Arbitration: An Efficient Alternative to Costly Litigation

Having spent the better part of 44 years practicing law, I have had the privilege of serving as both an advocate and a neutral on NAM's (National Arbitration and Mediation) Hearing Officer panel. When the topic of arbitration comes up, I am often asked questions by fellow attorneys. “Why should I place a particular matter into binding arbitration? Am I not better off allowing a jury to decide my case?” Typically, in an insurance dispute, the belief is that a jury will award more dollars from the plaintiff's perspective, and that a jury is safer than giving a blank check to an arbitrator from the carrier's perspective. As I will outline below, my universal answer to both sides is that the benefits of arbitration far exceed those of timely, costly, and inefficient litigation.

The Benefits of Arbitration

For those less familiar with binding arbitration, it is a contractual agreement to place a dispute, usually a lawsuit, into the hands of a neutral. The parties reach an agreement on an arbitrator to decide the case, what issues will be decided by the neutral (i.e., liability and damages), and the parameters for the award (i.e., $25k to $250K). The parties are provided with available dates for the neutral, and both sides offer input on when the proceeding will take place. How wonderful it is to know when the case will be heard, by whom the case will be heard, and what the parameters will be. The carrier has protected its insured, plaintiff's counsel has given his client some certainty around when the case will come to an end, and the minimum amount of money that the client will receive. Compare this with a case in the downstate court system that presents no certainty as to a trial date, thereby making witness and expert preparation a nightmare.

The costs to litigate an average case have skyrocketed. I recently retained a neurosurgeon for a litigated matter, and the costs just to review the medical records and examine the plaintiff were in excess of $15,000. Just imagine the cost of having the expert appear at trial! This is even more pronounced where multiple experts are retained by both sides. From the plaintiff's side, no money is earned on a case until it is either settled or tried. In some downstate venues, such as the Bronx, a case can remain pending for three to four years, or more. For carriers, the reserves on a case, dollars attributed to a particular claim, rise as time passes.

Further, one needs to understand that as a lawsuit progresses, costs are incurred. As each side invests more dollars into the prosecution or defense of a lawsuit, each becomes more reluctant to settle the case. As I noted above, with the bulk of cases having a value in the $15,000 – $150,000 range, how can litigation through trial make any sense from either side's perspective? Arbitration solves these problems.

I would be remiss if I did not emphasize that most arbitrations in recent years are increasingly conducted via online conferencing platforms. This allows convenience for both sides, relieving the cost and effort of travel. The rules of evidence are also relaxed at arbitration. Experts need not be produced, thereby avoiding the largest costs of a trial. Reports can be used and argued to the arbitrator.

Once an arbitrator renders a decision on a case, it is, for all intents and purposes, over. A release and stipulation of discontinuance are exchanged, and the settlement check is issued. Unlike litigation, where an appeal can cause a case to pend for another year or two, there are no appeals from the arbitrator's decision, unless one can show fraud. This brings about certainty and finality.

It is, of course, important to choose a qualified arbitrator for the dispute. All of the arbitrators on NAM's panel of neutrals are highly experienced in the specific areas of the law involved in the matter at hand (i.e., trip and fall, auto, products liability). NAM's Hearing Officer panel consists of former judges and highly experienced litigators.

Addressing the Common Concerns with Arbitration

Let's turn to some of the concerns that I have heard over the years. First, some believe that the arbitrators are biased. If their background leans towards carriers or plaintiffs, then they must be biased towards that side. But consider – do jurors have bias? Do they have experiences that may impact their decision? Everyone holds some form of bias. For example, I do not like peanut butter, but I can put aside that bias if I were to hear a case that involved peanut butter and jelly sandwiches. I would submit that the neutrals at NAM are highly experienced professionals who are better equipped to recognize potential bias and set it aside. The average juror is less equipped to set aside their leanings. Further, most of NAM's neutrals have handled both plaintiff and defense cases, particularly the former jurists.

A second concern about arbitration is that tribunals disclose the parameters for the arbitration to the neutral. Without hesitation, I can say that in my decade as a neutral with NAM, I have never had the parameters of an arbitration disclosed to me. It simply does not happen. It is a myth.

A third concern is fear. What if I receive a poor decision? The truth is that an unfavorable decision is possible for either party. However, the risks are greater with a jury. The jury has little knowledge of the law. They are more apt to render a verdict that is unexpected by one side or the other, which leads to appeals and long additional delays. These reasons make arbitration much more advantageous than a trial.

Fourth, how do I get my client or the carrier to select arbitration? I propose that arbitration as a method for resolving legal disputes sells itself. NAM offers highly experienced neutrals and a process that is far more cost-efficient than trial. Arbitration offers certainty and often a guaranteed minimal award. For the carriers, pend time is contracted, thereby controlling reserves. Putting one's fate into the hands of six lay jurors with no background in the area of the law being addressed is simply not prudent. It leads to unexpected results.

Not every case lends itself to arbitration. However, the great majority of cases absolutely are better served. The total costs for a basic personal injury case can range from $40,000 – $60,000, when one takes into account expert and counsel costs. Plaintiff's counsel may spend a week to two weeks on trial and not get paid unless there is a favorable verdict.

Plaintiffs' lawyers have to monetize files in inventory. That is, what is the best means and timing to resolve a case by whatever means chosen? Carriers have to consider their loss adjustment expense (i.e., attorney and expert fees, and increasing reserves over time). Both sides know that time is the enemy. Unlike red wine, cases generally do not get better with time. Reduced pend time benefits both sides, and arbitration is a method to achieve this desired result. As time passes, witnesses are lost, conditions change, and reserves go up.

Consider Arbitration for Your Next Dispute

In sum, arbitration works for carriers, the plaintiffs, and the defense bar. The key to arbitration is understanding the many benefits provided by this process, picking the right tribunal (NAM), selecting a solid neutral, and making sure the client understands the advantages of arbitration. At a time when the courts are congested and cases linger in the system for years, how can one not consider arbitration to resolve disputes? The process creates certainty, provides efficiency, and minimizes costs. Arbitration is, in the end, a win for all.

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Reprinted with permission from the August 25, 2025 edition of the NEW YORK LAW JOURNAL © 2025 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com

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Howard J. Kaplan, Esq. brings a unique perspective to the alternative dispute resolution process, having had the benefit of working in both a corporate and legal role for a major insurance company. In turn, this has resulted in the development of many positive working relationships with both sides of the bar throughout the years. He has arbitrated and mediated hundreds of personal injury cases and has a keen ability to bring parties together based on his years of experience as a trial attorney and negotiator. Mr. Kaplan is well known by the majority of the plaintiff and defense firms in the NY Metro area and, most significantly, is well respected by them for his ability to fairly evaluate and settle cases. Mr. Kaplan is available to arbitrate and mediate cases throughout New York.