are set forth in detail and are onerous.
The notice must include copies of de-
mands and complaints.
4. Retroactive Dates
The retroactive date, used in determin-
ing which occurrences are covered, is
set forth in the declarations. It typically
is the inception date of the insured's first
policy with the particular insurer, but has
in some cases been negotiated to be an
earlier date.
B. Exclusions
The Bermuda form policies contain
a large number of exclusions, many
of which reinforce the limitations on
coverage discussed above. Many others
are found in typical CGL policies. The
limitation on the length of this article
precludes a discussion of individual
exclusions.
c. Disputes
Bermuda policies have several features
which make disputes more difficult for
policy holders. First, they require all
disputes be arbitrated in Bermuda (some
policies specify London) by a three
arbitrator panel. (Condition B). Second,
they call for application of New York
law, which is generally viewed as more
favorable to insurers than other states'
laws. (Condition M(1)). Third, they at-
tempt to negate the universal principal
that ambiguities in the insurance policy
are to be construed against the insurer.
They require that the policy be con-
strued "without regard to authorship of
language; without any presumption, arbi-
trary interpretation, construction in favor
of either the Insured or the Company or
reference to the `reasonable expectations'
of either party; and without reference to
parol or other extrinsic evidence." (Con-
dition M(2)). Then, buried in the Condi-
tion on Cancellation (Condition E(4)) is
the right of the company to cancel the
policy if the insured files or commences
a suit or proceeding against the company
other than as provided in Condition B,
the Arbitration provision.
fications. Arbitrating in an unfamiliar
venue is likely to be expensive and more
difficult. Strategically, it will be best to
retain both American and local lawyers,
and arbitrators will have to be paid. The
insurers, on the other hand, who arbitrate
in Bermuda regularly will be playing on
their "home court." It may be necessary
to litigate in several venues, if not all
involved insurers have these arbitration
clauses, or call for London arbitrations.
The elimination of the principles of
contra preferentem (interpreting ambi-
guities against the insurer who drafted
the policy) and reasonable expectations
removes vitally important arrows from
the policy holder's quiver. In the author's
personal opinion, having practiced insur-
ance law for over 30 years, those two
principles have resulted in more policy
holder victories than any other factor
in insurance litigation. In addition, the
effort to prohibit "extrinsic evidence"
theoretically means that none of the
discussions which put context around the
language of endorsements or other policy
provisions can be referred to. Further,
because arbitrations are confidential
and decisions are not officially reported,
there currently is and likely will con-
tinue to be a dearth of decisions inter-
preting the policy language available to
the policy holder. Yet, the insurers who
are involved in multiple arbitrations will
know about prior arbitration decisions.
There are many questions over the
validity and enforceability of these provi-
sions on disputes. A number of states
have statutes which remove insurance
claims from those subject to their arbitra-
tion statutes or which outright bar insur-
ance policies from requiring arbitration.
Also, some courts have ruled blanket
arbitration clauses invalid. The effort to
preclude reliance on well entrenched
pro-policy holder interpretation princi-
ples and on otherwise relevant evidence
might also be looked upon with disfavor.
D. other Provisions
A number of other provisions in the
policy forms bear highlighting:
The policy is an "indemnity" policy which
requires that the loss must actually be
paid before the company can be called
upon to reimburse the amount due.
2. No Duty to Defend
The policies state that the company has
no duty to defend and shall not be called
upon to assume charge of the settlement
or defense.
3. Defense costs are Within limits
Defense costs paid by underlying
insurers or the insured are included in
the determination of the exhaustion of
underlying insurance and retentions, and
are included in the policy limits of the
Bermuda policies.
4. No Drop Down over
uncollectible coverage.
5. other Insurance
The policy attempts to take advantage of
all other valid and collectible insurance
that might cover an occurrence or claim
by making itself excess to all such
insurance, whether issued before, during
or after the policy period, except other
insurance specifically issued in excess
of the policy.
6. aggregate Reinstatement
The policy allows for one reinstatement
of the aggregate during the annual period
of the policy.
7. Punitive Damages
The policy covers punitive damages.
They are expressly included within the
definition of "Damages." However, the
definition of "Damages" also excludes
civil or criminal fines and penalties.
policy is written is essential to getting the
coverage expected. The Bermuda form
is restricted in many ways. Insurance
professionals need to assess whether it
meshes with other insurance in the pro-
gram and affords the coverage needed.