R590. Insurance, Administration.R590-122. Permissible Arbitration Provisions.
R590-122-1. Authority.
This rule is promulgated by the commissioner pursuant to Section 31A-2-201.
R590-122-2. Purpose and Scope.
(1) The purpose of this rule is to:
(a) recognize arbitration as an acceptable method of alternative dispute resolution; and
(b) provide guidelines for disclosure of a contract arbitration provision.
(2) Except as provided in Subsection (3), this rule applies to individual and group contracts and all classifications or lines of insurance.
(3) This rule does not apply to individual and group income replacement insurance or a health benefit plan that complies with Rule R590-215.
R590-122-3. Definitions.
Terms used in this rule are defined in Sections 31A-1-301 and 78B-11-102. Additional terms are defined as follows:
(1) "Compulsory binding arbitration" means a contract provision requiring arbitration as an automatic and exclusive remedy for any dispute involving a contract of insurance to the exclusion of any otherwise available judicial remedy, provided that the claim or controversy exceeds the jurisdictional limit of the small claims court of the state where the action would be brought.
(2) "Compulsory non-binding arbitration" means a contract provision requiring an insured to exhaust a procedure of extra-judicial arbitration as a condition precedent to the pursuit of an otherwise available judicial remedy.
(3) "Optional binding arbitration" means a contract provision requiring any party to an insurance contract to submit to arbitration as set forth in the contract at the election of any contracting party, provided that the claim or controversy exceeds the jurisdictional limit of the small claims court of the state where the action would be brought.
(4) "Permissible arbitration provision" means an arbitration provision in an insurance policy that:
(a) allows for an action to be brought against an insurer;
(b) prohibits the insurance policy to be construed according to the laws of another jurisdiction, except as necessary to meet the requirements of compulsory insurance laws of other jurisdictions;
(c) permits Utah courts jurisdiction over an action against the insurer; and
(d) limits the right of action against the insurer to less than three years from the date the cause of action accrues.
R590-122-4. Rule.
(1) Compulsory non-binding arbitration is contrary to the public interest and is not a permissible arbitration provision.
(2) Optional binding arbitration at the exclusive election of an insured party is a permissible arbitration provision, in which case the disclosure provisions in Subsection (5) may not apply.
(3) Compulsory and optional binding arbitration at the election of either the insured or the insurer are permissible arbitration provisions.
(4)(a) A policy form containing an optional binding arbitration provision for the exclusive election of an insurer will be disapproved under Subsection 31A-21-201(3), and these provisions in any previously approved form are declared not enforceable.
(b) A policy form described in Subsection (4)(a) will be construed and applied as if in compliance with the Insurance Code, as permitted under Section 31A-21-107.
(5) Except as excluded in Subsection (2), each application or binder pertaining to an insurance policy that contains a permissible arbitration provision must include or have attached a prominent statement substantially as follows:
ANY MATTER IN DISPUTE BETWEEN YOU AND THE COMPANY MAY BE SUBJECT TO ARBITRATION AS AN ALTERNATIVE TO COURT ACTION PURSUANT TO THE RULES OF (THE AMERICAN ARBITRATION ASSOCIATION OR OTHER RECOGNIZED ARBITRATOR), A COPY OF WHICH IS AVAILABLE ON REQUEST FROM THE COMPANY. ANY DECISION REACHED BY ARBITRATION SHALL BE BINDING UPON BOTH YOU AND THE COMPANY. THE ARBITRATION AWARD MAY INCLUDE ATTORNEY'S FEES IF ALLOWED BY STATE LAW AND MAY BE ENTERED AS A JUDGMENT IN ANY COURT OF PROPER JURISDICTION.
This statement must be disclosed prior to the execution of the insurance contract between the insurer and the policy holder and, in the case of group insurance, shall be contained in the certificate of insurance or other disclosure of benefits.
(6) No compulsory binding arbitration provision or optional binding arbitration provision may be construed to preclude any dispute resolution by any small claims court having jurisdiction.
(7) Any arbitration provision contained in an insurance policy shall comply with Title 78B, Chapter 11, Utah Uniform Arbitration Act.
(8) No agreement for arbitration may obligate an insured to pay more than 50% of the advance payments required to begin the arbitration process.
(9) No arbitration provision may require that arbitration be held at a place further from the residence of the insured than the nearest location of a State Court of General Jurisdiction.
R590-122-5. Severability.
