From that pic, it looks like you have the dress set to collide with her entire mesh, so when her arm swings in there, it's catching it. If you uncheck her forearms and hands, it should correct that.

Go through the collisions list and uncheck every part of her body that you don't want to interact with the dress sim.

If I had a nickle for ever time a woman told me to get lost, I could buy Manhattan.