Arbitration in Automobile Insurance Cases

December 18th, 2013 by Rieders Travis in Car Accidents

One way to resolve a car accident case without the delays of the court system is to use an alternative dispute resolution (ADR) process. Arbitration is one such mechanism. After entry of the arbitration award for a court administered arbitration, any party may demand a trial de novo after notice of the arbitration award. Trial de novo means the arbitration decision is stricken as if the arbitration never occurred. The decision has not precedential value to the ultimate decision in the case. There may be costs penalties if the judgment on the trial de novo is not more favorable than the arbitration award. If no written request for a trial de novo, the arbitration award becomes final.

There is generally no right to discovery in contractual arbitration. This decreases the costs of a lawsuit. Judicial arbitration usually permits discovery. Each party must deliver to the other party copies of the evidence planned to be presented to the judicial arbitrator. For judicial arbitrations, hearings may not be transcribed, and may not be used by parties as evidence even if they were. The arbitrator need not make any findings of fact or conclusions of law.

Arbitration clause allowing an insured to demand arbitration regarding coverage, does not pertain to someone who is not an insured. Northern Ins. Co., of New York v. Resinski, 827 A.2d 1240 (Pa. Super. 2003).

Arbitration panel does not have power to assess pre-award interest in non-compulsory proceedings, or unless the policy itself authorizes such action. Younkin v. Nationwide Ins. Co., 807 A.2d 275 (Pa. Super. 2002).

Any challenge to an arbitrator must establish substantial doubt as to arbitrator’s ability to act impartially. Sheehan v. Nationwide Ins. Co., 779 A.2d 582 (Pa. Super. 2001).

Insurance policy does not mandate arbitration when issue is whether family vehicle exclusion applies and policy clause mandates arbitration when there is a question regarding whether insured is legally entitled to collect compensatory damages. State Farm Mutual Auto. Ins. Co. v. Coviello, 233 F.3d 710 (3rd Cir. 2000).

Insurance policy cannot change Pennsylvania law requirement that challenges to arbitration awards occur within 30 days of award. Miller v. Allstate Ins. Co., 763 A.2d 401 (Pa. Super. 2000)

Pennsylvania Insurance Department does not have the authority to require mandatory binding arbitration for UM/UIM claims. Insurance Federation of Pa v. Dept. of Ins., 889 A.2d 550 (Pa. 2005). Insurance Company had filed a revision to its policy to eliminate arbitration provisions for UM and UIM disputes. The Pa. Insurance Department rejected the revision. Insurance Federation filed petition for declaratory judgment that Pa. Insurance Department did not have authority to require mandatory arbitration of UM and UIM coverage disputes. The court did not address whether the Insurance Department’s imposition of mandatory, binding arbitration upon uninsured and underinsured motorist disputes violates the constitutional right to a jury trial because it found the department had exceeded its authority.

UIM claims are outside the scope of arbitration agreement where title of policy is “Uninsured Motorists Arbitration” and not “Underinsured Motorists Arbitration.” Neuhard v. Travelers Ins. Co., 831 A.2d 602 (Pa. Super. 2003). Trial court erred when it ordered arbitration for UIM claim, as title of arbitration clause did not include such claims, and they were therefore outside of arbitration agreement.

Exhaustion clauses as a predicate for coverage under underinsurance provisions of an insurance contract are void as against public policy. As long as the insured credits the insurance company the face value of the adverse driver’s liability coverage, the insured’s underinsured motorist claim may begin before the claim against the adverse driver is settled. Harper v. Providence Washington Ins. Co., 753 A.2d 282 (Pa. Super. 2000). When Insured filed claim for UM/UIM benefits for damages in excess of those covered by the adverse driver’s policy, insurer argued the claim was premature under the contract because the insured had not yet exhausted the liability policy of the adverse driver. Court held arbitration does not need to be postponed. See also Krakower v. Nationwide Mut. Ins. Co., 790 A.2d 1039 (Pa. Super. 2001).