ARTICLE
3 January 2020

Arbitration Clauses Will Continue To Dominate In Reinsurance Contracts

CC
Clyde & Co

Contributor

Clyde & Co  logo
Clyde & Co is a leading, sector-focused global law firm with 415 partners, 2200 legal professionals and 3800 staff in over 50 offices and associated offices on six continents. The firm specialises in the sectors that move, build and power our connected world and the insurance that underpins it, namely: transport, infrastructure, energy, trade & commodities and insurance. With a strong focus on developed and emerging markets, the firm is one of the fastest growing law firms in the world with ambitious plans for further growth.
Insurers and insurance attorneys have a love-hate relationship with arbitration in insurance and reinsurance contracts.
United States Litigation, Mediation & Arbitration

Insurers to consider arbitration as an effective strategy in 2020.

Insurers and insurance attorneys have a love-hate relationship with arbitration in insurance and reinsurance contracts. Generally, they love arbitration about as much as they love the last result in the last arbitration they had.

Having said that, arbitration is favored over court litigation in reinsurance contracts and we will continue to see this in 2020. One reason for this is arbitration clauses also are more likely than not to be found in insurance contracts where the parties are companies from different countries. Arbitration under a neutral arbitration framework, perhaps with special rules about the neutrality of the arbitration panel, provides comfort to both parties that there will not be a "home court advantage" for either party.

Robust debates often ensue about the pros and cons of arbitration versus court litigation. Those favoring court litigation note that there is no meaningful right to appeal from arbitration awards and that sometimes arbitration panels get it wrong. Those favoring arbitration respond that if you won at arbitration, you are glad that there is no right to appeal, and that courts too "sometimes get it wrong."

The debates will continue, but it is clear that reinsurers benefit from a well-crafted arbitration clause in its policies, especially a clause which contains language to the effect that no rules of construction will be applied against the insurer, and also provides that the arbitrators have no authority to award punitive or exemplary damages. Looking ahead to 2020, insurers should look to level the playing field and consider arbitration as an effective strategy.

Read the rest of our insurance predictions here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More