Arbitration clauses are becoming increasingly common in property insurance. On January 25, the Kentucky Department of Insurance stated that arbitration clauses in property insurance will generally be invalid: 1
RE: POLITICAL PROVISIONS CONTAINING ARBITRATION AGREEMENT
The department has experienced a recent increase in form requests containing various references to " arbitration proceedings or other out-of-court dispute settlement procedures between insurers and its policyholders.
In accordance with § 417.050 of the KRS ("Validity of Arbitration – Exempted Agreements") and verification of court order, the institution will refuse insurance forms that require dispute resolution ("mandatory arbitration") as invalid and misleading itself . Security contracts containing arbitrations are specifically exempted from this prohibition by Buck Run Baptist Church, Inc. against Cumberland Sur. Ins. Co. 983 S.W.2d 501 (Ky. 1998).
Political regulations that offer – but not explicitly required – arbitration ("voluntary arbitration") will be subject to failure if they contain misleading or ambiguous language or headings. In addition, Kentucky Uniform Arbitration Act does not recognize "non-binding arbitration". Therefore, policy forms that contain this term may be subject to disapproval according to KRS § 304.14-130 ("Remarks for cancellation").
The Commissioner's approval of a Policy Form does not isolate an insurance clause from the judicial review. Bishop v. Allstate Ins. Co. 623 S.W.2d 865, 867 (Ky. 1981). Insurers are asked to review their own policy forms for compliance with applicable law.
We have noted the fight for arbitration clauses trying to be included in the insurance companies' policies and the removal of appraisal clauses in a number of services:
Nevertheless, the trend is clear. Some insurance industry members are now trying to sign contracts with the most beneficial language they can to exclude their customers from using the state legal system and favorable consumer protection laws. They do this partly by using arbitration clauses that choose law and arbitration to their advantage.
"When the end of the world comes, I want to be in Kentucky because it is always twenty years after the time."
1 Insurance Bulletin 2019-1, Kentucky Department of Insurance.