Arbitration Process

• If insurance companies or claimants cannot agree on the settlement of an insurance claim, an insurance company or claimant may request arbitration, typically in writing. A court or the parties involved select two or three arbitrators, who are third parties without material interest in the claim -- that is, their compensation does not depend on the outcome. Each party presents his side of the claim to the arbitrators, who review the facts of the claim and make a determination regarding fault or damage amounts.
  
  

Binding Arbitration

• In some cases, the decision the arbitrators reach may be legally binding. The parties involved in the claim, including the claimants and insurance companies, must adhere to the arbitrators' decision. If they do not, either a claimant or an insurance company can take the arbitrators' decision to court for enforcement. Your insurance policy contains language that tells you whether any arbitration between you and your insurance company, or between two insurance companies, will be binding.
  
  

Nonbinding Arbitration

• Nonbinding arbitration means that the parties are not required to accept the decision of the arbitrators regarding a claim dispute. In nonbinding arbitration, arbitrators act only in an advisory capacity, but cannot determine a definitive outcome. Your policy will tell you if any arbitration regarding a claim will be nonbinding.
  
  

Advantages

• The primary advantage of arbitration is that insurance companies and claimants can settle disputes without the expense of hiring attorneys and filing lawsuits. The stringent rules of evidence required in the legal system do not apply to arbitration, making it a more informal process than a lawsuit. Arbitration is also often a much quicker process than resolving a claim dispute through the legal system.
  
  

Payment of Arbitrators

• Payment of arbitrators depends on the language in your insurance policy. Typically, if the dispute is between you and your insurance company, you will pay for your arbitrator's expenses, and the insurance company will pay for its arbitrator. Insurance policies commonly stipulate that if there is a third arbitrator, you and the insurance company share the costs for that arbitrator.