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NCOIL Considers Market Conduct Arbitration

By Jim Connolly

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NU Online News Service, Feb. 12, 2004, 5:51 p.m. EST – Should arbitrators resolve disputes between insurers and state regulators over market conduct decisions?[@@]

The National Conference of Insurance Legislators, Albany, N.Y., has put its Market Conduct Surveillance model act draft on a fast track for adoption. The group could vote on the model at a meeting later this month. But NCOIL is still deciding what to do about arbitration.

Insurers fear that, without an arbitration provision, a state insurance department could act as a “prosecutor, judge and jury,” says Don Cleasby, assistant general counsel with the Property Casualty Insurers Association of America, Des Plaines, Ill.

Insurers need a cheaper alternative to full-scale litigation, Cleasby says.

An arbitration system would not be a delegation of a commissioner’s authority because it could only be used if a component of a market conduct review was outside of that authority, Cleasby says.

Cleasby points out that Florida already has an arbitration provision.

But Florida state Sen. Steven Geller, D-Hallandale Beach, Fla., says NCOIL is considering a provision that would be broader than the Florida arbitration provision.

The insurance commissioner in Florida is trying to have Florida’s arbitration law repealed, Geller adds.

Joel Ario, Oregon insurance administrator and secretary-treasurer of the National Association of Insurance Commissioners, Kansas City, Mo., warns that including an arbitration provision in the model could lead to a loss of uniformity, because arbitrators could reach different conclusions about similar cases.

When deciding who the decision-maker ought to be, some “want an arbitrator and I want a court of law,” Ario says. “These kinds of discussions give me heartburn and would give NAIC enormous heartburn.”