Kentucky DOI Clarifies Position on Arbitration Provisions

On January 25, 2019, the Kentucky Department of Insurance issued Bulletin 2019-1, explaining its position on arbitration or other out-of-court dispute resolution provisions contained in insurance policies.

In accordance with KRS § 417.050 and prior court decisions, any insurance policy, except surety contracts, mandating the arbitration of disputes shall be considered void and misleading per se. Additionally, any policy offering, but not explicitly requiring, voluntary arbitration will be subject to disapproval if the policy is deemed to use misleading or ambiguous language or headings. Kentucky’s Uniform Arbitration Act does not recognize non-binding arbitration and policies containing such provisions will be subject to disapproval as well.

Furthermore, the Bulletin points out that even if the Department approves policies containing such provisions, this does not insulate these provisions and they are still subject to judicial review.

For any questions regarding the Kentucky Department of Insurance’s arbitration requirements or any other compliance needs, please contact Westmont Associates, Inc.