As reported by our friends over at Public Justice, the Texas Department of Insurance (TDI) is currently considering a rule prohibiting mandatory arbitration provisions in insurance products.  This rule would be a great boon for insurance policy holders in Texas.  Several states have already adopted laws prohibiting or restricting use of arbitration clauses in insurance contracts and more than a dozen different state and federal appellate courts have already reported decisions upholding these laws on the basis that the McCarran Ferguson Act permits states to pass laws regulating arbitration of insurance claims without being preempted by the FAA.

Publci Justice submitted comments to the Texas Department of Insurance (TDI) last week encouraging the adoption of a rule limiting or prohibiting arbitration of insurance claims. Their comments discussed the inherent bias of private arbitration companies against consumers and some of the more egregious provisions corporations often include in their arbitration agreements to stifle claims by consumers.  They also explained that state laws prohibiting or restricting use of arbitration clauses in insurance contracts, by operation of the McCarran Ferguson Act, do not run afoul of the FAA.