How Does Arbitration Work in a Car Crash Claim?
Posted on behalf of Goldberg Finnegan, LLC on Mar 10, 2022 in Car Accidents
There are a few ways to resolve a car crash claim. Injured victims often seek a settlement through negotiation or end up in court to present their case. However, some victims may decide to seek arbitration in a car crash claim if settlement negotiations have stalled.
Goldberg Finnegan’s Silver Spring auto accident lawyers explain arbitration, including what it is and how it could benefit you. We also share some disadvantages you should know about.
It is worth pointing out that what might work well for one victim’s situation may not be best for you. A qualified attorney can review your situation to help you decide what may work best for your claim.
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What is Arbitration in a Car Crash Claim?
Arbitration is an alternative dispute resolution (ADR) process that enables crash victims to settle a car crash claim out of court. If settlement negotiations have stalled, some victims may prefer this approach to save money and avoid a courtroom trial.
Though less formal, arbitration is still a legal proceeding. In this meeting, as in a trial, both sides are able to present details about what happened. A neutral individual, called an arbitrator, listens to the details shared by both sides throughout the process. After each party has had the opportunity to share, the arbitrator determines the outcome.
In some states, such as California, Illinois, Colorado and Massachusetts, victims are sometimes forced into arbitration. These states allow insurance companies to insert a mandatory arbitration clause in their policies. Often the choice in that situation is for the victim to either accept the initial offer from the insurance company or enter into binding arbitration.
Fortunately, Maryland does not allow insurance companies to add these types of clauses to insurance policies. For a crash victim – or any personal injury victim seeking compensation – arbitration is optional.
Is an Arbitration Outcome Binding in Maryland?
That depends on the terms of arbitration agreed to ahead of time by both parties involved. There are two types of arbitration crash victims may seek:
If both sides have agreed to a non-binding arbitration agreement, the outcome could be that:
- Both sides may find the arbitrator’s decision acceptable and agree to the terms
- A plaintiff (injury victim) may find the settlement offer to be too low and reject it
- The defendant who is being sued for negligence may also refuse the arbitrator’s decision
It is different when both parties agree to binding arbitration. If you enter into a binding arbitration, the decision of the arbitrator is final. Injured victims in binding arbitration cannot seek other legal options to resolve the claim. This means that the option to go to court is no longer a possibility.
How a High Low Agreement Affects Binding Arbitration
When both parties agree to a binding arbitration, the insurance company may insist on a “high-low” agreement. This agreement simply sets the cap on the maximum amount the insurance company will agree to pay. However, it also sets the lowest amount victims may receive. So while the outcome could be anywhere in-between, it will not be more or less than those two limits. This is good in the sense that going into arbitration, both parties will know the worst and best possible outcomes.
What Are the Benefits of Arbitration in a Car Crash Claim?
There are a lot of benefits to arbitration that an injured victim may want to consider, such as:
- A claim can often be resolved much faster than it would if you settled or went to court
- The expense of arbitration in a car crash claim is far less than the expense of a jury trial
- Arbitration is not entered in public records; therefore any discussions are kept private
- Both you and the other party still have a chance to share your account of what happened
- Because it is informal, arbitration can also better consider the needs of both parties
Are There Disadvantages to Seeking Arbitration in a Car Crash Claim?
There are some disadvantages to arbitration over either a settlement or courtroom trial, including:
- The arbitrator, if recommended by the insurer, could have financial ties to that company
- The compensation from arbitration could be less than you might receive in a courtroom trial
- You could be at a disadvantage if your attorney lacks experience handling arbitration
Are There Any Other ADR Options for Resolving a Car Crash Claim?
Mediation is another type of ADR that crash victims may use and which attorneys often favor. Like arbitration, victims can use this as alternative to going to court. There are important differences with mediation that victims may find more to their liking:
- Unlike arbitration, if no agreement is reached in mediation, victims may still file a lawsuit
- Mediation agreements allow for more flexible terms than an arbitration agreement
- Either party may choose to accept or reject the terms of a mediation agreement
Do I Need an Attorney if I Resolve My Claim Through Arbitration?
It is generally best to work with an attorney, whether you are negotiating with the insurance company or going through arbitration. Statistics show that victims often get significantly more compensation when working with an attorney than they otherwise would.
Contact our law firm today to learn more about your potential legal options. There is no cost or obligation for this meeting. Our staff is available 24/7 to take your call.
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