Most reinsurance contracts have binding arbitration provisions.
The Federal Arbitration Act (FAA) sets out a national policy in
favor of arbitration. Yet, there are states that expressly preclude
arbitration provisions in insurance contracts. Does that apply to
reinsurance contracts?
In Washington Cities Insurance Authority v. Ironshore
Indemnity, Inc., No. 2:19-cv-0054-RAJ, 2020 U.S. Dist. LEXIS
39633 (W.D. Wash. Mar. 6, 2020), a public entities association
organized for the purse of self-insuring risks and jointly
purchasing insurance and reinsurance, purchased a reinsurance
agreement that included an arbitration provision. A dispute arose
concerning the settlement of a police misconduct lawsuit, which the
cedent presented to the reinsurer for payment. The cedent commenced
an action because of the reinsurer’s denial. The reinsurer
moved to compel arbitration and the cedent moved to establish that
the arbitration clause was void.
