Discussions about a new arbitration program designed to more efficiently resolve inter-insurer disputes over construction defect claims were recently held between two major associations.

The first meeting on this program was a joint project undertaken by Arbitration Forums Inc., a major arbitration group representing insurers, and the Construction Defects Claim Managers Association.

“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,” W. Russ Smith, president and chief executive officer of Tampa, Fla.-based Arbitration Forums, said in a statement.

The discussion addresses insurer concerns that a program tailored to the needs of construction defect disputes should include both the right process and the right people, he said.

Under the program's rules, two companies would have representatives at the first hearing to assure that the arbitrators had the proper understanding of issues in dispute and their supporting evidence.

Mr. Smith pointed out that the service is 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 defect arbitration program requires arbitrators to be highly 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, as well as the ability to analyze and apply contractual risk-transfer clauses.

Moreover, arbitrators of construction defect cases must be neutral, open-minded, impartial and capable of writing clear, concise and well-reasoned decisions, Mr. Smith said. He added that AF has developed a thorough program of user and arbitrator training and arbitrator certification.

“We will continue to recruit additional qualified arbitrators and require them to complete the certification process to meet the demand for this unique and valuable service,” he said.

Founded in 1943, AF has a membership of more than 4,000 insurers and self-insureds nationwide.