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Binding Arbitration

When the Decision is Final

Arbitration decisions cannot be appealed and must be honored by the insurance company. However, arbitration is a “private” way of administering justice.


What I mean by this is that there are still ways to get around arbitration awards and disputes. They are not very common (maybe because people call it good when the arbitration award comes), but they do happen.

Arbitration binds the parties and this is where it gets confusing. Who are the parties? If you are represented by an insurance company, then the insurance company is the party and not you.

There is a lot of dispute about this. But if two insurance companies go to arbitration, you personally can go after the person that hit you in small claims court (since you were not the party that went to arbitration).

I have seen this situation happen, where the arbitration award is 100% for one insurance company, but the judgment of the court is 100% for the other side. The crazy thing is that an insurance company must honor BOTH.

They are under a contract with another insurance company to honor the arbitration panel’s decision, but they are also bound by the auto policy which reads:

we will pay anything that you are legally required to pay because of an auto accident.


Some judges will ask if the case is in mediation and/or arbitration and will not want to hear your case until those cases are decided on.

However, some judges will be persuaded if you argue (I am talking about small claims court judges) that the insurance companies are dragging their feet and you need a faster recovery. This can lead to inconsistent awards, but it happens.

The arbitration award is binding over the parties that argue the claim.

That is either a dispute between insurance company v. insurance company, or YOU v. your insurance company (in this case you would be bound and cannot go to court).

You can wait and see if you agree with the arbitration award and if not, decide to try and recover in court.

This is not to say that this is an easy route (read the small claims court section). But it is a way to move around a road block to get your damages paid for.


Some insurance adjusters (not all) are very “set” on how they address fault and liability concerns.

They “assume” that because things are done one way, they cannot be done any another way; or because they come to one conclusion, this is the only possible correct conclusion to a problem or accident.

Judges tend to see both sides of the arguments and try to do what is fair, not what serves one insurance company’s interest better than the other.

Taking your case to a small claims court because you did not like the arbitration award is possible, but you might lose both or might lose even more than you got in the arbitration panel (i.e. 10% award of damages).


This has substantial risks. For that you want to weigh the possible results and consult with a lawyer. Usually going to small claims court will take a whole morning or afternoon, and about $100 in court costs.

Sometimes it is worth it to get your side actually heard. Sometimes this is too much hassle and it is better to take the decision of the arbitration panel and move on. It depends on your specific situation.

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