Article Image
Obama Administration Looking to Curb Mandatory Insurance Arbitration

Saturday, December, 24, 2016


With just over a month left in office, President Obama and his administration is pressing states to curb the use of fine print arbitration clauses in contracts by insurance providers. The request comes via an insurance report recently released by the Treasury Department.

Despite the federal government lacking the authority to regulate insurance companies or products due to individual state oversight, in recent years the federal government has overridden precedents set by previous administrations. The most notable example of this overreach was the federal government determining some insurance providers are “too big to fail.”

Now, the Treasury Department is encouraging states to “consider developing appropriate constraints on mandatory arbitration clauses in insurance contracts,” and asking that state policymakers and insurance regulators assess whether the lack of uniformity in state laws raises questions about whether consumer protections in the insurance industry should be more in line with what is offered in other industries.

Mandatory arbitration clauses in contracts are a relatively new development. Now, in order to do business with a company, consumers must agree that any dispute that arises will be settled by an independent arbitrator, as opposed to a class-action lawsuit.

Critics of mandatory arbitration clauses believe the process denies consumers due process rights and are a sneaky way to avoid corporate responsibility. Those in support believe it makes the legal system more efficient and allows for bigger settlements because legal fees are reduced and settlements are not split among several people.

Throughout the country, courts are taking anti-arbitration clauses stances, but nothing is officially settled and consumers continue to battle for their right to take legal action when wronged by a company.