Resolving Car Insurance Disputes: The Guide to Successful Insurance Arbitration

Arbitration could be your best go-to in resolving your car insurance dispute. It’s faster and costs less than litigation. But where do you start and how do you proceed with it? Read on to learn all about car insurance arbitration.

In the event of a car accident that your company refuses to settle, you basically have two effective options to follow: Litigation or Arbitration.

Taking your car insurance dispute to the courtrooms can be an exhausting experience. It can take up to one year to resolve, if not longer. Moreover, you have the litigation fees, the lawyer’s fee, and other expenses to pay. Together, these expenses might easily take out 50% of the money you recover, if successful.

Arbitration keeps your dispute outside the court and has been proven to cost less money and time compared to the previous option.  

According to Ed Anderson from National Arbitration Forum, “Arbitration can save parties 70-80% of the cost of litigating these cases.”

In arbitration, the dispute is usually solved within 90 days, and the cost of such procedure is inexpensive and usually includes,

“an administrative fee of $150 per party for appointment of a neutral and scheduling of an arbitration hearing or a mediation conference, plus a suggested compensation fee of $300 per day for the neutral arbitrator or mediator, to be paid equally by the parties ($150 per party). The exact compensation rate for the neutral will be agreed by the parties in each case, with the assistance of the AAA.”

(American Arbitration Association, 1989)

You may refer to our car accidents insurances Dos and Donts. For self-driving cars, refer to Everything Tesla: Right to Repair, Car Insurance, and Accident Disputes

What Is Arbitration

Arbitration is a time and cost-effective alternative dispute resolution with which you can settle a disagreement or a dispute outside of courtrooms.

Arbitration brings in a neutral and unbiased third party that can be either an individual or a panel with the purpose of reaching a fair resolution based on the facts that each side provides.

This decision-making third party is called the arbitrator and the decision they issue is known as the award.

The outcome of arbitration, or the award, can be either binding, cannot be appealed or overturned by the court for any reason, and under no circumstance, or nonbinding where you can either walk away with nothing or file a lawsuit.

This is something you should discuss with your insurer before signing an insurance contract or before initiating arbitration. In the case of a car insurance dispute, you should opt for binding arbitration.

Otherwise, the opposing party can easily overturn the award issued by the arbitrator or file an appeal. To learn more about arbitration, read our articles on online and offline arbitration, binding arbitration, arbitration agreement, and the impact of Coronavirus on arbitration.

The Process of Arbitration in Car Insurance Disputes: How Does It Work?

When you suffer a car accident, you expect your, or the at-fault driver’s, insurance company to pay a fair amount of money in compensation for your damages. However, sometimes, this may not be the case and a dispute will arise. Things might even escalate more if the car was defective, therefore, educate yourself more about Lemon Law to take an informed decision at the right time.

In this case, you and the insurer can choose to solve this disagreement through arbitration. This can be mentioned in the insurance contract or requested by either party.

Here’s the step-by-step process:

1- Filing:

The arbitration process officially begins when one party of the dispute files a Statement of Claim via a credible dispute resolution service such as the AAA in the United States. This process can be undertaken online, via the service’s website or email, or offline by email or their local office.

If the insurance contract includes an arbitration clause referring to AAA or ICDRP, the parties should provide this as part of their arbitration initiation process. The clause is usually located

If no such contract or clause is available, a party can initiate the process by approaching the AAA and filling in a Submission Agreement (SA), and the AAA, in turn, will contact the other involved party to obtain their agreement. Likewise, you can contact the other party and fill in a joint SA.

The SA can be found on the AAA’s website.

This SA must include:

• Signatures of the party/parties or their representatives
• names, addresses, and telephone numbers of all parties to the case, along with the insurance-company file or claim number and any court docket number;
• The dispute resolution procedure selected by the parties (in this case it would be arbitration)
• The nature and the amount of the claim (a brief description of the claim and the response of the insurer);
• Limitations, if any, on the neutral’s authority;
• The preferred place of hearing (any AAA regional office or another appropriate location); and
• An administrative fee of $150 per party.

2- Selection and Appointment of the Neutral:

The AAA, or the relevant ADR provider, will appoint an arbitrator based on the area of the dispute, which is car insurance.

The arbitrator is either an attorney or a retired judge who has no financial or personal interest in the controversy’s outcome.

The arbitrator fees are paid prior to the hearing, and they are to be determined by the AAA and the arbitrator himself.

As such, the arbitrator must meet a set of qualifications,

“Prior to accepting appointment, a person being considered for such appointment shall disclose any circumstance likely to prevent a prompt hearing or to create a presumption of bias. Upon receipt of such information, the AAA will either replace that person or communicate the information to the parties for comments. After reviewing any comments received from the parties, the AAA may disqualify that person.”

The AAA and other ADR providers allow more than one arbitrator to hear and decide the case with different options of use. In this case, you and your insurer will each appoint an arbitrator and the AAA will appoint a third who will function as the chairperson.

While the use of more than one arbitrator can enormously increase your expenses, it is advised as a way of making arbitration work for you more efficiently and safely.

Unless the agreement states otherwise, the arbitrator will set the date, time, and place of the arbitration hearing. The AAA will notify the parties at least 10 days before the hearing date.

3- Exchange of Information

Under the arbitrator’s authority, the involved parties can produce documents and identify any witnesses to be called in the hearing. The parties are required to exchange copies of all the documents and information they intend to exhibit at the hearing.

Should a dispute arise concerning or during the information exchange, the arbitrator is authorized to intervene and resolve it.

4- The Arbitration Hearing

The arbitration hearing is usually completed within a day. Parties, representatives, and any person who has an interest in the hearing can attend. The arbitrator directs and conducts the hearing in a fair manner to both parties, and it usually goes as follows, unless stated otherwise:

1. The claimant presents the supporting evidence of his claim.
2. The respondent presents his evidence of his defense.
3. Each party’s witnesses will answer the adverse party’s and the arbitrator’s questions.
4. The arbitrator will decide the relevance of the evidence provided and the materiality of it.
5. The arbitrator then inquires if the parties have anything to add, evidence or testimony.  When everything is concluded, the arbitrator announces the closing of the arbitration hearing.
6. The time limit within which the award will be made is either stated in the insurance contract or agreed upon during the arbitration. This time limit, no more than 30 days, starts immediately after the hearing’s closure.

For a valid and a good cause, the hearing can be postponed by any party, including the arbitrator. The requesting party will be charged a postponement fee of $100.

If a party believes that a rule or a requirement has not been respected or complied with has the right to object.

5- The Award

The award will be written and signed by the arbitrator in compliance with the law. It should include the following:

• The remedy or relief the arbitrator sees appropriate and from such date.
• The attorney’s fees, if authorized by law or requested by the parties.
• Other than the final award, the arbitrator can add decisions such assessment of fees, expenses, and compensations.

In the event of a settlement award, when the parties settle their dispute during the arbitration process, the arbitrator will set the terms of the settlement in what is known as a “consent award”.  Similar to the arbitrator’s award, the consent award must include the fees of arbitration and the arbitrator.

The award, or a true copy of the award, will be placed in each party’s mail. It may also be delivered in any manner that is authorized by law.

This guide summarizes the steps of insurance arbitration. For more details on your rights and duties in an insurance arbitration, check the AAA’s guide, Insurance Claims Dispute Resolution Procedures.

Enhancing Your Insurance Arbitration Experience

The contract you sign with your insurer is crucial to the arbitration experience. The contract must include an arbitration clause where details on the arbitrator and his qualifications are clearly stated.

Furthermore, having agreed to arbitrate any disputes in advance and before a dispute arises, known as pre-dispute arbitration, your costs can be much lower than a post-dispute agreement.

Any other details you consider important such as time limits, fees, and compensation should be discussed or included in the contract.

The importance of the arbitrator cannot be overstated, thus, in the arbitrator appointment phase, make sure you do your research on his background.

When determining the value of your claim, you should consider:

• The present expenses resulting from the accident such as your car’s value loss and repair costs
• Hospital bills
• The lost income or ability to produce income, and
• Your pain and suffering

How to estimate your insurance claims?

Your car’s value loss is the difference between your car’s market value before the accident and its current value after the accident.

Conversely, your pain and suffering are not easily determined as it’s not tangible. To calculate this, you can use the “Per Diem” method where you are compensated a said amount of money for every day or week you suffer from your injuries after the accident.

To calculate the total claim’s value, lawyers and insurers usually multiply the total of your damages (value loss, maintenance, income loss, and hospital bill) by a figure between 1.5 and 6. The generated amount will cover your pain and suffering.

It is important to know that the severity of your damages determines this multiplier. If your negligence or behavior was a leading factor in the accident, this decreases the multiplier too.

In a nutshell, the insurer will always attempt to minimize your damages and pay the minimum possible. Therefore, the stronger your evidence is, the better the money you will recover.

Conclusion

When you go through a dispute with your car insurance company or the at-fault driver’s, you should consider your options carefully. Depending on the circumstances of the incident, you should be able to decide whether to take whatever the insurer is offering, bring your case to court, or arbitrate it.

Overall, arbitration will cost you anything between $750 to $3,500 depending on the number of arbitrators and the whole process, which is 70-80% less than litigation costs. With this procedure, you are able to recover your money within 90 days.