Arbitration requirements, found either within the basic D&O policy form or as an attached endorsement, may appear innocuous but can contain onerous language. Such clauses can be troublesome, especially where binding arbitration is made a mandatory provision of the policy. Arbitration ordinarily means a proceeding voluntarily undertaken by parties who want a dispute resolved on the merits of the case by an impartial decision maker, whose decision the parties agree to accept as final and binding. Arbitration usually imports a procedure that is speedy, economical, and bears equally on insured and insurer. While arbitration is favored by many courts as a means of relieving overburdened calendars, it often favors the insurer and can still prove expensive. The following is a discussion of various arbitrations provisions that appear in D&O insurance policies.

Mandatory and Binding Arbitration

A mandatory and binding arbitration provision generally requires that any dispute under the policy must be resolved by the described method of arbitration and that the outcome of such dispute resolution is binding on the parties. The following are examples of mandatory binding arbitration requirements in D&O insurance policies.