A state judge has denied a bid by an insurer to force a policyholder into arbitration, ruling that the arbitration agreement may not be enforceable because the Federal Arbitration Act does not preempt state insurance law.

But Manhattan Supreme Court Justice Eileen Bransten (See Profile) gave National Union Fire Insurance Co. another chance to make its case, finding that its petition to compel arbitration “leaves open the substantial question of the validity” of the arbitration clause.