Coverage disputes between insurance companies and policyholders are mature to resolve through arbitration. ARIAS • US. works on a project to create an arbitration path, including amended rules and requirements for certified arbitrators, for these types of disputes and others. But unless the parties agree that the insurance contract contains an arbitration clause, the arbitration option is not available.
However, there are a number of insurances written for the industrial value of the global insurance market that contain arbitration clauses. If non-US insurers are involved and where a dispute resolution occurs, can these non-US insurance companies force arbitration? That question was recently answered by a New Jersey federal court.
In Cornell-Dubilier Electronics, Inc. v Allianz Versicherungs AG No. 18-5947 (SDW) (SCM) (DNJ Feb. 6, 2019), a coverage conflict arose between a policyholder – a former subsidiary of a large global energy company – with Superfund responsible for a place in New Jersey and a set of non-US insurance companies. The policyholder was wearing a suit in the New Jersey State Court and the insurance companies removed the case to the New Jersey federal court where they moved to force arbitration and continue the disputes. The policy (or at least some of them) had an arbitration clause allowing arbitration of "any difference arising between the insured and the insurer with reference to this insurance" in New York.
In granting the proposal to force arbitration, the strong federal policy noted in favor of arbitration. It established the requirements for forcing arbitration under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitration (the "New York Convention") and found that all four factors existed. There was no dispute that a written agreement existed (insurance contract) and that the written agreement provided for arbitration on territory that signed the New York Convention (the US is a signatory and its participation is carried out through Chapter 2 of the Federal Arbitration). The court found that the written agreement was commercial in nature (insurance and reinsurance contracts, said the court is commercially intended) and the dispute is not entirely domestic (the non-US insurers were French and United Kingdom nationals). Given that all four factors existed, under long-standing practice, the Court noted that it must order arbitration, unless it is determined that the agreement is invalid. That it couldn't do.
The court rejected the policyholder's argument that arbitration was inappropriate because the insurance companies challenged the policyholder's claim for coverage. The court stated that any question as to whether any conditions for arbitration have been fulfilled is that the arbitrators shall decide, not the court. The court also rejected the argument that because not all insurers agreed to the decision to force arbitration, the proposal could not be granted. The Court argued that nothing in the arbitral tribunal required all insurers to be part of a single movement to force arbitration. The Court of First Instance declared that it would not read such a requirement in the contract language.
This case is in line with the overwhelming trend of enforcing arbitration in insurance contracts (and other commercial contracts).