Intercompany Arbitration

Example

“After a car accident involving drivers from different states, the two insurance companies used intercompany arbitration to quickly determine which company owed what portion of the damages.”

Memory Tip

Think 'INTER-company' = companies arguing 'between themselves' use an 'umpire' (arbitrator) instead of dragging customers through court battles.

Why It Matters

Intercompany arbitration speeds up your claim payments by resolving insurance company disputes quickly and privately. Without this system, you might wait months or years for companies to settle their disagreements in court before paying your claim.

Common Misconception

Consumers often worry that intercompany arbitration might reduce their settlements, but this process only determines which insurance companies pay what portions. Your total compensation amount is determined separately and isn't reduced by how the insurers split their responsibilities.

In Practice

After a house fire, both your homeowner's insurance ($200,000 claim) and your neighbor's liability insurance ($50,000 for their negligent tree trimming that caused the fire) are involved. Instead of a two-year court battle over responsibility percentages, the companies use arbitration and resolve the dispute in 60 days. The arbitrator determines your insurer pays $120,000 and the neighbor's insurer pays $130,000, allowing you to receive your full settlement quickly while the companies handle their cost-sharing privately.

Etymology

Combines 'inter' (between) and 'company' with 'arbitration' from Latin 'arbitrari' (to judge). This practice developed in the early 20th century as insurance companies sought faster, cheaper ways to resolve coverage disputes without lengthy court battles.

Common Misspellings

Related Terms

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