In a dramatic reversal of its own precedent, the U.S. Court of Appeals for the Second Circuit on Thursday reignited a legal firestorm by siding with surplus insurers seeking to enforce arbitration over massive property damage claims tied to Hurricane Ida in Louisiana—shaking the foundation of long-held interpretations of international law.
A Storm of Legal Tension
The heart of the case lies in the insurers’ bid to compel arbitration under the New York Convention, an international treaty that compels member nations to honor arbitration agreements across borders. But standing in their path was a Louisiana state law forbidding arbitration of insurance disputes—seemingly shielded by the McCarran-Ferguson Act, which prioritizes state insurance laws over conflicting federal statutes.
Yet in a thunderbolt ruling, the Second Circuit declared that the McCarran-Ferguson Act does not override the New York Convention in this context. Why? Because, the court held, the treaty is self-executing, meaning it required no additional congressional action to become enforceable—an interpretation now validated by the U.S. Supreme Court’s 2008 ruling in Medellín v. Texas.
