                     United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 01-1223
                                   ___________

Standard Security Life Insurance        *
Company of New York, a New York         *
Corporation,                            *
                                        *
              Appellant,                *
                                        * Appeal from the United States
      v.                                * District Court for the
                                        * Western District of Missouri.
Devin West,                             *
                                        *      [PUBLISHED]
              Appellee.                 *
                                   ___________

                           Submitted: September 7, 2001
                               Filed: October 5, 2001
                                   ___________

Before BOWMAN, LOKEN, and HANSEN, Circuit Judges.
                           ___________

PER CURIAM.

      Standard Security Life Insurance Company of New York (Standard) appeals,
pursuant to 9 U.S.C. § 16(a), the District Court’s1 grant of Devin West’s motion to
dismiss Standard’s complaint which sought to invoke the Federal Arbitration Act




      1
      The Honorable Nanette K. Laughrey, United States District Judge for the
Western District of Missouri.
(FAA) to compel arbitration of the parties' insurance coverage dispute.2 See Standard
Sec. Life Ins. Co. v. West, 127 F. Supp. 2d 1064 (W.D. Mo. 2000). Having conducted
a de novo review of the District Court's judgment, see Honn v. Nat’l Ass’n of Sec.
Dealers, 182 F.3d 1014, 1017 (8th Cir. 1999), we affirm.

       In November 1998, University of Missouri football player West purchased an
insurance policy from Standard covering permanent total disability in the event he
suffered an injury or sickness that prevented him from playing professional football.
The policy included a provision stating that if a policy dispute arose, either the insured
or Standard could make a written demand for arbitration. West later submitted an
insurance claim, but Standard denied it and requested binding arbitration.

       After West filed suit against Standard in a Missouri state court claiming breach
of an insurance contract and vexatious refusal to pay, Standard filed suit in the District
Court seeking an order compelling arbitration of the parties' dispute pursuant to the
FAA. See 9 U.S.C. § 2 (1994) (declaring written arbitration provisions in contracts
“evidencing a transaction involving commerce” to be “valid, irrevocable, and
enforceable”). Standard also removed West's state-court suit to the District Court, and
the court consolidated it with Standard’s FAA suit. Standard moved to stay West’s
state-law claims pending the results of arbitration or, alternatively, to dismiss for failure
to state a claim on the basis that the FAA barred West’s coverage claims. West, in
turn, moved to dismiss Standard’s FAA action, arguing that the Missouri Arbitration
Act rendered the insurance policy’s arbitration clause unenforceable. See Mo. Rev.
Stat. § 435.350 (2000) (declaring that an arbitration “provision in a written contract,
except contracts of insurance and contracts of adhesion . . . is valid, enforceable and
irrevocable” (emphasis added)). West also argued that the FAA did not preempt
section 435.350 of the Missouri Revised Statutes because the McCarran-Ferguson Act


       2
       The District Court also denied Standard's motion to stay or dismiss West's state-
law claims.
                                             -2-
prevents inadvertent federal preemption of a state statute regulating the insurance
industry. See 15 U.S.C. § 1012(b) (1994) (“No Act of Congress shall be construed to
invalidate, impair, or supersede any law enacted by any State for the purpose of
regulating the business of insurance . . . unless such Act specifically relates to the
business of insurance . . . .”).

       In accordance with section 2 of the McCarran-Ferguson Act, inverse-preemption
operates to bar application of the FAA if (1) the FAA does not specifically relate to the
business of insurance, (2) the FAA would invalidate, impair, or supersede section
435.350, and (3) section 435.350 was enacted for the purpose of regulating the
business of insurance. See Murff v. Prof’l Med. Ins. Co., 97 F.3d 289, 291 (8th Cir.
1996), cert. denied, 520 U.S. 1273 (1997). The parties did not dispute in the District
Court whether the first two factors were met, and thus the court correctly focused on
the third factor: whether section 435.350 was enacted to regulate “the business of
insurance.”

       We hold that section 435.350 does regulate the business of insurance because
it applies to the processing of disputed claims. This processing, in turn, has a
substantial effect upon the insurer-insured relationship and the policy’s interpretation
and enforcement, both of which are “core” components of the business of insurance.
See United States Dep’t of Treasury v. Fabe, 508 U.S. 491, 501 (1993) (recognizing
that the core of the business of insurance includes the insurer-insured relationship and
the interpretation and enforcement of the policy); see also Express Scripts, Inc. v.
Wenzel, No. 00-2788, 2001 WL 947057, at *6 (8th Cir. Aug. 22, 2001) (explaining
that the Supreme Court has understood the McCarran-Ferguson Act to be a consumer
protection law concerned with the core business of insurance). We also conclude that
the District Court properly applied the three criteria relevant to deciding whether a
particular practice at issue—here, section 435.350’s prohibition against arbitration
clauses in insurance contracts—involves the business of insurance. See Union Labor
Life Ins. Co. v. Pireno, 458 U.S. 119, 129 (1982) (reaffirming that the three relevant

                                           -3-
criteria are whether the practice (1) has effect of transferring or spreading
policyholder’s risk, (2) is integral part of insurer-insured relationship, and (3) is limited
to entities within insurance industry).

        First, as the District Court noted, section 435.350 transfers or spreads the risk
by introducing the possibility of jury verdicts into the process for resolving disputed
claims. See Fabe, 508 U.S. at 503-04 (observing that without the performance or
enforcement of contract terms, no risk transfer occurs); Mut. Reinsurance Bureau v.
Great Plains Mut. Ins. Co., 969 F.2d 931, 933 (10th Cir.) (noting that an insurance
contract is evidence of agreement to spread risk and concluding that by enacting statute
invalidating written arbitration clauses in contracts of insurance, Kansas legislature had
limited enforceability of parties’ agreement to spread risk; therefore, statute applied to
reinsurance contract at issue), cert. denied, 506 U.S. 1001 (1992).3 Second, section
435.350 regulates an integral part of the insurer-insured relationship by invalidating an
otherwise mandatory insurance contract term that allows either party to compel
arbitration of policy disputes, thus subjecting all policy disputes to the possibility of a
jury trial. See Express Scripts, 2001 WL 947057, at *6 (concluding that state laws that
control insurance contract terms are generally seen to regulate insurance under either
the ERISA savings clause or the McCarran-Ferguson Act); Mut. Reinsurance Bureau,
969 F.2d at 933 (concluding that a Kansas arbitration statute similar to section 435.350
regulates the insurer-insured relationship); cf. UNUM Life Ins. Co. of America v.
Ward, 526 U.S. 358, 374 (1999) (finding that a California notice-prejudice rule met the
second McCarran-Ferguson factor by changing bargain between insurer and insured
and effectively creating mandatory contract term). And third, even though it is not part
of the Missouri Insurance Code, section 435.350 is limited to entities within the
insurance industry because insurance is the only industry singled out for an across-the-


       3
       The Kansas arbitration statute at issue in Mutual Reinsurance was amended in
1995 to provide that, when construing the scope of the statute's applicability,
reinsurance contracts are not to be considered contracts of insurance.
                                             -4-
board invalidation of arbitration clauses. See Fabe, 508 U.S. at 505-06 (rejecting
argument that Ohio statute was not an insurance law but a bankruptcy law on the
ground that the statute's primary purpose was identical to primary purpose of insurance
company itself, i.e., paying claims made against policies); Mut. Reinsurance Bureau,
969 F.2d at 934 (ruling that for McCarran-Ferguson Act to apply it is not necessary that
state statute be in form of insurance code or act relating only to insurance: Kansas
statute related basically to arbitration but nonetheless clearly and directly excepted
insurance).

      After carefully considering each of Standard’s arguments for reversal and the
cases Standard cites in support of them, we find that they provide no persuasive basis
for undermining the District Court’s well-reasoned analysis. Accordingly, we affirm.
The case is remanded for appropriate proceedings on West's state-law claims.

      Judge Loken concurs in the result only.

      A true copy.

             Attest:

                     CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




                                          -5-
