Challenging Unfavorable Arbitration Clauses

Risk Management

PUBLISHED ON: February 5, 2013

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In 1925, the often-cited the Federal Arbitration Act favoring arbitration of disputes was codified by Congress. Notwithstanding this federally legislated presumption in favor of upholding arbitration agreements, however, it is the states, not the federal government, that are vested with the power to regulate the business of insurance under the McCarran-Ferguson Act — and many states have statutes that prohibit or limit the arbitration of insurance disputes under certain circumstances. Currently, approximately 26 states have enacted legislation that expressly limits or wholly restricts submitting claims arising out of insurance disputes to binding arbitration.