NCJ Number
64383
Journal
Forum Volume: 13 Dated: (FALL 1977) Pages: 223-236
Date Published
1977
Length
14 pages
Annotation
THE PURPOSE OF REINSURANCE, ARGUMENTS FOR SUPPORTING REINSURANCE ARBITRATION CLAUSES, AND ENFORCEMENT OF ARBITRATION ARE TOPICS DISCUSSED IN THIS PAPER RECOMMENDING ARBITRATION OVER LITIGATION IN REINSURANCE.
Abstract
REINSURANCE MEANS SHARING INSURANCE RISKS OF THE PRIMARY INSURER AMONG ONE OR MORE REINSURERS THROUGH A SIGNED TREATY. THE RATE OF REINSURANCE IS NEGOTIATED BY THE PARTIES. REINSURANCE ENABLES AN INSURANCE COMPANY TO MAINTAIN OR INCREASE ITS RISK-WRITING CAPACITY FOR KINDS OF RISKS, POLICY LIMITS, AND THE NUMBER OF RISKS ASSUMED FOR GIVEN LINES OF BUSINESS. ALMOST ALL REINSURANCE AGREEMENTS CONTAIN SOME FORM OF ARBITRATION CLAUSE, THE INTENT OF WHICH IS TO PROVIDE AN EASY AND INEXPENSIVE MEANS OF RESOLVING DISPUTES ON AN EQUITABLE BASIS WITHOUT RESORTING TO LITIGATION. ARBITRATORS SETTLING POTENTIAL DISPUTES WOULD BE KNOWLEDGEABLE IN REINSURANCE CONCEPTS, AND THE PROCEEDINGS WOULD BE CONDUCTED CONFIDENTIALLY. LITIGATION IS A LESS INVITING ALTERNATIVE BECAUSE IT IS TIME-CONSUMING, IT CAN OBSCURE THE ORIGINAL INTENT OF THE PARTIES, AND IT IS NOT CONFIDENTIAL. MOREOVER, LITIGATION IS AN UNFRIENDLY AND THUS POTENTIALLY DAMAGING FORM OF RESOLUTION. ARBITRATION, AN OSTENSIBLY FRIENDLY SOLUTION, IS ENFORCED BY STATUTE IN FEDERAL JURISDICTIONS, 35 STATES, THE COMMONWEALTH OF PUERTO RICO, AND THE DISTRICT OF COLUMBIA. THE UNIFORM ARBITRATION ACT SERVES AS A MODEL FOR THE VARIOUS STATUTES IN THESE AREAS AND PROVIDES THE LEGAL FOUNDATION FOR ENFORCEMENT OF ARBITRATION AGREEMENTS. AN EXAMPLE OF AN ARBITRATION CLAUSE IS PRESENTED, AS IS A MODEL CLAUSE CONSISTENT WITH JUDICIAL OPINIONS CONCERNING PROVISIONS OF THE UNIFORM ARBITRATION ACT. FOOTNOTES ARE INCLUDED.