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This opinion is uncorrected and subject to revision before

publication in the New York Reports.

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No. 8 

In the Matter of Monarch 

Consulting, Inc., et al.,

 Respondents,

 v.

National Union Fire Insurance 

Company of Pittsburgh, PA,

 Appellant.

---------------------------------

In the Matter of National Union 

Fire Insurance Company of 

Pittsburgh, PA,

 Appellant,

 v.

Priority Business Services, Inc., 

formerly known as Inland Valley 

Staffing Services, &c.,

 Respondent.

---------------------------------

In the Matter of National Union 

Fire Insurance Company of 

Pittsburgh, PA,

 Appellant,

 v.

Source One Staffing, LLC.,

 Respondent.

Peter D. Keisler, for appellant.

Jeffrey E. Glen, for respondents.

United Policyholders; Dave Jones, amici curiae.

STEIN, J.:

In order to resolve whether the parties' disputes

pertaining to certain workers' compensation insurance Payment

Agreements should be submitted to arbitration, we must make a

threshold determination of whether the McCarran-Ferguson Act (15

USC § 1011 et seq.) precludes application of the Federal

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Arbitration Act (9 USC § 1 et seq. [FAA]) in relation to

California Insurance Code § 11658. We conclude that, because

application of the FAA does not "invalidate, impair, or

supersede" (15 USC § 1012 [b]) section 11658, the McCarranFerguson Act is not implicated, and the FAA applies to the

parties' Payment Agreements. Further, under FAA rules of

severability, the question of the enforceability of the Payment

Agreements and the arbitration clauses contained therein should

be submitted to arbitration. We, therefore, reverse the

Appellate Division order.

I.

Three statutes are at the crux of this dispute -- the

FAA, the McCarran-Ferguson Act, and California Insurance Code §

11658. 

The Federal Arbitration Act

The FAA was enacted by Congress "in response to

widespread judicial hostility to arbitration" (American Express

Co. v Italian Colors Restaurant, 570 US ___, ___, 133 S Ct 2304,

2308-2309 [2013]), and it aims to "ensure judicial enforcement of

privately made agreements to arbitrate" (Dean Witter Reynolds,

Inc. v Byrd, 470 US 213, 219 [1985]). Under the FAA, an

arbitration provision contained in any contract involved in

interstate commerce "shall be valid, irrevocable, and

enforceable, save upon such grounds as exist at law or in equity

for the revocation of any contract" (9 USC § 2). "This text

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reflects the overarching principle that arbitration is a matter

of contract" and, "consistent with that text, courts must

'rigorously enforce' arbitration agreements according to their

terms" (American Express Co., 570 US at ___, 133 S Ct at 2309,

quoting Dean Witter Reynolds Inc., 470 US at 221; see

Rent-A-Center, West, Inc. v Jackson, 561 US 63, 67 [2010]). 

Typically, "the FAA pre[e]mpts state laws [that] 'require a

judicial forum for the resolution of claims which the contracting

parties agreed to resolve by arbitration'" (Volt Information

Sciences, Inc. v Board of Trustees of Leland Stanford Jr. Univ.,

489 US 468, 478-479 [1989], quoting Southland Corp. v Keating,

465 US 1, 10 [1984]; see Preston v Ferrer, 552 US 346, 349-350

[2008]; Allied-Bruce Terminix Cos. v Dobson, 513 US 265, 272

[1995]). 

The McCarran-Ferguson Act

In certain circumstances, however, the

McCarran-Ferguson Act exempts state laws from FAA preemption (see

15 USC § 1012 [b]; see generally CompuCredit Corp. v Greenwood,

565 US ___, ___, 132 S Ct 665, 669 [2012]). In 1944, the United

States Supreme Court held that the federal government has the

power, under the Commerce Clause, to regulate the insurance

industry (see United States v South-Eastern Underwriters Assn.,

322 US 533, 553 [1944]). Prompted by concern that the Supreme

Court's ruling in South-Eastern Underwriters would interfere with

state regulation of the business of insurance, Congress enacted

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the McCarran-Ferguson Act to limit congressional preemption in

that arena (see Humana Inc. v Forsyth, 525 US 299, 306 [1999];

Department of Treasury v Fabe, 508 US 491, 500 [1993]). The

McCarran-Ferguson Act declared that "the continued regulation and

taxation by the several States of the business of insurance is in

the public interest, and . . . silence on the part of the

Congress shall not be construed to impose any barrier to the

regulation or taxation of such business by the several States"

(15 USC § 1011). Thus, under the McCarran-Ferguson Act, "[n]o

Act of Congress shall be construed to invalidate, impair, or

supersede any law enacted by any State for the purpose of

regulating the business of insurance . . . unless such Act

specifically relates to the business of insurance" (15 USC § 1012

[b]). Stated otherwise, "when Congress enacts a law specifically

relating to the business of insurance, that law controls," but

the McCarran-Ferguson Act precludes application of -- or, in

other words, reverse preempts -- a federal law in the face of a

state law regulating the business of insurance where "the federal

measure does not 'specifically relat[e] to the business of

insurance,' and would 'invalidate, impair, or supersede' the

State's law" (Humana Inc., 525 US at 306, 307, quoting Department

of Treasury, 508 US at 501; see 15 USC § 1012 [b]). 

California Insurance Code § 11658

California law requires most employers to maintain

workers' compensation insurance (see Cal Lab Code § 3700). The

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insurers that provide workers' compensation coverage to employers

are regulated by the California Department of Insurance (the

Department), its Commissioner, and the Workers' Compensation

Insurance Rating Bureau of California (WCIRB) (see Cal Ins Code

§§ 11750.3, 11751, 12921). The WCIRB, among other things,

provides statistics and rating information, formulates rules and

regulations in connection with insurance rates, and "examine[s]

policies, daily reports, endorsements or other evidences of

insurance for the purpose of ascertaining whether they comply

with the provisions of law and . . . make[s] reasonable rules

governing their submission" (Cal Ins Code § 11750.3 [e]; see Cal

Ins Code § 11750.3 [a] - [d]). 

Of particular relevance here, under California

Insurance Code § 11658 (a), 

"[a] workers' compensation insurance policy

or endorsement shall not be issued by an

insurer to any person in [California] unless

the insurer files a copy of the form or

endorsement with the rating organization

[WCIRB] . . . and 30 days have expired from

the date the form or endorsement is received

by the commissioner from the rating

organization without notice from the

commissioner." 

In other words, workers' compensation insurers must file copies

of their policies, endorsements, and forms with the WCIRB prior

to issuing the policies; after performing an initial review, the

WCIRB sends the policies to the Department for the Commissioner's

review (see Cal Ins Code § 11750.3 [e]; Cal Code Regs, tit 10 §§

2218, 2509.30; see also Cal Ins Code § 11735). If, within 30

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days, the Commissioner rejects a policy, form, or endorsement as

failing to comply with the requirements of the Insurance Law, "it

is unlawful for the insurer to issue any policy or endorsement in

that form" (Cal Ins Code § 11658 [b]). California regulations

also provide that "[n]o collateral agreements modifying the

obligation of either the insured or the insurer shall be made

unless attached to and made a part of the policy" (Cal Code Regs,

tit 10 § 2268). 

Sometime before 2011, the Department became aware that

workers' compensation insurers were entering into agreements with

their insureds after the initial policy agreements, and that

these subsequent agreements were not being filed with the WCIRB

or the Department. As reflected in a February 2011 letter

written by a Department staff attorney to the president of the

WCIRB, the Department took the position that these agreements

were required by law to be filed with the State. The Department

also expressed its view that arbitration provisions contained in

unfiled agreements may be considered unenforceable absent proof

that the insured expressly agreed to arbitration when it

initially entered into the policy agreement. 

In apparent accordance with that view, in 2011, the

California Legislature enacted California Insurance Code §

11658.5 (see Stats 2011, ch 566 [S.B.684], § 2). That statute

provides that arbitration provisions in workers' compensation

policies or endorsements must be disclosed to each potential

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insured contemporaneously with any quote for insurance coverage,

together with a notice that choice of law or venue and forumselection clauses in the policies may dictate a jurisdiction

other than California, and that such terms are negotiable (see

Cal Ins Code § 11658.5 [a] [1]). If the insurer fails to comply

with the disclosure requirements, the remedy is "a default to

California as the choice of law and forum for resolution of

disputes arising in California" (Cal Ins Code § 11658.5 [c]). 

Critically, however, this section applies only to insurance

policies "issued or renewed on or after July 1, 2012" (Cal Ins

Code § 11658.5 [e]). Prior to the enactment of section 11658.5,

and during all times relevant to this appeal, the California

Insurance Code and regulations were silent with respect to

arbitration provisions in workers' compensation insurance

policies and endorsements.

II.

Turning to the facts of the appeal before us, National

Union Fire Insurance Company of Pittsburgh, Pennsylvania, is an

insurance company licensed in Pennsylvania, with its principal

place of business in New York. At various times between 2003 and

2010, National Union issued workers' compensation policies to

three different California-based employers -- Monarch Consulting,

Inc.,1

 Priority Business Services, Inc., and Source One Staffing,

1

 Monarch Consulting Inc., as referenced herein, includes

Elite Management, Inc., Brentwood Television Funnies, Inc.,

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LLC. After the execution of the policies -- which were filed

with the WCIRB and the Commissioner of Insurance without

objection -- National Union and the insureds, respectively,

entered into various "Payment Agreements." In accordance with

the Agreements, National Union would extend credit to the

insureds by deferring payments due under the policies in return

for the provision of collateral on behalf of the insureds. The

Payment Agreements set forth the particulars of that arrangement

and what would occur in the event of a default. National Union

concedes that these Payment Agreements were never filed with the

State of California. Nevertheless, the parties operated under

the Agreements for several years. 

Central to this dispute, the Payment Agreements

contained arbitration clauses requiring that disputes arising out

of the Agreements, if not resolved internally, be submitted to

arbitration before a panel of three arbitrators with certain

qualifications and experience in the insurance industry. 

Significantly, the parties agreed that the arbitrators would

"have exclusive jurisdiction over the entire matter in dispute,

including any question as to its arbitrability." The Payment

Agreements and Addenda required that court proceedings concerning

Professional Employer Options, Inc., Recurrent Software

Solutions, Ahill, Inc., The Accounting Group, LLC, and PES

Payroll, IA Inc. 

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arbitration be commenced in New York.2

By early 2011, disputes arose between National Union

and each of the insureds under the Payment Agreements. 

Ultimately, three separate proceedings were initiated in Supreme

Court, involving a petition or cross petition by National Union

to compel arbitration in each case, and a petition by Monarch

Consulting to stay arbitration. In the Monarch Consulting and

Priority Business proceedings, Supreme Court granted National

Union's petitions to compel arbitration and denied Monarch

Consulting's petition to stay arbitration. In the Source One

matter, Supreme Court denied National Union's petition to compel

arbitration, and held that the Payment Agreements were

unenforceable.

National Union, Monarch Consulting, and Priority

Business appealed their respective adverse orders. Consolidating

the appeals, the Appellate Division, with two Justices

dissenting, reversed the orders compelling Monarch Consulting and

Priority Business to arbitrate, and affirmed the order denying

arbitration in the Source One matter (123 AD3d 51, 54 [1st Dept

2014]). The Appellate Division majority determined that, under

California law, National Union was required to file the Payment

Agreements with the State and that the appropriate penalty for

its failure to do so was to decline to enforce the arbitration

2

 No party to this appeal raises any challenge to the

jurisdiction of New York courts.

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provisions. In the majority's view, this result did not

contravene the FAA because the McCarran-Ferguson Act precluded

its application inasmuch as requiring arbitration would impair

and undermine the goals of California Insurance Code § 11658.

The dissenting Justices would have compelled

arbitration in each case. The dissent posited that the

McCarran-Ferguson Act did not reverse preempt the FAA because the

California Insurance Code did not regulate the use of arbitration

clauses in workers' compensation insurance policies and

endorsements and, consequently, application of the FAA would not

"impair" California law (id. at 79 [Gische, J. dissenting]. In

addition, the dissent would have held that, under the FAA, the

arbitrators, not the court, should determine whether the Payment

Agreements were required to be filed -- and any consequences for

National Union's failure to do so -- because the insureds

challenged the arbitration clauses on a ground that would

invalidate the Payment Agreements in their entirety.

National Union now appeals to this Court as of right

(see CPLR 5601 [a]). Echoing the views of the dissent below,

National Union argues that the McCarran-Ferguson Act does not

reverse preempt the FAA -- which National Union contends would

mandate arbitration -- because application of the FAA does not

interfere with, or undermine, California Insurance Code § 11658. 

Assuming we agree, National Union further asserts that the

insureds' challenge to the enforceability of the Payment

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Agreements is premised upon the validity of those Agreements as a

whole and, therefore, must be determined by arbitration.

In response, the insureds -- joined by the California

Commissioner of Insurance as amicus curiae -- argue that the

Payment Agreements and the arbitration clauses are illegal and

unenforceable because National Union failed to file them in

accordance with California Insurance Code § 11658. The insureds

contend that compelling arbitration pursuant to an arbitration

clause in an unfiled insurance agreement would undermine the

California filing statute and, consequently, the McCarranFerguson Act reverse preempts the FAA. Thus, the insureds argue,

the courts may decline to enforce the arbitration provisions in

the Payment Agreements. The insureds also claim that, even if

the FAA applies, the question of whether the arbitration

provisions are enforceable is one for the courts, not

arbitrators, to decide. 

III. 

To resolve the parties' contentions, we must first

determine whether the McCarran-Ferguson Act reverse preempts the

FAA. The relevant analysis is a three-part test, pursuant to

which the McCarran-Ferguson Act applies if: (1) the federal

statute in question does not specifically relate to insurance;

(2) the state law at issue was enacted to regulate the business

of insurance; and (3) the federal statute at issue would

invalidate, impair, or supersede the state law (see 15 USC § 1012

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[b]; Humana Inc., 525 US at 307). Here, the first two prongs of

this test are satisfied -- namely, the FAA does not specifically

relate to insurance (see Kong v Allied Professional Ins. Co., 750

F3d 1295, 1303 [11th Cir 2014]; Munich American Reins. Co. v

Crawford, 141 F3d 585, 590 [5th Cir 1998]; Stephens v American

Intl. Ins. Co., 66 F3d 41, 44 [2d Cir 1995]) and California

Insurance Code § 11658 was enacted to regulate the business of

insurance (see generally Rush Prudential HMO, Inc. v Moran, 536

US 355, 373 [2002]; Union Labor Life Ins. Co. v Pireno, 458 US

119, 129 [1982]). Thus, whether the McCarran-Ferguson Act

applies turns on whether application of the FAA -- assuming that

it would mandate arbitration here -- would "invalidate, impair,

or supersede" California Insurance Code § 11658 (15 USC § 1012

[b]).

As the Supreme Court explained in Humana Inc., "[t]he

term 'invalidate' ordinarily means 'to render ineffective,

generally without providing a replacement rule or law'" and "the

term 'supersede' ordinarily means 'to displace (and thus render

ineffective) while providing a substitute rule'" (525 US at 307

[internal citations omitted]). The Supreme Court has interpreted

the term "impair" more broadly to mean "'[t]o weaken, to make

worse, to lessen in power, diminish, or relax, or otherwise

affect in an injurious manner'" (id. at 309-310, quoting Black's

Law Dictionary 752 [6th ed. 1990]). Although the term "impair"

broadens the reach of the McCarran-Ferguson Act beyond federal

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statutes that directly conflict with a state law regulating

insurance, "when application of the federal law would not

frustrate any declared state policy or interfere with a State's

administrative regime, the McCarran-Ferguson Act does not

preclude its application" (id. at 310). 

Applying the above definitions here, the McCarranFerguson Act does not reverse preempt the FAA with respect to

California Insurance Code § 11658. This is so because neither

section 11658 -- nor any other California law which has been

brought to our attention -- would be invalidated, superceded or

impaired by application of the FAA inasmuch as California law did

not, at the relevant times, prohibit, limit, or regulate the use

or form of arbitration clauses in insurance contracts. The

clearest example of a scenario in which reverse preemption occurs

is where state law expressly prohibits arbitration of insurance

related disputes (see e.g. McKnight v Chicago Title Ins. Co.,

Inc., 358 F3d 854, 857-589 [11th Cir 2004]; Standard Sec. Life

Ins. Co. of New York v West, 267 F3d 821, 823 [8th Cir 2001];

Mutual Reins. Bureau v Great Plains Mut. Ins. Co., Inc., 969 F2d

931, 935 [10th Cir 1992]; see also Stephens, 66 F3d at 42). As

noted previously, at the times in question here, California law

did not -- and still does not -- prohibit arbitration in the

insurance context. Nor have the parties alerted us to any

California statutes or regulations granting that state's courts

or administrative agencies exclusive jurisdiction over insurance

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disputes (compare State Dept. of Transp. v James River Ins. Co.,

176 Wash 2d 390, 400, 292 P3d 118, 123 [2013]; Washburn v

Corcoran, 643 F Supp 554, 556 [SD NY 1986]). 

As the insureds point out, California courts have

consistently found the FAA to be reverse preempted by the

McCarran-Ferguson Act with respect to arbitration agreements in

health care service plans (see Zolezzi v PacifiCare of

California, 105 Cal App 4th 573, 588 n 11 [Cal Ct App 2003];

Imbler v PacifiCare of California, Inc., 103 Cal App 4th 567, 573

[Cal Ct App 2002]; Smith v PacifiCare Behavioral Health of

California, Inc., 93 Cal App 4th 139, 143 [Cal Ct App 2001]). 

However, the result in those cases was compelled by the existence

of a California statute mandating that certain disclosures be

contained in arbitration provisions in health care plans (see Cal

Health & Saf Code § 1363.1). Thus, in those cases, application

of the FAA would have "absolutely preclude[d]" enforcement of the

statute "to regulate the wording and organization of . . .

arbitration clauses" (Imbler, 103 Cal App 4th at 573; see Cal

Health & Saf. Code § 1363.1; Smith, 93 Cal App 4th at 143). By

contrast, in the workers' compensation insurance context,

California insurance law did not mandate a specific form or

content of arbitration clauses, or otherwise restrict their use.3

Moreover, although California Insurance Code § 11658

3 We express no opinion as to whether a different result

would be compelled in a case implicating the later-enacted

California Insurance Code § 11658.5.

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may have required the filing of the Payment Agreements, the

purpose of the filing rule is to ensure that the insurance

documents comply with the Insurance Code and accompanying

regulations -- none of which pertained to the use or form of

arbitration provisions. Neither the goal of the statute nor its

administrative scheme is undermined by applying the FAA. Should

the FAA mandate arbitration, the arbitrators can competently

determine the question of whether the Payment Agreements,

generally, and the arbitration provisions, specifically, are

enforceable under California law despite the fact that they were

not filed with the state. 

We disagree with the insureds' assertion that

application of the FAA would undercut the Department's authority

to review insurance agreements and incentivize violations of the

filing requirement. Significantly, the determination of whether

California Insurance Code § 11658 applies to the Payment

Agreements -- and, if so, the consequences of the failure to file

them -- will be made pursuant to California law regardless of

whether arbitration is compelled. Further, whether this issue is

resolved by a court or by arbitrators, the question of whether

the failure to file invalidates the Payment Agreements will not

be determined by the Department, itself. However, should it be

so inclined, the Department may pursue an enforcement action

against National Union. Thus, permitting arbitration will not

undermine the authority of the WCIRB or the Commissioner (cf.

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Preston, 552 US at 358 [rejecting argument that arbitration of

private dispute would undermine role of agency in enforcing

statute]).4 Rather, the insureds' contention that permitting

arbitration would somehow frustrate the filing requirement or

allow National Union to escape the consequences of its failure to

comply with section 11658 is based on nothing more than their

apparent hostility to arbitration. 

Our conclusion that the McCarran-Ferguson Act does not

reverse preempt the FAA is supported by the weight of the

relevant precedent. At least two courts in California have held

that the McCarran-Ferguson Act is not triggered by the

interaction between the FAA and California Insurance Code § 11658

with respect to arbitration agreements in unfiled insurance

documents because the California Insurance Code "does not address

the topic of arbitration or provide a procedural framework for

resolution of disputes" (Grove Lumber & Bldg. Supply, Inc. v

Argonaut Ins. Co., 2008 WL 2705169, *7 [CD Cal July 7, 2008]; see

Adir Intl. LLC v Travelers Indemnity Co. of Connecticut, No.

4 Indeed, the California Department of Insurance instituted

an enforcement action against Zurich American Insurance Company

and Zurich American Insurance Company of Illinois alleging

similar violations of California Insurance Code § 11658 by

Zurich's failure to file certain "Deductible Agreements." That

action was settled in 2013 with no penalties or admissions of

wrongdoing. Zurich agreed to submit future Deductible Agreements

to the Department of Insurance and allow insureds a one-time opt

out of the arbitration provisions in the Agreements for certain

disputes. The Settlement Agreement did not, however, prohibit

the use of arbitration clauses in filed agreements in the future. 

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BC575513 [Cal Super. Ct, August, 21, 2015]). Likewise, the

District Court of the Southern District of New York has held that

the McCarran-Ferguson Act does not reverse preempt the FAA in

relation to California Insurance Code § 11658 because the state

law and the FAA "address completely different matters" (Matter of

Arbitration Between Nat. Union Fire Ins. Co. of Pittsburgh, P.A.

v Personnel Plus, Inc., 954 F Supp 2d 239, 248 [SD NY 2013]). 

The Eighth Circuit reached a similar conclusion in a dispute

involving a filing requirement contained in Texas insurance laws,

holding that the enforceability of the unfiled agreement was a

question of the underlying merits and the Texas insurance laws

were not impaired by enforcement of the agreement to arbitrate

(see St. Paul Fire and Marine Ins. Co. v Courtney Enterprises,

Inc., 270 F3d 621, 625 [8th Cir 2001]; see also American Heritage

Life Ins. Co. v Orr, 294 F3d 702, 709 [5th Cir 2002]). We find

these cases to be persuasive, and the insureds' reliance to the

contrary on the unpublished decision in Ceradyne, Inc. v Argonaut

Ins. Co. to be unavailing in light of that court's focus on the

merits of the parties' substantive arguments and its failure to

address the applicability of the McCarran-Ferguson Act (2009 WL

1526071, *11 [Cal Ct App June 2, 2009]; see also American Zurich

Ins. Co. v Country Villa Serv. Corp., 2015 WL 4163008, *16 [CD

Cal July 9, 2015]). 

Accordingly, we hold that the McCarran-Ferguson Act

does not prevent application of the FAA to the Payment Agreements

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at issue in this case. 

IV.

We must next address whether, under the FAA, the

enforceability of the Payment Agreements and their arbitration

clauses is a question that should be resolved by arbitrators, or

by the court. 

"'[A]rbitration is a matter of contract and a party

cannot be required to submit to arbitration any dispute which he

[or she] has not agreed so to submit'" (AT&T Technologies, Inc. v

Communications Workers, 475 US 643, 648 [1986], quoting United

Steelworkers v Warrior & Gulf Nav. Co., 363 US 574, 582 [1960];

see First Options of Chicago, Inc. v Kaplan, 514 US 938, 943

[1995]). As the United States Supreme Court has stated,

"[c]hallenges to the validity of arbitration agreements . . . can

be divided into two types," namely, "challenges specifically [to]

the validity of the agreement to arbitrate" and "challenges [to]

the contract as a whole, either on a ground that directly affects

the entire agreement (e.g., the agreement was fraudulently

induced), or on the ground that the illegality of one of the

contract's provisions renders the whole contract invalid"

(Buckeye Check Cashing, Inc. v Cardegna, 546 US 440, 444 [2006]). 

"[A]ttacks on the validity of the contract, as distinct from

attacks on the validity of the arbitration clause[,] itself, are

to be resolved 'by the arbitrator in the first instance, not by a

federal or state court'" (Nitro-Lift Technologies, L.L.C. v.

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Howard, 568 US ___, ___, 133 S Ct 500, 503 [2012], quoting

Preston, 552 US at 349; see Buckeye Check Cashing, Inc., 546 US

at 444; Prima Paint Corp. v Flood & Conklin Mfg. Co., 388 US 395,

403-404 [1967]). 

The Supreme Court has also held that arbitration

agreements must be enforced according to their terms, and that

"parties can agree to arbitrate 'gateway' questions of

'arbitrability'" (Rent-A-Center, West, Inc. , 561 US at 68-69;

see Nitro-Lift Technologies, L.L.C., 568 US at ___, 133 S Ct at

503; Buckeye Check Cashing, Inc., 546 US at 445). Such

"delegation clauses" are enforceable where "there is 'clea[r] and

unmistakabl[e]' evidence" that the parties intended to arbitrate

arbitrability issues (First Options of Chicago, Inc., 514 US at

944, quoting AT&T Technologies, Inc., 475 US at 649). "When

deciding whether the parties agreed to arbitrate a certain matter

(including arbitrability), courts generally . . . should apply

ordinary state-law principles that govern the formation of

contracts" (First Options of Chicago, Inc., 514 US at 944).

Further, "courts treat an arbitration clause as

severable from the contract in which it appears and enforce it

according to its terms unless the party resisting arbitration

specifically challenges the enforceability of the arbitration

clause itself" (Granite Rock Co. v Teamsters, 561 US 287, 301

[2010]; see Nitro-Lift Technologies, L.L.C., 568 US at ___, 133 S

Ct at 503; Rent-A-Center, West, Inc., 561 US at 71; Buckeye Check

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Cashing, Inc., 546 US at 445). This rule of severability extends

to delegation clauses, which are severable from larger

arbitration provisions (see Rent-A-Center, West, Inc., 561 US at

71-72; Parnell v CashCall, Inc., 804 F3d 1142, 1146 [11th Cir

2015]; Brennan v Opus Bank, 796 F3d 1125, 1133 [9th Cir 2015]). 

Thus, where a contract contains a valid delegation to the

arbitrator of the power to determine arbitrability, such a clause

will be enforced absent a specific challenge to the delegation

clause by the party resisting arbitration (see Rent-A-Center,

West, Inc., 561 US at 71-72).

Here, the crux of the insureds' challenge to the

arbitration provisions is that National Union's failure to file

the Payment Agreements in accordance with California Insurance

Code § 11658 renders unenforceable the Payment Agreements and,

only by extension, the arbitration provisions. National Union

argues that this is, at its core, a challenge to the Payment

Agreements, not to the arbitration provisions, and, therefore, is

a matter for the arbitrator to decide. Regardless of whether the

insureds sufficiently directed their attack to the arbitration

provisions, a review of the record reveals that they did not

specifically direct any challenge to the delegation clauses

empowering the arbitrators to determine gateway questions of

arbitrability (see Rent-A-Center, West, Inc., 561 US at 71-72). 

Those delegation provisions, which state that the arbitrators

"have exclusive jurisdiction over the entire matter in dispute,

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including any question as to its arbitrability," are valid

because the parties "clearly and unmistakably" agreed to

arbitrate arbitrability (AT&T Technologies, Inc., 475 US at 649;

see First Options of Chicago, Inc., 514 US at 944; Malone v

Superior Ct., 226 Cal App 4th 1551, 1560 [Cal Ct App 2014];

Gilbert St. Developers, LLC v La Quinta Homes, LLC, 174 Cal App

4th 1185, 1192 [Cal Ct App 2009]). As the delegation clauses are

severable from the remainder of the agreements to arbitrate, we

must enforce them according to their terms and, under these

circumstances, the question of arbitrability is one for the

arbitrators (see Rent-A-Center, West, Inc., 561 US at 71-72).

IV.

In sum, we hold that the FAA applies to the Payment

Agreements because it does not "invalidate, impair, or supersede"

the California Insurance Code or any insurance regulations and,

consequently, the McCarran-Ferguson Act is not triggered (15 USC

§ 1012 [b]). Further, because the parties clearly and

unmistakably delegated the question of arbitrability and

enforceability of the arbitration clauses to the arbitrators --

in provisions that were not specifically challenged by the

insureds -- the FAA mandates that the arbitration provisions be

enforced as written. We, therefore, express no view on whether

National Union's failure to file the Payment Agreements rendered

the arbitration clauses unenforceable, because that question

should be determined by the arbitrators pursuant to the FAA and

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the parties' agreements to arbitrate arbitrability (see AT&T

Technologies, Inc., 475 US at 649). 

The insureds' remaining arguments are unpersuasive.

Accordingly, the order of the Appellate Division should be

reversed, with costs. In the first captioned proceeding, Monarch

Consulting's petition to stay arbitration should be denied and

National Union's cross petition to compel arbitration should be

granted. In the second and third captioned proceedings, National

Union's petitions to compel arbitration should be granted. 

* * * * * * * * * * * * * * * * *

Order reversed, with costs, and (1) in Matter of Monarch

Consulting, Inc. v National Union Fire Insurance Company of

Pittsburgh, PA, petition to stay arbitration denied and cross

petition to compel arbitration granted; (2) in Matter of National

Union Fire Insurance Company of Pittsburgh, PA v Priority

Business Services, Inc., petition to compel arbitration granted;

and (3) in Matter of National Union Fire Insurance Company of

Pittsburgh, PA v Source One Staffing, LLC, petition to compel

arbitration granted. Opinion by Judge Stein. Judges Pigott,

Rivera, Abdus-Salaam and Fahey concur. Chief Judge DiFiore and

Judge Garcia took no part.

Decided February 18, 2016

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