Purpose

• The purpose of the arbitration clause is to save the insurance company money. Settling disputes with consumers through arbitration is not as expensive as having to pay the legal costs of a lawsuit. Arbitration is also a less-time-consuming way to settle disputes for both the insurance company and the insurance policy holder. Once you sign an arbitration clause, you are agreeing not to file a lawsuit against your insurance company.
  
  

Common Arbitration Example

• The arbitration process is most commonly necessary when you do not agree on the appraisal value of your damaged property. For example, your home sustains damage from a storm and you make a claim against your homeowner's insurance. The insurance company sends out an adjuster to assess the cost to repair the damage. You do not agree on the assessment amount, so you hire your own appraiser or contractor to assess the damage. That appraiser comes up with a different amount. Your independent appraiser and the insurance company's appraiser cannot come to an agreement on the costs to repair the damage. You would then go to arbitration to settle the dispute.
  
  

Multiple Arbitrators

• In a multiple-arbitrator case, typically present is an arbitrator for you, an arbitrator for the insurance company and a third, neutral arbitrator. The neutral arbitrator acts as a referee. If your arbitrator and the insurance company's arbitrator cannot come to an agreement, the neutral arbitrator will make a decision after hearing both sides of the case. The decision is binding and you may not appeal it..
  
  

Single-Arbitrator Case

• In many cases, one arbitrator will hear the dispute. The arbitrator may or may not bring in a third, neutral appraiser. After listening to your side and the insurance company's side, the arbitrator will make a final decision based on the facts presented. The arbitrator's decision in such a case is not appealable.