Law Times

www.lawtimesnews.com Page 12 January14, 2008 / Law Times Too early to measure protocol's impact It's the 'better way' H urricane Katrina, the perfect storm of 2005, brought disaster, mis- ery, and proved a potent cata- lyst to George Bush's diminish- ing popularity. What it did not bring — although widely antici- pated — was an outbreak of in- surance litigation. "The litigation did not happen because the industry was much more aware than it used to be of other ways to resolve disputes," says Paul Moss, the London, U.K.-based head of claims for the Australian-based QBE Insurance Group's European operations. "Insurers and reinsurers are tak- ing control of the situation, rather than putting these matters in the hands of lawyers." Some of the best evidence that this is so can be found in the recent- ly formulated CPR International Reinsurance Industry Dispute Resolution Protocol (www.cpradr. org/CMS_disp.asp?page=ins_ ReinsuranceProtocol&M=7.14). Although the bulk of the reinsur- ance industry is centered in the U.S., the U.K., and Europe, it is of interest to Canadian lawyers be- cause virtually all Canadian insur- ers resort to the global reinsurance market. In April 2005, the New York- based CPR International Institute for Conflict Prevention & Resolu- tion — a non-profit organization aimed at promoting excellence and innovation in public and pri- vate dispute resolution that serves as a prominent multinational resources for avoidance, manage- ment, and resolution of business- related disputes — invited a group of high-profile members of the insurance community, including Lloyd's of London and QBE, to pinpoint the most costly areas of dispute that were ripe for reform and a best-practices approach. "What floated very quickly in the debate was the frustration that the reinsurance community was having with arbitration, which had become the most common form of dispute resolution in the indus- try," Moss says. "The consensus was that arbitration was too slow, way too expensive, and extremely onerous. It had become hostile and litigious, because lawyers on both sides had taken control of the process to the point where business considerations did not always pre- vail." "We all thought there must be a better way." The result was the protocol, de- veloped by a CPR committee that Moss chaired. "The protocol is the product of a group of participants in the U.S. and U.K., including cedants, reinsurers, and counsel," says Peter Phillips, CPR's senior vice presi- dent. "It is not centrally an encour- agement to mediate disputes so much as a best-practices protocol to guide the commercially rational management of disputed reinsur- ance claims." The protocol can be used in a number of ways: • insurers can refer to it or incorpo- rate it in their treaties and agree- ments; • insurers can adopt it unilaterally as part of their internal policies; • parties to disputes can adopt the protocol, in its original or modi- fied form, as a means of manag- ing information exchange; • groups of insurers, trade asso- ciations, and others can use the protocol to further develop best practices. The protocol has two parts: a statement of intent to follow certain procedures, based on an agreed-upon timetable when dis- putes arise between reinsureds and reinsurers, and a detailed account of the procedures. It includes a four-step process involving reasonable but rigorous timetables for the following: iden- tifying and giving early notice of a dispute; exchanging information and documents that will allow a rational assessment of the issues; direct negotiations; and, if neces- sary, introducing a third-party neutral to mediate. The protocol is not legally binding. Companies adopting it waive no rights or privilege, and no liability arises from declining to follow it. "The parties have every right to fall back on the ar- bitration clauses that are in most reinsurance contracts," Moss says. If mediation becomes neces- sary, the parties can choose their own mediator and forum. How- ever, the protocol incorporates a mediation procedure that parties agree to use if disagreement over such procedures arises. "Ultimately, the protocol maintains a degree of civility by providing a process and a time frame, within which everyone lays out their position by provid- ing the type of information that will encourage a settlement," he says. "We're hopeful that, even if there is no settlement, the pre- cursor process will defuse hostil- ity and facilitate the mediation process." Moss is convinced that the pro- tocol represents an improvement over arbitration, the most com- mon form of reinsurance dispute resolution. He points to the suc- cess that the English Commercial Court has had with mediation, and to mediation's increased pop- ularity among corporate general counsel. "According to a recent Grant Thornton LLP survey, eight out of 10 external lawyers, and nine out of 10 corporate lawyers, believe that more cases will be resolved by alternative dispute resolution over the next few years," he says. "Yet before the creation of the Protocol, the reinsurance industry had no consistent approach to me- diation." Mediation isn't new. It's rec- ognized as a powerful and cost- effective tool in the dispute reso- lution toolbox. It is suitable for local or international disputes. At a recent seminar in London, 100 of 130 Lloyd's members em- braced the use of mediation. And when asked to choose between resolution methods, they voted unanimously for mediation. Soon after, Lloyd's formally en- dorsed the protocol. Still, it's still too early to mea- sure the protocol's impact. 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Prices subject to change without notice, and to applicable taxes For a 30-day, no-risk evaluation call: 1 800 263 2037 or 1 800 263 3269 www.canadalawbook.ca LT0114 Insurance Titles V2 1/9/08 2:40 PM Page 1 'The industry is talking about it [the Protocol] a great deal, but it's hard to quantify usage,' Pe- ter Phillips says. BY JuLiuS meLnitzeR For Law Times LT LT-Jan 14 08.indd 12 1/10/08 8:07:11 PM

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