Second Circuit Holds New York Convention Is Self-Executing And Not Preempted By McCarran Ferguson Act

On May 8, 2025, United States Court of Appeals for the Second Circuit held, in Certain Underwriters at Lloyd's, London v. 3131 Veterans Blvd LLC,and Certain Underwriters at Lloyd's, London v. Mpire Properties LLC, Docket Nos. 23-1268-cv, 23-7613-cv, that the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention"), which governs international arbitrations, is self-executing and is not reverse preempted by the McCarran Ferguson Act, which ordinarily leaves the regulation of insurance to state law. By so concluding, the Second Circuit reversed its 1995 decision to the contrary in Stephens v. American International Insurance Co. ("Stephens")¹ and joined the Fifth Circuit's decision in Safety National² the Ninth Circuit's decision in CLMS Management,³ and the First Circuit's decision in Green Enterprises,⁴each of which has held that the New York Convention is self-executing. The Second Circuit's 3131 Veterans Blvd. decision is particularly important for foreign insurers and reinsurers operating in the U.S. Since New York is a popular seat for arbitrations involving foreign insurers and reinsurers, and many insurance policies and reinsurance treaties contain arbitration provisions, foreign insurers and reinsurers can now cite the decision against arguments that certain state laws prohibit arbitrations of insurance disputes.

3131 Veterans Blvd. and Mpire Properties each involved a coverage dispute between a Louisiana business and a foreign surplus lines insurer. Each policy at issue contained a broad arbitration provision. Unsatisfied with the monies offered to settle claims for damaged property, policyholders filed actions in Louisiana state court, arguing Louisiana law prohibits arbitration clauses in insurance contracts.⁵ The insurers, in turn, filed actions in federal court in New York, arguing the arbitration clauses are enforceable under the New York Convention and seeking compulsion of arbitration. The District Court judges, being bound by the Second Circuit's 1995 decision in Stephens, ruled for the policyholders. In Stephens, the Second Circuit previously held that the New York Convention is not self-executing and relies on an "Act of Congress" for its implementation and, therefore, the McCarran Ferguson Act is not preempted.⁶

On appeal, the Second Circuit reversed itself from 30 years ago and abrogated Stephens to the extent that it holds that the New York Convention is not self-executing. As an...