Insurance issues often influence the outcome of securities arbitrations and mediations, yet the workings of errors and omissions insurance is not fully understood by many lawyers, arbitrators and mediators. In fact, insurance information is generally not disclosable in securities arbitration, and is considered confidential information by many broker-dealers and insurance industry professionals. The overwhelming majority of securities arbitrations are litigated before the Financial Industry Regulatory Authority (FINRA). Yet the FINRA discovery guide does not require disclosure of insurance information in customer arbitrations, although a proposal has been floated which would make the respondent’s insurance coverage potentially discoverable. This article will survey some common insurance issues in arbitration and mediation, including conflicts of interest.
Cumulating Claims
The existence and extent of insurance coverage is useful information for claimants’ counsel and defense counsel alike, can significantly affect the outcome of mediation, and can sometimes even help claimant’s counsel determine whether a claim is worth pursuing in the first place. While larger financial industry wire-houses tend to be largely self-insured, at least at most levels, most independent model broker-dealers have at least some form of errors and omissions insurance, which is typically subject to a self-insured retention.
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