Court Follows Fifth Circuit Precedent in Enforcing Unsigned Insurance Arbitration Agreement Under New York Convention

The insured argued that the arbitration agreement at issue was not enforceable under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards because the agreement was not signed by both parties and therefore was not “an agreement in writing” as required by Article II of the Convention. The district court disagreed, relying on Sphere Drake Insurance PLC v. Marine Towing Inc., a Fifth Circuit case decided in 1994, which held that an arbitration agreement need not be signed to qualify as an “agreement in writing.”

The insured argued that the court should “depart from this binding precedent because there have been several developments in both the Fifth Circuit and in other circuit courts of appeal that have undermined Sphere Drake’s reasoning.” The district court, however, declined the insured’s invitation, noting that the court was “duty bound” to apply binding Fifth Circuit precedent “absent an intervening change in the law… by a statutory amendment, or the Supreme Court, or [the Fifth Circuit’s] en banc court.” As there had been no qualifying “intervening change in the law,” the court was required to apply the holding of Sphere Drake and thus found that the insurance contract and arbitration agreement therein constituted a sufficient “agreement in writing” to be enforced under the Convention.

The insured also argued that, if the court compelled the parties to arbitrate, it should issue a ruling that Louisiana law governed the dispute. The court noted that the insured sought to preempt an anticipated argument that the language of the arbitration clause precludes the award of penalties and attorneys’ fees for bad faith claims handling, which awards would be available under Louisiana law. The court again declined, noting that the insured cited no authority for the proposition that it could dictate the law to be applied to a future arbitration proceeding, nor did the insured address the fact that the court’s “limited jurisdiction” at this stage of proceedings was confined to determining the applicability of the Convention to the arbitration clause at issue.

Maxwell Heirsch, Inc. v. Velocity Risk Underwriters, LLC, No. 2:23-cv-00495 (E.D. La. July 26, 2023).