What is the definition of arbitration?

When two parties cannot agree on the terms of settlement for a particular issue, such as the amount to settle on a personal injury case, they can opt to arbitrate the case instead of going to court. Arbitration is form of dispute resolution that serves as an alternative, less costly, faster way of settling a case than litigation. It involves an unbiased third-party arbitrator who hears both sides’ stories, reviews evidence, and makes a decision on the case.  

How does arbitration work?

When the parties have agreed on arbitration, they begin by deciding upon an arbitrator to hire for their case and split the costs. They will schedule a meeting where the two parties, their lawyers, and the arbitrator will discuss the issues at hand and attempt to negotiate a resolution. Arbitrators are similar to judges in that they hear and decide issues, albeit in a less-formal setting like a law office instead of a courtroom.

There are two kinds of arbitration.

  • Binding:With binding arbitration, whatever the arbitrator decides is final, like a court order. Both parties must adhere to the arbitrator’s decision and cannot appeal it. Most binding arbitration meetings include a high-low agreement to protect the parties.
  • Non-binding:With non-binding arbitration, either party can refute the arbitrator’s decision if they do not agree. They can then seek another form of dispute resolution, such as litigation.

What is a high-low agreement in arbitration?

Most insurance companies require a high-low agreement in binding arbitration cases. In a high-low agreement, the parties agree to accept the arbitrator’s decision, provided the damage amount falls within an agreed-upon settlement range. The arbitrator will not know the high-low dollar amount when evaluating the case.

Here is an example of how high-low agreements work. In a slip and fall case, the insurance company and victim decide to arbitrate the damage award and agree upon a high-low agreement of a $25,000 to $50,000 settlement. The potential outcomes could include:

  1. If the arbitrator decides the victim should receive a dollar amount within that range, such as $35,000, the victim will recover that amount;
  2. If the proposed settlement falls below the range, such as a $20,000 settlement, the victim will still receive the lowest agreed upon amount of $25,000; or
  3. If it falls above the agreed-upon range, like a proposal of a $60,000 settlement, the victim will only receive the highest agreed upon amount of $50,000.

Why do people use arbitration?

People use arbitration to settle a wide range of disputes, from business issues to divorce. In the realm of personal injury, the insurance company or victim might ask the other party to agree to arbitrate the case if they cannot reach terms amicably. The two most common issues that the parties arbitrate in injury cases are liability and the amount of damages.

At the arbitration meeting, the parties will each present their side of the case and bring evidence such medical files, bills and receipts, written testimonies, and other documents. The arbitrator may ask the parties or witnesses questions, as well. Once the arbitrator has weighed all the facts of the case, she will issue a decision to both attorneys.

Should I arbitrate my claim?

Arbitration is not appropriate for every case. If you are having a problem settling your injury, call Berger and Green and speak to one of our qualified injury attorneys in Pennsylvania. Call 412-661-1400 to schedule a free consultation.