A federal judge in Louisiana has issued a temporary restraining order preventing Chubb Bermuda Insurance from enforcing an arbitration clause in a COVID-19-related business interruption dispute.
The case involves Louisiana-based hospitality group Landry LLC, which sought coverage under an excess and surplus policy for pandemic-related shutdowns. The policy required arbitration in London, but Landry argued the provision was invalid under Louisiana law. The Louisiana Supreme Court reaffirmed in 2024 that arbitration clauses in insurance contracts are unenforceable because they deprive state courts of jurisdiction.
According to a report from BestWire, Chubb Bermuda attempted to enforce arbitration in the UK, where the English High Court had recognised the clause and issued an anti-suit injunction. The Louisiana federal court’s restraining order effectively blocks that move until a Sept. 16 hearing, when judges will consider whether to issue a longer-term injunction.
Pressure on arbitration clauses
For insurers, the ruling raises uncertainty about the enforceability of arbitration provisions, particularly in surplus lines contracts. Arbitration has long been used by global carriers to manage litigation risk, but legal analysts warned this approach could face increasing resistance.
The decision could encourage more policyholder challenges in catastrophe-prone states, where arbitration has often been viewed as a safeguard against costly litigation. If courts extend restrictions beyond Louisiana, carriers may face greater exposure to state court actions and prolonged disputes.
Legal experts also see broader implications for Bermuda- and London-market insurers, whose US business models often depend on arbitration provisions to streamline resolution. The case highlights the need for precise drafting and careful consideration of state public policy when writing excess or surplus lines coverage.
While most COVID-19 business interruption cases have favoured insurers, this dispute shows pandemic-related litigation continues to test contract terms. Analysts say the outcome may shape how carriers handle dispute resolution for future catastrophe losses.
Chubb has not commented on the case.
