ESAB Group v. Zurich Insurance

ESAB Group, Inc. (ESAB) (plaintiff), a South Carolina manufacturing company, purchased Zurich Insurance, PLC policies through Trygg-Hansa Forsakrings AB, a Swedish insurance company (collectively, insurers) (defendants). The policies stated that disputes were to be resolved through arbitration in Sweden under Swedish law. ESAB faced products-liability lawsuits and looked to its insurers for defense and indemnification. Coverage was denied, and ESAB sued the insurers in South Carolina state court. Under the New York Convention (convention) and the Convention Act (CA) included in the Federal Arbitration Act (FAA), the insurers removed the case to federal district court. The district court held that the convention, rather than the CA, granted it the authority to enforce the parties’ international arbitration agreement. The court reasoned that the McCarran-Ferguson Act (MFA) applied only to federal statutes and could not allow South Carolina law to preempt federal law. ESAB appealed, arguing that the convention did not apply to compel arbitration because it was a treaty and thus not self-executing. The CA, ESAB contended, although self-executing legislation, did not state that it applied to insurance and therefore could not preempt state law and the MFA. The insurers argued that the MFA applied only to the business of insurance, not ESAB’s coverage dispute, and that Article II of the convention was self-executing to preempt state law.