Discussions about a new arbitration program designed to moreefficiently resolve inter-insurer disputes over construction defectclaims were recently held between two major associations.

The first meeting on this program was a joint projectundertaken by Arbitration Forums Inc., a major arbitration grouprepresenting insurers, and the Construction Defects Claim ManagersAssociation.

“If carriers resolve the underlying case and agree toarbitrate–rather than litigate–their differences, the time, effortand expense associated with these cases could be reducedsignificantly,” W. Russ Smith, president and chief executiveofficer of Tampa, Fla.-based Arbitration Forums, said in astatement.

The discussion addresses insurer concerns that a programtailored to the needs of construction defect disputes shouldinclude both the right process and the right people, he said.

Under the program's rules, two companies would haverepresentatives at the first hearing to assure that the arbitratorshad the proper understanding of issues in dispute and theirsupporting evidence.

Mr. Smith pointed out that the service is an adjunct to AF'sSpecial Arbitration Program, which encourages prompt settlement andresolution of claims disputes and reduces litigation expensethrough an informal process, where decisions are rendered by claimsprofessionals without setting precedent.

The new construction defect arbitration program requiresarbitrators to be highly knowledgeable of general liability andconstruction defect claims, general insurance coverage, andapplicable case law, as well as possess a working knowledge ofconstruction practices and nomenclature.

These arbitrators also must have a thorough understanding of thetriggers of insurance coverage, exhaustion theories and allocationmethods, as well as the ability to analyze and apply contractualrisk-transfer clauses.

Moreover, arbitrators of construction defect cases must beneutral, open-minded, impartial and capable of writing clear,concise and well-reasoned decisions, Mr. Smith said. He added thatAF has developed a thorough program of user and arbitrator trainingand arbitrator certification.

“We will continue to recruit additional qualified arbitratorsand require them to complete the certification process to meet thedemand for this unique and valuable service,” he said.

Founded in 1943, AF has a membership of more than 4,000 insurersand self-insureds nationwide.