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Binding Arbitration As An Alternative To Trial

Sometimes you can settle a case, sometimes you have to try a case. But there is an in between: binding arbitration. Binding arbitration is a less formal alternative to a trial that is appropriate in cases where both sides have some type of risk they want to limit.

When parties agree to binding arbitration, they agree to submit their evidence and even provide live testimony to an experienced neutral party. The arbitrator is usually an experienced attorney or retired judge. The parties also agree to a hi/low. This means that no matter what the result is, the Plaintiff is guaranteed a certain amount of money, but there is a cap as well. For instance, if the parties agree to arbitration with a high of $200,000 and a low of $25,000, then if the arbitrator awards $500,000, the Plaintiff will only collect the high limit of $200,000, and if the arbitrator awards $1,000, the Plaintiff will collect the low of $25,000. The high and low limits are not disclosed to the arbitrator.

Cases that go to arbitration usually involve complex medical issues or other issues related to the cause of injuries. In these cases, often the Plaintiff has a chance of either a very large recovery or no recovery at all. Imagine a Plaintiff with a disc injury, but she had pre-existing back pain. A jury might award nothing, but a jury might award hundreds of thousands of dollars. The Plaintiff might wish to limit her risk by agreeing to a low that would guarantee some recovery, and also be willing to trade that security for a cap on her award. The Defendant, on the other hand, may be at risk for a jury award higher than her insurance coverage. Often the high limit will be the Defendant’s insurance limits.

Arbitration also reduces the time and costs of a trial. Often a case that would require a two day jury trial can be arbitrated in just a few hours.

Binding arbitration is not appropriate for every case, but it allows for a faster resolution with less risk for both parties.

By Craig I. Meyers, Esq.

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