Wash. Law Prohibits Arbitration Clauses in Insurance Contracts, State High Court Affirms

SEATTLE — Washington state law prohibits arbitration agreements in insurance policies, the Washington Supreme Court has affirmed, explaining that the statute was enacted to protect the right of policyholders to bring an original “action against the insurer” in the state’s courts.

In a Jan. 17 opinion, the en banc court further held that the statute is not preempted by the Federal Arbitration Act because it regulates the business of insurance and is therefore shielded by the McCarran-Ferguson Act.

James River issued two insurance policies to Scarsella Brothers Inc. that provided coverage for certain liability related to Scarsella's work on a …