Hearing separate appeals over a group of eight domestic insurers' bid to arbitrate hurricane damage claims from two Louisiana policyholders, a Fifth Circuit panel wrestled Wednesday with whether those policyholders' respective property insurance coverages constituted one single policy, separate policies with each insurer or something in-between.

During oral arguments spanning almost 90 minutes, the three judges' focus on the exact structure of the town of Vinton's and One Lakeside Plaza LLC's separate property insurance programs indicated that they considered the policy structure question dispositive of the arbitration issue.

Fighting against potential arbitration proceedings under New York law, which is widely seen as generally more favorable to insurers, counsel for Vinton and Lakeside both argued Wednesday that their respective, broadly identical property insurance coverages constituted separate policies with each individual domestic insurer.

"There are separate policies according to the words these insurers themselves put into the policies," Vinton attorney Thomas Flanagan said, further pointing to a "contract allocation endorsement" stating that this "contract shall be constructed as a separate contract between the insured and each of the underwriters."

And without any foreign insurer presently named as a defendant in the cases, Vinton and Lakeside argued that an international treaty called the Convention on the Recognition and Enforcement of Arbitral Awards of 1958, of which the U.S. is a signatory, does not apply. Thus, they argued, the eight domestic insurers must litigate hurricane coverage under Louisiana law.

"On its face, the convention does not apply to contracts between U.S. parties, and the U.S. parties are the only ones with an actual case or controversy here," Flanagan said.

The policyholders further pointed to the Louisiana Supreme Court's October 2024 decision in Police Jury of Calcasieu Parish v. Indian Harbor Insurance Co. et al. , which involved state statutes generally prohibiting policy language that deprives Louisiana courts of jurisdiction or requires policy language to be construed under another state's law. Such statutes bar domestic insurers from invoking the doctrine of equitable estoppel to compel a Louisiana insured to go to arbitration per the terms of an arbitration agreement between the insured and a foreign insurer, Louisiana's justices found.

Having lost at the district court in the present cases, the eight domestic insurers urged the Fifth Circuit to instead look to its own March 2024 decision, initially unpublished, in the hurricane insurance arbitration case Bufkin Enterprises LLC v. Indian Harbor Insurance Co. et al. , which ruled the opposite way.

The Louisiana high court notably stated in the Calcasieu Parish case that it thought the Bufkin decision's legal conclusion was "flawed and not supported by Louisiana law." However, the domestic insurers maintained that because the federal common law governs equitable estoppel under the Convention, rather than state law, Bufkin still nonetheless controls.

The domestic insurers in the Vinton and Lakeside cases are identical to those in the Calcasieu Parish and Bufkin decisions: Indian Harbor Insurance Co., Lexington Insurance Co., QBE Specialty Insurance Co., Steadfast Insurance Co., United Specialty Insurance Co., General Security Indemnity Co. of Arizona, Old Republic Union Insurance Co. and Safety Specialty Insurance Co.

Although complex, the Vinton and Lakeside cases share the same basic factual background. After both policyholders suffered hurricane damage and believed they were entitled to more than what their insurers had paid, they first sued the domestic insurers and certain international insurers under their respective property insurance programs in state court.

But Vinton and Lakeside then dismissed the international carriers with prejudice before they were even served with the respective coverage actions, leaving only the eight domestic insurers in the cases. The domestic carriers then removed the disputes to federal court. Both policyholders' property insurance coverages contained an arbitration provision stating in part that "all matters in difference" between the insurers and insureds over the insurance "shall be referred to an arbitration tribunal" in New York applying New York law.

Bufkin Enterprises LLC engaged in similar "pleading-and-then-dismissing gamesmanship," the Fifth Circuit noted in the Bufkin decision, finding that it could still compel Bufkin to arbitrate with its eight domestic insurers under the doctrine of equitable estoppel, even though the foreign insurers were no longer parties in the case.

In turn, the eight domestic insurers in the two present cases urged the Fifth Circuit to adopt the same holding despite the Louisiana Supreme Court's Calcasieu Parish decision. After U.S. District Judge James D. Cain Jr. rejected domestic insurers' motions to compel arbitration, the Fifth Circuit consolidated the Vinton and Lakeside cases with several other similar hurricane-related insurance arbitration cases, records show.

Rather than separate policies, as Vinton and Lakeside maintained, the domestic insurers' counsel, Raffi Melkonian, argued Wednesday that there was instead one "overarching policy" that "contains all the terms and conditions of the policy, including the arbitration provision."

"And then there are contracts that set forth the liability of each insurer with respect to the insurance promised by this whole policy," he said, adding that such contracts are the "internal machinery" of the overarching policy.

"The liability is determined at the level of the policy, and then it filters through into the individual contracts that sit below the policy," he said. Vinton's and Lakeside's coverages specifically used the terms "policy" and "contract" differently, he continued, with the latter referring to the agreements outlining each insurer's share of total coverage liability.

"We all have to try to harmonize this document in order to understand what it's doing," Melkonian said, after U.S. Circuit Judge Andrew S. Oldham noted that there were still individual policy numbers, not contract numbers, listed in a declarations page.

"And I would say our friends on the other side really have no reading that gives any weight to what the arbitration provision says, what the contract allocation endorsement says, what any of that says," Melkonian said.

But it's "their fault" that the insurers structured Lakeside's insurance the way they did, Lakeside attorney Wells Watson told the panel Wednesday, noting that contractual ambiguities must be construed against the drafter of an insurance policy.

"There's no question there's commonality between these policies. But they're separate policies," Watson further argued. "The overarching concern was, 'We don't want to have to pay for somebody else.'"

If Lakeside were to sue all insurers for a single carrier not abiding by its coverage obligations, the other defendant insurers would surely argue that their own coverage fell under a separate policy agreement with Lakeside, he maintained.

Because the convention does not apply to begin with, given no international insurer is present, Louisiana law must necessarily apply and thus the Calcasieu Parish decision, he argued.

A representative of Vinton declined to comment. Representatives of the insurers and Lakeside did not immediately respond to a request for comment.

U.S. Circuit Judges Catharina Haynes, James C. Ho and Andrew S. Oldham sat on the panel.

The town of Vinton is represented by Thomas M. Flanagan, Camille E. Gauthier and Kansas M. Guidry of Flanagan Partners LLP and by Russell J. Stutes Jr. and Patrick Jody Lavergne of Stutes & Lavergne.

One Lakeside Plaza LLC is represented by Wells T. Watson of Baggett McCall LLC.

The appellant domestic insurers are represented by Raffi Melkonian, Thomas C. Wright, Eric B. Boettcher and Landon J. Francois of Wright Close & Barger LLP and by Sean P. Mount and Bryce M. Addison of Deutsch Kerrigan LLP.

The cases are Town of Vinton v. Indian Harbor Insurance Co. et al., case number 24-30035, and One Lakeside Plaza LLC v. Indian Harbor Insurance Co., case number 24-30758, in the U.S. Court of Appeals for the Fifth Circuit.