Arbitration clauses

Mandatory and binding arbitration clauses are included in a large proportion of consumer contracts.  These arbitration clauses are being challenged in various courts throughout the country on a daily basis.  A couple of the key attacks on the clauses are:

• The two parties, the business and the consumer, are not on equal footing, and;
• The clauses are not valid in cases where the person signing the agreement has died and the estate has pursued liability actions against a third party. 

Actuaries rely on stable legal environments when analyzing historical claim reporting and settlement patterns to produce reasonable loss reserve estimates and to price their insurance products adequately.  Invalidating these clauses may substantially disrupt the legal environment.

The uncertainty related to enforcing these contracts and the arbitration provisions weigh heavily on business.  On the other hand, injured parties need to have reasonable access to recover for damages caused by a third party.  Every year there is proposed federal legislation to limit or eliminate arbitration clauses in contracts, and many lawyers contend that consumers are being abused by these clauses. 

What do you think: Are outcomes for consumers worse under arbitration than under a traditional liability suit?  Are arbitration clauses a reasonable way to produce tort reform when other tort reform approaches like capping non-economic damages are not palatable?  Should there be more clarity for businesses to fully understand that these agreements are enforceable and are valid for living persons as well as the estates of deceased persons?  Should people have the free right to sign contracts with arbitration provisions if those same people are deemed to be on unequal footing with the party with whom the contract is signed? Let us know what you think.