An Alternative Dispute Resolutions Guide for Adjusters

By Christopher Shulman | October 15, 2012

Alternative dispute resolution (ADR) is playing an increasingly frequent and important role in claims adjusting.

The majority of an adjuster’s job entails working to resolve claims with claimants or their counsel directly, although, not all claims resolve in that fashion. Some that don’t settle result in litigation; others are subject to different kinds of ADR processes before, as part of, or during the litigation process.

It is estimated that in Florida alone, more than 75 percent of all unresolved claims (i.e., those that do not resolve through direct negotiation), are submitted to ADR. Most of those are referred to mediation, considered the most common type of ADR. Others are referred to appraisal.

If the claim reaches litigation, more than 90 percent of all insurance claims are referred to mediation. Occasionally, courts will refer insurance disputes, usually first-party claims entailing an assignment of benefits to a provider, to nonbinding arbitration.

It is not uncommon for third-party claims against insureds to be submitted to binding arbitration outside the court process (i.e., employment practices claims and certain other types of casualty claims).


The most common ADR process is mediation, in which a neutral assists the parties to explore a negotiated settlement.

Mediation is characterized by three core features:

  • Self-determination where the parties, not the mediator, make all substantive decisions on whether to settle and, if so, under what terms;
  • Confidentiality and, in some states, privilege, such that what is said at mediation stays at mediation unless there is an express exception; and
  • Impartiality of the mediator, meaning that the mediator does not take sides and has no undisclosed conflicts of interest with the parties or their counsel.

The mediator helps the parties try to understand where each side perceives their respective areas of risk to be, to frame offers each side might be willing to accept, and to appreciate what might happen if there were no deal.

The mediator typically starts with the parties and counsel making opening statements. Thereafter, in continued joint session and/or in private meetings, also known as caucuses, with just one side at a time, the mediator asks probing questions, leads a discussion on the strengths and weaknesses of each side’s case, and makes suggestions about offers or counteroffers each side might choose to move towards settlement.

If a deal is reached, it is a binding, enforceable agreement. If not, then the claim proceeds with further litigation.

Arbitration and Related Processes

In arbitration, the parties submit a claim to a neutral third person, known as an umpire in an appraisal and a neutral evaluator in neutral evaluations, who decides the outcome. This is the principle difference between mediation and arbitration: who decides.

There are two types of arbitration: binding and nonbinding. A nonbinding arbitration may also be referred to as an appraisal in first-party property losses or a neutral evaluation.

Depending on whether the arbitration is binding or non-binding, the parties are required to follow the arbitrator’s decision, or may seek resolution through litigation.

While the nature and format of the submission of proof may vary from formal, court-like presentations to oral or written arguments made by counsel or the parties, the arbitrator’s role is the same — to make a decision. If the decision is binding, but one side does not follow the award, the opposing party has recourse to the courts to enforce the award.

There are many factors to consider in deciding whom to select as a neutral for a claim: the neutral’s reputation and experience as an ADR professional; experience in the subject matter of the claim; lack of connection to the dispute or disputants; price; and ease of scheduling.

About Christopher Shulman

Shulman is a member of the Florida Circuit-Civil Mediator Society and a member of the National Academy of Distinguished Neutrals.

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