An arbitration clause is a policy term requiring certain disputes to be resolved through arbitration.
Insurance mechanics
In property claims, arbitration clauses often apply when coverage disputes cannot be resolved through normal adjustment. The clause usually specifies:
- who can demand arbitration,
- appointment process for neutral arbitrators,
- timeline to submit evidence, and
- whether the award is final and binding.
Claims impact
Arbitration can reduce delay, but it still requires disciplined documentation:
- adjustment report,
- loss photos and invoices,
- engineer or salvage assessments,
- correspondence trail.
Underwriting and legal context
Dispute-process wording affects long-tail risk, legal expense, and loss reserves. Some insureds prefer arbitration for speed and confidentiality.
Example
If policy A denies replacement-cost coverage while the insured and insurer agree a roof is covered, the arbitration clause can move the valuation disagreement to a binding neutral decision process before suit.