Opinion ID: 1791640
Heading Depth: 4
Heading Rank: 2

Heading: Effect of the Inadvertent Approval on the Validity or Enforceability of Policy

Text: ¶ 28. In the initial opinion and order of March 4, 2003, the chancery court based its decision to deny arbitration at least in part on an attorney general's opinion and the MDI's inadvertent approval of Gulf policy forms which mandated arbitration. The chancellor opined: The Court also notes that the Mississippi Attorney General has rendered an official opinion that Mississippi law does not provide that punitive damages can be excluded from insurance policies. Furthermore, it is the policy of the Mississippi Insurance Department not to approve policy forms that mandate arbitration. The policy was inadvertently approved by the Mississippi Insurance Department. Gulf should not benefit by resubmitting a policy provision it has been previously informed was unacceptable but which was erroneously approved by the Mississippi Insurance Department. Lee Harrell, a Deputy Commissioner of Insurance for the State of Mississippi, submitted an affidavit which is part of the record in this case. In this affidavit, Deputy Harrell stated, inter alia, that the MDI had in the past approved Gulf's submission of certain policy forms for a new program of employment related practices liability, and that these forms contained mandatory arbitration provisions. Deputy Harrell, in referring to a prior letter from Commissioner Dale, likewise stated in his affidavit: [I]t had been the policy of the Department of Insurance  and Commissioner Dale's policy as Commissioner of Insurance  not to approve policy forms, policy applications and other documents that provide for mandatory arbitration. Commissioner Dale explained that the approval of Gulf Insurance Company's employment related practices liability form containing a mandatory arbitration provision was the result of inadvertent oversight and it should not have occurred. (emphasis in the original). As already noted, there is also in the record an attorney general's opinion written in response to Commissioner Dale's inquiry as to whether certain insurance policies, including employment-practices liability policies, could exclude coverage for punitive damages under Mississippi law, and if so, would the Commissioner of Insurance have statutory discretion to disapprove policy forms which excluded punitive damages from coverage. In sum, the attorney general's opinion concluded that the Commissioner of Insurance was vested with sufficient [statutory] authority to set Department policy as to whether punitive damage exclusions are permissible. Orr involved an appeal from the United States District Court for the Northern District of Mississippi. The Orr court addressed the effect of an attorney general's opinion or a state official's policy statement on the FAA. The [McCarran-Ferguson] Act bars application of the FAA to insurance contracts only in the context of a state statute evincing the same, not mere policy statements of state officials or administrative rule interpretations of governmental entities. See Miller v. Nat'l Fidelity Life Ins. Co., 588 F.2d 185, 186-87 (5th Cir.1979). The party seeking to avail itself of the Act must demonstrate that application of the FAA would invalidate, impair, or supersede a particular state law that regulates the business of insurance. Id. at 187. The test under McCarran-Ferguson is not whether a state has enacted statutes regulating the business of insurance, but whether such state statutes will be invalidated, impaired, or superseded by the application of federal law. Id. Appellants fail to identify any statute that would be impaired, invalidated, or superseded by the application of the FAA. Instead, Appellants try to perpetrate a judicial end-run by asserting that an attorney general's opinion or insurance department's regulatory, administrative policy is the functional equivalent of a state law relating to insurance, thereby triggering the provisions of the Act. Appellants' arguments are without merit. First, [o]pinions of the Mississippi Attorney General do not have the force of law.... Frazier v. Lowndes County, Mississippi Bd. of Educ., 710 F.2d 1097, 1100 (5th Cir.1983) (citing Local Union No. 845, United Rubber, Cork, Linoleum and Plastic Workers of Am., Home Assoc. v. Lee County Bd. of Supervisors, 369 So.2d 497, 498 (Miss.1979)). Second, because no Mississippi statute addresses, much less prohibits or restricts, arbitration of credit insurance-related claims, disputes or controversies, the Commissioner of Insurance for the State of Mississippi (the Commissioner) is without regulatory authority to prohibit arbitration clauses relating to insurance. (Emphasis in the original). 294 F.3d at 708-09. ¶ 29. It is abundantly clear that it was not the intent of McCarran-Ferguson to reverse-preempt the application of the FAA because it was in conflict with state insurance department policy and an attorney general's opinion. Stated differently, a state insurance department policy and an attorney general's opinion are not state laws which are being invalidated by the application of the FAA. Thus, the learned chancellor erred in relying on the inadvertent approval theory espoused by Neel-Schaffer, and in finding that the Commissioner of Insurance and the Attorney General could disapprove insurance policy forms which included mandatory arbitration provisions. ¶ 30. Notwithstanding our foregoing discussion on the effect of a state department policy on the FAA, we again emphasize that the Mississippi Code provides a specific statutory mechanism for the Commissioner to disapprove a policy form currently in effect. See Miss.Code Ann. § 83-2-11. Even assuming arguendo that state department policy could reverse-preempt the FAA, which it cannot, it is of no moment in today's case because pursuant to the provisions of § 83-2-11, the policy form remained in effect until a hearing and order was entered disapproving the form. The Commissioner only indicated that he planned to initiate the disapproval process and that should such ever be done, it would not limit the enforceability of the form at that time but prohibit future use of the form. ¶ 31. However, the record is void of MDI's initiation of formal proceedings to reverse the inadvertent approval. The Legislature created a procedure in which the MDI could reverse approval of policy forms. In this instance, the MDI chose not to institute such proceedings. Thus until the conclusion of formal reversal proceedings, a policy form previously approved would remain valid and enforceable. Again, based on our finding that today's application of the FAA does not invalidate any state law, the fact that Neel-Schaffer alleges that the MDI policy form approval was inadvertent is of no moment. ¶ 32. Finally, Neel-Schaffer makes several arguments based upon principles of equity, estoppel and unconscionability. These are procedurally barred and without merit. As to substantive unconscionability, this issue is procedurally barred based on the fact that it is raised for the first time during this appeal. [14] ¶ 33. Finally, Neel-Schaffer argues that Gulf should be equitably estopped from attempting to enforce an arbitration clause which it knew was contrary to MDI policy. The doctrine of equitable estoppel requires proof of a belief and reliance on some representation, a change of position as a result of the representation, and detriment or prejudice caused by the change of position. Mound Bayou Sch. Dist. v. Cleveland Sch. Dist., 817 So.2d 578, 583 (Miss.2002). Neel-Schaffer does not address what misrepresentation Gulf made directly to it or how it acted on such misrepresentation. Moreover, Neel-Schaffer fails to reveal to us how it was ultimately prejudiced. This argument is without merit. ¶ 34. For the foregoing reasons, we unhesitatingly find that the arbitration clause contained in Gulf's insurance contract with Neel-Schaffer was valid and enforceable.