Florida Insurance Consumer Advocate Tasha Carter

Why do insurance agents sell surplus lines policies with arbitration clauses to take place in New York without warning and thoroughly explaining the consequences of such a clause to their policyholder clients? To be fair, if such a policy is the only one available and the agent fully explains how expensive it can be to arbitrate a matter in a faraway location with unfavorable law, what else can the agent do?

A number of states have tried to outlaw this practice. I am not certain why states do not simply make it illegal for the surplus lines agents to sell a policy with such a clause. The various insurance commissioners should do something about this issue with a suggested model law. I cannot think of one consumer whom this clause benefits.

The surplus lines markets, especially the Lloyds-related syndicates, are taking advantage of these clauses. They rely upon a treaty signed when Richard Nixon was president to enforce the clause. I am certain nobody thought the impact of that treaty would be to force people to arbitrate against Lloyds companies in faraway places. I have noted this in Choice of Law and Arbitration Provisions in Texas—Beware of These Provisions Which May Apply Laws of Another State.

Another recent federal case ruled that such a clause is binding and that the “arbitration is to occur in New York, applying New York law.”1 It cited numerous prior rulings with the same result.

So, what can be done? The first thing I am going to do is send this post to Florida’s Insurance Consumer Advocate, Tasha Carter. I will ask her to become much more vocal and help do something about this issue or explain why she refuses to do so. Her webpage states:

As Floridians become increasingly dependent on quality insurance products, a strong advocate is needed to represent the people when insurance decisions are made. Florida’s Insurance Consumer Advocate is an independent leader with an effective and powerful voice for all Floridians.

The Insurance Consumer Advocate is committed to finding solutions to insurance issues facing Floridians, calling attention to questionable insurance practices, promoting a viable insurance market responsive to the needs of Florida’s diverse population and assuring that rates are fair and justified.

It is about time she started advocating for her constituents against this harmful insurance clause.

Until then, I can only suggest that a policyholder avoid a policy with such an arbitration clause. The second thing is to obtain competent legal counsel in the event you are in this predicament. The policyholder should inquire about a suit against your agent for all the additional fees and costs you will have to expend just to collect your insurance benefits. Maybe the insurance agent lobby will stand up to the surplus lines insurance lobby?

Thought For The Day    

Treaties are like roses and young girls. They last while they last.

Henry Cabot Lodge


1 12260 Group v. Independent Specialty Ins. Co., No. 8:23-cv-1611 (M.D. Fla. Dec. 6, 2023).