Originally from Dispute Resolution Journal

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INTRODUCTION

The commercial insurance programs of many multinational and US businesses include “Bermuda Form” policies, a special policy form developed in Bermuda in the mid-1980s that includes unique provisions and provides for arbitration of disputes, usually in London under the substantive law of New York. Given the potential challenges that these specialty policies can create, policyholders should carefully consider purchase of Bermuda Form policies and structure them as favorably as possible to maximize coverage. In addition, if claims arise, policyholders can employ a number of strategies to ensure that the claim is presented with an eye toward the unique aspects of Bermuda Form policies.

I. HISTORY OF THE BERMUDA FORM

In the mid-1980s, insurance broker Marsh & McLennan, with a consortium of US policyholder companies from across the Fortune 500, created the first Bermuda Form insurance companies, ACE Insurance Company, Ltd., and XL Insurance Company, Ltd., to provide high excess Commercial General Liability (CGL) insurance to companies operating in the United States when the market for such insurance collapsed during the 1980s’ liability insurance crisis. ACE was formed in 1985 to provide high excess cover above US$100 million, and XL was started shortly thereafter, in 1986, to provide excess coverage below the ACE layer, with limits of between $25 million and $100 million.