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When dealing with an insurance claim against your company, litigation is an option, but it should always be the last option. It is always in the best interest of the company to try an alternative way of settling potential lawsuits.

The two most common ways to settle lawsuits outside of court are mediation and arbitration. According to Findlaw, the most salient difference between these two approaches is that mediation is non-binding whereas arbitration is typically binding.

What is mediation?

Mediation involves no final judgment. Rather, a mediator works with both sides of the case in order to come to a resolution that is palatable for both parties. The mediator is neutral and does not offer advice to either side. Many businesses feel that mediation is the best option because it allows both sides to come together in a neutral environment and discuss the issues at hand.

Overall, mediation decreases hostility and can inspire both sides to avoid expensive litigation.

What is arbitration?

Arbitration usually involves a panel of many arbitrators. These arbitrators are somewhat like a judge, in that they listen to evidence brought forth by both sides and offer written opinions at the end. It is possible for arbitration to happen with a single arbitrator, but it is more common for both sides to select their own arbitrator and then these two arbitrators select a third to complete a panel.

Once both sides present their evidence to the arbitrators, they then vote on the final decision. This process is far less expensive than litigation and the decisions tend to be binding (though there are situations where the decisions may not be).