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Top cases & what You need to know about Alternative dispute resolution (ADR) for the insurance industry
There's no denying that the insurance industry experiences a massive number of disputes each year. While some of these cases are taken to the courts, many of them are settled without ever having to go in front of a judge. When disputes involve insurance matters, it is especially beneficial to consider having them handled by an insurance arbitration firm. There are many characteristics of insurance arbitration cases that make them advantageous for all parties involved. Here's an overview of those characteristics and a look at five famous insurance arbitration cases that greatly influenced the insurance arbitration and mediation industry.
Insurance Law Mediation
Arbitrations are especially beneficial for insurance disputes involving foreign parties. Foreign court judgments can be difficult to enforce, but because of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, foreign arbitral awards limit the defenses that can be raised as a form of opposition once a settlement has been determined.
Another aspect of arbitrations that makes them exceptionally suitable for insurance disputes is the ability to maintain positive relationships between the involved parties. Taking cases to court often brings about an assortment of factors that affect both parties negatively, especially in relation to the timeline of the dispute. Arbitrations strive to reach an agreement as quickly as possible while still ensuring both parties are satisfied with the outcome.
Important Cases in Insurance Law Arbitration and Mediation
Another influential case is Sphere Drake Ins. Ltd. v. Clarendon Nat’l Ins. Co. A district court order was used to uphold an arbitration that had already been agreed upon. In this case, arbitration clauses were able to maintain enforceability. Although arbitration clauses can be modified by the courts under limited grounds, they can't if they don't specifically state they are voidable if the contract itself becomes void.
In Michigan Mut. Ins. Co. v. Unigard Sec. Ins. Co., the Ninth Court Appeals backed an arbitration award by outlining the cedent's obligation to provide information that is vital to the reinsurer's evaluation for determining if the claim is valid. Privileged information known by cedents is protected under the common-interest doctrine; however, the Michigan Mut decision shows how there is no blanket of protection of this information within arbitrations.
Lance Armstrong was involved in a famous arbitration case in which the courts did not rule in his favor. Instead, a Dallas insurance company sued him for fraud. The insurance company sought $12 million because Armstrong had lied under oath during a case that resulted in the company having to award him $7.5 million in 2006. Although Armstrong's attorneys brought arguments to the table saying the case couldn't be reopened, it was decided by an arbitration panel that the case should be reconsidered. This case clearly demonstrates the benefits that can be enjoyed.
Lastly, a case that shows the many beneficial characteristics of arbitration within the insurance industry is Employers Ins. of Wausau v. National Union Fire Ins. Co. of Pittsburgh. Offset clauses involved in the case stated that:
"THE REINSURER MAY OFFSET ANY BALANCES, WHETHER ON ACCOUNT OF PREMIUMS, COMMISSIONS, CLAIMS, LOSSES, ADJUSTMENT EXPENSE, SALVAGE. OR ANY OTHER AMOUNTS DUE FROM ONE PARTY TO THE OTHER UNDER THIS CERTIFICATE OF REINSURANCE OR UNDER ANY OTHER AGREEMENT HERETOFORE OR HEREAFTER ENTERED INTO BETWEEN THE COMPANY AND THE REINSURER, WHETHER ACTING AS ASSUMING REINSURER OR AS CEDING COMPANY."
The cedent in this case claimed a request for payment means that payment for the claim is due. However, the reinsurer stated payment was only due when litigation was implemented. Because of the processes involved in arbitration, it was possible for the cedent to have the dispute resolved, and in this case, the arbitration panel sided with the cedent;This case demonstrates how limited the options are for vacating an arbitration award or arbitration agreement.
Many insurance disputes can be effectively settled through the knowledgeable assistance available through insurance law mediators such as Settle the Dispute Group's firm that practices in insurance mediation and litigation cases. The best way to determine which disputes are suitable is by speaking with a highly-reputable mediator.