Arbitration
Arbitration is a dispute resolution process where a neutral third party (arbitrator) hears both sides and makes a legally binding decision, avoiding courtroom litigation.
What You Need to Know
Many insurance policies include arbitration clauses requiring disputes to be settled this way rather than through lawsuits. It's typically faster and less expensive than going to court.
Arbitration vs. litigation:
- Faster resolution — typically 6-12 months vs. 2-4 years for trial
- Lower cost — roughly $15,000-$50,000 vs. $50,000-$200,000+ for litigation
- Private process — proceedings are confidential, not public record
- Limited appeals — the decision is final except in extreme circumstances
Binding arbitration is the most common form in insurance policies — both parties must comply with the award, with very limited grounds for appeal (fraud, arbitrator misconduct, or exceeding authority).
Why It Matters for Restaurant Owners
Arbitration gets disputes resolved in months instead of years, which means you can focus on running your restaurant rather than a prolonged legal battle.
Common restaurant insurance disputes resolved through arbitration:
- Business interruption claims — disagreements over lost income calculations
- Property damage valuations — disputes over repair/replacement costs
- Coverage denials — the insurer refuses to cover a claimed loss
- Liquor liability claims — disagreements over alcohol-related incident coverage
A two-year lawsuit over a $200,000 claim means two years of uncertainty, mounting legal bills, and management time diverted from operations. Because arbitration decisions are usually final with limited appeal options, read your policy's arbitration clause and prepare your case thoroughly before you're ever in a dispute.
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