SW Legal studies in Business

Foreign Arbitration Clause in Insurance Policy Is Enforceable
Description Appeals court held that an English insurance company, which issued a policy on a boat in Massachusetts, could enforce the clause in the policy that required all policy disputes to be resolved by arbitration in England. Under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, this policy provision stands.
Topic International Law
Key Words Insurance; Arbitration
C A S E   S U M M A R Y
Facts The F/V Cape Cod, a commercial fishing vessel and the only asset of R&M, sunk in 1994, during which DiMercurio, a fisherman, was injured. He sued the company for his injuries and was awarded $350,000. R&M, having no assets, assigned DiMercurio all rights it had against Sphere Drake, a London-based insurer of the boat. DiMercurio took his claim to Sphere Drake but it denied the demand and invoked the arbitration process specified in the policy, which called for arbitration of all coverage disputes in London. DiMercurio then sued, contesting the validity of the arbitration provision. The district court held for Sphere Drake. DiMercurio appealed.
Decision Affirmed. When faced with a request to refer a dispute to arbitration under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the court make a very limited inquiry to be sure there 1) is a written agreement to arbitrate the subject of the dispute; 2) the agreement provides for arbitration in the territory of a signatory of the Convention; 3) the agreement arises out of a commercial relationship; and 4) a party to the agreement is not an American citizen or the commercial relationship has some reasonable relation with one or more foreign states. The holders of the policy, R&M, and its assignee, DiMercurio, are bound by the policy provision requiring arbitration of all coverage disputes to occur in England.
Citation DiMercurio v. Sphere Drake Insurance PLC, 202 F.3d 71 (1st Cir., 2000)

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