INSURANCE COMPANYS CAN’T FORCE ARBITRATION, MAYBE

If you don’t want to arbitrate don’t simply accept what your insurance company tells you about your rights.  For instance, James Smith applied for benefits under a policy of insurance he was entitled to receive.  The policy said that any dispute will go to arbitration.  It also said that arbitration was binding and let the insurance company pick the arbitrator.  An arbitrator is like a judge and is the person who will decide whether or not the claim is valid. 

 

In Mr. Smith’s case the insurance company disputed the claims and when Mr. Smith filed suit to pursue his claim in state court the insurance company filed a federal lawsuit under a law called the Federal Arbitration Act trying to force Mr. Smith into arbitration in front of their handpicked arbitrator.  Mr. Smith lived in a state which had an anti-arbitration provision in their state law.  Under the United States Constitution, supremacy clause, federal law is superior to and supersedes state laws which conflict with federal law.  However, Congress passed the McCarran-Ferguson Act which makes state law which regulates the business of insurance controlling over federal laws like the Federal Arbitration Act. 

 

Mr. Smith lived in a state that had an anti-arbitration provision when it came to insurance law. Although the policy said he had to arbitrate a Federal Court decided that state law trumped the Federal Arbitration Act and Mr. Smith was entitled to his day in court.  As a result the insurance company would have to face a jury to explain why Mr. Smith should not receive the benefits of the insurance policy that he had purchased.  The case settled for a large amount of money shortly thereafter.  While arbitration may be appropriate in some cases, and even mandatory in some states it is not mandatory in every state.  An insurance company may be from another state but if they sold a policy in your state you should check your legal rights before being forced into arbitration by an insurance company.

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Christian L. Faiella

Licensed since 1995

Member at firm Gump & Faiella

AWARDS

AV Preeminent

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Christian L. Faiella

Licensed since 1995

Member at firm Gump & Faiella

AWARDS

AV Preeminent

RECENT POSTS

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