What Does It Mean When a Lawsuit Goes to Private Arbitration?

Categories: Injury Blog

Arbitration is a form of dispute resolution, often used in lawsuits. It allows two parties to forgo the traditional route of a trial and work to find an agreeable settlement for both sides. Arbitration is in the same family of other dispute resolutions like mediation, but they are two separate things.

When you agree to private arbitration, you are removing the case from the civil court system. For a personal injury case, you are allowing a third-party arbitrator (which is often a lawyer who does this for a living, judge or retired judge) to listen to each side, the disputes, and make a decision on the case. In these cases, you are bound to what the arbitrator decides; in mediation, you are there to simply come to an agreement, but no one is bound, unless you agree to “binding mediation.”

Usually, arbitrators are paid by both parties in an even split, and the insurance company may ask for arbitration to avoid higher costs of litigation. Sometimes, an insurance policy may require that a lawsuit go through arbitration before it can go to court as well.

Understanding the Two Types of Arbitration: Binding and Non-Binding

You have two primary kinds of arbitration, binding and non-binding. It is essential that you understand these terms, as they will affect you significantly in negotiations.

  • Binding: Binding means that when the arbitrator makes his or her decision, it is final. You cannot appeal it in court either. Therefore, if you agree to binding arbitration, remember that you must be willing to take the risk and accept whatever the arbitrator decides in your case.
  • Non-Binding: Non-binding means you will both agree, and you can decide if you will accept the arbitrator’s ruling. But if you deny it, then you can file your lawsuit and go to trial to get a better outcome.

Is Arbitration Right for Your Lawsuit?

Arbitration can help save on the costs of traditional litigation, but before you opt-in, you may want to look at the pros and cons of this alternative dispute resolution.

The Pros of Arbitration

  • The arbitration will resolve a case much faster than going to court. One of the biggest benefits is how much time you save doing arbitration. If you were to take the case to court, you could wait months or years for the case to end. Civil courts are overburdened, which means you will wait just for your initial court date. Arbitration schedules are flexible and you can often have your meeting within the same 30-day period from filing.
  • Arbitration is much more cost-efficient than litigation. If you want to preserve more of your settlement and avoid extra fees on litigation, then arbitration is the best option. You will save on the discovery process because, in arbitration, it is streamlined and doesn’t take weeks or months like court. Discovery is limited to just exchanging documents, and not as many witness depositions are necessary. If you do have expert testimony as part of your case, you skip the depositions and the arbitrator hears from them directly.
  • In binding arbitration, the result is final, which means the parties cannot appeal that decision. One of the best benefits is that once arbitration is over, it is over. You do not have to worry about the insurance company filing an appeal against the verdict, and you can get your settlement finalized faster.
  • More relaxed rules for what evidence you can and cannot use in your case. In court, you will have motion after motion arguing about evidence. In arbitration, the rules are much more relaxed and the arbitrator can hear information that the regular court system may not let a jury hear. Even evidence that involves hearsay may be permissible.
  • The arbitrator is a skilled negotiator with expertise in the specific case area. In arbitration, the arbitrator used has to experience in your type of case – whether it is a car accident, dog attack, or another injury type.

The Cons of Using Arbitration in an Injury Lawsuit

  • An arbitrator is human and sometimes can be biased. While they are meant to remain impartial, an arbitrator may be more biased or award less to get more cases with an insurance company. When you work with a skilled injury attorney, you can protect yourself from instances of bias.
  • The limited discovery could work against you. While discovery rules are more relaxed, the limited procedures involved in discovery may work against you rather than for you. When you do full discovery, as you would in a court case, each side has a chance to investigate the information, develop their defenses, and even argue to exclude evidence. In discovery, this is all skipped over.
  • An arbitrator is paid by the hour and it can be costly. While you are saving on court costs, you may pay an extensive amount to the arbitrator for their hourly fee, especially as things drag on. When arbitration is not swift, the amount could be in the thousands.
  • You experience more inconsistent outcomes. With arbitration, the consequences are not based on legal standards or precedent, which means you might feel as though you get less than other cases with similar situations. The predictability in these cases is the hardest for any attorney to deal with as well, because your attorney will not know which way the arbitrator swings.

Is Arbitration Right for You? Ask an Experienced Injury Attorney

Whether you are being forced into it, or the insurance company has proposed arbitration, never accept the offer without first talking to an experienced injury attorney. Attorney Jeffrey H. Penneys, Esq., will review the facts of your case to not only decide if arbitration is necessary, but help build a strategy to work in arbitration so that you get the best settlement possible for your injury claim. Most importantly, attorneys have experience with specific arbitrators, know how they work in negotiations, and can prepare themselves better for the meetings.

To explore your options, schedule a free case evaluation by calling his office or requesting more information online.