March 13, 2019 Articles

Arbitrating Cyber Coverage Disputes

When buying such insurance, policyholders should seek to negotiate the terms of arbitration clauses to ensure a level playing field

by Peter A. Halprin and Daniel Garrie

Policyholders buying insurance are generally focused on obtaining sufficient coverage in dollar terms for the insurance risks that they face. They assume that they will receive the protection for which they have presumably paid handsome premiums. Many policyholders and their brokers therefore fail to consider the consequences of being compelled to arbitrate or forgo the bargaining power to negotiate the terms of the arbitration if and when a dispute arises. Policyholders and brokers, however, should bear in mind that arbitration clauses can and should be the subject of negotiation. As written, these clauses generally tilt the playing field toward the insurance company. As reshaped by negotiation, however, arbitration can be beneficial to policyholders as well as to insurance companies. 1

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