Using Arbitration to Settle Your Personal Injury Claim

Find out the pros and cons of using arbitration to settle your injury claim with the insurance company – and when you might not have a choice.

Arbitration and mediation are two methods of Alternative Dispute Resolution (ADR). They can be used to resolve personal injury claims when settlement negotiations stall.

Both ADR methods use a neutral person to help two opposing parties come to terms. But there is an important difference:

  • Meditators work to facilitate a settlement between the two parties, sort of like a referee. If you can’t work out a deal in mediation, you can still file a lawsuit.
  • Arbitrators listen to each party make their case, then the arbitrator decides the outcome. Most of the time, decisions made in arbitration are final.

We walk you through the pros and cons of using arbitration to resolve your personal injury claim, how arbitration works, and why arbitration may be your only option when insurance negotiations fail.

Pros and Cons of Injury Claim Arbitration

Insurance companies use arbitration to avoid lawsuits whenever possible. With the high cost of litigation, many companies view arbitration as an effective way to avoid the courtroom. They can settle personal injury claims at a fraction of what those claims might cost if they were litigated.

Whether or not you’re handling your injury claim without an attorney, it’s important to understand the advantages and risks involved in using arbitration to settle your claim.

Common types of injury claims like car accidents and slip and falls can be resolved with one arbitrator who’s been approved by both sides. The arbitrator’s fee is usually split evenly between the parties.

There are two basic types of arbitration:

  1. Binding arbitration means the decision of the arbitrator is final. You can’t file a lawsuit or seek an appeal of the decision.
  2. Non-binding arbitration means the parties can accept the decision of the arbitrator as final, but if one party chooses not to accept it, they have the right to file a lawsuit or propose some other means of settling the dispute.

Advantages of Binding Arbitration

  • Arbitration can be less expensive than a full-blown lawsuit
  • Your injury claim will be resolved faster in arbitration than waiting for a court date
  • You get a say in choosing the arbitrator
  • The rules of evidence are more relaxed than in court
  • You’ll have more time to present your case than in small claims court
  • Arbitration can be less stressful than presenting your case in a courtroom full of strangers

Disadvantages of Binding Arbitration

  • Arbitration fees may be higher than small claims court filing fees
  • You won’t have the option of a jury decision
  • You won’t be able to subpoena evidence on your own
  • The arbitrator’s decision is final – you can’t appeal or file a lawsuit
  • The arbitrator’s decision is usually not immediate – you may have to wait a week or more to receive the decision in the mail

Is Arbitration Better Than Small Claims Court?

It’s tough to say whether your chances of success will be better in small claims court or binding arbitration. Every case is unique, and by understanding both processes, you’ll be able to make an informed decision given your situation.

  • Both are relatively informal.
  • The cost of filing a small claims lawsuit is often less than the shared cost of hiring an arbitrator. In small claims court, the party who loses is sometimes required to reimburse the winning party for their court costs.
  • Both offer relatively prompt hearings.
  • Both allow the decision-maker, the judge or arbitrator, to compromise or settle the claim somewhere in between what both parties demand.
  • If you’re not satisfied with the verdict in small claims court, you can appeal your case to a higher court. If you’re not satisfied with the decision in binding arbitration, you won’t have the right to appeal.
  • There’s a limit to the amount of money you can get in small claim court. Limits vary from state to state. If your demand for compensation exceeds your state’s limit, binding arbitration may be the better option.

Talk to an experienced personal injury attorney to help you decide if arbitration is the best option for resolving your injury claim. 

How Arbitration Works for Injury Claims

One of the first steps in arbitration is selecting a qualified arbitrator. Both sides have a say in choosing the arbitrator, no matter the circumstances that led to arbitration of your dispute.

Most arbitrators are retired judges or experienced attorneys, although anyone can call themselves an arbitrator. Choosing an arbitrator takes some thought.

You’ll want an arbitrator who:

  • Is experienced in resolving personal injury claims
  • Has a good reputation as a fair and organized arbitrator
  • Has a manageable caseload

There’s no replacement for personal recommendations. Here’s where having a seasoned personal injury attorney comes in very handy. Your attorney will have past experiences with different arbitrators or can ask around the legal community for recommendations.

High-Low Agreements

Most insurance companies won’t participate in voluntary binding arbitration without a “High-Low” Agreement.

A high-low agreement is a written contract between you and the insurance company that says both sides agree to accept whatever amount the arbitrator finally decides, so long as it falls somewhere between the high and low amounts agreed to by both sides beforehand.

High-low agreements have advantages for both parties. They protect insurance companies from outrageously high awards, and claimants are guaranteed a minimum amount of compensation. Typically, an arbitrator does not know the high-low amounts before the arbitration begins.

Example: High-Low Agreement

John was injured in a car accident and couldn’t negotiate a settlement with the at-fault driver’s insurance company. He requested arbitration and the company agreed.

They had a high-low agreement, with the lowest acceptable amount of $7,500 and the highest $20,000.

Some of the possible outcomes of the arbitration are:

  1. The arbitrator decides John should receive $15,000. That amount falls within the high-low agreement range, so the insurance company must pay $15,000.
  2. The arbitrator decides the insurance company must pay $35,000. Because of the high-low agreement, John will only receive $20,000, which is the upper limit.
  3. The arbitrator decides John should only get $1,000. Because of the high-low agreement, John will receive $7,500, which is the lower limit.

What Happens During Arbitration?

Arbitration can be very similar to a small claims court trial, only without a roomful of spectators. The proceedings generally follow the same order:

Opening Statements: You or your attorney will tell the arbitrator about the nature of your claim and what you hope to achieve.

Case Presentations: You will make your case to the arbitrator, supported by evidence, to prove the other party was negligent and their negligence was the direct cause of your injuries. You’ll also provide evidence of your damages.

The insurance company’s attorney will make their case against paying your full demand. For example, they might argue that you share some blame for your injuries, or have a preexisting condition.

Closings Statements: Both sides will have the opportunity to summarize the strengths of their arguments and state what kind of decision they want the arbitrator to make.

Don’t expect the arbitrator to make a decision the same day as the arbitration meeting. There may be lots of medical records to sift through, or conflicting witness statements to review.

You might not get the final decision for a week or more, depending on how much evidence was submitted during arguments.

The arbitrator’s decision will be sent to you in writing, usually with some explanation of the reasoning behind the decision.

If you agreed to binding resolution, the arbitrator’s decision is final and your case is over.

Mandatory and Voluntary Arbitration

Arbitration may be voluntary, meaning you decided it was the best option for resolving your case, or mandatory, meaning you are required to participate in arbitration, usually because of a clause in your insurance policy.

Some states won’t allow you to file a lawsuit, even in small claims court, unless you can show you tried an alternative dispute resolution.

Mandatory Arbitration Clauses

You are most likely to run into a mandatory arbitration clause when you’ve filed an injury claim with your own insurance company, called a “first-party” claim.

First-party injury claims are normally filed under:

  • No-fault insurance Personal Injury Protection (PIP) coverage
  • Medical Payment (Med-Pay) coverage
  • Uninsured or Underinsured Motorist Coverage

Your car insurance policy is a contract between you and the insurance company. Because arbitration is less expensive than litigation for insurance companies, many policies have a clause requiring the insured to agree to arbitration rather than filing a lawsuit for disputed claims.

The arbitration clause in your policy may have wording like this:

“Any controversy or claim arising out of, or in any way relating to this insurance contract between the insured and the insurance company, which cannot be settled between the parties, must be submitted to binding arbitration. The costs of arbitration shall be shared equally between the insured and the insurance company. Both parties agree the arbitrator’s decision will be final and binding and cannot be appealed.”

Voluntary Arbitration

The insurance company can’t force you into arbitration when you make a third-party claim, meaning a claim against someone else’s insurance policy.

If you were injured in a car accident, you’d file a third-party claim against the at-fault driver’s insurance company.

You could also file a third-party claim with a business owner’s liability insurance if you were injured on the business’s property.

You can’t force the at-fault party’s insurance company to submit to binding arbitration (although some states have laws that require non-binding arbitration before you can file a lawsuit). That’s not to say the company won’t agree to it. Most insurance companies prefer binding arbitration over a lawsuit.

Requesting Arbitration to Resolve Your Injury claim

It’s rare for an insurance company to suggest arbitration if negotiations stall with a third-party claimant. They’d rather drag out negotiations until you give in and settle for less or the statute of limitations expires.

If you and the claims adjuster can’t negotiate a reasonable settlement, you can tell the adjuster you want your claim submitted to binding arbitration. If the insurance company believes your claim has some merit, they may agree.

If the company doesn’t agree to arbitration, you can tell them your next step will be to file a lawsuit.

Threatening a lawsuit won’t work if your case is weak. However, if your case has a good chance of winning at trial, the insurance company will likely agree to binding arbitration. You won’t know unless you ask.

You can tell the adjuster you’d like arbitration, but always follow-up with a formal written request.

Sample Letter: Request for Arbitration

Date of the letter

Your name
Your address

Adjuster’s name
Insurance company’s name
Insurance company’s address


Your name and the insured’s name
Claim number
Date of the injury


Dear (adjuster’s name):

Despite repeated attempts to settle my injury claim, our discussions have stalled, and further negotiation efforts appear to be futile. In the interest of justice and the spirit of compromise, I propose we submit the claim to binding arbitration.

In an effort to settle this claim amicably while avoiding litigation, I look forward to hearing from you as soon as possible.

Yours truly,

Your name/signature

When Claim Negotiations Fail

If the adjuster won’t come off a low-ball settlement offer or refuses to keep negotiations moving forward, consider talking to a personal injury attorney before resorting to arbitration.

Hiring an attorney might be all it takes to get a stubborn or lazy adjuster to offer an acceptable settlement amount.

Moreover, sometimes, when you can’t get a first-party claim settled, you may have grounds for a bad faith case against the insurance company, in addition to your injury claim.

Most injury attorneys don’t charge for their initial consultation. There’s no obligation, and no reason not to explore all your legal options. Find out what an experienced attorney can do for you.

Video: Using Arbitration to Resolve Personal Injury Disputes

Charles R. Gueli, Esq. is a personal injury attorney with over 20 years of legal experience. He’s admitted to the NY State Bar, and been named a Super Lawyer for the NY Metro area, an exclusive honor awarded to the top five percent of attorneys. Charles has worked extensively in the areas of auto accidents,... Read More >>