The U.S. Supreme Court this morning declined to hear an insurance coverage case in which a consumer contract mandated arbitration.
The case, Old Republic Home Protection Co. v. Sparks, No. 20-237, involves a mandatory arbitration requirement in a consumer contract for home services repairs.
It examines a clash between the McCarran–Ferguson Act, 15 U.S.C. 1012(b), a 1945 law that gives insurance regulation to the states; the Federal Arbitration Act, and the Oklahoma Arbitration Act, which states, “The [Oklahoma] Arbitration Act shall not apply to collective bargaining agreements and contracts which reference insurance, except for those contracts between insurance companies.” Okla. Stat. Ann. tit. 12, § 1855(D).
The law, notes the Oklahoma Supreme Court case that was the subject of the home service company’s petition for certiorari, provides a “reverse preemption,” taking Oklahoma insurance contracts out from under the FAA’s auspices.
Oklahoma’s top Court agreed with the plaintiffs, noting that they “argued that the federal McCarran-Ferguson Act authorized the ‘reverse preemption’ of the FAA in this instance. Because the FAA did not preempt relevant Oklahoma state law involving the regulation of insurance, [the plaintiffs] replied that the Court of Civil Appeals did not err in holding that § 1855 of the Oklahoma Uniform Arbitration Act barred the enforcement of arbitration in this matter.” Sparks v. Old Republic Home Protection Co., 467 P.3d 680 (Okla. S.Ct. 2020) (available at https://bit.ly/3omxDvA).
The decision stands, and the case appears headed for a trial court for resolution.
The plaintiffs are a Moore, Okla., married couple, that had filed suit against Old Republic Home Protection Co., of San Ramon, Calif., under a home service contract that they charged provided faulty repairs to their air conditioning system which damaged their home.
The issue officially presented by Old Republic and rejected by the Court today was
“Whether, in a case involving interstate commerce and a written contract with an arbitration provision that expressly requires application of the Federal Arbitration Act, a state arbitration statute that by its terms “shall not apply to . . . contracts which reference insurance” (a) qualifies as a “law enacted by [a] State for the purpose of regulating the business of insurance” under the McCarran–Ferguson Act, and (b) can support reverse preemption of the FAA based on an asserted impairment of such a state law.“
Scotusblog has the papers in the case, including the Oklahoma opinion, at https://bit.ly/39NaXR3.