Page 442 - IC38 GENERAL INSURANCE

a) Arbitration

Arbitration is a method of settling disputes arising out of contracts.
Arbitration is done in accordance with the provisions of the Arbitration and
Conciliation Act, 1996. The normal method of enforcing a contract or
settling a dispute there under would be to go to a court of law. Such
litigation, however, involves considerable delay and expense. The
Arbitration Act allows the parties to submit disputes under a contract to the
more informal, less costly and private process of arbitration.

Arbitration may be done by a single arbitrator or by more than one, chosen
by the parties to the dispute themselves. In the event of a single arbitrator,
the parties have to agree about that person. Many commercial insurance
policies contain an arbitration clause stating that disputes will be subject to
arbitration. Fire and most miscellaneous policies also contain an arbitration
clause which provides that if the liability under the policy is admitted by the
company, and there is a difference concerning the quantum to be paid, such
a difference must be referred to arbitration. Normally the arbitrator‟s
decision is considered final and binding on both the parties.

The wording of the condition varies from policy to policy. Generally, it
provides as follows:

i. The dispute is submitted to the decision of a single arbitrator to be
appointed by the parties, or in the event of any disagreement between
them upon appointment of a single arbitrator, to the decision of two
arbitrators each appointed by the parties.

ii. These two arbitrators shall appoint an Umpire, who presides at the
meetings. The procedure during these meetings resembles that of a
court of law. Each party states his case, if necessary, with the help of a
counsel and witnesses are examined.

iii. If the two arbitrators do not agree on a decision, the matter is submitted
before the Umpire, who makes his award.

iv. Costs are awarded at the discretion of the arbitrator/arbitrators or
Umpire making the award.

Disputes relating to question of liability are to be settled through litigation.

Example

If the insurers contend that the loss is not payable because it is not covered
under the policy, the matter has to be decided by a Court of Law. Again, if the
insurers refuse to pay the claim on the ground that the policy is void because it
was obtained through fraudulent non-disclosure of material facts (breach of the
legal duty of „utmost good faith‟), the issue has to be resolved through
litigation.

Note: There is no arbitration condition in marine cargo policies.

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