Reinsurance Contract Subject to Ban Against Arbitration, Missouri Appellate Court Affirms

ST. LOUIS — A reciprocal risk retention group that issued a facultative reinsurance contract to the insurer of a school district cannot arbitrate a coverage dispute because the contract is subject to the Missouri Arbitration Act’s prohibition against mandatory arbitration in insurance contracts, a state appellate court has affirmed.

In a May 24 opinion, the Missouri Court of Appeals found the facultative contract is not purely one of reinsurance because it goes “beyond the mere reinsurance of a loss” by giving the reinsurer control over claims asserted by policyholders. Moreover, a third-party beneficiary of the facultative contract can assert bad …