Arbitration
Arbitration is a process for resolving a dispute outside of court, where a neutral third party (an arbitrator or panel) hears both sides and issues a decision that may be binding or non-binding depending on what the policy or contract specifies. The Allen Thomas Group flags arbitration clauses in policies and contracts up front, since agreeing to binding arbitration can waive a business's right to sue or go before a jury.
How Arbitration Differs from Litigation
Litigation happens in a public court, follows formal court procedure, and can be appealed through the court system. Arbitration is private, generally faster, and the arbitrator's decision, if the clause makes it binding, is very difficult to overturn even if one side believes it was wrongly decided. Many commercial contracts and some insurance policies include a mandatory arbitration clause requiring disputes to go this route instead of to court.
Arbitration vs. Appraisal
| Arbitration | Appraisal | |
|---|---|---|
| Scope | Can resolve coverage disputes, liability, and contract disputes | Resolves only the dollar amount of an already-covered loss |
| Decision maker | Arbitrator(s) chosen per the clause | Two appraisers plus an umpire if needed |
| Binding? | Depends on clause wording | Typically binding once decided |
Why This Matters
A business that signs a contract or accepts a policy with a mandatory binding arbitration clause without noticing it may be giving up its ability to take a serious dispute to court later. Reviewing dispute resolution clauses before signing, not after a conflict arises, is the only way to know what options are actually available if something goes wrong.
How The Allen Thomas Group Can Help You
We'll help you understand exactly how arbitration affects your coverage and cost, then shop your policy across 15+ A-rated carriers to find the right fit.
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