Arbitration of Car Accident Claims

Find out how arbitration works and the benefits and downsides of using it to resolve your car accident claim.

By , J.D. ● University of San Francisco School of Law
Updated by Stacy Barrett , Attorney ● UC Law San Francisco
Updated 3/08/2023

If you've been involved in a car accident, your car insurance claim could end in arbitration—by choice or because your insurance policy demands it. Arbitration is a common form of alternative dispute resolution (ADR).

Car accident arbitration involves a hearing where you and the insurance company present information about your claim to a neutral person, called an "arbitrator." The arbitrator hears the case and decides the outcome. An arbitrator's findings are typically legally binding and final (you can't appeal them). Some people prefer arbitration hearings because they are less formal, faster, and cheaper than courtroom trials.

This article will help you prepare for arbitration. You'll learn how arbitration works and what you can expect at the hearing.

What Is Car Accident Arbitration?

Getting in a car accident can be overwhelming. All of a sudden you've got unexpected bills to pay and you might be recovering from minor or serious car accident injuries.

If you're lucky, the insurance claim process will go smoothly. You'll submit a claim to your own insurer (first-party claim) or the at-fault driver's insurer (third-party claim) and you'll get a large enough settlement to cover your accident-related losses. But what if the insurance claim process doesn't go smoothly?

When your car accident claim is in dispute, arbitration is a potential legal option. Arbitration is a method of resolving legal disputes without having to file a car accident lawsuit.

Who Can Arbitrate Car Accident Claims?

Arbitration can be voluntary or mandatory. Many businesses, including insurance companies, include mandatory arbitration clauses in their contracts with customers that require them to go to arbitrate disputes instead of going to court. Car insurance companies often require customers to agree to arbitrate first-party claims. Examples of first-party claims include claims filed under:

Insurance companies prefer arbitration because it tends to be faster, cheaper, and more predictable than a jury trial.

When settlement talks with your insurer stall or fail, check your policy for a mandatory arbitration clause. If your policy has an arbitration clause, you can't sue or threaten to sue. You have to submit your claim to arbitration.

Arbitration Agreements

Whether arbitration is voluntary or mandatory, the parties should agree in advance on how the arbitration will work. Here are some questions a voluntary arbitration agreement or mandatory arbitration clause should answer.

Who Will Pick the Arbitrator?

Many arbitration agreements require that disputes be arbitrated through an arbitration group or associations, like the American Arbitration Association (AAA) or Judicial Arbitrations and Mediation Services (JAMS). If an arbitration association is involved, you and the insurance company will get a list of potential arbitrators. Most arbitrators are local lawyers or retired judges. Each side will get a chance to choose one or more names from the list of potential arbitrators. The association will then look for names accepted by both sides.

Another potential option is to find an independent arbitrator. Many county and state bar associations have arbitration programs that can connect you with independent arbitrators.

Before you choose an arbitrator, do some research. Arbitrators usually have websites. You'll want an arbitrator who understands car accident claims and isn't biased toward insurance companies.

Will the Arbitration be Binding or Nonbinding?

Arbitration can be binding or nonbinding. When arbitration is binding, the arbitrator's decision is final and the parties have no right to appeal. Nonbinding arbitration requires both parties to agree to accept the arbitrator's decisions or either party can reject it and file a lawsuit.

Most mandatory arbitration clauses, including the ones buried in the fine print of auto insurance policies, require binding arbitration.

What Rules Apply?

Formal rules of evidence don't apply in arbitration proceedings. You'll likely be able to submit documents like medical bills and treatment records in arbitration without having to call witnesses to "authenticate" the records like you would in court. Most people appreciate the relaxed rules at arbitration hearings, especially people who choose to represent themselves without the help of a lawyer.

Unlike in court, you have no automatic right to discovery in arbitration. You and the other party will have to agree on what information to exchange and how to exchange it. At a minimum, most parties agree to let each other know in advance the witnesses they plan to call and the documents they will present at the hearing

Who Will Pay for Arbitration?

Arbitration hearings may be cheaper than drawn-out courtroom battles, but the cost is still significant. You'll need to sort out who is going to pay for what costs in advance.

Potential arbitration costs include:

  • filing fees
  • hearing fees
  • administrative fees and expenses
  • hearing room rental
  • arbitrator fees
  • arbitrator expenses (like travel and meal costs), and
  • discovery costs.

Will There Be a "High-Low" Agreement?

In "high-low" arbitration, the parties specify that the award will be no higher or lower than certain amounts. The parties don't tell the arbitrator about the high-low agreement. If the arbitrator's award is outside of the agreed-upon range, it will be increased or lowered. For example, if you agree to a "low" of $5,000 and a "high" of $15,000, a $2,000 award would be increased to $5,000. On the flip side, a $25,000 award would be reduced to $15,000. If the arbitrator's award was $10,000, the award would remain at $10,000 because it's within the high-low range.

High-low arbitration is appealing to both sides because it takes some of the uncertainty out of the car accident claim process. A high-low means that no matter what the arbitrator decides, you will not recover more than the "high" or less than the "low" figures.

Pros and Cons of Car Accident Arbitration

Arbitration is an increasingly popular way to resolve legal disputes. Many businesses, car insurance companies, and even health care plans have started including mandatory arbitration clauses in their contracts.

Advocates for arbitration suggest that it helps resolve disputes faster and cheaper than going to court. Critics argue that the up-front costs of arbitration are actually higher than going to court. They also question the objectivity of arbitrators and wonder whether arbitrators may be more inclined to favor the large companies—like car insurers—that bring them a steady stream of business over individuals.

Other potential pros of arbitration include:

  • a less hostile environment than a courtroom
  • flexible scheduling, and
  • simplified rules and procedures.

Arbitration hearings are typically confidential. Court reporters are not required and the arbitrator's decision may not be made public. Depending on the nature of your case, you may think the privacy that arbitration affords is a benefit or drawback of arbitration.

Learn more about the pros and cons of arbitration.

How to Request Car Accident Arbitration

If you're car accident settlement negotiations have stalled or failed, it might be time to ask for arbitration. The insurance adjuster will likely try to talk you out of it. Going to arbitration will cost the insurance company more money than a routine settlement. Try to use your request for arbitration strategically to get a higher offer. If you still can't get a fair settlement, send a written request for arbitration by certified mail with a return receipt requested.

If you need help deciding whether to pursue arbitration or a car accident lawsuit, talk to a lawyer. A lawyer can help you figure out if you're bound by a mandatory arbitration clause and whether arbitration makes sense for your case.

Do I Need a Lawyer for Car Accident Arbitration?

You aren't required to have a lawyer represent you at an arbitration hearing. You may feel more comfortable representing yourself at an arbitration hearing than you would in court because the rules and procedures are more relaxed.

But if your accident was serious and you have a significant amount of money at stake, you should hire a lawyer to help you. The insurance company will no doubt be represented by a lawyer. You should be too. If the arbitrator's decision is binding, you'll only have one chance to get the best outcome possible in your case.

How to Prepare for Car Accident Arbitration

It's your job to convince the arbitrator that someone else is legally responsible for your accident-related losses (called "damages"). You'll need to be prepared.

Organize your documents. You'll typically need to submit documents in advance of the hearing. For example, you'll want to submit medical records as proof of your injuries and pay stubs to support your claim for lost wages. Make sure you send copies to the arbitrator and the other side. Make copies for yourself too and bring your copies to the hearing.

Pictures are worth a thousand words. Use photos, drawings, and diagrams as exhibits to make your points. You may have taken your own car accident scene photos or you might find some helpful photos and diagrams in the police report.

Organize your testimony. You will have a chance to tell your side of the story. Think carefully about what you want to say. You might even want to put your thoughts in writing before the hearing to make sure you remember everything you want to tell the arbitrator.

Anticipate the other side's arguments. Think about what the insurance company might argue and prepare to rebut it. Do you expect the insurance company to argue that you share fault for the accident? Will the insurer try to deny you compensation because you didn't get the "right" medical treatment? Use what you learned during negotiations to push back against their defenses.

Prepare for witnesses. If you plan to call witnesses, think about what you want to ask them. Write down your questions so you don't forget anything important. You'll want to prepare to question the other side's witnesses too. Be respectful of all witnesses.

You will be most persuasive when you are prepared and sincere. Don't exaggerate. Stick up for your point of view, but stay in control. Argue the facts only.

Here's What Will Happen at the Arbitration Hearing

Arbitration hearings are less formal than court hearings, but they tend to have a similar structure.

Opening Statements

You'll introduce yourself, tell the arbitrator what you think the evidence will show, and say what you want the arbitrator to do. The other side will have a chance to make an opening statement too.

Case Presentations

Next, you'll put on your evidence. Usually, you'll testify first. You should stick to the facts in your testimony. Don't speculate about things you don't know. If your dispute is with another driver's insurance company, you'll need to show that the other driver was at fault for the car accident. You'll also have to detail your injuries and losses, including vehicle damage, medical bills, lost wages, and pain and suffering. You'll have a chance to call other witnesses too, including eyewitnesses to the crash, and family members who can explain how your injuries have affected you.

The insurance company will then have a chance to present evidence. For example, the company may call the driver who collided with you to testify that the accident was actually your fault.

Both sides can present witnesses and documents. You and the insurance company's lawyer will take turns questioning each witness. The arbitrator may ask the witnesses questions too.

Closings Statements

At the end of the hearing, both sides will have a chance to summarize what the evidence showed and explain why the arbitrator should decide the case in their favor.

You won't get a decision (called an "award") on the day of the hearing. The award will be mailed to you after the arbitrator has made a final decision.

The Final Decision

You will receive the arbitrator's decision in writing, usually within 14 to 30 days after the hearing. Most parties voluntarily follow the arbitrator's decision. If the other side doesn't do what the award says, the winning party may go to court to confirm and enforce the arbitration award.

You have no right to appeal an arbitration award like you would a court verdict. If your arbitration is binding, the arbitrator's award is final and can typically be vacated only when there is evidence of fraud, corruption, or misconduct on the part of the arbitrator.

If your arbitration is nonbinding, you have the right to appeal the arbitrator's decision or otherwise continue the litigation process.

Next Steps

If you've been in a car accident, it's hard to know whether arbitration is the right choice for your situation. A lawyer can answer your questions and help you figure out whether a mandatory arbitration clause applies to your situation.

If arbitration is your only option, a lawyer can help you prepare for the hearing and represent you at the hearing. Most car accident lawyers offer free consultations and handle cases on a contingency fee basis, which means you'll only have to pay the lawyer a fee if you win a settlement or arbitration award.

Learn more about how contingency fee agreements work and how an attorney can help with your car accident claim. When you're ready, you can connect with a lawyer directly from this page for free.

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