Report on Proposed Bulletin DFR 2020-1: Arbitration Clauses, Choice of Law, and Choice of Venue Provisions in Insurance Policies

Report to Agency on Public Comment Period
Date: October 28, 2019
To: Dept. of Consumer and Business Services
From: Raven Collins, Policy Analyst
Subject: Oregon Division of Financial Regulation Proposed Bulletin on Arbitration Clauses, Choice of Law, and Choice of Venue Provisions in Insurance Policies Comment Period Start September 20, 2019 Comment Period End: October 11 , 2019 Background This proposed bulletin is a reminder to all insurers that pre-dispute mandatory arbitration clauses, choice of law, and choice of venue provisions in policies are prohibited under Oregon law. DFR is adopting the 2018 NAIC model bulletin regarding arbitration clauses and is reiterating existing DFR policy and product standards. Summary of \Vritten Comments DFR received comments from industry, consumer advocate stakeholders, and the general public. All supported the proposed bulletin, and some comments rec01mnended minor wording changes:

• Peter Kochenburger, Arny Bach, Brendan M. Bridgeland, Erica L. Eversman, Karro! A.
  Kitt, Kenneth S. Klein, Jackson Williams; NAIC Consumer Representatives, supported ' the proposed bulletin and reco1mnended wording changes to make clear that the guidance applied to all lines of insurance, and that pat1ies may mutually agree to arbitrate after a dispute arises. They emphasized that "pre-dispute mandatory arbitration provisions interfere with core state and federal constitutional rights," are restricted by Oregon Supreme Com1 rulings, and are " inconsistent with insurers' legal obligations to treat their

policyholders in good faith and to consider their policyholders' interests on equal footing to their own."

• Brad Vincent, Vincent Properties, Inc., identified himself as a long time member of the
  business community. He stated that he heartily approves the message, and applauds DFR's continuing efforts to help protect consumers. He indicated that without this oversight, businesses would " run rampant over the rights of consumers."
• Mark Summers, PBC Insurance, submitted comment stating that the bulletin "reminds
  insurance cmTiers that our state is fully engaged to protect the rights of the insured public." He highlighted the guidance regarding choice of venue provisions as particularly important for protecting consumers that "would not have the finances and/or time to travel elsewhere in order to receive a fair outcome."
• Edward Davis, Maps Insurance Services, recommended a grammatical edit to delete the
  word "that" in the sentence "The Oregon Supreme Court has found that the use of pre￾dispute mandatory arbitration clauses in insurance policies to be unconstitutional." Discussion The wording changes recommended in the public comments would help clarify the guidance in the proposed bulletin. Summary Having fully considered all submissions, I recommend the following:
• Modify the third footnote citation to read 744 P.2d 992, rather than 714 P.2d.
• Delete the word " that" in the sentence "The Oregon Supreme Court has found that the
  use of pre-dispute mandatory arbitration clauses in insurance policies to be unconstitutional."
• Under "Purpose," add another sentence emphasizing that the bulletin applies to all
  insurance lines thereby protecting both personal lines and commercial policyholders.
• Alter language in the last sentence of the second paragraph under "Pre-dispute
  Mandatory Arbitration Clauses" to specify that parties may still mutually elect to arbitrate after the dispute arises. Raven Collins Policy Analyst \cbs\dfs\xaprofiles\xa7redirect\winkelkj\documents\offiine records (or)\final bulletin w route slip\reporttoagencyonpubl iccommentpd- arbitrationbulletin.docx 2