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Auto Accident Injury Claim Arbitration

In the United States, it is possible to settle auto injury cases via arbitration, which is less formal than a state court proceeding. This is done to save time and money that would otherwise be spent on a courtroom trial.

Incentives

While entering an arbitration agreement for auto accident injuries is usually voluntary, the main incentive to do so appears to be that the injured party may threaten the insurance company with a lawsuit in the state court system. In no-fault states, the government may even mandate it.

Results

Provision of Service

While the government provides the incentive to enter arbitration, the choice to opt for private arbitration instead of state court proceedings usually must be made by both parties. This indicates that the market is able to provide the service of providing judgment that is reputable enough to satisfy all parties, and be preferable to state court proceedings. There is often the opportunity to choose among many arbitrators, though the choice is sometimes stipulated by contract or law.

Private arbitration tends to be faster than state courts. The time between filing and award can reasonably be 85 days. It is also less expensive to the parties, though there is an interesting question about government-related sources of income for arbitration organizations (see Funding below). Finally, the market of arbitrators and rules provides much more flexibility than state courts. For example, a "high-low" agreement may be possible, wherein a minimum and maximum award are decided ahead of proceedings. It is also possible to agree to not allow the case to go to appeals, which may actually be to the advantage of the injured party.

Funding

Fees for the arbitration process (administrative fee and arbitration fee) are paid by one or both parties of the arbitration. By contrast, state courts are funded by a combination of taxes and court fees.

However, it should be noted that arbitration organizations often have government customers and contracts.

Enforcement

Arbitration for auto injury claims tend to be enforced by the government as legally binding.

Sources

Reference

Findlaw article: Car Accident Arbitration
Nolo article: Car Accident Arbitration
American Arbitration Association, information about government relationships.
NPR article on state court fees.
National Center for State Courts article on taxpayer money spent on state courts.

Other Resources

Insurance Information Institute: No-fault auto insurance