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WASHINGTON—Insurance industry officials are voicing strong opposition to legislation approved earlier this week by a House subcommittee that would abolish use of arbitration agreements in consumer, franchise and employment contracts.
The bill, H.R. 3010, the Fairness in Arbitration Act, passed the Subcommittee on Commercial and Administrative Law of the House Judiciary Committee Tuesday by voice vote.
“As drafted, the bill is overly broad and appears to implicate contracts beyond those contracts it is purported to affect,” said Marc Racicot, president of the American Insurance Association Monday in a letter asking the subcommittee not to act on the bill.
Additionally, enactment of H.R. 3010 would be a “dangerous precedent,” Mr. Racicot said, “one that would limit the issue of arbitration and other alternative dispute resolution mechanisms to avoid costly and time consuming litigation.”
Passage by the full Judiciary Committee was originally scheduled for yesterday, but action was delayed because of strong industry opposition, according to officials at the Institute for Legal Reform, a unit of the Chamber of Commerce.
Two similar bills—H.R. 6126, Fairness in Nursing Home Arbitration Act of 2008, and H.R. 5312, Automobile Arbitration Fairness Act of 2008—were also passed by the House subcommittee and await full committee action.
Action on companion legislation to the Fairness in Arbitration Act, S. 1782, is pending in the Senate Judiciary Committee.
The AIA is also part of a broad coalition of business groups that wrote a letter to the subcommittee saying that the bills are “disconcerting” because they are “unwarranted and would wreak havoc on a long-standing and effective form of alternative dispute mechanism.”
This coalition included trade groups representing the automobile, financial services, health care, manufacturing and homebuilding industries.
In his letter, Mr. Racicot said that ever since adoption of the Federal Arbitration Act in 1925, “federal law has supported the use of arbitration as a fair, efficient and effective alternative to our overcrowded court system.”
He added that the use of arbitration “has been found to benefit consumers in many ways—including cost and time savings over litigation.”