Court Opinion

ID: 9948415
Source: CourtListenerOpinion
Date Created: 2024-03-06 23:00:39.795394+00
Date Added: 2024-06-11T14:29:33.404882
License: Public Domain

Case: 23-30246   Document: 80-1   Page: 1   Date Filed: 03/06/2024

      United States Court of Appeals
           for the Fifth Circuit
                                                           United States Court of Appeals
                                                                    Fifth Circuit

                       ____________                               FILED
                                                              March 6, 2024
                        No. 23-30246                         Lyle W. Cayce
                       ____________                               Clerk

Indian Harbor Insurance Company; QBE Specialty
Insurance Company; Steadfast Insurance Company;
General Security Indemnity Company of Arizona; United
Specialty Insurance Company; Lexington Insurance
Company; HDI Global Specialty SE; Old Republic Union
Insurance Company; GeoVera Specialty Insurance
Company; Transverse Specialty Insurance Company;
Certain Underwriters at Lloyd's London, severally
subscribing to certificate no. AMR-73525,
                                        Plaintiffs—Appellees,

                            versus

Belmont Commons, L.L.C., doing business as 925 Common;
Belmont Delaware, L.L.C.,
                                    Defendants—Appellants.
          ______________________________

Belmont Commons, L.L.C., doing business as 925 Common;
Belmont Delaware, L.L.C.,
                                      Plaintiffs—Appellants,

                           versus

Indian Harbor Insurance Company; QBE Specialty
Insurance Company; Steadfast Insurance Company;
General Security Indemnity Company of Arizona; United
Specialty Insurance Company; Lexington Insurance
Company; Old Republic Union Insurance Company;
 Case: 23-30246            Document: 80-1         Page: 2      Date Filed: 03/06/2024

                                        No. 23-30246

GeoVera Specialty Insurance Company; Transverse
Specialty Insurance Company,
                                Defendants—Appellees,

                    ______________________________

                    Appeal from the United States District Court
                       for the Eastern District of Louisiana
                     USDC Nos. 2:22-CV-3874, 2:22-CV-3876
                    _____________________________

Before Richman, Chief Judge, Stewart, Circuit Judge, and Hanks,
District Judge.*
Per Curiam: **
        In this first-party insurance case, the policyholders seek a partial
reversal of the district court’s order compelling them to arbitrate their claims.
We AFFIRM.
                         PROCEDURAL BACKGROUND
        Belmont Commons L.L.C. and Belmont Delaware L.L.C. (collectively
“Belmont”) own a property (“the property”) that is located near the French
Quarter in New Orleans, Louisiana and consists of luxury apartments, retail
space, and parking. To insure the property against damage caused by named
windstorms, Belmont obtained a surplus lines insurance policy1 (“the

        _____________________
        *
          United States District Judge for the Southern District of Texas, sitting by
designation.
        **
             This opinion is not designated for publication. See 5th Cir. R. 47.5.
        1
          As the Louisiana Department of Insurance has put it, “[s]urplus lines insurance
is an alternative type of property and casualty insurance coverage for consumers who
cannot get coverage in the standard market. Standard insurance companies may choose not
to write policies for specialty risk or high-risk situations such as extremely old homes

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 Case: 23-30246         Document: 80-1         Page: 3      Date Filed: 03/06/2024

                                     No. 23-30246

Policy”) that allocated named windstorm coverage among eleven separate
insurance companies (“the Insurers”). Nine of those insurance companies—
Indian Harbor Insurance Company, QBE Specialty Insurance, Steadfast
Insurance Company, General Security Indemnity Company of Arizona,
United Specialty Insurance Company, Lexington Insurance Company, Old
Republic Union Insurance Company, GeoVera Specialty Insurance
Company, and Transverse Specialty Insurance Company—are domiciled in
the United States (“the domestic Insurers”), while the remaining two—
Certain Underwriters at Lloyd’s, London severally subscribing to Certificate
No. AMR-73525 and HDI Global Specialty SE—are domiciled in,
respectively, Great Britain and Germany (“the foreign Insurers”).
        The Policy included an arbitration clause that read, in relevant part:
        All matters in difference between the Insured and the Companies
        (hereinafter referred to as “the parties”) in relation to this insurance,
        including its formation and validity, and whether arising during or
        after the period of this insurance, shall be referred to an Arbitration
        Tribunal in the manner hereinafter set out.
        ...
        The seat of the Arbitration shall be in New York and the Arbitration
        Tribunal shall apply the law of New York as the proper law of this
        insurance.
        The Arbitration Tribunal may not award exemplary, punitive,
        multiple, consequential, or other damages of a similar nature.

        _____________________
located in coastal areas, expensive boats and cars, day-care centers’ liability needs, or
medical malpractice needs, which may be insured by surplus lines companies.” Accessed at
https://ldi.la.gov/docs/defaultsource/documents/publicaffairs/consumerpublications
/surplus-lines.pdf?sfvrsn=418e7c52_15.

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       The Policy also included allocation language providing that “[t]his
contract shall be constructed as a separate contract between the Insured and
each of the Underwriters.”
       On August 29, 2021, Hurricane Ida struck New Orleans, damaging
the property. Belmont made a claim on the Policy, and a third-party claim
administrator, Sedgwick Delegated Authority (“Sedgwick”), handled the
claim for the Insurers. After concluding its investigation, Sedgwick sent
Belmont a letter on the Insurers’ behalf denying Belmont’s claim on the basis
that the storm damage to the property fell below the Policy’s $1,464,000.00
named windstorm deductible.
       Belmont then sued the domestic Insurers (but not the foreign
Insurers) in Louisiana state court for breach of contract, bad faith, and unfair
claims handling practices. On the day that it filed its Louisiana action against
the domestic Insurers, Belmont also served a demand for arbitration under
the Policy on all of the Insurers, both foreign and domestic; in its arbitration
demand, Belmont purported to “reserve[] for juridical adjudication all claims
it may have for bad faith.”
       In response, the Insurers, both foreign and domestic, served their own
demand for arbitration under the Policy on Belmont and filed a complaint to
compel arbitration in the Eastern District of Louisiana. The domestic
Insurers then removed Belmont’s lawsuit against them to the Eastern
District of Louisiana, where the two actions were ultimately consolidated.
       Once the cases were in one place, the Insurers moved to compel
arbitration under the Policy’s arbitration provisions and the Convention on
the Recognition and Enforcement of Foreign Arbitral Awards (“the
Convention”). The district court granted the Insurers’ motion and denied
two motions for reconsideration filed by Belmont. However, in its order
denying Belmont’s second motion for reconsideration, the district court, at

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                                  No. 23-30246

Belmont’s request, certified its order compelling arbitration as appealable
under 28 U.S.C. §1292(b). Another panel of this Court granted Belmont’s
motion for leave to appeal from the district court’s order.
     THE DISTRICT COURT’S ANALYSIS AND BELMONT’S
                              CONTENTIONS
       In compelling arbitration, the district court applied the doctrine of
equitable estoppel as articulated by this Court in Grigson v. Creative Artists
Agency L.L.C., 210 F.3d 524, 527 (5th Cir. 2000), observing that “Grigson
estoppel has been consistently applied by Louisiana courts.” In Grigson, this
Court, adopting a test outlined by the Eleventh Circuit, wrote that “equitable
estoppel allows a nonsignatory to compel arbitration . . . when the signatory
to the contract containing an arbitration clause raises allegations of
substantially interdependent and concerted misconduct by both the
nonsignatory and one or more of the signatories to the contract.” Id. (quoting
MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir. 1999)) (ellipsis
added; emphasis removed). The district court also cited the Convention,
which requires district courts to order arbitration if: (1) there is an agreement
in writing to arbitrate the dispute; (2) the agreement provides for arbitration
in the territory of a Convention signatory; (3) the agreement arises out of a
commercial legal relationship; and (4) a party to the agreement is not an
American citizen. Francisco v. STOLT ACHIEVEMENT MT, 293 F.3d 270,
273 (5th Cir. 2002). With Grigson and the Convention providing its guiding
principles, the district court’s reasoning proceeded in three steps: (1) the
Convention requires Belmont to arbitrate its disputes with the foreign
Insurers;   (2)   Belmont’s     pleadings    allege   “identical,   interrelated
misconduct” by all of the Insurers in the handling of Belmont’s Hurricane
Ida claim; and, accordingly, (3) Grigson estoppel allows the domestic Insurers
to compel Belmont to arbitrate its claims against them as well.

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                                 No. 23-30246

       On appeal, Belmont contends that the district court’s analysis was
erroneous at steps two and three. With regard to step two, Belmont asserts
that its pleadings do not allege interdependent and concerted conduct. As to
step three, Belmont asserts that Louisiana statutory law invalidates
arbitration clauses contained in insurance contracts that are issued by
domestic insurers and that insure property located in Louisiana. Belmont
acknowledges that, as the district court pointed out, the Louisiana statute
that bars arbitration clauses in insurance contracts issued by domestic
insurers contains a carve-out for surplus lines insurers. However, Belmont
contends that the district court misgauged the reach of the carve-out.
                           LEGAL STANDARD
       We review the district court’s determination of a motion to compel
arbitration de novo and review any factual findings underlying that
determination for clear error. Forby v. One Technologies, L.P., 909 F.3d 780,
783 (5th Cir. 2018).
                                 ANALYSIS
       Although the district court correctly analyzed and applied the Grigson
estoppel doctrine, we see no need to invoke Grigson. As we mentioned above,
subsumed within the district court’s Grigson analysis was an interpretation of
the carve-out provision in Louisiana’s statutory bar on arbitration clauses in
insurance contracts. We agree with the district court’s interpretation of the
carve-out provision; and a straightforward application of that provision
allows all of the Insurers, both foreign and domestic, to enforce the Policy’s
arbitration clause.
       La. R.S. § 22:868(A) provides:
       No insurance contract delivered or issued for delivery in this state and
       covering subjects located, resident, or to be performed in this state, or

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       any group health and accident policy insuring a resident of this state
       regardless of where made or delivered, shall contain any condition,
       stipulation, or agreement either:
       (1) 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.
       (2) Depriving the courts of this state of the jurisdiction or venue of
          action against the insurer.
       La. R.S. § 22:868(A).
       “Although it is not clear from this provision’s text that arbitration
agreements are voided, Louisiana courts have held that such agreements are
unenforceable because of this statute.” Safety National Casualty Corp. v.
Certain Underwriters at Lloyd’s, London, 587 F.3d 714, 719 (5th Cir. 2009) (en
banc). However, as the district court noted, La. R.S. § 22:868(D) creates
a carve-out from the statute. Subsection (D) reads:
       The provisions of Subsection A of this Section shall not prohibit a
       forum or venue selection clause in a policy form that is not subject to
       approval by the Department of Insurance.
       La. R.S. § 22:868(D).
       Surplus lines insurers’ forms for property insurance are not subject to
approval by the Louisiana Department of Insurance. La. R.S. § 22:446(A).
Since surplus lines insurers are covered by La. R.S. § 22:868(D), the
district court reasoned that the prohibition on arbitration clauses contained
in La. R.S. § 22:868(A) does not apply to the Policy.
       We agree with the district court. The determinative issue regarding
the scope of the carve-out is whether an arbitration clause is considered a

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“forum or venue selection clause” under La. R.S. § 22:868(D). The
Louisiana Supreme Court has not addressed the question, and it recently
declined to answer a question certified to it by the Eastern District of
Louisiana that would have resolved the matter. See Southland Circle, LLC v.
Independent Specialty Insurance Co., 370 So. 3d 1047 (La. 2023).
       In the absence of a final decision by the Louisiana Supreme Court,
“we make an Erie guess, which requires us to employ Louisiana’s civilian
methodology, whereby we first examine primary sources of law: the
constitution, codes, and statutes.” Apache Deepwater, L.L.C. v. W&T
Offshore, Inc., 930 F.3d 647, 654 (5th Cir. 2019) (quotation marks omitted).
Under Louisiana law, “[t]he starting point for interpretation of any statute is
the language of the statute itself.” Pierce Foundations, Inc. v. Jaroy
Construction, Inc., 190 So. 3d 298, 303 (La. 2016). “The words of a law must
be given their generally prevailing meaning.” La. Civ. Code art. 11.
“Words of art and technical terms must be given their technical meaning
when the law involves a technical matter.” Id. “When a law is clear and
unambiguous and its application does not lead to absurd consequences, the
law shall be applied as written and no further interpretation may be made in
search of the intent of the legislature.” La. Civ. Code art. 9.
       The Louisiana Supreme Court, citing its own decision in Hodges v.
Reasonover, recently characterized arbitration clauses as “a type of venue
selection clause.” Donelon v. Shilling, 340 So. 3d 786, 790 n.6 (La. 2020)
(citing Hodges v. Reasonover, 103 So. 3d 1069, 1076 (La. 2012)). Hodges in turn
cited and quoted Ginter ex rel. Ballard v. Belcher, Prendergast & Laporte, in
which this Court described an arbitration clause as “a type of forum-selection
clause.” Hodges, 103 So. 3d at 1076; see also Ginter ex rel. Ballard v. Belcher,
Prendergast & Laporte, 536 F.3d 439, 443 (5th Cir. 2008).

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       Given that the Louisiana Supreme Court has characterized arbitration
clauses as a type of venue selection clause, we conclude that the carve-out
contained in La. R.S. § 22:868(D) unambiguously includes arbitration
clauses. Moreover, including arbitration clauses in the carve-out does not
lead to absurd consequences; La. R.S. § 22:868(D) provides a measure of
flexibility to surplus lines insurers—who by definition are willing to insure
risks and provide coverage for consumers who cannot get coverage in the
standard market—by exempting them from the strictures of La. R.S. §
22:868(A). Since the Insurers are all surplus lines insurers and the Policy is
a surplus lines policy, all of the Insurers may enforce the Policy’s arbitration
clause, La. R.S. § 22:868(A) notwithstanding.
                              CONCLUSION
       We AFFIRM the district court’s order compelling arbitration.

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