StateCover Guide
Glossary

Arbitration

By Editorial team, last reviewed

Quick answer

Arbitration is a way to settle a dispute outside court. A neutral person with no stake in the outcome hears both sides and decides, and the decision is usually binding. In car insurance it is used for some claim disputes between drivers and insurers.

How it works

Arbitration can come up in a few ways:

  • Under state law. In New York, for example, you can request no-fault arbitration if your insurer denies a no-fault benefits claim in whole or in part. The result is final and binding on all parties.
  • Under your policy. Some policies include an arbitration clause. Read it to see which disputes it covers, whether it is optional or required, and who pays the arbitrator.

Arbitration is broader than appraisal. Appraisal only sets the dollar amount of a loss, while arbitration can decide other questions, depending on what the policy or state law allows. Because a binding decision is hard to appeal, ask how the process works and what it will cost before you agree to it. Your state insurance department can explain the options in your state.

Sources

Last reviewed by the StateCover Guide editorial team. See our editorial policy. Spotted an error? Tell us.