What provision found in liability policies promotes claim settlements and reduces legal expenses?

Arbitration is a provision found in liability policies that facilitates the resolution of disputes outside of the traditional court system. This process involves both parties agreeing to submit their disagreements to an impartial third party, known as an arbitrator, who makes a binding decision. The primary purpose of arbitration is to expedite the resolution of claims, which in turn promotes quicker settlements.

By opting for arbitration, both parties can avoid the lengthy and expensive nature of litigation, which often involves court appearances, extensive legal fees, and protracted timelines. Since arbitration is generally less formal and can be scheduled more flexibly, it significantly reduces the legal expenses associated with resolving claims. This feature is particularly beneficial in liability policies where parties aim to minimize costs while efficiently addressing claims.

The other options, while they involve methods of dispute resolution, do not inherently carry the same binding nature or efficiency as arbitration. Mediation, for example, is a collaborative approach where a mediator helps facilitate negotiations, but its outcomes are not binding unless the parties reach a mutual agreement. Litigation is often time-consuming and costly, making it less appealing for those looking to settle claims efficiently. Negotiation is an important step in dispute resolution but may not lead to a definitive resolution like arbitration does, as it relies on