Standard Fire & Special Perils Policy - condition of ' arbitration ' explained !

Fire insurance contract  is "an agreement, whereby Insurer in return for a consideration undertakes to indemnify the other party against loss or damage to  defined subject-matter being by fire or other named perils”.  The contract of insurance involves all the elements of an ordinary contract and insurance contracts. Section 2(6A) in The Insurance Act, 1938 states :  “fire insurance business” means the business of effecting, otherwise than incidentally to some other class of insurance business, contracts of insurance against loss by or incidental to fire or other occurrence customarily included among the risks insured against in fire insurance policies.  In India, now we have the ‘Standard Fire and Special Perils Policy’ being used by all the General Insurers.

The Policy besides recital clause names perils insured, General exclusions and General conditions ~~ this post is on condition no. 13.

Heard of “Arbiter” ??   -    an Arbiter or Arbitrator is a person by whose decision the parties to a dispute agree to be bound in arbitration. Arbitration, a form of alternative dispute resolution (ADR), is a technique for the resolution of disputes outside the courts. The parties to a dispute refer it to arbitration by one or more persons (the "arbitrators", "arbiters" or "arbitral tribunal"), and agree to be bound by the arbitration decision (the "award"). A third party reviews the evidence in the case and imposes a decision that is legally binding on both sides and enforceable in the courts.

An arbitral tribunal is a panel of one or more adjudicators which is convened and sits to resolve a dispute by way of arbitration. The tribunal may consist of a sole arbitrator, or there may be two or more arbitrators, which might include either a chairman or an umpire. The parties to a dispute are usually free to agree the number and composition of the arbitral tribunal. Different legal systems differ as to how many arbitrators should constitute the tribunal if there is no agreement.

The parties are generally free to determine their own procedure for appointing the arbitrator or arbitrators, including the procedure for the selection of an umpire or chairman. If the parties decline to specify the mode for selecting the arbitrators, then the relevant legal system will usually provide a default selection process. Characteristically, appointments will usually be made - if the tribunal is to consist of a sole arbitrator, the parties shall jointly appoint the arbitrator not later than (for example) 28 days after service of a request in writing by either party to do so.If the tribunal is to consist of three arbitrators:each party shall appoint one arbitrator not later than (for example) 14 days after service of a request in writing by either party to do so, andthe two so appointed shall forthwith appoint a third arbitrator as the chairman of the tribunal.If the tribunal is to consist of two arbitrators and an umpire-each party shall appoint one arbitrator  and the two amongst them shall appoint an Umpire.  Most arbitration clauses will provide a nominated person or body to select a sole arbitrator if the parties are unable to agree.  In default of such a provision, where the parties are unable to agree, an application for an appointment is usually made to the court.

A well drafted arbitration clause will also normally make provision for where a party to the dispute seeks to cause delay by refusing to make or agree an appointment. Now here is what condition no. 13 of our Standard Fire and Special Perils Policy says :

If any dispute or difference shall arise as to the quantum to be paid under this policy (liability being otherwise admitted) such difference shall independently of all other questions be referred to the decision of a sole arbitrator to be appointed in writing by the parties to or if they cannot agree upon a single arbitrator within 30 days of any party invoking arbitration, the same shall be referred to a panel of three arbitrators, comprising of two arbitrators, one to be appointed by each of the parties to the dispute/difference and the third arbitrator to be appointed by such two arbitrators and arbitration shall be conducted under and in accordance with the provisions of the Arbitration and Conciliation Act, 1996.

It is clearly agreed and understood that no difference or dispute shall be referrable to arbitration as hereinbefore provided, if the Company has disputed or not accepted liability under or in respect of this policy.

It is hereby expressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon this policy that the award by such arbitrator / arbitrators of the amount of the loss or damage shall be first obtained.

The arbitration clause in earlier policies [eg., Fire Policy A/B/C] were slightly differently worded and made reference to two arbitrators and an Umpire being appointed by them, when sole arbitrator is not being agreed upon.

Moving away from Insurance, ‘Arbiter’ - is a fictional ceremonial, religious, and political rank bestowed upon alien Covenant Elites in the Halo science fiction universe. In the 2004 video game Halo 2, the rank is given to a disgraced commander as a way to atone for his failures. The  Arbiter allies with the Covenant's enemies—humanity—and stops the ringworld Halo from being activated. The Arbiter is a playable character inHalo 2 and its 2007 sequel Halo 3; a different Arbiter appears in the 2009 real-time strategy game Halo Wars, which takes place 20 years before the events of the main trilogy.Award-winning actor Keith David lends his voice to the character in Halo 2 and 3, while David Sobolov voices the Arbiter of Halo Wars.The Arbiter has appeared in three series of action figures and other collectibles and marketing in addition to appearances in the games.

With regards – S. Sampathkumar

14^th Aug 2015.