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What Happens When a Personal Injury Claim Goes to Arbitration?

Despite what we see on television and in movies, most civil suits, including personal injury claims, do not go to trial. There are alternatives to the courtroom drama. While some cases come to the suspenseful end of a jury verdict, the majority, 95-96% of all personal injury claims, are settled pretrial. According to The Law Dictionary, alternative dispute resolution (ADR) is “a process adopted to end a problem before taking legal action.”

Litigation is the process of taking a case to court; you are presenting your case before a judge and jury. There are three alternatives, or ADR, to litigation: settlement, mediation, and arbitration.

  1. Settlement: Settlement is a cost-effective option for ending a lawsuit and can be considered at any point during the legal process, including after court proceedings begin.
  2. Mediation: A mediator is a neutral third party who helps the opposing sides reach a settlement. Mediation is cheaper, takes less time, and is not as contentious as court proceedings.
  3. Arbitration: Like mediation, arbitration depends on a neutral third party. However, in arbitration, the neutral third party, arbitrator, acts as a private judge rather than a negotiator between the two sides. 

In personal injury arbitration, the arbitrator renders a decision, including the amount of the award given to the plaintiff. Before considering the option of arbitration, it is a good idea to have some basic knowledge of what it is and how it works.

What is arbitration?

Arbitration is a voluntary ADR process that refers to a specific method with one or more people hearing both sides and then rendering a decision to resolve a dispute. It takes place outside of a courtroom and not in front of a judge or jury. In some circumstances, arbitration can be required, as in disputes involving insurance companies, business contracts, and even between consumers and corporations. 

An agreement to arbitrate may be included in a contract between two parties to settle a possible dispute in the future, or parties may agree upon it after a specific dispute arises. While arbitration is like mediation, there is one primary difference; the arbitrator decides how to resolve the dispute. In mediation, the mediator guides the parties toward a mutual decision that both sides can accept. The arbitrator is the third-party, unbiased individual(s) agreed upon by the disputing parties responsible for making the final decision on the case.

Arbitration, particularly personal injury arbitration, plays a vital role in resolving civil cases. It helps avoid litigation, has your claim settled in a timely and affordable manner, and is hopefully a more amicable process. Often, a lawsuit can become complicated and drawn out. In contrast, arbitration provides both parties with the opportunity to resolve their dispute in a streamlined and agreeable fashion. In the case of binding arbitration, it significantly limits the possibility of appeal.

In an interview with Daniel Fisher from Forbes, Imre Stephen Szalai, a professor at Loyola University College of Law in New Orleans, said, “A robust system of arbitration is healthy for our court system — it serves as a safety valve.” Szalai added that if low-dollar litigation “is going to get clogged up in the federal court system, it can easily flow to an alternative system.”

What is the History of Arbitration?

The United States has a longer history of turning to arbitration to settle disputes than England and France. According to the American Bar Association (ABA), Native Americans relied on arbitration to resolve problems within and between tribes. The colony of Massachusetts had laws that supported the use of arbitration as early as 1632, but the process was not the preferred method for settling claims. American courts tended to follow the English precedent that did not require the enforcement of the decision reached. In other words, the decision was not binding.

Early in American law, arbitration was limited to certain disputes like bankruptcy and those dealing with the admiralty, the courts that dealt explicitly with ships, seas, and navigatable waters (ABA). The late 19th and early 20th centuries saw unprecedented industrial growth in the United States, increasing civil claims between companies and claims between employers and laborers. Arbitration became a common way to settle commercial disputes. 

In 1925, President Calvin Coolidge signed the Federal Arbitration Act (FAA), giving the arbitration process a legal and protected foundation that applied to state and federal courts. The enactment of the FAA led to an increase in the cases brought to arbitration, the creation of rules that govern the process, and the formation of the American Arbitration Association (AAA).

What controversies are there regarding arbitration?

There are some controversies about the arbitration process. It is essential to comprehend that while arbitration is an exceptional tool for reaching a settlement, it is not always a suitable replacement for going to court. Some claim that arbitration privatizes the justice system since it is an alternative to going to court without the opportunity to appeal the decision. 

In some circumstances, the injured party may not have the choice of taking their case to court. Certain industries, like insurance and banking, have clauses that automatically send cases against them into arbitration. Additionally, there is forced arbitration which is arbitration ordered by a judge. 

Often people don’t realize that they have signed an arbitration clause with a company or employer. In 2018, the US Supreme Court upheld a law that forces employees to use arbitration to settle complaints against their employer. Some believe that the rules for arbitration tend to favor businesses and that consumers and employees have a more difficult time winning a case if it goes to arbitration than they would have had in a courtroom.  

It is important to remember that arbitration is just one of many tools of the civil justice system. While it may work reasonably in many personal injury cases, it is not suitable for every situation.

How does arbitration work in personal injury insurance settlements?

Many personal injury suits involve claims against a business’s insurance company for denied coverage. Businesses carry insurance to protect their assets should a customer or employee experience an accident while on the property. Arbitration is a common way to settle an insurance dispute between insurance providers and policyholders. 

In arbitration, both parties present their case and position to the arbitrator. Both parties must offer as much evidence as possible to support their side. In arbitration regarding personal injury insurance settlements, there are two common outcomes. 

  1. An insurance provider will have to pay for damages they might have previously denied coverage. 
  2. A policyholder might have to pay for damages that the arbitrator ruled were not included in the insurance policy.

Insurance exists to protect an individual or group against financial loss due to loss of use of property, injuries that occurred during an accident, or harm done because of malpractice. There are insurance products to cover just about everything, even specific parts of the human body. It is not unheard of for a business holding the contract for an athlete or performer to have arms or legs insured to protect their investment. The most common types of insurance involved in personal injury arbitration are:

  • Auto Insurance
  • Medical Malpractice Insurance
  • Home or Property Insurance
  • Product Liability Insurance

What is arbitration for an injury case?

Personal injury arbitration is an alternative for disputing parties to come to a resolution without the time and stressfulness of a trial. 

Personal Injury

Common types of personal injury cases that can lead to arbitration are: 

  • Motor Vehicle Accidents
  • Medical Malpractice
  • Wrongful Death
  • Property Liability
  • Product Liability

Can you get money from personal injury arbitration?

Yes, compensation from arbitration comes in the form of an arbitration award that the arbitrator may grant. However, an arbitration award can be economic or non-economic. In personal injury cases, it is predominantly economic, which means that one party will have to grant money to the other party. Usually, this money covers actual costs such as lost wages and medical bills and can include payment for emotional damages. It can also include expenses for long-term care and therapy, such as that needed for someone with a traumatic brain injury (TBI).

An example of a non-economic arbitration award could be that a decision in a product liability case forces a company to add additional safety measures or warnings or stop producing the product altogether.

Costs for arbitration are generally less than the cost of a trial, and you may be able to recover them if you include them in the amount your request. There are two main costs in the arbitration process: 

  • administrative fees paid to the AMA.
  • arbitrator compensation and expenses. (Arbitrators can charge an hourly or a daily rate.)

What is the process of arbitration?

Arbitration is similar to a trial but much less formal. In arbitration, the plaintiff is known as the claimant, the one bringing the claim, and the defendant is called the respondent, the one responding to it. The claimant and respondent will need attorneys to represent them during the arbitration. 

Discovery is the process of making something that is unknown, known. Even if the case is going to arbitration, the discovery process must occur. It is the pretrial process in which the two sides exchange information about witnesses and evidence that they plan to use in court or arbitration. It also can help set the case and the process by concentrating the litigation on the issues discussed.

Types of Discovery for Personal Injury Arbitration

Discovery in Personal Injury

Discovery items can include interrogatories, production of documents, admissions, and depositions.

  • Depositions

A deposition is a witness’s sworn, out-of-court testimony. Lawyers use these to gather important information, and they can use it at trial under particular circumstances. A person giving a deposition is called the deponent.

  • Requests for Admissions

Attorneys use these written statements to secure basic facts and avoid the need to establish them during a trial. They are a way to have both parties acknowledge and accept some facts ahead of time.

  • Interrogatories

These are written questions from one party to another for them to answer under oath. The attorneys can use it during depositions or trials. One purpose of interrogatories is to track a party’s or witness’s answers overtime to catch changes or falsifications in testimony.

  • Requests for Production

Requests for production require a person or entity to produce documents that work as physical evidence. They can be in the form of papers or electronic files. These requests can also occur in the form of a subpoena if the person or entity to produce documents is not a party to the case. 

  • Informal Discovery

Informal discovery information can include photographs or third-party documentation not otherwise mentioned above.

Limits on Discovery

Although discovery can be extensive, legal limits on discovery exist to preserve the privacy and dignity of the other parties. There are various reasons to limit discovery, including trade secrets, confidentiality, or other privacy concerns.

Some of the limits on discovery can be:

  • Confidential Conversations: Conversations between people engaged in specific relationships have special legal protection known as privilege, for example, conversations between spouses, a client and his lawyer, or a patient and their doctor.
  • Private Matters: This can include aspects of their personal life, such as their sexual preferences or partners, beliefs, family relationships, or health issues.
  • Privacy of Third Parties: Information should not be shared about a witness or people involved with the claimant or respondent but not directly involved with the case.
  • Public Information: Not all information disclosed during the discovery phase must be brought to court or be part of the public record.

After both parties have collected and exchanged their evidence through the discovery process, it will be time to attend an arbitration hearing. 

During the hearing, the arbitrator, a neutral third party, will provide individuals with the ground rules of the arbitration proceedings. They will listen to and review the evidence and arguments presented by both parties. Once both sides have presented, no more evidence or arguments will be allowed. The arbitrator will issue a decision based on the facts and evidence presented during the proceedings. 

What happens if you win a personal injury arbitration?

Personal Injury Arbitration

When the arbitrator reaches a decision, the claimant and the respondent will receive written notification. The winning party will receive the arbitration award as determined by the arbitrator. Depending on the rules and the parties’ arbitration agreement, the losing party usually has 14 to 30 days from the close of the hearing to give the award to the winning party. 

Are arbitration awards final?

Personal injury arbitration works like a court trial, and the law expects both sides to comply with the results. However, there are two different types of arbitration.  

  • In legally binding arbitration, the arbitrator’s decision is final. It may not be reviewed or overturned by a court except in very limited circumstances, such as cases of fraud or misuse of power.
  • In non-binding arbitration, either party can disagree and decide to take their case to court. 

Going to court after an arbitration depends on the type of arbitration. You are only guaranteed the option of going to court if you are not satisfied with the arbitrator’s decision if it was non-binding. Your personal injury attorney should incorporate language into the arbitration agreement that prevents the arbitration outcome and certain types of evidence from being later used in a court trial.

Can arbitration awards be challenged?

You can only challenge arbitration awards in court in cases where the arbitration was non-binding or the rare case that the agreement provided for an appellate proceeding. However, according to the AAA (American Arbitration Association), there are only limited grounds on which a court may decide to overturn an arbitration award.

  • The award was acquired by corruption, fraud, or undeserved means.
  • There was evident partiality or corruption by the arbitrators.
  • Arbitrators were guilty of misconduct in denying to delay the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy.
  • The arbitrator exceeded their authority or imperfectly executed it so that a mutual, final, and definite award upon the subject matter submitted was not made.

What happens after arbitration fails?

When arbitration is not legally binding, and both parties are not satisfied with the results, they can continue to solve their dispute in court.

What happens if a party defaults or disobeys an order made by an arbitrator?

Both parties are required by law to follow the decision made by the arbitrator if the personal injury arbitration is legally binding, which means that if a party disobeys, they will be facing legal consequences. 

Most of the time, parties will voluntarily obey the arbitrator’s decision; if a party wins in the arbitration and the other party does not do what the award says, the winning party may go to court to confirm the arbitration award and make the other party face legal consequences for not complying. The court can enforce the arbitration award like any other court judgment. Usually, each state establishes its own rules and laws for enforcing the arbitrator’s decision.

Contact an Attorney

If you have a personal injury case and reside in the Chicago area, contact Trent Law Firm. At Trent Law, we’re committed to securing you every dollar you deserve for your personal injury case. We’re a Chicago Law Firm devoted to ensuring that your case receives the attention it deserves. 

How can we help you?

Get in touch with us or find our office near you
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