Med-arb is a hybrid dispute resolution process that combines mediation and arbitration, offering a structured yet flexible approach to resolving conflicts efficiently. In Kenya’s insurance sector, where disputes over claims and policy interpretations are common, med-arb aligns well with multi-tier ADR protocols promoted by regulators and courts.
Defining Med-Arb
Med-arb begins with mediation, where a neutral third party facilitates negotiations between disputants to reach a voluntary settlement. If mediation fails, the process seamlessly transitions to arbitration, where the same or a different neutral issues a binding decision.
This hybrid model addresses mediation’s non-binding limitation by providing finality through arbitration, while retaining mediation’s collaborative spirit. Parties agree upfront on the process terms, often in writing, ensuring the outcome is enforceable.
In practice, the mediator caucuses privately with each side, explores interests, and proposes solutions without imposing them. Failure to settle leads to arbitration hearings with evidence presentation and a reasoned award.
Legal Framework in Kenya
Kenya’s Constitution under Article 159(2)(c) mandates courts to promote ADR, including mediation and arbitration, before litigation. The Arbitration Act, 1995 (as amended) governs arbitration, recognizing hybrid processes if parties consent, while Civil Procedure Rules Order 46 empowers courts to refer disputes to ADR.
No specific statute defines med-arb, but it fits within flexible ADR provisions. The Insurance Regulatory Authority (IRA) standardizes policies with tiered clauses: negotiation (30 days), mediation (next 30 days), then arbitration via Chartered Institute of Arbitrators (Kenya Branch) (CIArb-K).
Courts enforce these clauses strictly, staying proceedings for ADR compliance. In Kenya Alliance Insurance v. Annabel Muthoki, the court upheld policy arbitration defaults over court mediation.
Insurance Disputes in Kenya
Insurance conflicts often involve claim denials, coverage scope, quantum assessments, or utmost good faith breaches under the Insurance Act. Common cases include motor accidents, health claims, and property damage, with IRA requiring fair handling within 90 days.
ADR is encouraged to decongest courts, where backlogs delay resolutions for years. Policies embed multi-tier mechanisms, making med-arb a natural evolution: mediation first per IRA standards, arbitration if needed.
The Policyholders Compensation Fund Regulations reinforce ADR pre-litigation. Tribunals like the Insurance Appeals Tribunal handle some matters, but commercial courts favor ADR referrals.
Advantages of Med-Arb Generally
Med-arb saves time, resolving disputes in weeks versus court years, by leveraging mediation’s speed and arbitration’s enforceability. Costs drop significantly—no protracted discovery or appeals—while confidentiality protects sensitive insurance data.
Parties retain control via mediation, fostering creative solutions beyond legal rights. Knowing arbitration looms motivates serious negotiation, increasing settlement rates (often 70-80%).
Flexibility allows tailoring rules, venue, and timing, with binding awards enforceable under the Arbitration Act and New York Convention.
Tailored Advantages in Kenyan Insurance
In Kenya, med-arb streamlines IRA-mandated tiers, avoiding sequential delays. For claim disputes, mediation clarifies facts (e.g., causation in multi-loss scenarios), transitioning to arbitration for binding quantum if needed—ideal for indemnity limits or proximate cause tests.
Cost efficiency matters amid rising premiums; insurers save on litigation fees, policyholders on delays. A motor claim denied for non-disclosure might settle via mediation on adjusted terms, averting full arbitration.
Preserves relationships: Insurers retain clients, policyholders maintain cover. Courts’ ADR push reduces backlogs, aligning with Article 159. CIArb-K panels ensure expert neutrals familiar with insurance law.
Enforceability trumps pure mediation; awards are final, with limited set-aside grounds under Section 35 Arbitration Act, minimizing appeals that plague litigation.
Practical Application Example
Consider a Nairobi policyholder claiming KSh 5 million for fire-damaged property. Insurer denies citing wear-and-tear exclusion. Under med-arb:
- Mediation Phase: Neutral reviews policy, site reports; parties negotiate reinstatement value, perhaps agreeing to KSh 4 million with salvage rights.
- Arb Transition: If impasse, arbitrator assesses proximate cause (fire vs. deterioration), rules bindingly.
This resolves in months, versus 2-3 court years, with IRA timelines met.
| Aspect | Med-Arb Benefit | Court Litigation Contrast |
|---|---|---|
| Time | Weeks/months | Years |
| Cost | Lower fees | High advocates/experts |
| Confidentiality | Private | Public hearings |
| Finality | Binding award | Appeals possible |
| Expertise | Insurance-savvy neutral | Generalist judges |
Challenges and Mitigations
Bias risk: Same neutral in both phases may influence mediation via arbitration threat. Mitigation: Use different neutrals or disclose process.
Limited precedent: Awards non-public, but Kenyan courts uphold them. Parties can stipulate reasoned decisions.
Adoption: Train more CIArb-K mediators/arbitrators; IRA could endorse med-arb in standards.
Future in Kenyan Insurance
With NCIA promoting ADR and IRA’s consumer focus, med-arb could standardize via policy clauses. Judicial referrals (Civil Procedure Section 59) will grow it.
For professionals drafting clauses: “Disputes first to med-arb under CIArb-K rules; same neutral unless objected.” This leverages advantages fully.
Med-arb empowers Kenya’s insurance sector toward efficient, fair resolutions, balancing collaboration with certainty.
SHAFIQ TAIBJEE
Lawyer/Arbitrator/Mediator/Islamic Arbitrator & Expert
Honorary Fellow IICRA -Dubai-UAE