Arbitration Provision Against Public Policy

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In Atlanta Flooring Design Centers, Inc. v. R.G. Williams Construction, Inc., — S.E.2d –, 2015 WL 4311070 (Ga. App. July 16, 2015), the Georgia Court of Appeals addressed the validity of a contract clause in a construction contract. In the contract, R.G. Williams Construction, Inc. (“Williams”), the general contractor, and Atlanta Flooring Design Centers, Inc. (“AFDC”) agreed to arbitrate any disputes related to the contract. In addition, Williams and AFDC expressly agreed “not to challenge the validity of the arbitration or the award.” The court, relying in part on analogous federal arbitration law, held that the clause – precluding judicial review of an arbitration award – altered Georgia’s statutory arbitration scheme, frustrated Georgia’s public policy and was void and unenforceable.

In light of the holding in Atlanta Floor, subrogating insurers should review Georgia contracts containing arbitration clauses to see if the contracts’ arbitration clauses attempt to limit or expand the judicial review process following an arbitration award. If an arbitration clause attempts to limit or expand the judicial review process, the insurer should analyze whether the arbitration clause is enforceable.

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