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Is Valuation Illegal in Arkansas? | Real estate insurance coverage law blog

A 1989 Arkansas Insurance Bulletin indicates that arbitration and assessment clauses should not be included in insurance policies. This bulletin is still available on the Arkansas Department of Insurance Web site and states:


The provisions of Arkansas law prohibit binding arbitration or assessment clauses in insurance policies or contracts. See Ark. Code Ann. §§ 23-79-208 (1987) and 16-108-201 (1987).

This department has unintentionally approved policy forms that contain mandatory and binding arbitration / assessment clauses. To be acceptable, the policy language must refer to the fact that arbitration / evaluation procedures are voluntary and non-binding in order to avoid a contracting party being deprived of the right to try by the jury.

The Department requests that insurers and advisory organizations as soon as possible apply to the Property and Casualty Division approval amendment form to correct these impermissible clauses in new and existing policies. 1

While the bulletin has been around for over thirty years, I wondered what the legal basis was according to the codes given. When you go to the codes, there does not seem to be anything that addresses "assessment" or makes neither arbitration nor assessment illegal as the bullet suggests. Arbitration is specifically protected and can be included in contracts in Arkansas with a savings clause that makes the law not applicable to certain contracts or situations:

16-108-233. Savings clause – Certain measures excluded

(a) This subchapter does not affect a measure or an ongoing proceeding or a right acquired before the entry into force of this subchapter.

(b) This subchapter does not apply to:

(1) Personal injury or damages issues;

(2) Disputes between employers and employees; or

(3) An insured or beneficiary under any insurance or annuity agreement. 2

There are older cases in Arkansas that maintain valuation prices with the fairly standardized finding that:

Any reasonable change and presumption is for an allocation made by valuers under the terms of a fire policy, and it should not be returned it is not clear that it was done without authority, or was the result of fraud or mistake, or of the error or misconduct of the valuers. 3

Recent cases, however, seem to indicate that

With regard to the laws of both Arkansas and Oklahoma, it is clear that the position of insurers is unsustainable, as Simmons had no legal obligation to submit to a non-volunteer, binding evaluation process, which is set out in the general valuation provision in the IRI policy or in the insurers' written requirements. Arkansas law provides that a non-voluntary, binding assessment provision cannot be enforced, as it would deprive a contracting party of the right to review by the jury the essential facts of the policy. See Ark. Code Ann. § 23-79-203 (& # 39; No insurance or annuity agreement shall contain any terms, conditions or agreements that directly or indirectly deprive the insured or beneficiary of the right to review by the jury facts that arise during the insurance or agreement … All such provisions, terms or agreements shall be invalid. & # 39;) 4

The Charter cited by the Court states:

23-79-203. Review by the jury.

(a) No insurance or annuity agreement shall contain any condition, provision or agreement that directly or indirectly deprives the insured or the beneficiary of the right to try the jury in all factual issues that arise during the insurance. or contract.

(b) All such terms, conditions or agreements are void. 5

It appears that the Bulletin is correct and should refer to the Charter above.

Thought For The Day

I just got back from Mississippi and over there when you talk about the West Bank, they think you mean Arkansas.
—Pat Buchanan
____________________________________________ [19659026] 1 Arkansas Insurance Bulletin 19-89, Policy Provisions on Arbitration or Assessment . Available at https://insurance.arkansas.gov/uploads/resource/documents/19-89.pdf [19659026] 2 Sheet. Code (Uniform Arbitration Act) §16-108-233. Savings clause – certain measures excluded.
3 Niagara Fire Ins. Co. v. Boon 76 Ark. 153, 88 S.W. 915 (1905); See also Miller v. Am. Ins. Co. of Newark, N.J. 124 F. Supp. 160, 164, n. 1 (WD Ark. 1954) (seemingly equating assessment clause with arbitration clauses, but not definitively decisive in the matter).
4 Simmons Food, Inc. v. Industrial Risk Insurance 2015 WL 12912443, at * 3 (WDArk., 2015).
5 Ark. code (insurance) §23-79-203. Trial by the jury.

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