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Property/casualty insurer use of arbitration as an alternative to the more formal and confrontational tort system results in a more efficient and equitable disposition of claims, benefiting both consumers and companies, a leading industry expert representing the Alliance of American Insurers told a National Association of Insurance Commissioners’ hearing March 10.

“Arbitration, as well as other forms of alternative dispute resolution, minimizes the costly and time-consuming elements of jury trials, including discovery and trial preparation expenses,” said David Narigon, senior vice president of Employers Mutual Casualty Co., Des Moines, Iowa, in a presentation during a public hearing of the NAIC’s Consumer Protection Working Group. “In this way arbitration streamlines the process, saving time, and providing all parties involved with more control over the process and eventual outcome.”

Narigon explained that other ways the property/casualty insurance industry uses such clauses are in automobile insurance policies covering physical damage appraisals, and to resolve personal injury protection claims. “In fact, regulations in some states, such as New York, mandate arbitration,” he noted.

Some companies also use arbitration clauses in policies for uninsured and underinsured motorist coverage. “The availability of these agreements is beneficial for both policyholders and insurers because they provide an alternative avenue to resolve disputes and are less costly than litigation,” Narigon added.

Perhaps the property/casualty industry’s most prevalent use of arbitration is something that consumers never actually see: signatory agreements for binding inter-company arbitration through organizations such as Arbitration Forums Inc. Narigon, who also serves as chairman of the board of Arbitration Forums, noted that the organization handles more than 400,000 cases between insurers annually with a total resolved dollar value of more than $1.8 billion.

“Inter-company arbitration averages about $85 per case including the filing fee, claim adjusters’ time and all other expenses and costs,” he added. “Litigation, on the other hand, usually costs thousands of dollars. In addition, arbitration is much faster than litigation. The average case is disposed of in about 80 days, from filing to hearing, compared to the years it takes for a lawsuit to come to trial.

Topics Carriers Property Casualty