“Is that safe to conclude that all disputes which arise between the insurer and the insured over the policy can be arbitrable? Do we have a possibility of raising “public policy” test to contest the idea? Why or why not? ”

INTRODUCTION:

 “The topic mainly derives from the term insurance, its impacts, problems related to it & it’s probable solutions. Insurance is one of the most commonly & widely used term at today present world. As the asset & liability situation is becoming more uncertain day by day, therefore the importance of insurance or getting insured has also emerged keeping a pace with it. Moreover, people all over the world are now more cautious & well aware of their own rights & safety. Moreover, in this age of mass competition, it is very difficult for people to earn something, but it takes only seconds to lose it. Therefore, mostly based on security purpose, people tends to get insured which provides some sort of guarantee towards their property. Even in some countries depending on the asset & government policy, the government has made mandatory to go for insurance. Insurance does not only safeguards one’s property, but also creates a clear-cut documentation regarding the ownership of a specific product or asset. It also helps in curbing corruption at some cases. The insurance policy is mainly based on an agreement, where the two parties makes the agreement as per the law & order provided or established by the specific government. In the policy, the rules & individual rights are clearly stated which in most cases solves or creates automatic solutions for disputes.  But, there are cases where the situation or a single party takes the advantage of the loop-holes of law & thus the situation gets into the grey area. There comes the point of problem solving either though arbitration, public policy or by going to the court.

This entire paper will discuss about the issues & facts related to the stated topic, where discussions will be done form both the legal perspective & the general perspective.

 Insurance:

“In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment”.[1]

As stated earlier, insurance is a form of risk management, where the risk can be hedged against any sort of loss towards any property or the subject insured, against any loss which is uncertain. The transfer can be stated as equitable, as the entire policy is done through payment. In general perspective, it can be stated that, someone can buy safety or security against any specific asset, where the insurer will provide the returns in case any uncertain loss happens with the asset or product insured. On other terms, it can be stated that the person “insured” is buying the safety in terms of financial payment.

 Insurance Policy & Principles:

“Insurance involves pooling funds from many insured entities (known as exposures) to pay for the losses that some may incur. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring”.[2]

In order to meet up the principle of insurance, the subject has to be a matter of being insurable. Where, it must maintain certain characteristics. As per the policy, there are two major parties that plays the main role behind the deal, they are the “insurer” & the “insured”.

There are different types of insurances, including:

ü      Auto insurance

ü      Home insurance

ü      Health insurance

ü      Accident, sickness and unemployment insurance

ü      Casualty

ü      Life

ü      Burial insurance

ü      Property

ü      Liability

ü      Credit, etc.[3]

 Insurer:

“One who has obliged himself to insure the safety of another’s property, in consideration of a premium paid, or secured to be paid, to him. It is his duty to pay any loss which has arisen on the property insured”[4].

As stated earlier, the insurer is the party or person, who is going for the insurance procedure where that party or person provides safety/ security/ certainty against any specific uncertain loss. In response, that party or individual has to provide or pay the amount of loss that the insured product or property may go through. Because of this fact, the insurer charges premium from the person or party who has asked for insurance.

 Insured:

“The person or entity who will be compensated for loss by an insurer under the terms of a contract called an insurance policy”.[5]

In contrast to the insurer, the person who seeks & gets the safety or security of any asset, can be stated as “insured”. The insured party provides a specific amount of financial payment to the insurer in order to hedge the risk associated to its specific product or asset. 

 Dispute:

“Dispute is a state of prolonged public controversy or debate, usually concerning a matter of opinion in the theory of law, a controversy differs from a legal case; while legal cases include all suits, criminal as well as civil, a controversy is a purely civil proceeding”.[6]

In general terms, dispute can be stated as the controversy between parties related to any specific matter, topic or contract. It can mostly be stated as a conflict of rights & claims. This also includes the assertion of right, one side demand, which is made by contrary claims against one another.

In terms of insurance, disputes are a common term in today’s world. Dispute arises when despite of having specific documented contract, the claim & acceptance between the insurer & the insured does not match.

 Arbitration:

“Arbitration, a form of alternative dispute resolution (ADR), is a legal technique for the resolution of disputes outside the court, where the parties to a dispute refer it to one or more persons (the “arbitrators”, “arbiters” or “arbitral tribunal”), by whose decision they agree to be bound. It is a settlement technique in which a third party reviews the case and imposes a decision that is legally binding for both sides.^”[7]

Problems usually are solved through a number of procedures or methods. Arbitration is one of them, which plays a very vital role in terms of problem solving situations or attempts. Through this procedure, the parties in conflict without going to the court can solve the dispute with the help of a third party, whose decisions they think that they are bound to follow. This policy or technique is also well practiced worldwide & also has got mass acceptance. Though this entire procedure is taking place outside the court, it does not mean that the procedure is done apart from the law. The proceedings are based on law, where the code of conduct of the law & order is strictly maintained.

Public Policy:

“Public policy as government action is generally the principled guide to action taken by the administrative or executive branches of the state with regard to a class of issues in a manner consistent with law and institutional customs”.[8]

The shaping & formulation of public policy is a very complex procedure, where numerous personnel or individuals or interest groups tend to influence or manipulate the policymakers to perform the act in a specific way. A person playing the major role behind it uses a variety of strategy formulation & tactics to achieve their goal & target. This also includes advocating the positions of those groups or individuals in public, either by attempting to manipulate their supporters & opponents or by mobilizing their allies to take control of a specific issue.

 Disputes, Arbitration & Public policy:

When there is the proper implementation of rule of law, then it can be expected that all disputes that arises between the insurer & the insured can be arbitrable. Arbitration has been a well followed option in terms of dispute resolution. The main concern regarding arbitration is the public policy can be influenced through education, lobbying or political pressure. Groups related to advocacy usually attempts to educate the policy makers as well as the general people regarding the type & origin of the problems aroused, required level of legislation to resolve the problems & mostly the required level of funding in order to provide the service & to conduct the research. Therefore, it can be clearly stated that the public policy itself is influenced by advocacy. An unbiased & unaltered research data can play a very vital role in terms of educating the people as well as the policy makers which can eventually improve the overall public policy process.

 Conclusion:

There is always an option to solve a problem or dispute. It depends which procedure to choose. Even after selecting a specific policy, procedure or pattern, the question comes whether the policy or procedure will be appropriate or unbiased. Or whether, what is the probability to get maximum possible positive output from the effort. After the prolonged discussion, we can state that disputes which arises between the insurer & insured over the policy can be arbitrable in many cases. But it is not always safe. Because, when it comes to raising “public policy”, there is always a chance for manipulation or biasness. As long as the manipulation of bias factor cannot be removed, then there is always a chance of alteration & misuse of justice. But as long as the threat regarding alteration & manipulation can be taken care of, we can hopefully state that the disputes that occur between the insurer & insured can be arbitrated, and public policy can also be of best use & outcome.

                                                             BIBLIOGRAPHY

ü      Black’s Law and lee Dictionary. Second Pocket Edition. Bryan A. Garner, editor. West. 2001

ü      “Company.” Crystal Reference Encyclopedia. Crystal Reference Systems Limited. 27 Nov. 2007.

ü      Dignam, A and Lowry, J (2006) Company Law, Oxford University Press ISBN 978-0-19-928936-3.

ü      John Micklethwait and Adrian Wooldridge, The Company: a Short History of a Revolutionary Idea (New York: Modern Library, 2003)

ü      A Treatise on the Law of Corporations, Stewart Kyd (1793-1794)

ü      http://en.wikipedia.org/wiki/Company

ü      http://en.wikipedia.org/wiki/Corporation#cite_note-8

ü      http://en.wikipedia.org/wiki/Corporation

ü      http://en.wikipedia.org/wiki/Corporation#Ownership_and_control

ü      http://en.wikipedia.org/wiki/Corporate_personhood

ü      http://www.nytimes.com/2009/09/22/opinion/22tue1.html

ü      http://www.businessowner-cover.com/uploads/Advantages_and_Disadvantages_of_business_entity_types..pdf

ü      Congressional Research Service (CRS) Reports regarding the US Insurance industry

ü      Federation of European Risk Management Associations

ü      Insurance at the Open Directory Project

ü      Insurance Bureau of Canada

ü      Insurance Information Institute

ü      Museum of Insurance – displays thousands of antique insurance policies and ephemera

ü      National Association of Insurance Commissioners

ü      The British Library – finding information on the insurance industry (UK bias)

ü      Law and lee Dictionary. Ryan A. Garner, editor. East. 2003

ü      “Company.” Paradox Reference Encyclopedia. Paradox Reference Systems Limited. 27 Dec. 2002.

ü      A and Lowry, J (2006) Company Law, Oxford University Press ISBN 978-0-19-928936-3.

ü      John Micklethwait and Adrian Wooldridge, The Company: a Short History of a Revolutionary Idea (New York: Modern Library, 2003)

ü      A Treaty on the Law of Corporations, Stewart Miles (1793-1794)