A Tool To Smooth Reinsurance Disputes (National Underwriter)

Friday, February 23, 2007

Steve Tuckey

With legal conflicts between primary and secondary insurers on the rise, a new mediation tool could cut the cost of such disputes, experts at a New York seminar said this week.

Developed by the New York-based International Institute for Conflict Prevention and Resolution, the new protocol, it was explained, provides a framework for mediating insurer-reinsurer disputes that could avoid many costly processes such as depositions and discovery.

New York-based attorney Vincent Vitkowsky served on the advisory panel that developed what became the International Reinsurance Industry Dispute Resolution Protocol.

“The Protocol is not a legally binding agreement, and a company choosing to adopt it waives no right, defense or privilege, and no cause of action arises from not following it,” he said.

Mr. Vitkowsky said that dissatisfaction with arbitration has grown in recent years. “Some think it is too long and expensive,” he said. “Alternatively, there is sometimes a sense that not every dispute requires the full and customary arbitration process, especially the expensive and contentious phase which includes depositions.”

Participants at the seminar agreed that insurer-reinsurer disputes are on the rise, although any evidence would be anecdotal since there is no formal tallying of such disputes.

The protocol stimulates creativity “when it can still make a difference in maintaining trading relationships in a sinking market.”

Depositions and cross examinations can poison business relationships, and use of the Protocol can not only avoid that but also help ensure the dispute does not arise again.

“In the U.S., reinsurance arbitrators tend to treat depositions as a fundamental matter of due process, like habeas corpus,” Mr. Vitkowsky said. “In international commercial arbitration, generally, there are often no depositions.”

Paul Moss, head of claims for the Australian insurer QBE, said the London-based movement for “contract certainty” will help the cause of mediation since it will codify the process over the traditional arbitration clause that is a part of standard reinsurance contracts.

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