Alternative dispute resolution offers insurers and policyholders a quick, cost-effective alternative to litigation. Both mediation and arbitration are private and set no precedents. Yet despite these advantages, it's not necessarily the norm.
Although most insurers as well as policyholders recognize the benefits of ADR and prefer it over litigation, many standard-form U.S. commercial policies do not contain ADR provisions.
After a claim dispute arises, the relationship between policyholders and insurers often deteriorates rapidly, which makes the agreed upon use of options such as mediation and arbitration unlikely. Instead, the dispute ends up in court.
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