Auto Insurance Arbitration: Your Right To Know

Arbitration is an alternative to going to court over a dispute. In the context of auto insurance, arbitration is a method of resolving legal disputes without having to file a car accident lawsuit. It is a hearing where both insurance companies submit evidence in support of their policyholder to a third-party arbitrator. The arbitrator hears both sides of the disagreement and decides the outcome.

Arbitration clauses in auto policies

Arbitration is a common feature of auto insurance policies, which are a contract between the insurance company and the policyholder. It is a method of Alternative Dispute Resolution (ADR) where a neutral third party, the arbitrator, is chosen to hear both sides of a disagreement and decide the outcome.

There are two kinds of arbitration: binding and non-binding. Binding arbitration means the arbitrator's decision is final with no right of appeal. Non-binding arbitration means both parties can accept the decision, or either party can reject it and file a lawsuit.

Insurance companies tend to mandate binding arbitration in auto policies. This means that if you are trying to settle your claim without a lawyer and negotiations fail, arbitration might be a good option for resolving your dispute with the insurance company. However, you should check your policy for an arbitration clause and, if it is there, you must submit your claim to arbitration.

Arbitration is often used when fault for an accident is unclear and the evidence does not indicate negligence, or is interpreted differently by each insurer. It is typically faster and less costly than going to court.

Advantages of arbitration

Arbitration is a common form of alternative dispute resolution (ADR) in auto insurance claims. It is a less formal, private trial where a neutral third party, the arbitrator, acts as a judge and makes a legally binding decision. Here are some advantages of arbitration:

Less Formal and Less Stressful

Arbitration is less formal than a courtroom trial, making it less stressful for those involved. The rules and procedures are more relaxed, and there are no detailed rules of procedure to follow.

Faster Resolution

Arbitration can be scheduled sooner than a court date and often concludes within a couple of months, whereas personal injury lawsuits can take over a year to reach trial. The arbitration hearing itself usually lasts only a day or two, and the arbitrator's decision is typically received within a couple of weeks.

Cost-Effective

Arbitration is generally less expensive than a full-blown lawsuit or litigation. The costs are shared between the two parties, and there are no monetary limits like in small claims court.

Flexible Scheduling

You can schedule arbitration at a time that works for you, and the hearing can be held at the arbitrator's office, a courthouse, a hotel meeting room, or another neutral location.

Simplified Rules and Procedures

The rules of evidence are more relaxed in arbitration than in court, and there is no requirement for discovery, allowing for a simpler and less time-consuming process.

Confidentiality

Arbitration hearings are typically confidential, providing privacy for those involved.

Receiving Compensation Quickly

If you are awarded compensation, you will typically receive it within a week or two of the arbitrator's decision.

Requesting arbitration

When to Request Arbitration

Request arbitration if your settlement negotiations have stalled or failed. Tell the claims adjuster that you want the claim referred to arbitration. If your insurance agreement contains an arbitration clause, you may be bound by it. If it doesn't, and the insurance company refuses arbitration, your next step is to file a lawsuit.

How to Request Arbitration

If you still can't get a fair settlement from your insurance carrier, insist on arbitration. Follow up with a written request sent by certified mail, with a return receipt requested.

The insurance adjuster will likely try to talk you out of arbitration, as it will cost the insurance company more money than a routine settlement. Try to use your request for arbitration strategically to get a higher offer.

Choosing an Arbitrator

Once you've requested arbitration, you will need to choose an arbitrator. Arbitrators are usually retired judges or local attorneys certified to conduct arbitrations. You will likely have to split the arbitrator's fee with the insurance company, so be prepared for this cost.

You and the insurance company will receive a list of potential arbitrators and will need to select one or more names from the list. The association will then search for names chosen by both sides. If only one arbitrator is chosen by both parties, they will preside over the hearing.

Before making your choice, do some research. Check the arbitrators' websites and see what type of law they practice. You probably don't want to choose an arbitrator who specialises in insurance defence, but rather an active or retired personal injury attorney.

Choosing an arbitrator

• Qualifications: The arbitrator should have experience in handling auto insurance disputes and be knowledgeable about the relevant laws and regulations. They should also be certified to conduct arbitrations. Arbitrators are usually retired judges or local attorneys.
• Impartiality: It is essential to select an impartial arbitrator who can objectively review the evidence and hear both sides of the dispute. Avoid arbitrators who may have a conflict of interest or bias towards one of the parties involved.
• Specialisation: Consider the arbitrator's area of specialisation. For auto insurance disputes, it may be beneficial to choose an arbitrator with experience in personal injury law or insurance law. Avoid arbitrators who specialise in insurance defence, as they typically work for insurance companies.
• Research: Take the time to research the potential arbitrators. Review their websites, professional backgrounds, and areas of practice. This can provide valuable insights into their expertise and potential biases.
• Agreement: Both parties involved in the dispute must agree on the chosen arbitrator. This process can take time, as it requires finding a mutually acceptable individual. Be prepared for back-and-forth discussions with the other party until a consensus is reached.
• Cost: Arbitrators typically charge fees for their services, which can be significant. These fees are usually split between the two parties involved in the dispute. Consider the cost and determine how the fees will be allocated.
• Association Membership: Many arbitrators are associated with organisations such as the American Arbitration Association (AAA) or Judicial Arbitrations and Mediation Services (JAMS). These associations can provide lists of potential arbitrators and help facilitate the selection process.

Preparing for arbitration

Once you've filed for arbitration, you'll need to select an arbitrator to hear your claim. Arbitrators are often retired judges or experienced lawyers. The parties generally have to agree on an arbitrator, so it's important to research each candidate and choose one with a reputation for fairness and integrity.

After selecting an arbitrator, you will set a deadline for exchanging documents with the insurance company and a date for the arbitration hearing. Review the information provided by the insurance company to understand their argument against your claim, and be prepared to present evidence that weakens their case.

On the day of the arbitration, be prepared to:

• Make an opening statement
• Call witnesses and cross-examine them
• Present evidence that explains and supports your claim
• Handle opposition
• Make closing statements

Remember that arbitration is like a courtroom trial without all the detailed rules of procedure. It's normal to feel some stress and anxiety about the proceeding, but you can boost your confidence by being well-prepared.

• Organize your documents: Submit documents in advance of the hearing, such as medical records as proof of your injuries and pay stubs to support your claim for lost wages. Make sure to send copies to the arbitrator and the other side, and bring your copies to the hearing.
• Use visual aids: Use photos, drawings, and diagrams as exhibits to make your points.
• Organize your testimony: Think carefully about what you want to say and put your thoughts in writing before the hearing to ensure you remember everything.
• Anticipate the other side's arguments: Think about what the insurance company might argue and prepare to rebut it.
• Prepare for witnesses: If you plan to call witnesses, prepare questions for them in advance. Also, be ready to question the other side's witnesses.

Arbitration Timeline

• Days 1-60: Filing, initiating, and selecting the arbitrator
• Days 61-90: Information exchange and preparation
• Day 91-100: Arbitration hearing (may last one or more days)
• Days 101-110: Arbitrator's decision

Frequently asked questions