Vince Vitkowsky of Edwards Angell Palmer & Dodge LLP presented on Thursday concerning Dispute Resolution Clauses in reinsurance contracts, which specifically focused on arbitration clauses. Though there are various forms of dispute resolution used in commercial practice, arbitration has been the standard method in the reinsurance industry since the 1800s. He suggested that despite criticisms of the arbitral process, arbitration is the most practical and fair way to resolve disputes in the reinsurance industry, since parties are able to have their dispute heard before one or more arbitrators who almost always have significant experience in the reinsurance world, instead of judges who may be overburdened or have less knowledge and interest in reinsurance. Though the pool of arbitrators to select from in the U.S. is small, those that make up the pool are very qualified and committed to rendering a fair award.

Mr. Vitkowsky reviewed some of the wordings currently used in modern dispute resolution clauses. He suggested that the most important clause is one which sets out the process for selecting an umpire, who often acts as the “neutral” arbitrator on a three-person panel. Reinsurance arbitrations typically involve a panel of three arbitrators, in which each of the parties chooses one “party-appointed” arbitrator, and then those two arbitrators choose the third (the umpire). Although many contracts allow for procedures that leave the selection up to chance, the most reliable way to obtain a fair outcome is to stipulate in the agreement that the umpire will be chosen from an accredited list such as the ARIAS umpire database.

Mr. Vitkowsky also highlighted some of the more unusual arbitration clauses. One example is a “baseball clause,” whereby each party presents the panel with monetary suggestions for the award and the panel then chooses only between those two suggestions. “Night baseball” is a variation on this idea, whereby the parties do not disclose their suggestions for the award until after the panel has put forth its own suggestion, at which time the party’s suggestion closest to the panel’s will prevail.