RISKVUE ARCHIVE | QUESTIONS OF THE MONTH

Mandatory Arbitration Provisions

Dear riskVue: I seem to recall reading something from one of your publications regarding mandatory arbitration provisions in insurance policy contracts. We have such provisions in our D&O and excess liability insurance policies but I'm not sure whether these are desirable features. What say you?

I review construction and service contracts along with insurance contracts on a daily basis. I am seeing more and more mandatory arbitration provisions included. I am in favor of these agreements for the following reasons:

    -- Arbitration is less expensive than a jury trial.

    -- The arbitrators are more familiar with the subject than a jury would be.

    -- Arbitrators don't give out huge awards. They are more in line with actual damages.

    -- Arbitration is much quicker than the court system.

Robert G. Williams, Risk Manager
Carroll County Government

This question reminded us of an excellent article on the love-hate relationship that insurers, risk managers, and attorneys have with mandatory arbitration clauses. Originally published in 1994, Mandatory Arbiration Clauses in Insurance Contracts Stir Controversy is an oldie-but-goodie we think you'll enjoy reading.

Gary Griffin
riskVue Editor

riskVue | The webzine for risk management professionals
May 2007