Monarch Consulting, Inc. v. National Union Fire Insurance Company of Pittsburg, PA

National Union Fire Insurance Company of Pittsburg, PA (defendant) issued workers’-compensation policies to three California-based employers: Monarch Consulting, Inc., Priority Business Services, Inc., and Source One Staffing, LLC (plaintiffs). In California, workers’-compensation insurance was regulated by the California Department of Insurance (the department) and its commissioner, along with the Workers’ Compensation Insurance Rating Bureau of California (WCIRB). Before insurers could issue workers’-compensation policies within the state, insurers had to file copies of all polices and endorsements with the department and WCIRB for review at least 30 days prior to issuance to ensure compliance. When filings were rejected, policies could not issue as initially filed. When agreements were made modifying obligations under the insurance agreement, the agreements had to be attached or made part of the policy. Before National issued the three workers’-compensation policies, National filed the required documentation. However, National did not file payment agreements that it entered with each of the insureds, extending them lines of credit by way of payment deferments in exchange for collateral. Unlike the policies themselves, the payment agreements contained arbitration clauses. When the payment agreements were entered, California law was silent regarding arbitration provisions in insurance policies. However, by the time disputes arose regarding the payment agreements, a state insurance-code provision had been enacted requiring insurers to disclose certain information about proposed arbitration agreements; otherwise, California law and forum were the default, but the law did not prohibit arbitration provisions. Three separate actions were filed where either Monarch, Priority Business, or Source One sought to stay arbitration or National sought to compel arbitration; a stay was granted in only one of the cases at the trial-court level. The three cases were consolidated on appeal, and the appellate division reversed the two cases that compelled arbitration, concluding that the McCarran-Ferguson Act (MFA) precluded application of the Federal Arbitration Act (FAA). National appealed.