Court Opinion

ID: 9781795
Source: CourtListenerOpinion
Date Created: 2023-08-30 17:32:10.115948+00
Date Added: 2024-06-11T07:34:39.548047
License: Public Domain

Justice KOURLIS,
dissenting:
Because I do not read the Colorado Health Care Availability Act, § 13-64-403, 5 C.R.S. (2002), as a law aimed at regulating the “business of insurance,” I do not view the McCarran-Ferguson Act, 15 U.S.C. § 1012(b) (1997), as applicable. For that reason, although I concur in the Majority’s conclusion that the arbitration agreement at issue here applies to wrongful death actions and to non-party spouses, I respectfully dissent from the conclusion that the McCarran-Ferguson Act exempts sections 13-64 — 403(3) and (4) of the Colorado Health Care Availability Act from federal preemption.
I. The Colorado Health Care Availability Act
The analysis in this case is complex and, for me, is best undertaken in simple steps. There are three relevant pieces of legislation, state and federal, which come into play. The first is the Colorado Health Care Availability Act (“HCAA”), specifically Part 4, Procedures and Evidence in Medical Malpractice Actions. §§ 13-64-401 et. seq., 5 C.R.S. (2002). The HCAA evidences the General Assembly’s intent that arbitration agreements be a voluntary and knowing contractual undertaking between the patient and the health care provider. To that end, the statute requires certain bold-faced language in the agreement, designed to notify the patient that by signing the agreement, he or she is “agreeing to have any issue of medical malpractice decided by neutral binding arbitration rather than by a jury or court trial.” § 13-64 — 403(4). It is undisputed that in this case, the agreement did not contain that notice and thus, would be unenforceable.1 To this point in the analysis, therefore, by operation of Colorado law, the arbitration award in this case would be vacated and Karen Pacheco would be entitled to proceed in her wrongful death lawsuit.
II. The Federal Arbitration Act
The next step in the analysis, however, involves the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1 et. seq. (1999). I agree with the Majority that the FAA would apply to this contract, but because I would *385also hold that it is the focal or dispositive statute, I expand upon the Majority’s discussion somewhat. The FAA states that:
A written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
9 U.S.C. § 2.
The purpose of the FAA is to “overcome courts’ refusals to enforce agreements to arbitrate” and is grounded in Congress’ powers under the Commerce Clause. Allied-Bruce Terminix Co. v. Dobson, 513 U.S. 265, 270, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995). In enacting the FAA, Congress “declared a national policy favoring arbitration and withdrew the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration.” Southland Corp. v. Keating, 465 U.S. 1, 10, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984). Generally, then, the FAA preempts state law that conflicts with it, by operation of the Supremacy Clause. U.S. Const, art. VI, cl. 2.
The agreement here pertains to transactions involving commerce, in that it provides for medical services in other states to its Colorado members. See Grohn v. Sisters of Charity Health Svcs. Colo., 960 P.2d 722, 725-26 (Colo.App.1998) (hospital’s business activities, which include payment of out-of-state medical costs of in-state insureds, and receipt of goods and services from out-of-state vendors constitute transactions “involving commerce” within the ambit of the FAA). Hence, the only question is whether the FAA would otherwise apply to invalidate the specific proscriptions of the HCAA and render the arbitration agreement enforceable even though it does not comply with the HCAA.
The FAA establishes federal substantive law that governs issues of enforceability for all arbitration agreements that involve commerce. Perry v. Thomas, 482 U.S. 483, 489, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987); Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). To the extent that any state law conflicts with the FAA, that state law is preempted by operation of the Supremacy Clause of the United States Constitution. See U.S. Const, art. VI, cl. 2; Southland Corp., 465 U.S. at 16, 104 S.Ct. 852; Doctor’s Assoc., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996).
An arbitration clause almost identical to the one at issue here was held enforceable by the United States District Court for the District of Colorado in Morrison v. Colorado Permanente Medical Group, P.C., 983 F.Supp. 937 (D.Colo.1997). In that case, the court viewed Doctor’s Associates as disposi-tive. The Supreme Court, in Doctor’s Associates, held that the FAA preempted a Montana statute, which also required arbitration agreements to contain a special notice, in underlined capital letters. The Court held:
By enacting § 2, we have several times said, Congress precluded States from singling out arbitration provisions for suspect status, requiring instead that such provisions be placed “upon the same footing as other contracts.” Montana’s § 27-5-114(4) directly conflicts with § 2 of the FAA because the State’s law conditions the enforceability of arbitration agreements on compliance with a special notice requirement not applicable to contracts generally. The FAA thus displaces the Montana statute with respect to arbitration agreements covered by the Act.
517 U.S. at 687, 116 S.Ct. 1652 (internal citations omitted). Following the Court in Doctor’s Associates, the court in Morrison held that the medical services arbitration provisions found in sections 13-64-403(3) and (4) of the HCAA were preempted by the FAA. 983 F.Supp. at 943.
By creating special language requirements for arbitration provisions in medical service agreements, it is my view that the HCAA does indeed impose special conditions on medical arbitration agreements not applicable to contracts generally. Accordingly, those special requirements imposed by Colorado legislation would be preempted by the *386FAA, and the arbitration clause in this agreement would be valid and enforceable even though it does not contain the special notice required by the HCAA.
III. The McCarran-Ferguson Act
The final step in this inquiry then must turn to the McCarran-Ferguson Act, 15 U.S.C. § 1012(b) (1997), which the Majority holds would operate to preclude the FAA from applying and would therefore revive the Colorado statutory requirements. That Act provides that “No 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....” 15 U.S.C. § 1012(b). Pacheco argues, and the Majority agrees, that this Act operates as a bar to what would otherwise be FAA preemption because sections 13-64-403(3) and (4) of the Colorado HCAA involve the “business of insurance.” On this point, I disagree.
The history of the McCarran-Ferguson Act is relevant to the limited construction I here suggest. McCarran-Ferguson was enacted in response to the Supreme Court’s decision in United States v. South-Eastern Underwriters Ass’n, 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440 (1944). In that case, the Court held that insurance transactions were subject to federal regulation in general under the Commerce Clause, and to the antitrust laws in particular. Id. at 553, 560-61, 64 S.Ct. 1162. Prior to that, the states had assumed the exclusive regulation of insurance. Congress acted by passing the McCarran-Ferguson Act to assure that the states would continue to have “a free hand in regulating the dealings between insurers and their policyholders,” Sec. & Exch. Comm’n v. Nat’l Sec., Inc., 393 U.S. 453, 459, 89 S.Ct. 564, 21 L.Ed.2d 668 (1969), but did not intend “to clothe the States with any power to regulate or tax the business of insurance beyond that which they had been held to possess prior to the decision [in South-EastemV’ Id. (quoting H.R.Rep. No. 143, 79th Cong., 1st Sess., 3 (1945)).
In National Securities, the Supreme Court was called upon to determine whether an action by the Securities and Exchange Commission to invalidate a merger of insurance companies that had been approved by the State of Arizona was barred by the McCar-ran-Ferguson Act. The Court held that it was not, noting in its analysis that the McCarran-Ferguson Act was intended to protect the dealings between insurance companies and their policyholders, and not to protect the many other activities in which insurance companies engage. Id. at 460, 89 S.Ct. 564. In an effort to explain the reach of the Act and what would constitute the “business of insurance,” the Court stated:
Certainly the fixing of rates is part of this business.... The selling and advertising of policies, and the licensing of companies and their agents 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 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 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.
Id. (internal citations omitted). Importantly, the Court distinguished between provisions of state law focusing on the relationship between stockholders and the company, and provisions dealing specifically with service to policyholders. Id. The Court held that the former was not within the scope of McCar-ran-Ferguson, while the latter was.2 Id. at 460-62, 89 S.Ct. 564.
The Court again provided guidance for the application of the McCarran-Ferguson Act in *387Union Labor Life Insurance Co. v. Pireno, 458 U.S. 119, 102 S.Ct. 3002, 73 L.Ed.2d 647 (1982). In that case, the Court held that a health insurance provider’s use of a professional association’s peer review committee to determine reasonableness and necessity of chiropractic charges did not constitute the “business of insurance” so as to be exempted from application of federal antitrust laws. Id. at 129, 102 S.Ct. 3002. The Court outlined three factors, commonly referred to as the Pireno factors, to assist in determining what constitutes the “business of insurance:” “first, whether the practice has the effect of transferring or spreading a policyholder’s risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry.” Id. (citing Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 99 S.Ct. 1067, 59 L.Ed.2d 261 (1979)). While noting that not one of the factors was in itself determinative, the court found that the Peer Review Committee met none of the factors and was not, therefore, part of the “business of insurance.” Id. at 129-32,102 S.Ct. 3002.
In United States Department of Treasury v. Fabe, 508 U.S. 491, 504, 113 S.Ct. 2202, 124 L.Ed.2d 449 (1993), the Court held that' an Ohio bankruptcy priority statute relating to liquidation of a bankrupt insurance company escaped federal bankruptcy law preemption by operation of the McCarran-Ferguson Act because the Ohio law was “designed to carry out the enforcement of insurance contracts by ensuring the payment of policyholders’ claims despite the insurance company’s intervening bankruptcy.” In Fabe, the Court did observe that it had developed and applied the Pireno factors in the context of analyzing Sherman Antitrust Act issues under the second clause of the McCarran-Ferguson Act, and that those factors were, therefore, not definitive. Id. at 505, 113 S.Ct. 2202; see also Davister Corp. v. United Republic Life Ins. Co., 152 F.3d 1277, 1281 (10th Cir.1998) (holding that a Utah state statute consolidating all claims against a liquidating insurer was enacted to protect policyholders and was, therefore, exempt from application of the FAA by reason of the McCarran-Fergu-son Act). However, even without the Pireno factors, the court in Fabe held that the business of insurance preserved to state regulation relates to the rights of policyholders. Fabe, 508 U.S. at 506,113 S.Ct. 2202.
Hence, to the extent that Pireno continues to apply to non-antitrust inquiries, I would observe that the Colorado HCAA provisions at issue are not “integral to the policy relationship between” the medical service provider and its insurer, nor do they regulate, constrain, set benefits, exclusions or limitations that effect the relationship between the insurer and the policyholders.
Even if the proper inquiry in determining whether the statute at issue is whether the statute is “aimed at protecting or regulating” the relationship between the insurance company and the policyholder, Maj. op. at 382-383, I suggest that the HCAA cannot meet that test. The provisions of the Colorado HCAA at issue here, specifically part 4, deal with “Procedures and Evidence in Medical Malpractice Actions.” As the title indicates, the primary purpose of these provisions is to control and constrain medical malpractice actions, not to regulate the insurance policy itself. Indeed, the effect of the statute may be to reduce medical malpractice premiums; however, that consequence does not change the fact that the provisions were enacted to control medical malpractice actions, not medical malpractice insurance within the meaning of the McCarran-Ferguson Act. It is particularly evident that sections 13-64-403(3) and (4) of the HCAA is not related to the “business of insurance” because its focus is solely on protecting the informed choice of patients, so as not to bind them to an arbitration clause without their knowledge. That purpose is not about insurance.
Beginning with the easy axiom, if the HCAA arbitration provision were a general law concerning what an arbitration agreement must contain in order to be valid in Colorado, that law would likely find no shelter within the McCarran-Ferguson Act, but would rather be construed as a law of general application. See Hart v. Orion Ins. Co., 453 F.2d 1358 (10th Cir.1971) (enforcing an arbitration agreement by holding the McCar-*388ran-Ferguson Act did not apply because the court found the provisions had general applicability to contract disputes); Hamilton Life Ins. Co. v. Republic Nat’l Life Ins. Co., 408 F.2d 606 (2nd Cir.1969) (finding that arbitration statutes did not regulate the “business of insurance”; rather, they regulated the method of handling contract disputes generally); Am. Bankers Ins. Co. v. Crawford, 757 So.2d 1125 (Ala.1999) (enforcing an arbitration agreement in a policy despite State’s anti-arbitration statute because statute did not regulate the “business of insurance” as to prevent enforcement of the policy under the FAA). As the Colorado HCAA applies generally to medical service providers and their patients, and not specifically to the relationship between insurers and their insureds, it would be a law of general application, and thus not subject to the McCarran-Ferguson savings clause.
Thus, it is the placement of the arbitration clause limitation language within the HCAA that must be the pivotal factor — it must evidence the General Assembly’s intent to regulate only certain arbitration agreements that impact upon or relate to insurance. I do not so read the HCAA. Rather, I read the HCAA not as aimed at the relationship between the medical services provider and the insurer, but rather as being aimed at the relationship between the medical services provider and the patient. Granted, the General Assembly did indeed express its intent in enacting the legislation to contain the increasing costs of malpractice insurance,3 but they chose to address that goal by limiting the remedies available to a patient claiming malpractice against a medical services provider — not by regulating the amount which an insurer could charge in premiums or by regulating the nature of coverage the insurers could or should provide. For example, although “qualified insurer” is a defined term, it appears only twice in the HCAA: in the section concerning periodic installment obligations, section 13-64-206, and in the section concerning funding that obligation, section 13-64-208.
The HCAA is about containing and limiting malpractice awards, with the intent thereby of reducing malpractice insurance premiums and stemming the exodus of doctors from the profession. To say that it is “aimed at the business of regulating insurance” is to say that any legislation that has an effect on insurance premiums is aimed at the business of regulating insurance. So, for example, legislation requiring drivers to wear seat belts or motorcycle riders to wear helmets would be aimed at the business of regulating insurance because it could have an effect on insurance premiums. In short, I suggest that the interpretation the Majority affords the McCarran-Ferguson Act sweeps with a broad and wide arc that could swallow federal preemption under the Supremacy Clause.
IV. Conclusion
Accordingly, although I concur in portions of the Majority opinion, I dissent from the ultimate result and would instead reverse the court of appeals’ opinion and uphold the trial court’s judgment enforcing the arbitration award.
I am authorized to state that Justice BENDER joins in this dissent.

. We so held in Colorado Permanente Medical Group, P.C. v. Evans, 926 P.2d 1218, 1226 (Colo.1996). We did not address the FAA preemption argument in that case because it was not raised and preserved at the trial court level.

. While the court found that the provision requiring the State Director of Insurance to conclude that the security of and services rendered to policyholders would not be substantially reduced by a proposed merger before approving it was within the scope of McCarran-Ferguson, as it clearly related to the "business of insurance," the Court found no conflict between the federal and state law and allowed application of both. Id. at 462, 89 S.Ct. 564.

. Notably, the result advocated by the Majority would have the converse result. Application of the McCarran-Ferguson Act to the Colorado HCAA operates to disadvantage the doctor, as a malpractice insurance policyholder, because he will be subjected to a full trial, rather than having recourse in the enforcement of the arbitration award.