Understanding Arbitration Clauses in Illinois Uninsured Motorist Policies

Arbitration clauses in Illinois uninsured motorist (UM) policies play a crucial role in resolving disputes between policyholders and insurance companies. These clauses require that any disagreements regarding the UM coverage be settled through arbitration rather than litigation. This blog delves into the intricacies of arbitration clauses in UM policies, exploring their benefits, challenges, and the procedural aspects involved for Illinois policyholders.

What is an Arbitration Clause?

An arbitration clause is a provision in an insurance contract that mandates the resolution of disputes through arbitration. Arbitration is an alternative dispute resolution (ADR) process where an arbitrator, who is a neutral third party, hears both sides of the argument and makes a binding decision. This process is generally faster and less formal than going to court.

The Role of Arbitration Clauses in Uninsured Motorist Policies

In the context of uninsured motorist policies in Illinois, arbitration clauses are designed to streamline the resolution of disputes over UM claims. These disputes can arise over various issues, including:

• Determining Fault: Whether the uninsured driver was at fault for the accident and whether the plaintiff was comparatively negligent.
• Extent of Damages: The amount of compensation the policyholder is entitled to receive.
• Coverage Disputes: Whether the policy covers the specific circumstances of the accident.

Example of an Arbitration Clause

A typical arbitration clause in an Illinois uninsured motorist policy might look like this:

Arbitration Clause: In the event of any dispute between the policyholder and the insurance company regarding coverage, liability, or the amount of damages under the Uninsured Motorist Coverage, such dispute shall be resolved by binding arbitration.

The arbitration shall be conducted in accordance with the rules of the American Arbitration Association (AAA). Both parties agree to mutually select an arbitrator from the AAA’s panel of arbitrators. If the parties cannot agree on an arbitrator, the AAA shall appoint one.

The arbitration hearing shall take place within 90 days of the arbitration demand, unless otherwise agreed by the parties. Each party shall bear its own costs and expenses, including attorney’s fees, and shall equally share the costs of the arbitrator and the arbitration proceeding.

The arbitrator’s decision shall be final and binding on both parties, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

Benefits of Arbitration Clauses

1. Speed and Efficiency:
   • Quicker Resolution: Arbitration typically resolves disputes faster than traditional court litigation, allowing policyholders to receive compensation more quickly.
   • Less Formal: The process is less formal and more streamlined, which can reduce the stress and complexity associated with court proceedings.
2. Cost-Effectiveness:
   • Lower Costs: Arbitration can be less expensive than litigation, saving on attorney fees, court costs, and other related expenses.
   • Limited Discovery: The arbitration process often involves limited discovery compared to court cases, further reducing costs and time.
3. Expert Decision-Making:
   • Experienced Arbitrators: Arbitrators are often experts in insurance law and claims, providing informed and knowledgeable decisions.
   • Specialized Knowledge: Their expertise can lead to more accurate and fair outcomes based on the specifics of the insurance industry and UM claims.

Challenges of Arbitration Clauses

1. Limited Appeal Rights:
   • Binding Decisions: Arbitration decisions are generally binding and offer limited grounds for appeal, which can be a disadvantage if the policyholder disagrees with the outcome.
   • Finality: The finality of the arbitration decision means that policyholders must accept the arbitrator’s ruling even if it is unfavorable.
2. Perceived Bias:
   • Choice of Arbitrator: There can be concerns about the impartiality of the arbitrator, especially if the selection process is influenced by the insurance company.
   • Imbalance of Power: Policyholders may feel at a disadvantage if the insurance company frequently participates in arbitration and has more experience with the process.
3. Costs:
   • Arbitrator Fees: While generally less expensive than litigation, arbitration still involves fees for the arbitrator, which can be significant.

Procedural Aspects of Arbitration in Illinois Uninsured Motorist Policies

1. Initiating Arbitration:
   • Demand for Arbitration: To initiate arbitration, the policyholder must typically submit a written demand for arbitration to the insurance company. This demand outlines the nature of the dispute and the desired resolution. The terms of how the demand should be made and the time period in which the demand must be made are typically outlined in the policyholder’s insurance policy.
   • Agreement to Arbitrate: Both parties must agree to arbitrate the dispute. If the insurance policy includes a mandatory arbitration clause, this agreement is generally presumed.
2. Selection of Arbitrator:
   • Mutual Selection: Both parties typically agree on a neutral arbitrator. If they cannot agree, the selection may be made by an arbitration service or through a court-appointed process.
   • Panel of Arbitrators: In some cases, a panel of three arbitrators may be used, with each party selecting one arbitrator and the third being mutually agreed upon or appointed by the two selected arbitrators.
3. Arbitration Hearing:
   • Presentation of Evidence: Both parties present their evidence and arguments during the arbitration hearing. This can include witness testimony, expert opinions, and documentary evidence.
   • Rules and Procedures: The arbitration process follows specific rules and procedures, which are typically less formal than court procedures but ensure a fair hearing.
4. Arbitration Award:
   • Decision: After the hearing, the arbitrator issues a written decision, known as an award, which outlines the findings and the resolution of the dispute.
   • Binding Nature: The arbitration award is binding on both parties, and compliance with the award is generally required by law.

Considerations for Policyholders

1. Reviewing the Policy:
   • Understanding the Clause: Policyholders should thoroughly review their UM policies to understand the arbitration clause, including the process and implications.
   • Seek Legal Advice: Consulting with an experienced attorney can provide clarity on the rights and obligations under the arbitration clause, including the process for demanding arbitration.
2. Preparing for Arbitration:
   • Gathering Evidence: Collecting all relevant evidence and documentation to support the claim is crucial for a successful arbitration outcome.
   • Expert Witnesses: Engaging expert witnesses, such as accident reconstruction specialists or medical experts, can strengthen the case.
3. Negotiation and Settlement:
   • Pre-Arbitration Settlement: Policyholders should consider the possibility of negotiating a settlement before proceeding to arbitration, which can save time and costs.

Arbitration clauses in Illinois uninsured motorist policies offer a streamlined and cost-effective alternative to litigation for resolving disputes. While there are benefits such as speed, efficiency, and expert decision-making, there are also challenges, including limited appeal rights and potential biases. Understanding the procedural aspects and preparing adequately for arbitration can help policyholders navigate this process effectively. For those facing UM disputes, consulting with an experienced personal injury attorney is essential to ensure their rights are protected and to achieve the best possible outcome.

Contact the Illinois Car Accident Attorneys at John J. Malm & Associates

If you or a loved one has been injured in a motor vehicle accident with an uninsured driver, contact the Naperville personal injury attorneys at John J. Malm & Associates to learn more about how you may be entitled to receive compensation for your injuries.