Arbitration for Motor Vehicle Insurance Disputes

Arbitration for Motor Vehicle Insurance Disputes

Arbitration (which is sometimes referred to as a type of Alternative Dispute Resolution, or ADR) is a procedure in which the parties to a dispute, for example, parties who disagree about some aspect of a motor vehicle insurance policy, voluntarily submit the issues they are unable to agree upon to the judgment of one or more disinterested persons, called arbitrators, and agree to abide by the judgment of the arbitrators, which is called an award. One significant thing to note about arbitration is that it takes place outside the court system and so can be conducted less formally and with less expense than a traditional judicial proceeding.

Arbitration has the potential to be an effective way of handling disputes in the area of motor vehicle insurance. Such disputes are sometimes small or moderate in size, and this fact, together with the sheer number of such disagreements that are bound to arise in a society built around frequent use of cars and trucks, suggests that arbitration should be employed in motor vehicle insurance disputes whenever the nature of a particular disagreement and the amount involved will permit its use. Some motor vehicle insurance policies contain clauses requiring the parties to make use of arbitration in case of a dispute under the policy.

The use of arbitration in the area of motor vehicle insurance is not free of controversy or difficulty, however. Arbitration is, after all, a substitute for allowing people the sort of access to the courts in matters involving their financial interests that our citizens have traditionally enjoyed, so it is looked on by some people with disfavor. In addition, because the insurance business in the United States is regulated by the different laws of each of the 50 states rather than by a single federal law covering the entire nation, the degree of favor that arbitration procedures enjoy will differ from one state to another. (There is a federal statute, the Federal Arbitration Act, which is generally favorable to the use of arbitration procedures and which applies to some disputes involving insurance.)