Arbitration for Construction Defect Claim Disputes

New construction project arbitration program launched

By IFAwebnews Staff
Posted: January 4, 2010
A new arbitration program designed to resolve inter-insurer disputes regarding construction defect claims recently held its first hearing.
The program is a joint project undertaken by Arbitration Forums, Inc. (AF), the largest arbitration service organization in the country, and the Construction Defects Claim Managers Association (CDCMA), designed to "significantly reduce the time, effort and expense" of these cases, organizers said.
"If carriers resolve the underlying case and agree to arbitrate-rather than litigate-their differences, the time, effort and expense associated with these cases could be reduced significantly," said W. Russ Smith, president and CEO of Tampa, Fla.-based AF.
This new service addresses the insurers' concerns that a program tailored to the needs of construction defect disputes should include both the right process and the right people, he said.
As permitted under the program's rules, two companies had representatives at the first hearing to assure that the arbitrators had the proper understanding of issues in dispute and their supporting evidence.
Smith called the program an "adjunct" to AF's Special Arbitration Program, which encourages prompt settlement and resolution of claims disputes and reduces litigation expense through an informal process where decisions are rendered by claims professionals without setting precedent.
The new construction defects program requires specific arbitrators, who organizers say must be knowledgeable of general liability and construction defect claims, general insurance coverage and applicable case law, as well as possess a working knowledge of construction practices and nomenclature.
These arbitrators also must have a thorough understanding of the triggers of insurance coverage, exhaustion theories and allocation methods, along with the ability to analyze and apply contractual risk transfer clauses.