Table of Contents
In Short
- Resolves disputes through arbitration, common in insurance and reinsurance contracts.
- Institutional rules (LCIA, ICC) or ad hoc procedures such as ARIAS (UK) Rules.
- Essential in insurance policies but may not carry over to reinsurance contracts.
Tips for Businesses
When dealing with insurance or reinsurance disputes, arbitration offers a cost-effective way to resolve conflicts. Ensure your contracts include clear arbitration clauses to avoid future complications. For simpler disputes, consider using ARIAS Fast Track Arbitration Rules to save time and costs.
Your business may encounter a commercial dispute with another company, including an insurance provider, such as in a reinsurance disagreement. When faced with a business dispute, resolving it quickly and cost-effectively is crucial. Arbitration offers an alternative dispute resolution (ADR) method for addressing commercial conflicts. In arbitration, a panel hears both sides and issues an arbitral award, helping to settle disputes without unnecessary costs or delays. This article explores insurance and reinsurance arbitration and provides key legal insights.
What is Insurance and Reinsurance Arbitration?
When you contract with another party, you may have an arbitration clause specifying that any disputes will be resolved through arbitration. Insurance policies often include such clauses. Insurance arbitration is a process where disputes are resolved via arbitration, such as:
- allegations of non-disclosure; or
- questions about contractual terms.
In insurance and reinsurance disputes, arbitration typically occurs under an excess liability policy known as the Bermuda Form, which applies to companies operating in the United States. Despite the policy being governed by New York law, the seat of arbitration is usually London or Bermuda.
This guide outlines how to resolve commercial disputes.
What Are the Different Types?
When parties to a commercial dispute choose arbitration, they can select the form in which the arbitration will proceed. This can include the rules of arbitral institutions such as, for example, the:
- London Court of International Arbitration (LCIA);
- International Chamber of Commerce (ICC);
- Singapore International Arbitration Centre (SIAC); or
- Hong Kong International Arbitration Centre (HKIAC).
However, arbitration agreements rarely refer to the LCIA or ICC for insurance and reinsurance arbitration. Instead, they often refer to institutions based in the jurisdiction whose law governs the insurance policy. For insurance and reinsurance contracts, this is usually English law. In addition, London is generally the chosen seat of arbitration.
It is also common for arbitration to be conducted ad hoc. This means parties to the arbitration may:
- use a set of arbitration rules already in existence;
- write their own regulations; or
- use domestic arbitration law existing in the seat of arbitration.
What Are the ARIAS (UK) Rules?
When agreements do not follow institutional arbitration rules, they often use the ARIAS (UK) Rules. ARIAS (UK) was created in 1994 to establish a procedure for insurance and reinsurance arbitration. They have produced two sets of rules, the:
- ARIAS (UK) Rules; and
- ARIAS Fast Track Arbitration Rules.
ARIAS (UK) also produces suggested wording for insurance and reinsurance arbitration clauses.
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Arbitration Agreements
An arbitration agreement between you and the other party is essential to ensure disputes are resolved through arbitration. This should be an express agreement that an arbitration clause is included. However, this can become an issue in reinsurance contracts, as they often state that the policy is “all terms and conditions as original”. This will not usually suffice for an arbitration clause in the original policy to be recognised in the reinsurance agreement.
A further note is that these agreements often say that jurisdiction is with the English Court but that arbitration must resolve a dispute. This can appear confusing. However, English courts tend to see this as meaning that arbitration should take place to resolve a commercial dispute, but the court will have supervisory jurisdiction.
Key Takeaways
Insurance and reinsurance arbitration occurs when your insurance policy includes an agreement to resolve disputes through arbitration. This process can address issues like contractual interpretation. While some arbitration follows institutional rules, many insurance disputes are resolved on an ad hoc basis using the ARIAS (UK) Rules. Importantly, if a policy references “all terms and conditions as original”, this is usually insufficient to carry over an arbitration clause.
If you need help understanding arbitration insurance, our experienced disputes and litigation lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Insurance and reinsurance arbitration is where you resolve commercial insurance disputes through arbitration.
Usually, these agreements use existing rules, not institutional arbitration rules, such as the ARIAS (UK) Rules.
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