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When Can Insurance Companies Require Participation in Mandatory Binding Arbitration?
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When Can Insurance Companies Require Participation in Mandatory Binding Arbitration?

November 2, 2023 Insurance Industry Legal Blog

Reading Time: 3 minutes

In Florida, significant changes to insurance regulations have taken effect as of December 2022, with the implementation of Senate Bill 2A. This comprehensive bill addresses several critical areas, including flood coverage disclosure, assignment of benefits, prompt pay laws, and, notably, mandatory binding arbitration limitations for insurance claims. This blog focuses on the provisions related to mandatory binding arbitration in property insurance contracts.

What is Arbitration?

Arbitration is an alternative dispute resolution process whereby the parties agree to submit their dispute to an impartial arbitrator, usually an attorney or retired judge. The arbitrator is responsible for rendering a final and binding decision, similar to a court judgment. In arbitration, each party will have an opportunity to present their case, including evidence, arguments, and witnesses, to the arbitrator. The arbitrator will listen and evaluate each party’s case and evidence and issue a final decision.

While arbitration shares similarities with litigation, there are significant differences. One of the primary distinctions is the forfeiture of certain rights in arbitration which is typically enjoyed during litigation, such as the right to a trial by jury and formal adherence to the rules of evidence. This trade-off is essential to consider when deciding between arbitration and traditional litigation.

On the other hand, arbitration is intended to be a cost-effective and speedy alternative to court litigation. The cost associated with arbitration varies depending on the selection of the arbitrator. Depending on the clause provided in the insurance policy, the insurance company may bear the full cost of the arbitration, or the cost may be shared between the insurer and the policyholder.

When is Arbitration Mandatory in Property Insurance Claim Disputes?

Senate Bill 2A created Section 627.70154, Florida Statutes, which provides the conditions whereby an insurance company may require a policyholder participate in mandatory binding arbitration for property insurance claim disputes. For property insurance policies issued in Florida after December 16, 2022, an insurance company may require that a policyholder participate in mandatory binding arbitration, only if all of the below conditions are met:

  • The mandatory binding arbitration requirements are contained in a separate endorsement attached to the property insurance policy;
  • The premium for the policy includes an actuarially sound credit or premium discount for the mandatory binding arbitration endorsement;
  • The policyholder signs a form electing to accept mandatory binding arbitration, which notifies the policyholder of the rights given up in exchange for the credit or premium discount, including, but not limited to, the right to a trial by jury;
  • The endorsement establishes that an insurer will comply with the mediation provisions set forth in s. 627.7015 before the initiation of arbitration; and
  • The insurer also offers the policyholder a policy that does not require that the policyholder participate in mandatory binding arbitration.

If all of the above conditions are not met, then the insurance company cannot require that a policyholder participate in mandatory binding arbitration. Section 627.70154 also makes clear that that the above changes do not impair any right under any insurance policy that was in effect or effective before December 16, 2022.


Senate Bill 2A brings significant changes to the landscape of insurance regulations in Florida. The inclusion of mandatory binding arbitration provisions in property insurance contracts offers policyholders a choice while encouraging a more cost-effective and efficient dispute resolution process.

Continued reading in the series:

Policyholders Are No Longer Permitted To Assign Their Insurance Benefits in Florida | Jimerson Birr (
Part I: The Shift in Florida Insurance Litigation with the End of One-Way Attorneys’ Fees | Jimerson Birr (
Part II: The Shift in Florida Insurance Litigation with the End of One-Way Attorneys’ Fees | Jimerson Birr (

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