An arbitration agreement or clause is a part of a contract in which parties agree that certain types of disputes may be handled through arbitration instead of litigation. If you sign a binding arbitration agreement, you relinquish your rights to pursue a remedy in court. But what if you are unhappy with the arbitration clause as it stands? Can you negotiate a change?

The answer is, it depends. You may be able to negotiate some parts of the mandatory arbitration clause in your insurance contract, but you could also be denied coverage for refusing to agree to the clause.

The basics of an arbitration proceeding

An arbitration proceeding is a dispute resolution process conducted privately in which either a single arbitrator or a panel of arbitrators serves in the capacity of a judge. Commonly, the arbitrator is a judge or lawyer with experience in a specific area of law and provides the arbitration services for a fee. The rules of arbitration are not as stringent as those in a standard court proceeding. There is also no jury involved. After each side has presented its case along with evidence, the arbitrator issues a decision, which is usually final, with little to no opportunity for appeal.

Although it may seem more reasonable to go through arbitration rather than through a court proceeding, the consensus is that arbitration gives companies a distinct advantage over the people who sign their contracts. The following reasons support this view:

  • No jury
  • Limited discovery process
  • Confidentiality (no public record)
  • No appeals possible (except for blatant arbiter misconduct)

Negotiating an arbitration clause in an insurance policy

Unfortunately, you may have limited options if your insurer requires you to sign an arbitration agreement. Courts have consistently given insurers the green light to make the signing of an arbitration clause a prerequisite of obtaining policy, much as they have with nursing homes, employees, and other companies. Stated another way, you may be denied coverage if you do not agree to sign an arbitration clause.

However, there may be times when you can “get around” an arbitration agreement. You can negotiate the contract from the start, before you agree to sign anything, to include provisions for:

  1. Who chooses the arbiters
  2. How discovery is presented
  3. Who will pay which fees
  4. Whether certain types of claims can still be brought in court

If you are unable to negotiate, you should seek the advice of an experienced Tennessee insurance dispute attorney. In some cases, your arbitration clause may actually be invalid. If you must abide by it, then you deserve to have a lawyer who is experienced in representing policyholders in these types of disputes.

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If you need help with the negotiation of an arbitration clause, our Tennessee insurance dispute attorneys are here to provide you with the legal counsel and advice you need. McWherter Scott & Bobbitt serves clients from offices in Nashville, Chattanooga, Jackson, Memphis, and Knoxville. To set up a free case review with one of our attorneys – Clint Scott, or Jonathan Bobbitt, or Brandon McWherter – give us a call at 731-664-1340, or use our contact form.