Mandatory Arbitration Clauses can keep you out of court!

Mandatory Arbitration Clauses can keep you out of court! Can this clause be defeated or disputed?

Mandatory Arbitration clauses provide the rules for disputes between you and your insurance company. They limit your ability to go to court and present a lawsuit against the carrier directly. I say limit because even if the language reads that arbitration is mandatory, you can still defeat this clause.

Mandatory Arbitration is a panel of independent claim adjusters and insurance professionals that will look over your claim and determine if the offer for your damages is fair.

There are several panels within the United States dedicated to arbitrate claims. It is very likely that the insurance carrier has already put in the policy what arbitrator panel they prefer (i.e. American Arbitration Association). The rules of the given association will be the rules applied to your case (date to present your case, requirements for arguments, forms you need to file, etc).

The insurance company will pay the cost of arbitration (except for you own legal counsel if any), unless you disagree with the arbitration panel. If this is the case, you need to write your insurance company a letter requesting for arbitration since there cannot be agreement, in that letter you can express your disagreement with the arbitration panel. If this is the case, then your insurance company will select an arbitrator, you will select another arbitrator (paid by you).

Those two arbitrators will select a third arbitrator (which will be paid by both parties) to finally hear your case. You will also be responsible for your own legal fees.

Remember that if you go to arbitration, you will lose all rights of appeal (in most cases anyway). The arbitration decision is final. Pay attention to your arbitration hearings and make sure you keep on top of the arbitration panel.

Mandatory Arbitration clauses can be defeated when the carrier is acting in bad faith. If you can prove that there is bad faith (difficult to do), then the insurance company will have to answer to a judge.

They can also be defeated if the clause does not say that the arbitration award is final. If you go to arbitration and lose, and the policy does not say it is final, then you can appeal to a court of law. You do have to go to arbitration first.

Mandatory Arbitration can be combined with a Choice of Law clause. This could be devastating to your case! learn more on Choice of Law Clauses.