Which method involves settling a dispute by accepting the decision of an impartial outsider?

• A. Arbitration
• B. Subrogation
• C. Liberalization
• D. Loss Payable Clause

Answer: (A)

Arbitration is a dispute resolution method where the parties agree to present their disagreement to an impartial third party or panel, whose decision is binding and enforceable. This setup gives a neutral expert the authority to settle the dispute, and the outcome must be accepted by all involved, much like a court ruling but often more private and faster. In this question, the key idea is that the decision of an outsider is accepted as final, which is the defining feature of arbitration.

Subrogation refers to an insurer seeking reimbursement from the party responsible for the loss after paying a claim; it’s about recovering costs, not resolving disputes. Liberalization isn’t a dispute-resolution mechanism; it describes expanding policy terms or coverage. A Loss Payable Clause designates who will receive payment under a policy, which affects payment flow rather than how disputes are settled.