Oregon Warns Insurance Industry About Arbitration Clauses

The Oregon Insurance Division is warning the insurance industry to be careful about arbitration clauses.

According to a recently posted bulletin, “It has recently come to [OID’s] attention that policy forms, certificates, and obligor of service contracts may contain arbitration provisions which do not comply with Oregon laws regarding the use of arbitration.”

Oregon laws do not allow mandatory binding arbitration clauses, OID said. Arbitration must be at the mutual agreement of the parties, occur in Oregon, and be according to Oregon laws. Anytime arbitration language is used in insurance contracts, Oregon law applies to all lines of insurance (health, life, and property/casualty), as well as service contracts.

“Subject to ORS 36.600-36.740, if the contract provides for arbitration if claim settlement cannot be reached, the parties may elect arbitration by mutual agreement at the time of the dispute after the claimant has exhausted all internal appeals and can be binding by consent of the insured person. (If the contract provides for arbitration when claim settlement cannot be reached and the policy owner elects arbitration, arbitration takes place under the laws of the State of Oregon and is held in the insured’s county or any other county in this state agreed to by both parties.),” OID said.

OID suggested that producers review Oregon filed products to make sure that if they contain an arbitration provision, they comply with the law.

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