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Alternative Dispute Resolution

avoid lawsuits by learning alternative dispute resolutions

Many types of business insurance—particularly professional liability insurance policies—are designed to provide financial and legal assistance in the event of a lawsuit. However, there are other methods of resolving disputes that stop short of lawsuits, and many insurers offer incentives for their use.

If you are aware of a situation that is escalating into a potential lawsuit against your business, it is almost always worthwhile to look into alternative dispute resolution methods to try to settle the matter without involving the courts.

Here are three types of alternative dispute resolution that may come into play:

  • Negotiation – This is generally the first step and it involves a meeting between the two parties in the dispute attempting to settle their differences on their own terms. If the situation is caused by miscommunication or a misunderstanding, negotiation can be an effective way to get both parties back on track and work toward a mutually satisfactory solution.
  • Mediation – In cases where two parties cannot negotiate successfully without assistance, mediation may be needed. This involves bringing in a trained mediator to conduct the negotiations and try to resolve their dispute.
  • Arbitration – One step short of an actual trial, arbitration takes the form of a hearing led by a panel of arbitrators. Two arbitrators are chosen by the two parties in the dispute and a third is chosen by the arbitrators themselves. This panel hears evidence—usually over the course of a few days or weeks—deliberates, and issues their decision in writing. The parties in the dispute generally agree in advance to be bound by the decision (also called the “award”) of the arbitrators.

Even if your business ends up using more than one alternative dispute resolution method to avoid a trial, the savings of time (particularly lost work time) and money will still be significant.

Any time a situation with a client or other party looks like it may be heading for a lawsuit, it’s worthwhile to consider other resolutions before things go that far.