pursuant to sections 627.411(1)(a) and (b), Florida Statutes. The Office of Insurance Regulation concluded the proposed arbitration agreement did not comply with sections 624.155, 627.428(1), and 627.455, Florida Statutes. The Office of Insurance Regulation also determined the arbitration agreement contained inconsistent or ambiguous clauses, or exceptions and conditions which deceptively affected the risk purported to be assumed in the general coverage of the contract.

The right to resolve any dispute through binding arbitration is established under the provisions of the Federal Arbitration Act, 9 U.S.C. §§ 1-16. Typically, federal enactments take precedence over, or preempt, state laws by virtue of the Supremacy Clause found in Article VI, Clause 2, of the United States Constitution. With respect to the business of insurance, Congress has evidenced its determination that the business of insurance is the exclusive province of the individual states through enactment of the McCarran-Ferguson Act. 15 U.S.C. §§ 1011-1015. This is known as "reverse preemption." Accordingly, "state laws enacted `for the purpose of regulating the business of insurance' do not yield to conflicting federal statutes unless the federal statute itself `specifically relates to the business of insurance.' See 15 U.S.C.A. § 1012(b)." James Mitchell & Co. v. Fla. Dep't of Ins., 679 So.2d 334, 337 (Fla. 1st DCA 1996). In other words, a three-prong test has been established to determine whether the McCarran-Ferguson Act applies in any particular situation: (i) whether the federal law relates specifically to the insurance business to bar the application of a state statute; (ii) whether the state statute was specifically enacted to regulate the insurance business; and (iii) whether the state statute would be impaired, invalidated, or superseded by application of the federal law. Moore v. Liberty Nat'l Life Ins. Co., 267 F.3d 1209 (11th Cir.2001).

The parties agree that the Federal Arbitration Act does not specifically relate to the business of insurance. We reject United's argument that section 624.155, Florida Statutes, was not enacted to regulate the business of insurance and that this provision would not be impaired, invalidated or superseded by application of the Federal Arbitration Act and United's proposed arbitration agreement.¹

In Securities and Exchange Commission v. National Securities, Inc., 393 U.S. 453, 89 S.Ct. 564, 21 L.Ed.2d 668 (1969), the Court considered the intent of Congress and the meaning of the language in the McCarran-Ferguson Act regarding laws "regulating the business of insurance." Justice Marshall, for the majority of the Supreme Court, stated:

The statute did not purport to make the States supreme in regulating all the activities of insurance companies; its language refers not to the persons or companies who are subject to state regulation, but to laws "regulating the business of insurance." Insurance companies may do many things which are subject to paramount federal regulation; only when they are engaged in the `business of insurance' does the statute apply. Certainly the fixing of rates is part of this business; that is what South-Eastern Underwriters was all about. The selling and advertising of policies, FTC v. National Casualty Co., 357 U.S. 560, 78 S.Ct. 1260, 2 L.Ed.2d 1540 (1958), and the licensing of companies and their agents, cf. Robertson v. People of State of California, 328 U.S. 440, 66 S.Ct. 1160, 90 L.Ed. 1366 (1946), are also within the scope of the statute. Congress was concerned with the type of state regulation that centers around the contract of insurance, the transaction which Paul v. Virginia [75 U.S. (8 Wall.) 168, 19 L.Ed. 357 (1868)] held was not `commerce.' The relationship between insurer and insured, the type of policy which could be issued, its reliability, interpretation, and enforcement-these were the core of the `business of insurance.' Undoubtedly, other activities of insurance companies relate so closely to their status as reliable insurers that they to (sic) must be placed in the same class. But whatever the exact scope of the statutory term, it is clear where the focus was-it was on the relationship between the insurance company and the policyholder. Statutes aimed at protecting or regulating this relationship, directly or indirectly are laws regulating the `business of insurance.'"

393 U.S. at 459-460, 89 S.Ct. 564. (Emphasis added).

Section 624.155(1)(a), Florida Statutes, provides that "[a]ny person may bring a civil action against an insured when such person is damaged" by a violation by the insurer of certain statutory provisions.² Section 624.155(1)(b) provides that any person may bring a civil action against an insurer when such person is damaged by the insurer not attempting to settle claims in good faith, failing to promptly settle claims, or making claims payments not accompanied by a statement setting forth the coverage under which payments are being made. Section 624.155(4) provides: "Upon adverse adjudication at trial or upon appeal, the authorized insurer shall be liable for damages, together with court costs and reasonable attorney's fees incurred by the plaintiff."

Section 624.155 is a statute regulating the business of insurance. The statute relates, directly or indirectly, to the relationship between the insurance company and the policyholder. The proposed arbitration agreement would impair, invalidate or supersede section 624.155. The statute provides for a civil action — with the relevant procedural protections. The statute also provides for court costs and fees. Mandatory binding arbitration lacks the procedural and constitutional protections (such as jury and appeal to an ...