Mandatory Arbitration Clauses in Insurance Policies

American Integrity Insurance Company has been approved by the Florida Office of Insurance Regulation to permit discounts for homeowners who agree to arbitration within their policies. While many Floridian homeowners are seeking discounts on policies in the wake of the massive inflation of policy premiums, homeowners should be cautious of this particular discount.

Arbitration is an agreement not to pursue litigation and privately resolve disputes. An arbitrator is selected by the parties who will decide if a party is entitled to damages or not. Although it may seem advantageous that both parties have a say in the neutral arbitrator, large companies have exploited the system and frequently suggest those who have previously granted favorable outcomes to them. Additionally, once the arbitrator determines the award, the party seeking damages is barred from seeking court remedies and cannot challenge the arbitrator’s determination.

The endorsement granted by the Florida Office of Insurance Regulation to American Integrity Insurance Company permits the homeowner to select an arbitrator if the parties cannot agree to one, eliminating some of the potential for a loss of neutrality. However, the Insurance Company is now permitted to avoid paying attorney’s fees for the homeowner, which can quickly become costly for them. Even in out of court disputes, individuals should still be represented by counsel to ensure they are on an even-playing field with insurance companies.

More insurance companies are now looking into seeking endorsements from the Florida Office of Insurance Regulation to permit the same. Although the discounts may seem attractive, homeowners should be weary of accepting an agreement in their policy that assigns them new duties and potentially, more expenses.

This article is not intended to be legal advice nor create an attorney-client relationship.