Are arbitration clauses in insurance policies enforceable?

The short version

• Under the Federal Arbitration Act a written arbitration agreement is normally “valid, irrevocable, and enforceable” (9 U.S.C. 2). In insurance the fight is over the exceptions, and a court works through three questions.
• The McCarran-Ferguson Act lets a state insurance law override (“reverse preempt”) a federal Act that does not specifically relate to the business of insurance (15 U.S.C. 1012(b)), so a state anti-arbitration insurance statute can void a policy’s arbitration clause.
• Several states bar or limit arbitration in insurance contracts. We verified five insurance carve-outs in state arbitration statutes, plus Washington’s and Louisiana’s jurisdiction statutes read to bar it (the table below); other surveys count more and disagree, so check each on its own legislature site.
• A foreign insurer can flip the result. The New York Convention still requires a court to refer the parties to arbitration (Article II(3)), and, as of 30 October 2026, every federal circuit to rule has agreed a state ban cannot stop it.
• Appraisal is not arbitration, and uninsured-motorist arbitration is often required by law, so both sit outside this question. How these disputes are actually run is in insurance arbitration.^{1,4,5,6,13,15,16,17,18,19,20}

This is our reading of statutes, treaties and judgments, not legal advice.

Are arbitration clauses in insurance policies enforceable?

Yes by default, but insurance is the big exception, so the honest answer is that it depends on three things. The Federal Arbitration Act (FAA) makes a written arbitration agreement “valid, irrevocable, and enforceable” (9 U.S.C. 2), and in the 2025 3131 Veterans case the Second Circuit confirmed that the FAA’s pro-arbitration default, including its rules on who decides questions of arbitrability, still applies unless something displaces it (printed pages 11 to 13).^1,6

The three questions the rest of this page answers are these. Is the contract insurance that a state regulates? Does that state’s law bar arbitration in insurance? Did a foreign insurer issue the policy, which pulls in the New York Convention? If the answer to the second is yes and the third is no, the clause is usually void. If a foreign insurer is involved, it usually survives.^4,5

Can an insurance company force you into arbitration? It turns on the same three questions. It helps to separate a first-party claim, which is you against your own insurer on a property or uninsured-motorist loss, from a third-party claim brought by someone else. A standard homeowners or hurricane-damage claim runs through these same three questions; the surplus-lines policies in 3131 Veterans were themselves Louisiana hurricane cover. How policyholder, motor, no-fault, insurer-to-insurer and coverage disputes are run once arbitration is on the table is in insurance arbitration.^4,5,6

First: is it an insurance contract the state regulates?

McCarran-Ferguson only shields a state law that regulates “the business of insurance” (15 U.S.C. 1012(a), (b)), so the exceptions live and die on whether the contract is insurance at all. That is why the consumer policy and the contract between two insurers come out opposite ways.⁵

Most of the state statutes spare insurer-to-insurer and reinsurance contracts. Nebraska excepts “a contract between insurance companies including a reinsurance contract” (25-2602.01(f)(4)); Montana excepts “those contracts between insurance companies” (27-5-114(2)(c)); Missouri says reinsurance contracts are not “contracts of insurance” for its arbitration section (435.350); Oklahoma excepts “those contracts between insurance companies” (12 O.S. 1855(D)); and Kentucky keeps enforceable “arbitration provisions between two (2) or more insurers, including reinsurers” (KRS 417.050(2)).^{16,17,18,19,20}

So a reinsurance arbitration clause is broadly enforceable even in an anti-arbitration state, because the parties are insurers rather than consumers. The mechanics of those panels are in reinsurance arbitration. One more carve-out is worth knowing: a self-funded employee benefit plan is governed by ERISA, whose deemer clause says such a plan is not “deemed to be an insurance company” for a state insurance law (29 U.S.C. 1144(b)(2)(B)), so a state anti-arbitration insurance statute may not reach it.²²

Second: does your state bar arbitration in insurance?

Some states do, by statute, and in those states the McCarran-Ferguson Act lets the state law reverse preempt the FAA, so a pre-dispute clause in a consumer insurance policy is generally void and unenforceable. The Second Circuit put it plainly in 3131 Veterans: the FAA and the rules that flow from it were reverse preempted by Louisiana law (printed pages 11 to 13).^5,6

Reverse preemption is worth a plain definition. Normally a federal law beats a conflicting state law. Congress flipped that for insurance in 1945: a federal Act gives way to a state insurance law “unless such Act specifically relates to the business of insurance” (15 U.S.C. 1012(b)), and the FAA does not. One caveat belongs on the page. Washington’s statute does not name arbitration; it voids a policy condition “depriving the courts of this state of the jurisdiction of action against the insurer” (RCW 48.18.200(1)(b)), and the anti-arbitration effect comes through the case law reading that language.^5,15

We do not give a national count. Published surveys disagree with one another, so the table above is only what we read on each state’s own site. Kansas, which some lists still include, is out: its old arbitration statute (K.S.A. 5-401) was repealed effective 1 July 2018, and the replacement has no insurance carve-out. Where arbitration is allowed, how the underlying claim runs is in insurance arbitration.²¹

Third: did a foreign insurer issue the policy?

If the policy is international, with a foreign insurer, a foreign seat or performance abroad, the New York Convention applies, and it still requires the court to refer the parties to arbitration “unless it finds that the said agreement is null and void, inoperative or incapable of being performed” (Article II(3)). A state ban usually cannot stop that. Chapter 2 of the FAA, the US Convention Act, carries the treaty into domestic law (9 U.S.C. 201 to 208), and the United States joined the Convention in 1970.^3,4

The state ban loses here because of one question: is Article II(3) “self-executing”? A treaty provision is self-executing when it works as law in US courts on its own, with no separate Act of Congress to carry it out. If it is, it is not an “Act of Congress” that McCarran-Ferguson can reverse preempt. In 3131 Veterans the Second Circuit held Article II(3) self-executing, abrogated (overruled) its own 1995 Stephens ruling, and reversed and remanded (printed pages 14 to 25).^6,11

The hottest sub-topic is the surplus-lines and Louisiana hook. Surplus-lines insurers cover risks that ordinary carriers will not write, such as hurricane exposure on the Gulf coast. The policies in 3131 Veterans covered Hurricane Ida damage in Louisiana. La. R.S. 22:868(A)(2) voids clauses depriving the state’s courts of jurisdiction, and in 2024 the Louisiana Supreme Court held that the 2020 amendment allowing a forum or venue selection clause in a policy form not subject to Department of Insurance approval “clearly maintained Louisiana’s long-standing prohibition of” arbitration clauses. Only the self-executing Convention overrode it; the domestic FAA path stayed reverse preempted (printed pages 9 to 13). What happens to the award afterwards is in enforcing an arbitral award.^6,13,14

How have the US courts split?

They used to split; by 2026 they have converged. Every federal circuit to rule now refuses to let McCarran-Ferguson reverse preempt the New York Convention, though they reach it by different routes, and the lone holdout, the Second Circuit’s 1995 Stephens, was abrogated in May 2025 (printed pages 14 to 25). The test they all now use is Medellín v. Texas, 552 U.S. 491 (2008), which asks whether the provision is a directive to domestic courts, says the United States “shall” or “must” act, and was intended to take immediate legal effect in domestic courts.^6,12

One honest footnote: the split is only about international policies, so a purely domestic clause in an anti-arbitration state stays void even after 2025.⁶

Is appraisal the same thing as arbitration?

No. Appraisal decides only the amount of a loss, not coverage or liability, so it is not the clause this enforceability fight is about. Arbitration can reach coverage, bad-faith and statutory claims; appraisal cannot, so the two are challenged on different grounds, and a reader with an insurance claim should not run them together. How an appraisal panel is named and run, and why it is enforceable almost everywhere, is in the insurance appraisal process.

When is insurance arbitration actually required?

In two places the usual “clauses are suspect” story flips. Uninsured and underinsured-motorist (UM and UIM) arbitration is often built in by law, or by a policy a state requires an insurer to file, rather than a coverage-dispute clause the insurer chose to add. Whether it is mandatory, and whether the award binds or can be reopened at a trial, varies by state. Those specifics sit on the companion insurance-arbitration page, not in a statute we opened here, so see insurance arbitration.

The other place is insurer-to-insurer work. A reinsurance arbitration clause between sophisticated companies is broadly enforceable, because of the carve-outs in the state statutes above (for example Nebraska’s and Missouri’s), not despite them. On who pays, a consumer arbitration splits filing fees, arbitrator fees and deposits differently from forum to forum, so that is a question for the specific clause and rulebook, not a single figure we would quote.^16,18

Can you challenge or get out of the clause?

Sometimes, through the three questions above and, failing those, through ordinary contract defences. Do you have to arbitrate your insurance claim, or can you still sue? If a state anti-arbitration statute applies to a domestic policy, you can resist the clause. Beyond that, the usual routes are unconscionability or another generally applicable contract defence under the FAA’s savings clause (9 U.S.C. 2), the insurer’s failure to file the form with the state regulator, and the limits of a choice-of-law clause.^1,5

Two of those need a caveat. The non-filing argument, that an unfiled side agreement’s arbitration clause is void under state insurance law, has both won and lost, so treat it as an argument rather than settled law. And picking New York or Texas law may not escape a hostile state’s statute: in 3131 Veterans the policies chose New York law and a New York seat, and that did not avoid Louisiana’s statute on the domestic FAA path (printed pages 5, 11 to 13).⁶

After an award, review is narrow. A US court can vacate a domestic award only on the FAA’s grounds, such as the arbitrators having “exceeded their powers” (9 U.S.C. 10(a)(4)); a Convention-governed award faces the Convention’s own narrower refusal grounds. The limits on a court’s power to set aside an award are what make the written record matter. A free consumer alternative, the complaint route, is in insurance ombudsman schemes.^2,4

Outside the US, consumer-protection law can also limit these clauses. In the UK a pre-dispute arbitration clause is automatically unfair against a consumer for a claim up to £5,000 (Arbitration Act 1996 ss 89 to 91; the Unfair Arbitration Agreements (Specified Amount) Order 1999, SI 1999/2167, article 3).^23,24,25

What would make insurance disputes fairer and faster?

In our view, the fight over these clauses is a fight about process. A policy wording, a state insurance code and the New York Convention are all written rulebooks, and the disputes under them are mostly many, similar and individually small: first-party property claims, uninsured-motorist demands, no-fault files. Across these statutes and cases, the question is the same: whether a case is decided consistently, by a named person, on a record. The state statutes that void clauses depriving a court of jurisdiction (La. R.S. 22:868) protect that; the Convention’s own escape hatch is an agreement that is “null and void, inoperative or incapable of being performed” (Article II(3)); and vacatur under 9 U.S.C. 10 polices arbitrators who exceed their powers. Read together, they point one way. On that reading, insurance disputes are fairer and faster when each claim is decided under its own rulebook, by a person, on a record a policyholder, an insurer, a court or a regulator can check afterwards. How AI is actually bounded in arbitration is in AI in arbitration.^2,4,6,13