A major new Fifth Circuit decision provides the clearest roadmap yet for Louisiana policyholders and public adjusters dealing with arbitration provisions in surplus lines policies. Unfortunately, the roadmap has two roads, and the policyholder may be forced to travel both.

The case is Transportation Consultants, Incorporated v. Certain Underwriters at Lloyd’s, London. 1 The dispute arose from Hurricane Ida damage to Louisiana property covered by a surplus lines commercial property policy. The policy was subscribed to by nine American insurance companies and two foreign insurance companies.

The policy contained a broad arbitration clause essentially stating that every disagreement concerning the insurance had to be resolved through arbitration. It also contained a contract allocation endorsement stating that the policy should be treated as a separate contract between the policyholder and each individual insurer.

The simplest way to understand the Fifth Circuit’s ruling is to imagine that eleven insurers sold pieces of one insurance program. Nine are American companies, and two are foreign companies. Although the coverage appears to be a single policy, the allocation endorsement states there are actually eleven separate contracts.

Louisiana law prohibits arbitration clauses in insurance contracts. Accordingly, the nine American insurers cannot force the policyholder into arbitration. The policyholder may sue those insurers in court.

The two foreign insurers are different. An international treaty known as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards overrides Louisiana’s anti-arbitration law when the requirements of the Convention are satisfied. The policyholder must arbitrate its claims against those foreign insurers.

So, arbitrate against the foreign insurers and litigate against the American insurers. But there is a catch.

The Fifth Circuit held that the federal trial judge must reconsider whether the lawsuit against the American insurers should be stayed until the arbitration against the foreign insurers is completed. In a similar case, Crescent City Surgical Operating Company v. Interstate Fire & Casualty Company, the Fifth Circuit required such a stay because the arbitration and litigation concerned the same loss, the same coverage questions, and inseparable claims. 2

In practical terms, a policyholder may win the legal argument that the American insurers cannot compel arbitration, yet still find the courthouse door temporarily locked while the foreign arbitration proceeds. The foreign arbitration can become the first and most important proceeding even though most of the insurers are American.

This is the current law that Louisiana policyholders, public adjusters, insurance agents, brokers, and attorneys should follow. Some of my prior posts about this rapidly changing area of law may no longer be valid.  For example, I previously noted in “Do Louisiana Cases Against Lloyds Have to Go to Arbitration if the Policy Has an Arbitration Clause,” that a Louisiana policyholder might obtain a different result by challenging the arbitration provision in New York. That was true under older Second Circuit precedent. It is no longer reliable advice.

In May 2025, the Second Circuit reversed course and held that the New York Convention is self-executing and is not displaced by state insurance laws through the McCarran-Ferguson Act. The old difference between the Second and Fifth Circuits has largely disappeared. Policyholders should not assume that running to a New York courthouse will save them from arbitration.

My earlier warnings remain entirely valid. Read the full policy. Look for arbitration provisions, choice-of-law clauses, forum provisions, shortened limitations periods, restrictions on damages, and endorsements dividing the policy into separate contracts. Arbitration is not appraisal. It is private litigation, usually with lawyers, witnesses, experts, legal arguments, significant expense, and very limited appellate review.

Here is the practical checklist following Transportation Consultants:

1. Obtain the complete policy immediately.

Do not rely on a declarations page, binder, quotation, coverage summary, or what the agent remembers selling. Obtain the complete certified policy, including every endorsement and every document incorporated by reference. The contract allocation endorsement may determine which insurers can compel arbitration. The arbitration rules may control deadlines, discovery, tribunal selection, costs, and where the proceeding will take place.

2. Identify every insurer and its percentage of the coverage.

Surplus lines programs often contain numerous insurers subscribing to different percentages of the risk. Make a chart identifying each insurer, whether it is American or foreign, its percentage participation, and the policy or contract number assigned to it. Do not confuse the lead insurer, claims administrator, managing general agent, broker, or adjuster with the actual insurance companies assuming the risk.

3. Do not confuse a foreign insurer with a foreign arbitration location.

The New York Convention applies even if the arbitration will take place in New York, because a foreign insurer is involved. The policyholder does not necessarily have to be sent to London or another country for the treaty to apply. A Louisiana policyholder can be forced into a New York arbitration governed by New York law because one or more participating insurers are foreign companies.

4. Look carefully for separate-contract language.

The result in Transportation Consultants and Town of Vinton 3 depended heavily on language stating that the policy must be treated as a separate contract between the policyholder and each insurer. That language prevented the foreign insurers from pulling the American insurers into arbitration with them.

If the policy does not contain comparable language, the result may be different. Never assume that every mixed domestic-and-foreign surplus lines policy will produce the same outcome.

5. Calendar every deadline separately.

Do not assume that filing a lawsuit stops an arbitration deadline. Do not assume that beginning arbitration preserves a lawsuit against the American insurers. Do not assume that a court-ordered stay suspends every prescriptive or contractual limitation period.

The policyholder and public adjuster should identify all notice requirements, proofs of loss, suit limitations, arbitration deadlines, appraisal provisions, and post-loss duties. Competent coverage counsel should determine which deadlines apply and whether a written tolling agreement is needed.

6. Treat the claim file as trial evidence from the first day.

Arbitration should not be handled like an informal appraisal. Photographs, videos, measurements, estimates, invoices, damaged materials, weather information, witness statements, expert reports, and communications with each insurer should be carefully preserved.

A distant arbitration makes it harder and more expensive to bring witnesses to the hearing or show the decision-makers the damaged property. Evidence that is not collected early may be impossible to recreate later.

7. Public adjusters should involve qualified coverage counsel early.

Public adjusters should identify and flag arbitration, venue, choice-of-law, remedy, and limitation provisions. They should not guess about whether those provisions are enforceable. That is a legal determination involving state law, federal statutes, an international treaty, and rapidly changing appellate precedent.

Waiting until the claim is denied or the deadline is approaching can eliminate strategic choices that existed earlier.

8. Attorneys must address the stay issue and not merely whether arbitration is enforceable.

After Transportation Consultants, defeating arbitration against the American insurers is only half the battle. Attorneys must develop a factual record showing why the claims against the domestic insurers should proceed while the foreign arbitration is pending.

The court will consider whether the two proceedings involve the same operative facts, whether the claims are inherently inseparable, and whether the lawsuit would critically affect the arbitration. Separate adjusting conduct, separate payment decisions, insurer-specific representations, different defenses, and individual bad faith conduct may become important.

9. Do not dismiss foreign insurers without calculating what is being surrendered.

In Town of Vinton, the foreign insurers were dismissed with prejudice, leaving only American insurers that could not compel arbitration. That strategy may eliminate arbitration in the proper case, but it also means surrendering the foreign insurers’ shares of the insurance recovery.

Giving up substantial coverage merely to avoid arbitration may be a very expensive victory. The available limits and percentage participation must be calculated before that decision is made.

10. Prepare for the possibility of two proceedings.

The policyholder may have to arbitrate against foreign insurers and later litigate against American insurers. Testimony, expert opinions, causation positions, damage calculations, and policy interpretations must remain consistent.

What is said in the arbitration may be used later in the lawsuit. The arbitration award may also create arguments about issue preclusion, admissions, or evidentiary consequences. One coordinated legal strategy is essential.

11. Examine what the agent or broker disclosed before the policy was purchased.

Insurance agents and brokers selling these policies are doing their clients a disservice when they fail to explain the practical consequences of mandatory arbitration, distant forums, foreign governing law, restricted damages, and substantial arbitration expenses.

The problem is not necessarily the use of surplus lines insurance. Some difficult risks cannot obtain coverage in the admitted market. The disservice occurs when the agent sells the product as if it were ordinary property insurance, fails to search for better terms, and never explains that collecting benefits may require expensive private litigation hundreds or thousands of miles from the damaged property.

A broker should disclose these provisions in plain language before the policyholder buys the policy. If no policy without arbitration is available, the client should be told that. If an endorsement providing for Louisiana law or a Louisiana forum can be negotiated, the broker should try to obtain it. Silence is not meaningful advice. These losses are ripe for insurance agent negligence claims because the policyholder is often forced to arbitrate at much higher costs, under less favorable law, and through a slower process that prevents full, prompt recovery.  These policies are simply horrible for a policyholder stuck in a dispute.

12. Never assume that arbitration means faster or cheaper.

Insurance companies often praise arbitration as efficient. It may be efficient for an insurer that repeatedly uses the same lawyers, arbitrators, experts, and policy provisions. It may be anything but efficient for a policyholder paying tribunal fees, attorney fees, expert expenses, travel costs, and witness expenses merely to recover benefits under a policy covering Louisiana property.

Louisiana has already expressed its public policy by prohibiting arbitration provisions in insurance contracts. Yet foreign insurers can invoke an international treaty to avoid that state law. This problem is not limited to Louisiana. It can arise in other states with insurance anti-arbitration statutes when foreign surplus lines insurers participate in the policy.

A complete solution will probably require congressional action. Congress would have to state expressly that state insurance laws invalidating predispute arbitration provisions apply notwithstanding the New York Convention and Chapter 2 of the Federal Arbitration Act. An executive order cannot rewrite the treaty, the federal statute, or the appellate decisions enforcing them.

The practical lesson is to find the arbitration clause immediately, identify every insurer, read every endorsement, calendar every deadline, preserve the evidence, and obtain knowledgeable legal advice before making a strategic move.

In surplus lines insurance, the most expensive clause in the policy may be the one that says where and how the insurer can be forced to pay.

Thought For The Day

“Every man a king.”
—Huey P. Long

1 Transportation Consultants v. Certain Underwriters at Lloyd’s, London, No. 25-30372 (5th Cir. Sept. 3, 2026).

2 Crescent City Surgical Operating Co. v. Interstate Fire & Cas. Co., 25-30044 (5th Cir. April 22, 2026).

3 Town of Vinton v. Indian Harbor Ins. Co., 161 F.4th 282 (5th Cir. 2025).