Mandatory Arbitration of Tennessee Insurance Disputes

There’s been a lot of discussion about arbitration clauses in the news lately. The sum of it is, most of the time, policyholders get the short end of the stick when it comes to these clauses, because they deny you your right to a fair trial. We wanted to talk a little bit about them today, so that you can understand why it’s important to read the fine print – and to call one of our attorneys if you need help.

Why do so many insurance policies have mandatory arbitration agreements, now?

It used to be that if there were a dispute between a policyholder and their insurance carrier, the dispute would be heard by a local or federal judge or a local or federal jury. Over the past years, insurance companies have decided that there is a better option – for them. Insurers now make it a condition of many policies that contests be heard by a board of arbitrators who have the sole authority to decide the case.

Insurance contracts that make arbitration mandatory include commercial and residential policies, life insurance contracts, disability insurance, and first-party insurance contracts, including your medical insurance policies. While there have been attempts to argue that a mandatory arbitration clause is unconscionable—because the policyholder really has very little choice but to agree to the arbitration clause—the courts have upheld their validity.

Advantages of insurance arbitration

The employers often argue that arbitration is not only just as fair as jury trials, but that there are many reasons arbitration benefits both sides. The supposed advantages are:

• Arbitrations are less expensive.
• Arbitrations are less time-consuming.
• The arbitrators who decide the cases are much more familiar with standard dispute issues than jurors are.
• There is less stress involved because the arbitration is not before a jury.
• The rules of evidence are less strict.
• Arbitrations are not open to the public.

Disadvantages of insurance arbitration

Potential policyholders should understand that there are strong reasons why insurance companies prefer arbitrations over jury trials. The insurance companies would not put these clauses into the insurance contracts if it were not better for them. Some of the key reasons arbitration clauses are against individual policyholders’ best interests are:

• A jury of your peers is more likely to understand your frustrations and anger at not being paid what is due to you.
• There is normally less opportunity to discover what the insurance company is hiding than in a jury case.
• Arbitrations may not be at a convenient location, such as the county courthouse.
• Arbitrators tend to be more cynical because they have heard many similar cases and are thus less likely to offer fair awards.
• Insurance arbitration usually consists of three arbitrators, one of whom favors the insurance company.
• Mandatory arbitration clauses that require that the loser pay the other side’s legal fees are especially onerous because many policyholders cannot afford the legal fees. This possibility can deter policyholders who have been wronged from taking action.

When arbitration is mandated, there are still many steps Tennessee insurance arbitration lawyers can take to maximize the chances of a strong recovery. Selection of the best arbitrators is the first key. Policyholders still have a right to present their case, offer the testimony of expert appraisers and other professionals, and question the insurance company’s witnesses. Claimants are entitled to the full amount of damages set forth in the policy if they can show the damages were covered under the policy.

At the Rocky McElhaney Law Firm, we know that insurance disputes can be a real challenge – and that insurance companies aren’t likely to offer you a fair settlement without a fight. Mandatory arbitration clauses can be a real detriment to people who have lost their homes, their cars, or any of their property. That’s why you need an experienced Nashville attorney on your side, to guide you about your options. To learn more about our services, or to speak with one of our team members in Nashville, Hendersonville or Knoxville, please call 615-425-2500, or fill out our contact form.