Originally from Dispute Resolution Journal

HEALTH CARE

McCarran-Ferguson Act

The spouse of a deceased insured was not required to arbitrate a wrongful death action because the arbitration agreement failed to comply with the Colorado Health Care Availability Act, which as a statute regulating the business of insurance was protected from preemption by the McCarran-Ferguson Act.

Mr. Pacheco, who was insured by the Kaiser Health Plan Foundation of Colorado, died after an extended hospitalization. The Kaiser health plan contained an arbitration clause requiring “any claim of medical malpractice” to be submitted to binding arbitration where the claim was asserted “by a Member, or by a Member’s heir or personal representative.” After her husband’s death, Mrs. Pacheco filed a wrongful death action against her husband’s doctors and the corporation that provides medical services to Kaiser members. The trial court dismissed the suit, holding that she was required to arbitrate. It determined that the arbitration clause was enforceable because the Federal Arbitration Act preempted inconsistent statutory requirements in the HCAA. Following the arbitration, the trial court denied Mrs. Pacheco’s motion to vacate the award. She appealed.

The Colorado Court of Appeals reversed, holding that (1) Mrs. Pacheco was not bound by the arbitration agreement because she was a nonparty, (2) she was not her husband’s heir, and (3) the Kaiser agreement didn’t cover wrongful death actions by a nonparty spouse.

The Colorado Supreme Court granted reviews to answer two questions: (1) is a nonparty spouse required to arbitrate a wrongful death claim when the agreement provides for binding arbitration of all medical malpractice claims? (2) Does the FAA preempt certain restrictive provisions in the HCAA with which the Kaiser agreement did not comply?

Looking at the plain, ordinary meaning of the Kaiser agreement, the court held that the provision for arbitration of “any claim of medical malpractice” included wrongful death. It also held that Mrs. Pacheco would be an heir under the Kaiser agreement. Moreover, the reference to “heirs or personal representatives” in the agreement was broad enough to bind Mrs. Pacheco as spouse of the insured. Accordingly, she would have to arbitrate the dispute unless the FAA preempted application of the HCAA.

Mrs. Pacheco argued that the FAA itself was preempted because the McCarran-Ferguson Act “reverse-preempts” the FAA. The court agreed that McCarran-Ferguson exempts from federal preemption state statutes that regulate the business of insurance. As a result, the state-mandated language and typeface requirements of the HCAA applied, and since the Kaiser agreement failed to meet them, the court held that the arbitration clause was not enforceable.

Allen v. Pacheco, 71 P.3d 375 (Colo. 2003).

—Liz Carson