Arbitration Clauses Can Make Dispute Resolution Arbitrary

The outcome of an arbitration can be determined by choice-of-law provisions and other clauses that dictate who may serve as an arbitrator and how the proceedings must be conducted. This is particularly true in the context of insurance coverage litigation, which often turns upon which state’s substantive law applies and on such state’s established doctrines of insurance policy interpretation. As a result, policyholders in different states who are sold the same policies do not necessarily have the same coverage.

While this article focuses on arbitration clauses in insurance policies, the principles discussed apply broadly. Parties to any agreement containing an arbitration clause must pay careful consideration to the law applicable to the agreement, as well as any clauses regarding the construction and interpretation of the agreement.

Below, we focus on four provisions generally found in insurance and reinsurance agreements that can fundamentally alter the nature and outcome of a dispute.