How Arbitration is Used to Resolve Car Insurance Policy Disputes

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Written by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: May 5, 2022

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When you file an auto insurance claim, your auto insurance company will not automatically grant your request. Instead, they will conduct their own research of the situation and determine how much of the claim they are obligated to pay for under your current car insurance policy. Your company may deny your auto insurance claim, or offer you a settlement lower than what you are seeking.

KEEP IN MIND: It is not uncommon for your car insurance carrier to produce a settlement lower than the one requested when you filed your claim. This disagreement about what your car insurance is worth may require a neutral party to resolve it. If that is the case, you may want to consult with a car accident attorney prior to moving forward.

In the event that you and your car insurance company cannot come to an agreement on the settlement amount owed, your car insurance policy will commonly contain a dispute resolution clause allowing either party to request an out-of-court settlement process. Appraisal or arbitration, either combined or separate, are common tools of dispute resolution found in auto insurance policies. It is important that you understand what your insurance policy says about using appraisers or arbitrators to assist dispute resolution so you can prepare for either event.

TIP: A claim dispute can also be an opportunity for you to find a more favorable insurance carrier; keep that in mind as you attempt to resolve your disagreement under your current policy, and visit the Free Advice Quote Center for competitive insurance rates from top rated insurance companies.

The Auto Insurance Arbitration Process

Arbitration is a common way to resolve disputes without trial. Parties that agree to arbitration will select an arbitrator, or panel of arbitrators, who will review the facts of the dispute and make a decision on how it will be resolved. Arbitration is more informal than a court case as arbitrators do not follow rules of procedure or evidence like a court will, and each party is allowed to fully explain all the facts of the case as they understand them before the arbitrator makes a decision.

Parties favor arbitration because it leads to quicker resolution, and is typically less expensive than going to court. An arbitrator’s decision will have legal enforcement, so the decision of an arbitrator is binding on the parties.

TIP: It is common that each party to an arbitration is represented by an attorney, so you should consult with an experienced auto insurance attorney before attending arbitration.

Car Insurance Arbitration Clause

Arbitration for car insurance issues is similar to arbitration in many other cases. The process will be driven by the terms of your insurance policy. A car insurance policy can have a formal arbitration clause, or an appraisal clause that gives the decision making power to neutral appraisers hired by each party.

In the event that multiple parties are involved, the process for arbitration may be coordinated by two or more insurance companies, along with any legal counsel.

Look through your car insurance policy to find either of the following:

  • Appraisal Clause: An appraisal clause in your car insurance plan is a type of auto insurance arbitration that will typically state that if neither party can agree on the amount an insurance company owes on a damages claim, then each party hires an appraiser to look at the claim and proposed settlement figures. Ideally, the appraisers will fairly assess the value, and come to an agreement on the amount the insurance company owes on the claim. Depending on the appraisal clause, if the two appraisers cannot agree then they will submit their findings to a third appraiser, and the three will either work out an agreement or the third appraiser will cast his or her vote with one of the other two to determine the amount of the claim.
  • Auto insurance arbitration clauses in your policy agreement allow the parties to select an arbitrator to hear both parties argue the claim amount and make a final decision. Unlike an appraisal clause in which appraisers do all the work, arbitration allows the parties to present their case to the decision maker. Either party may request arbitration as a means of resolving the dispute, and each party will pay equal amounts to fund the process. During a car insurance arbitration hearing, you will be able to demonstrate the cost of the damages to your car, and why your insurance company owes what you allege they do. Your insurance company will respond, and the arbitrator(s) will make a decision that binds the parties and resolves the dispute.

Whether you are resolving a dispute over an auto insurance claim under an appraisal clause or an arbitration clause, you will need to seek out and hire an appraiser to evaluate your damages, and provide any accident or witness reports to support your claim.

KEEP IN MIND: Although not a court process, car insurance arbitration does involve a contractual provision in your insurance policy that must be followed, and a method of dispute resolution that you are probably unfamiliar with, so consult an experienced attorney for assistance.

Using an Attorney for Auto Insurance Arbitration

Most attorneys will offer a free consultation, so you are able to sit down and have a conversation about your auto insurance claim without committing any money towards the attorney. If you are facing car insurance arbitration to resolve a claims dispute, you will want to speak with an auto insurance attorney and find out the steps you need to take to succeed in your arbitration.

An attorney can also help you understand your car insurance policy and identify what your appraisal or arbitration options are. If you find that you are unsatisfied with your car insurance provider’s auto insurance arbitration clause, then you have an opportunity to shop around for a better alternative.

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