Insurance as a Risk Management Tool for ADR Implementation in Construction Disputes

Nowadays, along with the inherent intricacy and magnitude of large-scale construction projects come increasingly complex disputes. Because most projects operate on tight budgets, alternative dispute-resolution (ADR) techniques such as negotiation, mediation, and arbitration are being widely adopted in large-scale construction projects to help handle disputes in more effective and cost-saving ways. However, the risk of incurring uncertain ADR-implementation costs in the dispute-resolution process has become an important issue. The traditional self-insured approach of simply retaining all risks is no longer considered economical. One way to reduce the potential for variations in the dispute-resolution budget is to price ADR techniques as an insurance product, which allows project participants to transfer the risk of incurring unexpectedly high ADR-implementation costs to the insurance company. Despite this advantage, many factors are preventing project participants from investing in ADR-implementation insur...

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