insurance

Intercompany Arbitration

A dispute resolution process where insurance companies resolve disagreements between themselves through binding arbitration rather than litigation. This typically occurs when multiple insurers cover the same loss and disagree about which company should pay what amount.

Example

“When both the auto and homeowners insurers claimed the other should cover the garage fire damage, they resolved their coverage dispute through intercompany arbitration.”

Memory Tip

Think 'INTER-COMPANY = INSURANCE companies settling disputes between themselves' rather than involving courts or customers.

Why It Matters

Intercompany arbitration speeds up claim resolution and reduces costs that would otherwise be passed on to consumers through higher premiums. It ensures you get paid promptly while insurers sort out their coverage responsibilities privately.

Common Misconception

Consumers often worry they'll be left unpaid while their insurers argue about coverage. In reality, typically one insurer pays the claim first and then seeks reimbursement from other insurers through arbitration, so the policyholder isn't left waiting.

In Practice

Sarah's car slides on ice and crashes into her neighbor's garage, causing $15,000 in damage. Her auto liability insurer and the neighbor's homeowners insurer both believe the other should be primary. Sarah's auto insurer pays the claim immediately to maintain customer service, then files for intercompany arbitration seeking $10,000 contribution from the homeowners insurer. The arbitrator reviews both policies and awards the auto insurer $7,500, splitting the coverage 50/50 based on policy language and applicable laws.

Etymology

Combines 'inter' from Latin meaning 'between,' 'company' from Latin 'companis' meaning 'bread sharer,' and 'arbitration' from Latin 'arbitrari' meaning 'to judge' - literally judging disputes between companies.

Common Misspellings

intercompany arbitratoninter-company arbitrationintercompany arbirtrationintercompany arbitriation

Related Terms

subrogation

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