Car Accident Arbitration: When Does It Apply? (2025)

Types of Claims That Go to Car Insurance Arbitration

When you purchase auto insurance, the parties’ rights and duties are set out in an insurance policy contract. This policy defines the premium you pay and the benefits you receive after a covered event. It also includes other clauses, such as the process for resolving disputes between you and your insurer.

Arbitration typically happens in two situations. First, disputes over first-party claims filed by the policyholder with their insurer often go to arbitration.

Policyholders often wonder, “Why is my car accident claim going to arbitration?” This happens because car insurance policies include mandatory arbitration clauses that require policyholders to arbitrate disputes with the insurer. This restriction usually does not apply to third-party claims filed by injured people after auto accidents.

For example, if your car gets hit by another driver, you file a first-party claim under your collision coverage. The insurer’s claims adjuster determines the value of your losses and verifies that the accident falls within the scope of your policy. If your losses are covered, the adjuster offers a settlement. If they are not covered, the adjuster denies your claim.

In either case, you may disagree with the adjuster’s actions. The forum for resolving this dispute is set out in your insurance policy. Most of the time, the dispute resolution process requires binding arbitration and eliminates your right to go to court.

Second, insurance companies often resolve claim disputes between them using binding arbitration. Suppose that you live in a state that uses comparative negligence rather than contributory negligence. Under comparative negligence, each driver receives a percentage of the blame based on their share of the fault for the crash.

If your insurer pays 100% of your repair bill under your collision coverage after a crash, it can pursue reimbursement from the insurer for the at-fault driver in proportion to their blame. This process, called subrogation, often involves arbitration between auto insurance companies when they disagree about the percentage of fault.

Your insurer might pursue 100% reimbursement, but the other driver’s insurer might attribute 25% of the blame to you for the crash. If the insurers cannot resolve their differences, they may go to arbitration.

What Is Arbitration?

To understand arbitration, you must first understand litigation. What is litigation? It is the resolution of a dispute by a judge or jury. It follows the official rules of evidence and civil procedure, and it includes the right to appeal an adverse ruling or decision.

Arbitration is similar to a trial, but rather than occurring before a judge or jury, an arbitrator decides the case. Arbitrators are often attorneys, retired judges or trained arbitrators. They may also have experience specific to your issue. For example, an insurance arbitrator might have worked in the insurance industry.

Both sides present evidence and witnesses. However, arbitrations do not follow the rigid rules of evidence used in court. Thus, the proceeding might feel looser and less formal than a trial. Moreover, arbitrations can happen more quickly than trials. Once you and the other party are ready, you can schedule an arbitration with the arbitrator.

The cost of arbitration may be less than the cost of litigation. A litigation lawyer might charge more to prepare for trial than arbitration because of the rigid rules used in court. Moreover, judges hold many pre-trial hearings, while arbitrators rarely conduct pre-arbitration hearings.

On the other hand, judges are paid using tax dollars. The parties may pay filing fees and court costs but do not directly pay the judge’s salary. Arbitrators, on the other hand, charge an hourly fee. The longer the arbitration takes, the more it costs.

Arbitration Timeline and Process

Car accident arbitration works like a simplified, accelerated car accident lawsuit. Trials can drag on for over a year, but the arbitration process can usually be completed in a few months, if not sooner. While each case is unique, this is an example of a typical car accident arbitration timeline:

Days 1 to 60

Typically, the first 60 days of the process involve filing for arbitration and choosing an arbitrator. To start the process, you often need to tell your claims adjuster you want to refer your claim to arbitration. However, your attorney can guide you through the actual filing for arbitration.

Once both parties have agreed to arbitrate the case, they must choose an arbitrator. Often, they will use the American Arbitration Association or another third-party service.

Days 61 to 90

Once the arbitrator has been chosen, the parties begin exchanging information and preparing for the arbitration hearing. This is similar to the process of discovery in personal injury lawsuits.

Days 91 to 100

Next is the arbitration hearing. Depending on the complexity of your case, it may last a day or multiple days. Just like they would in a trial, both sides make arguments, present evidence and may even call witnesses.

Days 101 to 110

After arbitration has been completed, the arbitrator will typically take several days to make a decision.

What Happens After Car Accident Arbitration?

Once the parties present their evidence, the arbitrator will apply the law and issue a decision. This decision usually resolves the dispute in favor of one party or the other. If the law and facts support another outcome, the arbitrator has the authority to issue it.

For example, suppose that you filed a first-party claim with your insurer that went to arbitration. Your position was that the insurer was liable for $25,000 to pay for your damaged vehicle, and the insurer’s position was that it had zero liability. The arbitrator might rule in your favor but only award $18,000.

Binding vs. Nonbinding Arbitration

If you are unhappy with the arbitrator’s decision, what you do next depends on the type of arbitration:

• Binding: The arbitrator’s decision is final and legally enforceable.
• Non-Binding: The arbitrator’s decision is not legally enforceable.

In binding arbitration, the arbitrator’s decision is treated similarly to a court ruling. While there are very limited circumstances where you may be able to appeal, you generally may not take the case to trial or file a lawsuit if you dislike the result.

Non-binding arbitration is less common. Because the arbitrator’s decision isn’t legally enforceable, it’s treated more like a guideline. If you or the other party disagrees with the decision, either of you may pursue legal action.

When insurance companies require or agree to arbitration, it is almost always binding arbitration. Insurers don’t want to go through the time and expense of arbitration only to face a lawsuit right after.

How a Lawyer Helps in Car Accident Arbitration

Arbitration may not be as complex as litigation, but unless you’re an attorney, it can still be incredibly confusing. Having the help of an experienced lawyer doesn’t guarantee success, but it greatly increases your chances of recovering the full compensation you’re owed.

Just as they know what types of cases are likely to win in court, car accident lawyers also understand what types of arguments tend to work best before arbitrators. Your lawyer can assemble critical evidence and present a strong case on your behalf.

Contact ConsumerShield to Learn More About Car Accident Arbitration

Arbitration after a car accident often involves high stakes. ConsumerShield can educate you about arbitrations and help you find an arbitration lawyer. Contact us for a free case review and an attorney referral.