Mandatory Arbitration Clause

Mandatory Arbitration Clauses can keep you out of court!

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 outlined in the policy what arbitrator panel they prefer (i.e. American Arbitration Association).

The rules to follow in the dispute are given by the association. They determine how rules are 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 your own legal counsel if any), unless you disagree with the arbitration panel.

If this is the case, you need to write to your insurance company a letter requesting an arbitration panel since you do not agree with that panel.

Once the insurance company receives the letter, then the insurance company will select an arbitrator, you will select another arbitrator (paid by you).

Those two arbitrators will try to settle among them. If they cannot, they 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.

Click below for an explanation insurance coverages and terms:

Coverages and Terms Overview

Automobile Liability Insurance or Liability Page 1
Automobile Liability Insurance or Liability Page 2

Automobile Medical Payments or Personal Injury Protection (PIP) Page 1
Automobile Medical Payments or Personal Injury Protection (PIP) Page 2

Collision Coverage (Protection Against Loss to the Auto) Page 1
Collision Coverage (Protection Against Loss to the Auto) Page 2

Comprehensive Coverage (Protection Against Loss to the Auto) Page 1
Comprehensive Coverage (Protection Against Loss to the Auto) Page 2

Under or Uninsured Motorist Property Damage (UMPD) Page 1
Under or Uninsured Motorist Property Damage (UMPD) Page 2

Under or Uninsured Motorist Bodily Injury (UMBI)

Rental Reimbursement or Loss of Use Coverage Page 1
Rental Reimbursement or Loss of Use Coverage Page 2

Restoration Coverage

Towing and/or Road Assistance Coverage (Emergency Packages)

Insurance Clauses and Terms

Actual Cash Value or ACV
Additional Insurance Clause
Cancellation of Coverage Clause
Choice of Law Clause
Forum Selection Clause

Duty to Cooperate Clause
Duty to Report Losses Clause
Financial Responsibility Clause
Insurable Interest Concept
Interpretation of the Policy Concept

Mandatory Arbitration Clause
Mitigation of Damages Clause
Non Duplication of Benefits Clause
Proof of Loss Clause
Promissory Estoppel Concept

Reservation of Rights Concept
Reasonable and Necessary Clause
Right of Appraisal Clause
Right of Settlement Clause
Rights of Counsel Concept

Subrogation of Rights Clause Part I
Subrogation of Rights Clause Part II
Statute of Limitations Concept
Replacement Cost Value
Restoration Coverage
Transfer of Benefits Clause