South Carolina Personal Lines Practice Exam

What process is used to settle a casualty claim when the insured and insurer can't agree?

1. Mediation

2. Litigation

3. Arbitration

4. Negotiation

The correct answer is: Arbitration

The correct choice is arbitration, which is an alternative dispute resolution process that is commonly used to settle disagreements between an insured and an insurer when they cannot reach an agreement regarding a casualty claim. In arbitration, both parties present their case to an impartial third party, known as the arbitrator, who reviews the evidence and makes a binding decision. This process is beneficial because it is typically faster and more cost-effective than going through the court system. Arbitration allows for a private resolution without the need for public litigation, which can be advantageous for both the insurer and the insured. Mediation, another form of dispute resolution, involves a mediator who facilitates discussions between the parties to help them reach a mutual agreement, but the mediator does not make a binding decision. Litigation refers to the formal process of taking a case to court, which can be lengthy and expensive. Negotiation generally involves informal discussions between the parties to try to settle the claim, but it may not always lead to a resolution, especially if there is a significant disagreement. Arbitration stands out as the option that provides a definitive and enforceable resolution in situations of impasse.