The Insurance and Reinsurance Dispute Resolution Task Force (Task Force) was established in 1997 to “improve the reinsurance dispute resolution process by identifying common problems and recommending industry-wide, flexible, business-like solutions.”
The Task Force undertook a variety of tasks, one of which was to draft a set of procedures that could be utilized by the insurance and reinsurance industries for the resolution of their contractual disputes. This set of procedures is referred to as the Procedures for the Resolution of U.S. Insurance and Reinsurance Disputes (Procedures).
In undertaking this effort, initially in 1997 and continuing in 2003, and again since reconvening in 2007, the Task Force attempted to balance several goals. One was to set forth, in writing, the actual insurance and reinsurance arbitration practice as it exists. The second was to enhance and clarify minor procedural issues that sometimes result in unnecessary conflicts between Parties. And the third goal was to tackle some of the major issues that cause inefficiencies and a lack of confidence in the current system, and recommend alternative procedures that might result in greater fairness and a higher level of certainty to the Parties.
An example of this third goal is the umpire selection process created in Article 6 of the Procedures: Appointment and Composition of the Panel. The often-used process of selecting an umpire by lot (in the absence of agreement) is random, arbitrary and prone to potential manipulation. The umpire selection process reflected in Article 6 is intended to encourage parties to reach agreement on an umpire and remove or reduce the potential for manipulation, arbitrariness or chance in the event that agreement cannot be reached. It is intended to motivate the parties to select competent, well-qualified individuals.
As has been the practice in prior editions of the Procedures, the Task Force considered and in some cases, debated at length, many topics while drafting the 2009 edition. The resolution of some of those issues is reflected in these Procedures. However, although other issues were fully considered, the Task Force took no position on them and therefore they are not addressed in this edition. Examples include the precedential or collateral effect of arbitration awards; the designation of a choice of law provision (which remains an Optional Consideration); the applicability of the Procedures to international disputes; and the authority of a panel to appoint its own expert witnesses.
In the 2004 edition of the Procedures, the Task Force addressed the issue of consolidation involving multiple reinsurers, the same contract and the same loss, and offered sample wording as an Optional Consideration. In the years since the publication of the 2004 edition, there have been significant changes in the law relating to consolidation of arbitration disputes. After extended discussion, the Task Force decided to again address consolidation as an Optional Consideration, but eliminated the use of one sample clause which may no longer address the various developing issues that can arise in connection with consolidation. Instead, the 2009 edition of the Procedures now provides that parties “may consider whether to include a consolidation provision and the content of any such provision,” allowing parties to consider the appropriateness of a consolidation provision, and its content, on a case by case basis. This revised wording should not be construed as an indication of the views or positions of the Task force as a whole, of any Task Force member, or of his/her respective employer, regarding consolidation in arbitration .
The 2009 edition of the Procedures seek to reflect certain changes in the legal environment, continuing changes in the insurance and reinsurance industry, the practical needs of parties to an insurance or reinsurance agreement, and the views of professional arbitrators charged with resolving disputes. The 2009 edition of the Procedures continues to build upon prior versions, and remains an important step forward in preventing unnecessary friction in the arbitration process and providing parties with more certainty regarding what to expect from the process, consistent with the traditional goals of reinsurance arbitration. The Task Force hopes contracting parties will consider incorporating these Procedures into their future contracts or, through a separate agreement, applying them to their existing relationships. Parties should feel free to incorporate them, as written, or with modifications to their unique situations.
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