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Resolving claim dispute can involve many different methods

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There are several methods for settling differences, each with its own plusses and minuses.

Take mediation, for instance. While the process generally is quick and inexpensive, the decision isn't binding.

“The fundamental problem with mediation is it is not coercive,” said Thomas M. Reiter, partner at Pittsburgh-based global law firm K&L Gates L.L.P.

“You can mediate all you want, but at the end of the day it doesn't guarantee the insured will get its money,” he said.

This drawback has a silver lining, however. “The fact that mediation isn't binding means that either party can continue with its side of the dispute in arbitration or litigation,” Mr. Reiter added.

Binding arbitration ends the dispute, but it, too, isn't perfect. “One cannot say arbitration is advantageous or disadvantageous,” said attorney Dan Bailey, member of the Columbus, Ohio-based law firm Bailey Cavalieri L.L.C.

“On the one hand, it is frequently quicker than litigation because you don't have to wait to get on the docket of the court; you just appoint the arbitrators and do your thing. It is also typically cheaper because you can limit the scope of the discovery so it doesn't drag out like litigation usually does,” he said.

Nevertheless, Mr. Bailey acknowledged that “some arbitrations last just as long and are as expensive as litigation,” he said. “There's no silver bullet.”

The biggest potential downside to arbitration is that once a decision is reached, there is no recourse to revisiting the issue. “You get one shot and that's it,” Mr. Bailey added.

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While neither attorney recommended litigation as the initial sally in a claim dispute, the primary advantage to the courtroom for the insured is that if a decision is reached with which it disagrees, there is always the opportunity to appeal it to a higher court.

On the downside is the uncertain emotional makeup of a jury. “Unlike professional arbitrators and mediators, juries are made up of lay people who may not understand the issues very well,” Mr. Reiter said.

While juries often side with the policyholder in cases against big insurers, there is no guarantee of this outcome, he added. “Many insurers prefer arbitration, and insureds often prefer otherwise,” he said. “But, one never knows.”

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