Arbitration Procedure and Advantages of Arbitration


The advent of arbitration is becoming increasingly common in insurance policies and practice, more especially where a defined coverage is been considered.

Most cases of arbitration over litigation are been given utmost consideration by some legal activists or practitioners, which is based on the nature of the particular case.

In Nigeria, the law on the cases of arbitration is governed by the Arbitration Act Cap 13, Law of Nigeria 1958 volume 1 at page 38, section 3 of this act stated that submission shall be irrevocable and would have effect as an order of the court.

Therefore, once a party has contracted to settle all disputes by this means, it remains binding on him for the duration of the contract and he cannot revoke it by a unilateral act.

Arbitration in insurance: This is one of the insurance dispute resolutions procedure between the provider of insurance and the policyholder. It is an alternative to litigation, but still involving a decision by a person not involved in the dispute, is the process termed arbitration.

Arbitration Procedure

The nature of a policy may lay down the arbitration procedure which may stipulate that one arbitrator be mutually picked by the disputing parties; if they cannot agree, each may appoint one, and the two arbitrators must appoint an umpire.

The umpire sits on the hearing but has only a casting vote.

Technical expert, who have particular knowledge of the matter under dispute, is usually selected as arbitrators, and the cost of the hearing are awarded at the discretion of the arbitrators or umpire.

Most importantly, arbitration cannot be insisted upon by an insurer unless the policy contains an arbitration condition.

The insurer cannot insist on arbitration with a claim from a third party. The third party is not bound by the terms of the contract and has every right to proceed to litigation even if the dispute concerns quantum only.

Advantages of Using Arbitration

Enumerated below are the advantages of using arbitration

1. Image, many people argue that the image of the insurer is saved by not being on the headline of the newspapers.

2. Expert judgment: the dispute is not expected to be an expert in disputes involving the amount or value of property whereas the arbitrator agrees upon is an expert in the valuation of the property. As a professional, he is in a better position to give a fairer judgment.

3. Less expensive: It is believed that it will be less costly than a court hearing. Although solicitors and lawyers will be engaged, it is expected that there will be savings from the expenses on the solicitors or lawyers and others over many months of hearing in courts

4. Arbitration is faster than court action:
Court hearing takes many months or years whereas arbitration takes a few weeks

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