Limit for arbitrated claims disputes increased

The Canadian Insurance Claims Managers Association (CICMA) has increased the limit for arbitrated claims disputes to $100,000 from $50,000, the association’s national arbitration director told Canadian Underwriter last month.

CICMA manages the Canadian Inter-Company Arbitration Agreement, a formal agreement in place to provide a quick alternative to litigation of liability and damage disputes on subrogation claims between insurers. Insurance Bureau of Canada member carriers are signatories to the agreement, by which they are bound to forgo litigation in favour of arbitration.

CICMA national arbitration chair John Russell says for years the limit for arbitrated claims disputes was $50,000. “We have tried over the years to get it increased, and we were successful in September of 2024 by voting of the signatory companies,” Russell says in an interview.

Another change is the response times for claims disputes, which has increased from 30 days to 60 days. This will allow arbitration respondents a bit more time to consider settlement or to provide a formal response to the arbitration chair, Russell says.

“In a nutshell, we’re trying to cut down on litigation costs and we’re trying to speed up the [claims dispute] process,” says Russell, who is also the senior vice president of claims at Westland Insurance. “What it essentially does is pushes things of a smaller variety into an arbitration process that is governed by a number of senior claims leaders from across the country.”

The Canadian Inter-Company Arbitration Agreement handles disputes between carriers related to physical damage and subrogation claims, including business interruption. Arbitration is managed by CICMA, a national association with provincial chapters.

The fine print

Damage cannot exceed $100,000 unless agreed upon by all parties. Any subrogation claim in which a company asserts a defensive lack of coverage can’t be arbitrated, Russell adds. The arbitration agreement applies to personal and commercial insurance disputes, but certain lines of coverage, such as equipment breakdown, aviation, ocean, and marine, fall outside of the arbitration process.

Here’s an example of how the process works: Adjusters for a liability insurer and a property insurer dispute a claim, which is then escalated to pre-arbitration officers from each insurer. “Quite a lot of them get resolved at that point,” Russell says.

If not, the parties move to the arbitration process, which involves filing an arbitration document to the arbitration chair of CICMA in that jurisdiction. The fee to file an arbitration application is now $300 (up from $250) for the applicant, Russell says. The respondent doesn’t pay any fees unless they are counterclaiming, for which the fee is also $300.

After that, the dispute goes to the CICMA arbitration chair in the provincial jurisdiction, who convenes an arbitration panel (usually an arbitration chair and two senior claims leaders from companies not involved in the arbitration). The chair reviews the matter and makes a determination based on liability and quantum of the loss. The arbitration chair then sends out a written decision to both applicants and respondents. Appeals are not allowed.

Saving on litigation costs is a major benefit of the arbitration agreement, Russell says. “Cost of litigation on a small claims matter could be $5,000 to $20,000, whereas if you put it to the panel, it’s a $300 fee,” he adds. “With the courts, it could take years to get to a trial. Typically, our decisions are rendered within one to two months after the panel hearing.”

“Quite often matters before the court are decided by a judge who might not be familiar with insurance matters, whereas these arbitrations are decided by experienced senior claims leaders — so subject matter experts,” Russell says. “We believe this is one of the value-adds that we can provide the membership and also insurance companies — to be able to resolve matters a little bit quicker and more economically.”