Becoming An Insurance Arbitrator: A Step-By-Step Guide

Insurance arbitration is a process that brings in a neutral third party to settle a dispute between two parties. This third party, known as an arbitrator, is responsible for making an appropriate decision based on the specifics of a claim or case. Arbitrators are typically retired judges or lawyers with specialised expertise, and they can work independently or as part of a group. While the process of becoming an arbitrator may vary depending on location and industry, there are some general steps that aspiring insurance arbitrators can take to increase their chances of success.

Gaining the necessary qualifications and experience

Education and Legal Knowledge

Firstly, a strong educational background in law is essential. Aspiring insurance arbitrators should aim to obtain a bachelor's degree in law or a related field, such as dispute resolution or arbitration. This academic foundation will provide a solid understanding of legal principles, dispute resolution techniques, and the insurance industry.

Professional Experience

In addition to academic qualifications, gaining practical experience in the legal field is crucial. Consider pursuing internships or clerkships with law firms, insurance companies, or arbitration organisations during your studies. This will allow you to apply your knowledge in a real-world context and develop valuable skills in research, analysis, and decision-making.

Understanding Insurance Policies and Disputes

Familiarise yourself with the intricacies of insurance policies and the types of disputes that commonly arise. Develop a comprehensive understanding of insurance law, including the rights and obligations of policyholders and insurers. This knowledge will enable you to interpret complex insurance policies, identify areas of contention, and make informed decisions during the arbitration process.

Impartiality and Ethical Guidelines

Ethical conduct is paramount for insurance arbitrators. Ensure you understand and adhere to the ethical guidelines and standards set forth by relevant arbitration institutions and regulatory bodies. Maintain impartiality and objectivity throughout the arbitration process, treating all parties involved with fairness and respect.

Communication and Interpersonal Skills

Strong communication and interpersonal skills are essential for effective arbitration. Develop your ability to actively listen, facilitate discussions, and mediate between disputing parties. Practice clear and concise writing skills, as arbitrators are often required to produce detailed reports and written decisions.

Industry-Specific Training

Consider enrolling in industry-specific training programs or certifications offered by arbitration associations. These programs can provide specialised knowledge and skills in insurance arbitration, including case management, evidence evaluation, and award determination.

Networking and Mentorship

Build a strong professional network within the insurance and arbitration industries. Attend industry events, join relevant organisations, and seek out mentorship opportunities with established arbitrators. These connections can provide valuable insights, support, and potential career opportunities.

Stay Informed on Industry Developments

The insurance industry and alternative dispute resolution field are constantly evolving. Stay abreast of legal developments, industry trends, and changes in regulations and standards. This includes keeping up with case law, legislative updates, and emerging best practices in insurance arbitration.

By following these steps and gaining the necessary qualifications and experience, you can effectively position yourself for a career as an insurance arbitrator, ensuring you have the knowledge, skills, and ethical framework to excel in this role.

Understanding the pros and cons of arbitration

Arbitration is a common form of alternative dispute resolution (ADR) that is often chosen or mandated when two parties want to settle a claim outside of the courtroom. It involves a hearing where both parties present information about their claim to a neutral third party, called an "arbitrator", who then decides the outcome. The arbitrator's findings are typically legally binding and final, although non-binding arbitration is also an option.

Pros of Arbitration

• Reduced hostility: Arbitration encourages both parties to help with the decision-making process, with the arbitrator acting as a mediator to guide them to a resolution.
• Speed: Arbitration is usually quicker than litigation, which can be drawn out and last for years.
• Cost: Arbitration is typically cheaper than litigation because of the significant time reduction and the fact that legal teams are paid hourly.
• Flexibility: Arbitrators have more flexibility than judges to decide what type of evidence they deem relevant and appropriate to the case, which can lead to fairer "rulings".
• Privacy: Arbitration proceedings are usually private and not publicized, safeguarding both parties from embarrassment or unwanted disclosure of information.
• Specialized expertise: Arbitrators are often retired judges or lawyers with specialized expertise in the subject matter of the dispute.
• Simplicity: Arbitration is a streamlined process that is less formal and has more simplified rules and procedures than courtroom trials.

Cons of Arbitration

• Waiver of rights: Binding arbitration involves waiving the constitutional right to a jury trial, which can put a policyholder at risk of a biased judgment.
• Secrecy: The privacy of arbitration proceedings can shield abusive business practices from scrutiny, as there is no public record of repetitive, bad faith tactics used by insurance companies.
• Lack of fairness: Arbitrators are selected by the parties, and there may be a financial incentive for them to side with an insurance company due to the possibility of repeat future assignments.
• Limited discovery: The streamlined nature of arbitration can be a disadvantage if a lengthy discovery process would be beneficial to the case.
• Finality: Arbitration awards are typically final, with no ability to appeal the arbitrator's decision.
• Limited recovery: Arbitration clauses often limit the types of recovery allowed in litigation, such as exemplary and punitive damages as well as recovery of attorneys' fees.
• Cost of arbitrators: In arbitration, the parties must share the costs of the arbitration panel, which can be very high and may be unaffordable for some policyholders.

Knowing the different types of arbitration

Arbitration is a form of alternative dispute resolution (ADR). It is an out-of-court method for resolving a dispute between two parties, with a neutral third party, the arbitrator, making a decision about the case. There are several types of arbitration, each with its own unique characteristics and implications.

Non-Binding Arbitration

Non-binding arbitration is a more casual and flexible process used to minimize court costs and delays. It is often chosen for petty disputes as it allows either party to take their case to court if they are dissatisfied with the arbitrator's decision. This type of arbitration typically involves a panel of three arbitrators, with each opposing party choosing one arbitrator each, and those two arbitrators choosing a third.

Binding Arbitration

In binding arbitration, both parties agree by contract that the matter will be resolved by an arbitrator and that the decision will be final and cannot be appealed. This type of arbitration is often used to solve a claim between a policyholder and an insurance company and can be included in auto insurance policies, workers' compensation insurance, and general liability insurance.

Mandatory Arbitration

Mandatory arbitration is specified in a contract, stating that arbitration must be used to resolve a dispute. This means that arbitration is the only means to resolve a disputed claim, and litigation cannot be pursued.

Voluntary Arbitration

Voluntary arbitration, on the other hand, is when a contract states that the parties can opt into arbitration if they wish to settle a dispute outside of court. This gives the parties the option to choose arbitration after a dispute has arisen and allows them to compare different dispute resolution methods.

Pre-Dispute Arbitration

Pre-dispute arbitration clauses are often included in employment contracts and require workers to agree to arbitrate disputes before they can begin a job. These clauses pose a threat to consumers and workers as they can give companies an unfair advantage in fighting lawsuits.

WIPO Arbitration

WIPO Arbitration is a specific type of arbitration conducted under the World Intellectual Property Organization (WIPO) Rules. It is often used for disputes involving intellectual property, patents, trademarks, and licensing agreements. WIPO Arbitration can be expedited to resolve disputes quickly and efficiently.

How to select an arbitrator

The selection of an arbitrator is a crucial step in the insurance arbitration process. Here are some detailed guidelines on how to choose an arbitrator:

• Independence and Impartiality: The arbitrator must be an independent and impartial individual with no affiliation or bias towards either the insurance company or the policyholder. It is essential to ensure that the arbitrator is unbiased and can make a fair decision based on the facts of the case.
• Qualifications and Expertise: Arbitrators are typically retired judges or experienced lawyers with specialised knowledge in insurance claims. When selecting an arbitrator, consider their qualifications, expertise, and industry experience. Some policies may require the arbitrator to have held a senior-level position in insurance claims or underwriting.
• Agreement Between Parties: Both the insurance company and the policyholder must agree on the choice of arbitrator. Each party typically selects an arbitrator, and then the chosen arbitrators select a third, neutral arbitrator. This process ensures that both sides have a say in the selection and promotes confidence in the arbitrator's impartiality.
• Arbitration Groups: If the parties cannot agree on an arbitrator, they can seek recommendations from arbitration groups such as the American Arbitration Association (AAA). These groups provide lists of qualified and experienced arbitrators who are familiar with the arbitration process and can handle insurance-related disputes fairly and efficiently.
• Research and Due Diligence: Once you have a list of potential arbitrators, conduct thorough research on their background, experience, and track record. Review their qualifications, areas of expertise, and any specialised knowledge they may have that is relevant to your specific case. Due diligence will help you make an informed decision and select the most suitable arbitrator.
• State Laws and Policy Terms: Keep in mind any limitations or requirements specified in your insurance policy or state laws regarding the selection of an arbitrator. These factors may restrict your options or outline specific criteria that the arbitrator must meet.

Remember, the selection of an arbitrator is a critical step in ensuring a fair and impartial resolution to your insurance dispute. Take the time to review your options, conduct research, and make an informed decision that aligns with the requirements of your specific case.

The role of the American Arbitration Association

The American Arbitration Association (AAA) is a non-profit organisation that focuses on alternative dispute resolution. It provides services to individuals and organisations that wish to resolve conflicts outside of court. The AAA does not arbitrate disputes itself, but it does administer mediation and provides administrative support to arbitrations. This includes assisting in the appointment of mediators and arbitrators, setting hearings, and providing information on dispute resolution options.

The AAA was founded in 1926 by the merger of the Arbitration Society of America and the Arbitration Foundation. It is headquartered in the Equitable Building in New York City and has offices throughout the US. The AAA also administers the International Centre for Dispute Resolution (ICDR), which was established in 1996 and overseas international arbitration proceedings initiated under AAA rules. The ICDR has offices in New York City, Mexico City, Singapore, and Bahrain.

Many contracts include an arbitration clause naming the AAA as the organisation that will administer arbitration between the parties. The AAA may appoint an arbitrator in some circumstances, for example, if the parties cannot agree on an arbitrator or if a party fails to exercise its right to appoint one.

In addition to its dispute resolution services, the AAA also offers education, training, and publications for those seeking a broader or deeper understanding of alternative dispute resolution. The AAA also designs and develops alternative dispute resolution (ADR) systems for corporations, unions, government agencies, law firms, and the courts.

The AAA plays a crucial role in the insurance arbitration process. When a disagreement arises over an insurance claim, arbitration is often used to resolve the conflict without going through litigation. In some cases, commercial policies require mandatory arbitration as the only means of resolving disputes. The AAA can recommend an arbitrator for insurance disputes, and the parties involved will need to agree to pursue arbitration for the process to begin, unless it is already mandated in the policy.

The AAA's goal is to facilitate a fair and impartial dispute resolution process, providing administrative support and expertise to help move cases through arbitration or mediation to completion.

Frequently asked questions