THERE’S LIFE IN THE OLD DOG YET – THE USE OF ADR IN INSURANCE PRACTICE
Both insurance/reinsurance and alternative dispute resolution (ADR) are founded in the same old tradition; namely, to further commerce through informality, speed, low cost and commercial realism. Historically, confidential binding arbitration has been used in the insurance arena to resolve disputes among insurers in the reinsurance context and between insureds and insurers under high excess catastrophic liability policies. In recent years, it has been resorted to more frequently in all types of insurance disputes involving coverage of first-party property claims and third-party claims, including claims under professional indemnity (PI) and directors and officers (D&O) policies.
The mechanics for dealing with and resolving disputes are increasingly provided for in well-drafted policy clauses that not only oblige the parties to pursue alternative means of dispute resolution (arbitration and mediation) but also ensure that such proceedings remain entirely confidential to the parties for the protection of brand image or reputation.
In the insurance coverage context, arbitrations typically proceed under either: (i) the standard commercial arbitration model in which the parties nominate a single arbitrator or a tripartite panel of arbitrators; or (ii) a modified reinsurance model where the parties each select an arbitrator with insurance industry expertise or experience who in turn selects a neutral umpire, most likely a professional arbitrator (and frequently someone with a background in insurance).
Oct-Dec 2019 issue
Vavrovsky Heine Marth Rechtsanwälte