Whether a particular jurisdiction’s statute of limitations provides a reinsurer with a valid basis to deny payment of a cedent’s claim is sometimes a hotly-contested issue. Where a dispute is litigated in state or federal court, a reinsurer may argue that the relevant limitations period of that jurisdiction relieves the reinsurer of its indemnity obligations for a claim. By contrast, where a reinsurance agreement mandates that the parties resolve their claim-related disputes in arbitration, a cedent may assert that the panel is not bound to apply the statute of limitations law of any particular state, particularly where the agreement contains an “honorable engagement” clause or similar language. Other provisions, such as “governing law” or “choice of law” clauses, may also factor into the applicability of a time-bar defense in arbitration.
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