The Oregon Division of Financial Regulation published a bulletin reminding insurers that policies may not have mandatory arbitration clauses, choice of law provisions, and choice of venue provisions.
Under ORS 742.005 of the Insurance Code, the DCBS director may disapprove of any form if it is determined that it contains unfair or unjust provisions. A pre-dispute mandatory arbitration clause is one where one party to the dispute may initiate arbitration and resolve the claim unilaterally.
The Insurance Code states that the results of an appraisal are not binding on any party that did not request it. The two parties must agree to initiate the appraisal process. Any policy containing a pre-dispute mandatory arbitration clause will be disapproved.
Choice of law and choice of venue provisions are contractual provisions that specify the state or location whose laws will govern any disputes that arise under the contract. Oregon law states that insurance transacted in the state will be governed by Oregon law, and any provision requiring the use of foreign laws are prohibited.
The Division states that the provisions are an unfair trade practice and injurious to the public. Any policy form filing containing all of these provisions will be disapproved.
The bulletin can be found here.
Ray Sugrim
Ray Sugrim is an Insurance Editor with FC&S Expert Coverage Interpretation, a division of National Underwriter Company and Arc Network. Ray is responsible for helping develop and edit content for subscribers. Ray is a St John’s University graduate with a degree in Risk Management & Insurance and is a CPCU candidate.