## Facts

- National Union issued workers’ compensation insurance policies in California to Monarch Consulting, Priority Business Services, and Source One Staffing.
- California required workers’ compensation policy forms and endorsements to be filed with state regulators before use.
- Alongside the filed policies, National Union used separate “Payment Agreements” governing premium payment and collateral obligations.
- The Payment Agreements were not filed with California regulators and contained arbitration clauses not found in the filed policies.
- Disputes arose over amounts allegedly owed under the Payment Agreements.
- The insureds sought to stay arbitration; National Union sought to compel arbitration.

## Issues

1. Whether the McCarran–Ferguson Act bars application of the Federal Arbitration Act (FAA) because enforcing arbitration would “invalidate, impair, or supersede” California Insurance Code § 11658’s filing requirements.
2. If the FAA applies, whether the parties clearly and unmistakably delegated questions of arbitrability and enforceability (including challenges based on non-filing) to the arbitrators.

## Decision

- The Court of Appeals reversed the Appellate Division in all consolidated matters.
- The court held that applying the FAA to the Payment Agreements does not “invalidate, impair, or supersede” California Insurance Code § 11658; therefore, McCarran–Ferguson reverse-preemption does not apply.
- The court held the FAA governs and requires enforcement of the arbitration provisions.
- Because the arbitration provisions incorporated arbitral rules authorizing arbitrators to decide jurisdiction and scope, the parties clearly and unmistakably delegated arbitrability.
- Under FAA severability principles, challenges to the Payment Agreements’ enforceability were for the arbitrator, and arbitration was compelled.

## Legal Principles

- McCarran–Ferguson reverse-preempts a federal statute only when applying the federal statute would “invalidate, impair, or supersede” a state law enacted to regulate the business of insurance, and the federal statute does not specifically relate to insurance.
- A state insurance filing requirement, without a direct rule negating arbitration or rendering arbitration clauses unenforceable in a manner conflicting with the FAA, does not by itself trigger McCarran–Ferguson reverse-preemption of the FAA.
- Under the FAA, arbitration is a matter of contract, and courts must enforce arbitration agreements according to their terms absent a valid contract defense directed at the arbitration clause itself.
- FAA severability treats an arbitration clause as separable from the remainder of the contract; challenges to the contract as a whole are generally decided by the arbitrator.
- Incorporation of arbitral rules empowering arbitrators to determine their own jurisdiction constitutes clear and unmistakable delegation of arbitrability to the arbitrator.

## Conclusion

The court compelled arbitration, holding that the FAA governs the Payment Agreements because enforcing arbitration does not conflict with California’s insurance filing statute under McCarran–Ferguson, and that arbitrators—not courts—must decide enforceability objections to the agreements under delegation and severability doctrine.


Matter of Monarch Consulting, Inc. v. National Union Fire Insurance Co. of Pittsburgh, Pa., 26 N.Y.3d 659 (2016)