Arbitration in auto insurance is primarily utilized to resolve disputes concerning which coverage?

Arbitration in auto insurance is primarily used to resolve disputes related to Underinsured Motorist (UM) and Uninsured Motorist (UIM) coverage because these coverages specifically address situations where a policyholder suffers injuries or damages caused by a driver who either has insufficient insurance or no insurance at all. Since these scenarios often involve claims that are contingent upon the actions of another party, they can lead to disputes regarding the extent of coverage, the amount of damages, and the application of policies.

The arbitration process provides a structured means of resolving these disputes without resorting to lengthy and costly litigation. It allows both parties to present their cases to an unbiased third party, which can lead to a quicker resolution. The use of arbitration is particularly suitable for UM/UIM coverage because the claims often hinge on interpretations of policy language and the facts surrounding the accident, making them ideal candidates for an alternative dispute resolution method.

Other coverages like collision, comprehensive, and liability typically involve more direct claims management processes, where the insured’s losses are assessed according to established guidelines and procedures set forth in the policy.