USA Law and Practice Contributed by: Christina Culver, Rhonda Thompson and L. Michael Brooks, Thompson, Coe, Cousins & Irons, LLP
operations, developers, and injured users span mul- tiple states. The dominant emerging trends include: • courts finding personal jurisdiction in states where AI outputs cause harm and where AI companies maintain significant commercial contacts; • the continued application of the state-by-state approach to choice of law; and • increasing pressure to rationalise these conflicts through a unified federal framework. In trending AI liability contexts, indemnity agreements are used to spread risk, recognising that AI develop- ers and operators may contribute to potential harms. 3. Arbitration in Insurance Disputes 3.1 Recognition of Arbitration Clauses The United States has a strong federal policy favouring arbitration. The Federal Arbitration Act (FAA) makes a written arbitration provision in a contract affecting interstate commerce valid, irrevocable and enforcea- ble, subject only to ordinary contract defences (9 USC § 2). The courts routinely enforce arbitration clauses in reinsurance treaties and large commercial insurance programmes, where arbitration is the market norm. Insurance is the important exception. Under the McCarran-Ferguson Act, no federal statute is con- strued to supersede a state law enacted to regulate the business of insurance unless the federal statute specifically relates to insurance (15 USC § 1012). Because the FAA does not mention insurance, a state statute that prohibits or limits arbitration of insurance disputes can reverse-preempt the FAA. The practical result is a patchwork: many states restrict or bar man- datory arbitration clauses in consumer and certain direct insurance policies, while reinsurance and com- mercial arbitration agreements are generally upheld. 3.2 Enforcement of Arbitral Awards For domestic awards, the FAA directs that a court must confirm an award unless it is vacated or modified on the narrow statutory grounds in Sections 10 and 11 (9 USC §§ 9–11). Federal courts read the US Supreme Court’s decision in Hall Street Associates , L . L . C . v Mattel , Inc . as making those statutory grounds exclu-
sive, so parties cannot contract for expanded judicial review ( Citigroup Global Markets , Inc . v Bacon , 562 F.3d 349 (5th Circuit 2009)). Whether manifest disre- gard of the law survives as a vacatur ground remains the subject of a circuit split, with some courts treating it as abandoned and others as a gloss on the statute. Foreign and non-domestic awards are enforced under the New York Convention, implemented through Chapter 2 of the FAA, which requires confirmation unless an Article V defence applies (9 USC § 207). The Panama Convention operates similarly through Chapter 3 (9 USC §§ 301–307). Enforcement is a single-step, summary process in which the court has little discretion and the party resisting bears a heavy burden ( CBF Indústria de Gusa S / A v AMCI Holdings , Inc ., 850 F.3d 58 (2nd Circuit 2017); Chevron Corp . v Republic of Ecuador , 949 F. Supp. 2d 57 (D.D.C. 2013)). Only courts in the primary jurisdiction, the seat of the arbitration, may vacate an award; other courts may only enforce or refuse enforcement ( Corporación AIC , SA v Hidroeléctrica Santa Rita S . A ., 66 F.4th 876 (11th Circuit 2023)). 3.3 Practical Use of Arbitration in Insurance Matters Arbitration is near-universal in reinsurance and com- mon in large commercial placements, but far less available in consumer lines because of state restric- tions. Reinsurance clauses frequently include honour- able engagement provisions that relieve arbitrators of strict rules of law and allow tailored equitable reme- dies ( First State Insurance Co . v National Casualty Co ., 781 F.3d 7 (1st Circuit 2015)). They may not, however, rewrite the contract they are appointed to interpret ( PMA Capital Insurance Co . v Platinum Underwriters Bermuda , Ltd ., 659 F. Supp. 2d 631 (E.D. Pa. 2009)). Confidentiality is not automatic. Parties commonly sign standard-form confidentiality agreements, and arbitrators, not courts, generally decide disputes over their scope ( Trustmark Insurance Co . v John Hancock Life Insurance Co ., 631 F.3d 869 (7th Circuit 2011)). The scope for challenge or appeal is deliberately nar- row; judicial review of arbitral awards is among the narrowest known in the law ( First State Insurance Co . v National Casualty Co ., 781 F.3d 7 (1st Circuit 2015)).
295 I NSURANCE L I T IGATI O N 2026
CHAMBERS.COM
Powered by FlippingBook