Auto Insurance Inter-Company Arbitration: What is it and Why is it Used?

The Nationwide Inter-Company Arbitration Agreement is a forum, through which insurance carriers resolve automobile physical damage subrogation, without the delays and expense of litigation.

All the companies participating in this arrangement, bind themselves to submit disputes involving subrogation, against other signatory companies.  Local arbitration committees, composed of claims professionals with at least 5 years of claims adjusting experience, or 3 years of experience and a certification in claims adjusting decide the cases.

Arbitrators must complete a claims proficiency exam, a forum knowledge exam and hearing simulations before sitting on a panel of arbitrators. All panel members are unpaid volunteers.

In 1943 the casualty insurance industry began using arbitration in order to avoid litigation between insurance companies.  The New York City Claim Manager’s Council appointed the first arbitration board. By 1951, casualty insurers throughout the United States recognized the success of this methodology. The original agreement was rewritten and sponsored as a nationwide program.  Today Arbitration Forums Inc, a non-profit corporation, headquartered in Tampa, Florida administers nationwide Inter-Company Arbitration.  It, annually, resolves 450,000 claims with a value of over $2.2 billion.

When you submit an auto insurance claim to your insurance carrier, unless you are in one of the few states in our nation with no-fault responsibility laws, a determination must be made as to responsibility for the accident. This determination is most often made when two or more claims representatives from different companies have a discussion about the facts of the accident as reported to them by each of their drivers and any witnesses.

Witness statements from passengers, which are considered partial, and independent impartial witnesses, as well as the location of damages on the vehicles, and their direction of impact are taken into consideration.  Sometimes an on-scene investigation and photographs of the location where the “crash” occurred can help resolve a dispute.

A great number of accidents involve a discrepancy in versions that can not be resolved between the two or more adjusters handling the claim. This is especially true in the case of multi-vehicle “crashes”.

That is when Inter-Company Arbitration comes into play.  One of the adjusters simply states that it is not possible to resolve responsibility for the accident through additional discussion, and says she/he will be filling Inter-Company Arbitration.

The adjuster, having so determined, then fills out an Inter-Company Arbitration form which looks very much like a court document.  The company filling the arbitration is company #1 and the responding company is company #2.  The company name, adjuster name, company address, insured name, claim file number and type of claim are stated for each company.  Then a narrative is written, by the filing adjuster, which outlines the facts and dispute.  The filing adjuster must send a copy of the filing and all attachments to the responding company.  Very strict deadlines apply to all submissions.

The company responding to the arbitration submits a letter outlining their version of the facts, upon receipt of the Inter-Company Arbitration filing.  This response delineates the discrepancies and details all facts.  Both adjusters include copies of driver’s statements, witness statements and photographs to substantiate her/his version of responsibility.

The arbitration panel reviews all narrative summaries and documents submitted, and renders a final decision which is binding on all parties. The decision is stated as either “company #1 sustained the facts as submitted” or “company #1 failed to establish its case against company #2”. Of course there are variations in this wording, but the decision is stated in this manner.

Once the decision is rendered, the losing insurance carrier must pay according to the findings.  The decision rendered in Inter-Company Arbitration can impact your insurance premium for many years in the future, and determine the percentage of your collision deductible, that will be returned to you.

An advantage of this forum is that the facts of the claim and all attachments are reviewed in detail by the panel, which tends to be composed of very experienced claims professionals with a firm grasp on the subject of liability and local responsibility laws.  An impasse that results from the strong stances of less experienced adjusters is easily concluded in this venue.

A skilled claims representative will not enter into Inter-Company Arbitration when the evidence would indicate a loss is eminent. It is key that you, as an insured, do everything you can to help document the facts of a “crash”.  Do not be afraid to mention unusual circumstances or reiterate statements made by the other driver at the scene.  Begin documenting the facts and components of the accident, immediately after it occurs.  The better you present your case, the stronger the possibility that your adjuster can win Inter-Company Arbitration on your behalf.

The great majority of claims never end up in Inter-Company Arbitration, but the ones that do are resolved in a much more expedient and cost effective manner, because of this important forum.  Without it insurance carriers would be forced to sue one another each time a dispute arose.  Inter-Company Arbitration is a very effective way to keep your insurance premiums from being consumed by court costs and attorney’s fees, generated by litigation among insurance companies.