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How can you avoid insurance litigation?

On Behalf of | Dec 6, 2023 | Insurance Law |

Legal issues involving insurance can be complicated. For policyholders, the terms and conditions of their policy – and when it applies – can be difficult to understand. For insurance companies, sorting through the alleged facts that are involved in a claim can be the most difficult part of the process. No one wants to engage in insurance claims in bad faith, but the reality is that sometimes these situations lead to litigation. But, can that be avoided?

Alternative dispute resolution

If possible, it is oftentimes beneficial to all parties involved to find ways to avoid courtroom litigation as part of efforts to resolve insurance claims. This is where “alternative dispute resolution” options can come into play. Typically, when “ADR” – as it is commonly known – is an option in a legal situation, the specific option is either: direct negotiations; mediation; or arbitration.

Obviously, the direct negotiation option can be part of attempting to resolve the issue at any time, from the time the claim is filed until just moments before a jury trial starts. The parties can always discuss options, but setting a specific time to meet and discuss settlement as a specific resolution to the issue can focus the parties on how, if possible, the insurance dispute can wrapped up.

Mediation involves a bit more structure to settlement talks. In mediation, a neutral third-party mediator will facilitate the settlement discussions between the parties, looking for creative ways, when needed, to help the parties see the strengths and weaknesses of each other’s legal stances, all in hopes that a settlement can be reached. Arbitration is one step more formal and is more closely related to actual courtroom litigation.

Typically, both parties present their cases to a neutral, third-party arbitrator, who then makes a decision – similar to what a judge or jury would do. In many situations, in order for arbitration to be an option, the parties usually have to agree that whatever decision is made by the arbitrator is the final decision and no further litigation will occur.


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