"Oh boy!" Was my first thought after reading a case claiming that these arbitration proceedings that require policyholders to differ in remote locations could not be stopped by state law. Congress should stop this and state legislators should write laws to ban the insurance companies selling such policies.
Let us all be honest and agree that these arbitration clauses are anti-consumer when they come. The insurers and the agents who sell these products are not friends of the policyholders. I warned of these clauses in Surplus Line Carriers Select Divorce and the Law of New York to pay less coverage and less on claims .
The case 1 poses a risk to builder policies covering property in Louisiana that has an arbitration clause that states:
Any dispute, controversy or claim arising from, in connection with or in connection with it policy, will be finally settled by arbitration. The arbitral tribunal shall be implemented in accordance with the International Arbitration Rules for the US Arbitration Association in force at the time of the arbitration panel. The arbitral tribunal shall be New York, New York, in the United States.
The policyholder quoted Louisiana law as making such an arbitration clause illegal and innocent. The policyholder also pointed to the compliance with the state clause in the policy that claimed that this clause meant that the policy would be interpreted to find that the Louisiana law that made the arbitration clause unlawful:
If any of the terms of this policy conflict with the statutes of the jurisdiction there the insured property is located, these terms are changed to comply with such statutes.
The court agreed and held:
[T] his policy contains an arbitration. It is the arbitration in the insurance policy that is said not to comply with [the Louisiana statute,] a statute that prohibits arbitration agreements. This state charter, which we held in the Safety National, is predicted by the Convention. Because the State Charter, …. As preceded by the Convention, is not the Charter and cannot be applied to McDonnel's policy. And since the law does not apply to the policy, there is no conflict between the policy and the state's statute. With the condition set out, the compliance clause is not triggered. its usability only leads to the conclusion that the arbitral tribunal survives, non-existent under state law.
Insurance defense lawyers in New York, the most common place for the arbitration panel to take place in these surplus lines, must be smiling because you will have a lot of legal activity from remote locations. Excess lines require managers who are lowballing deals, delaying payments and denying claims, lighting cigars and fist are pumping each other over this result. Excessive policyholders are flooded with messages to change policy language and write policies with arbitration clauses in New York.
There is nothing good for policyholders in this decision. The markets for surplus markets are growing and it will allow these operators to sell even cheaper insurance, as most policyholders generally find it too expensive to fight for their benefits in arbitration far from home.
The thought of the day
Good intentions can often lead to unintended consequences. It's hard to imagine a team dedicated to the workforce known to Henry Ford to serve the needs of a workplace formed by Bill Gates' innovations.
1 McDonnel Group, LLC v. Great Lakes Insurance SE, UK Branch No. 18-30817, – F.3d -, 2019 WL 2082905 (5: May 13, 2019).