Inter-company arbitration: how insurers settle claims among themselves

When two insurers disagree about who should pay for the damage in a crash, the dispute is usually settled by a panel of claims professionals at a private, industry-run forum called Arbitration Forums, not by a judge. Insurers that sign the Automobile Subrogation Arbitration Agreement promise to give up lawsuits against each other over covered car damage claims and to accept the arbitrator's ruling as final. You are not a party to that proceeding, but its outcome decides whether your insurer gets its money back, whether your deductible is returned to you, and how the accident is classified in your insurer's files.

This article explains how the system started, which disputes it covers, how a case is filed, heard and paid, and what you can do before and after it. The consumer side of the same process is covered in subrogation explained: how your insurer recovers your deductible and arbitration and mediation in auto insurance disputes; this article goes into the rules the insurers themselves follow.

Where inter-company arbitration came from

Arbitration Forums, Inc. (AF) traces its beginnings to 1943. According to AF's own reference guide to its agreements and rules (revised June 2026), the New York City Claim Managers' Council set up a committee that year to arbitrate automobile physical damage disputes among its members. By 1951 the casualty insurance industry had turned the idea into a nationwide program, and by the late 1960s arbitration committees were hearing and closing almost 100,000 cases a year. The administrative body that exists today was incorporated in 1981 and has been based in Tampa, Florida, since 1992, the guide says.

The scale today is much larger. AF's home page describes it as the nation's largest arbitration and subrogation services provider, founded in 1943, with more than 5,000 members, about 1.1 million arbitration disputes and 2.3 million subrogation demands a year, and more than $27 billion in claims. Its membership page puts the network at more than 5,100 companies and says arbitrators come from panels of more than 6,700 claims professionals. These are figures AF reports about itself, undated on the pages as of November 2026.

AF is a not-for-profit organization governed by a board made up mainly of senior claim executives from its member companies. That is worth knowing: the forum is built and staffed by the industry whose disputes it resolves. Its purpose is speed and low cost between companies that deal with each other thousands of times a year, not consumer protection.

What the agreement makes compulsory

The core document is the Automobile Subrogation Arbitration Agreement. Under Article First, signatory companies must give up litigation and arbitrate automobile damage disputes through AF in two situations:

• Subrogation against an at-fault party. A subrogated insurer or self-insured entity seeks to recover from a party it says caused the loss. Subrogation means an insurer that paid its policyholder's claim steps into the policyholder's shoes to recover the money from whoever was responsible.
• Concurrent coverage. Two policies cover the same party for the same accident, and they dispute which pays. Rental car disputes are a common example.

The agreement is not one-size-fits-all. AF runs separate forums, each with its own signed agreement: Auto Physical Damage, Personal Injury Protection, New York PIP, Medical Payment, Property, Special Arbitration (disputes among liability carriers over who should contribute to a settlement) and an international reciprocal program. The reference guide stresses that each agreement is independent, so two insurers can both belong to AF and still not both be bound to the same forum.

The table below separates what is compulsory from what is voluntary.

That last point matters for old claims. Filing a lawsuit in a matter that belongs in arbitration does not make it go away. Rule 1-2 requires the party who sued to dismiss the suit within 60 calendar days after being told the other side is a signatory, and says the court filing preserves the filing deadline for a limited period afterward.

The dollar limit and what counts toward it

The compulsory limit in the auto forum is $100,000 in total company-paid damages, according to AF's rules, effective October 21, 2024. The reference guide adds three details that change how the cap works in practice:

• The limit applies to each damaged vehicle or person (a "feature"), not to the accident as a whole.
• Your deductible does not count toward the limit. The guide's example is a $99,000 insurer payment plus a $5,000 deductible, which is still heard because the deductible sits outside the cap.
• Legal fees do not count either, unless the responding policy's limit includes them.

Most auto damage claims are nowhere near the cap. A claim that is over it can be trimmed. The recovering company may limit its filing to $100,000 even if it paid more, but it then gives up the rest, and any fault percentage the arbitrator finds is applied to the reduced figure.

Who decides, and how a hearing works

The agreement says signatory companies must supply qualified arbitrators from among their full-time employees and hear as many cases as they file. In plain terms, the people deciding your insurer's case are claims professionals from other insurance companies, and your insurer's own staff decide other companies' cases.

Several features of the process come straight from AF's rules:

• One arbitrator by default. A three-person panel can be requested when the amount involved is $15,000 or more, for an added fee (Rule 3-3).
• No one sees the other side in person. Hearings are informal and confidential, formal rules of evidence do not apply, and no recording is allowed (Rule 3-6). A company representative may appear by phone, but only to answer the arbitrator's questions.
• The file speaks for itself. The arbitrator may consider only what the rules list: properly raised defenses, evidence that was listed and attached, the damages amounts entered, and damage disputes raised in the right place (Rule 3-5).
• No default judgments. A case is heard even if the responding company never answers, but the decision must still rest on submitted evidence (Rules 3-2 and 4-1).
• Local law governs. Article Third requires decisions to rest on the law of the jurisdiction, consistent with accepted claim practices. The reference guide says arbitrators must consider state statutes, regulations and court decisions that the parties raise, and that any defense available in court, including an exclusion, is available in arbitration.

AF says the time from filing to hearing is usually under 90 days, and that its minimum filing fee is $50, as of November 2026.

How a case moves from filing to payment

The rules set a fairly rigid path. For a typical collision case:

1. Your insurer pays you under your collision coverage, less your deductible, and decides the other driver caused the loss.
2. It tries to settle first. AF's rules treat an attempt to settle as a condition before filing.
3. It files online with the identity of the other insured, the claim or policy number, and the other company's representative. Evidence must be attached at filing. Amendments are not allowed once the case is submitted (Rule 2-1).
4. The other company answers by a due date, with its own evidence. It gets one fee-paying extension (Rule 2-9). If it disputes the repair or rental amounts, causation or a partial exclusion, it must do so in the designated damages step or the arbitrator will not consider the point (Rule 2-5).
5. An arbitrator decides liability and damages from the file.
6. The loser pays within 30 calendar days of the decision's publication date, with payment made only to the recovering company (Rule 5-1). If it does not, the winner sends written payment requests at 30-day intervals and, after about 60 more days, may sue to collect with statutory interest and costs (Rule 5-2).
7. The recovering insurer pays you the deductible share it is owed.

Two other timing rules matter. A responding company may raise a coverage defense, such as policy limits or a denial, up to 60 days after the decision is published (Rule 3-9). And a clerical or jurisdictional error, such as a mathematical mistake or switching the parties' names in the liability ruling, can be reported to AF within 30 calendar days of publication (Rule 4-2). AF alone decides whether an error was made, and that decision is not reviewable.

A worked example with a fault split

Say your insurer pays $8,000 to repair your car after a crash at an intersection, and you pay a $500 deductible, so the total loss is $8,500. Your insurer says the other driver ran a red light. The other driver's insurer says you were also speeding and that its customer was only partly at fault. These figures are hypothetical.

The rules say the arbitrator applies a fault percentage to the company's claim and that the deductible is carried as a courtesy calculation, with the insured not a party. Under the proportionate-sharing principle in the NAIC's model rules (discussed below), the deductible is typically recovered in the same proportion. Here is how the money could look at three different outcomes:

Notice what the second row does to you. At 70%, your insurer recovers $5,600 of its $8,000 payment, and you recover $350 of your $500. The other $150 stays with you. If the law where the crash happened bars recovery by someone partly at fault, the third row can result from a small share of blame. Alabama, Maryland, North Carolina, Virginia and the District of Columbia follow contributory negligence rules that can have this effect; see comparative vs contributory negligence and modified comparative negligence: how the 50 and 51 percent bars work for how the rules differ.

When arbitration is not available

The exclusions in Article Second are the reasons some claims fall out of the system and into letters, lawsuits or small claims court:

• The other company is not a signatory. It must give written consent. Answering a filing without a valid objection to jurisdiction counts as consent under the rules' definitions.
• A coverage denial. If the responding company says its insured had no policy or that it denied coverage, a copy of the denial letter sent to its insured takes the case out of jurisdiction. Without that letter, the case is heard and the arbitrator rules on the coverage defense (Rule 2-4).
• Policy limits. The responding company may not be forced to pay beyond its policy limit. The recovering company can accept the limit and reimburse its insured's out-of-pocket costs from the award so the case stays in arbitration. AF's guide says it has no jurisdiction over the insureds, so unless the recovering company expressly agrees to cover its insured's costs, the limits defense is upheld.
• Settlement requires the insured's consent. The agreement excludes policies under which the insurer cannot settle without its customer's consent.
• No insurance at all. When the at-fault driver is uninsured, there is no second insurer to arbitrate against. Recovery then depends on uninsured motorist property damage coverage, a direct claim against the driver, or both. See small claims court for car accident damages: limits and evidence for the court route.

What happens to your deductible

AF's guide is explicit that damages sought in arbitration cannot include the insured's out-of-pocket expenses. It says the deductible is not awarded as such but appears in the decision as a courtesy calculation for the member companies, and that the insureds are not parties to the case. Payments that follow a decision are supposed to include the deductible portion where one applies, which the guide describes as a matter of goodwill between the companies.

Your protection is therefore state law and your insurer's practices, not the arbitration rules themselves. The NAIC's model unfair claims settlement regulation, Model 902, says insurers should, on the claimant's request, include the first-party claimant's deductible in subrogation demands, and that recoveries are to be shared proportionately unless the deductible has been recovered another way. States adopt their own versions. California's regulation, 10 CCR 2695.7(q), requires every insurer making a subrogation demand to include the first-party claimant's deductible and share recoveries proportionately. Your state may differ, so ask your insurer and, if needed, your department of insurance.

If you pay a high deductible and the other insurer disputes fault, the practical points are:

• Ask your adjuster in writing to include your deductible in the demand.
• Keep your repair invoice and proof of deductible payment; they are the evidence behind that line.
• Ask how long recoveries usually take. A deferment can postpone a case for a year, and an insurer may wait for a related injury claim to resolve.

For the same issue from the other direction, see do you pay a deductible if the accident was not your fault?.

Fault decisions, your record and your premium

A ruling in arbitration is a finding between two companies. AF's agreement says the decision does not carry preclusive effect in other claims or suits arising from the same accident, and that it is conclusive only on the issues submitted and only between the parties to the arbitration. On its face, that means it does not bind you, the other driver, or a court deciding a different claim, such as an injury lawsuit.

What it does not say is what your own insurer must do with its internal records. Whether a favorable ruling changes how your insurer coded the accident, and whether a surcharge is removed, depends on the insurer and the state. Do not assume it happens automatically. Ask.

State rating rules sometimes set a floor. In California, an insurer may treat a driver as "principally at fault" only if the driver's actions were at least 51 percent of the legal cause, and only if the accident involved injury or death or more than $1,000 in property damage. Under 10 CCR 2632.13 the insurer must investigate, give written notice of the determination, and let the insured request reconsideration within 30 days of receiving the notice; the insurer must answer in writing within 30 days. If it later modifies a determination it has reported to a loss underwriting exchange, it must report the change within 20 days. That framework is specific to California. Other states handle accident surcharges and appeals differently, and the general mechanics are covered in how to contest your insurer's decision that you were at fault.

If you disagree with the fault decision

Arbitration is final and binding for the companies, with a narrow exception for clerical or jurisdictional errors. A few states have their own statutes governing intercompany arbitration, and the reference guide tells readers to look to those statutes where they exist. In practice, the time to influence the outcome is before the case is filed, because the arbitrator reads only what is in the file. Insureds and witnesses cannot appear unless a company representative also appears, and they may only clarify a written or transcribed statement that is already listed as evidence (Rule 3-7). The rules state that witness testimony is not treated as evidence.

Here is a sequence that works within those limits:

1. Get your account into the file early. Give your adjuster your written statement, photos, dash cam video, the police report number and witness contacts. AF's reference guide says its system rejects embedded audio and video and does not accept links to outside sites; audio such as a recorded statement must be submitted as a written transcript, and video needs a special arrangement to be shown to the arbitrator, so ask your adjuster how your clip will be presented.
2. Say what you disagree with. Tell the adjuster which fact the fault finding rests on and offer the evidence that contradicts it.
3. Ask for the insurer's position in writing. Ask whether it intends to file with AF, what percentage it will claim, and whether it will tell you the result.
4. Expect limited access to the decision. AF treats filings, communications, hearings and decisions as confidential (Rule 2-13), so your insurer may summarize the outcome rather than send you the decision.
5. Escalate through your department of insurance if your insurer will not consider your evidence or tells you the arbitration result without explanation. how to file a complaint against a car insurance company explains the steps, and the after-accident checklist and information form helps you gather evidence at the start.

A scripted set of questions can make the conversation more productive:

• "Has this claim been filed with Arbitration Forums or another forum?"
• "What fault percentage are you asserting against the other driver?"
• "Is my deductible included in the demand, and when will I be paid my share?"
• "If the result goes against us, how will you record fault on my policy, and can I see that in writing?"
• "What evidence did you attach, and can I add to it before filing?"

Common questions

Can I file with Arbitration Forums myself?

No. AF's services are available to insurers, self-insureds and commercial insureds with large retentions that have signed an agreement. Individual drivers are not members. Your routes for a dispute with another driver are a claim through your insurer, a demand letter, or a court filing. See subrogation: when your insurer sues the at-fault driver for what insurers do when arbitration is not available.

Does the arbitrator's ruling mean I was at fault for my injury claim too?

By the agreement's own terms, the decision is conclusive only on the issues submitted and only for the parties to the arbitration, and it is not intended to be admissible in other proceedings. Injury claims follow separate rules. A licensed attorney can say how a particular ruling affects a particular injury claim.

What if the other driver's insurer never signed the agreement?

Then compulsory arbitration does not apply unless that insurer gives written consent. Your insurer may pursue the claim through demand letters, negotiation or a lawsuit. A signed consent to arbitrate cannot be revoked once given.

Does this process also cover injuries?

Some AF programs address medical costs, such as Personal Injury Protection and Medical Payment, and Special Arbitration lets liability carriers settle contribution disputes. These forums depend on state law and signed agreements. The auto physical damage forum is the one most drivers meet after an ordinary collision.

Can an insurer settle with me and still use arbitration?

Yes. Many claims are paid first and recovered later. The standard personal auto policy form says a person who receives payment must do whatever is necessary to let the insurer exercise its recovery rights and must do nothing after the loss to prejudice them, so do not sign a release with the other driver before talking to your insurer.

Key takeaways

• Insurers that sign the Automobile Subrogation Arbitration Agreement must arbitrate covered auto damage disputes with each other at Arbitration Forums, up to $100,000 per claim as of the rules effective October 21, 2024.
• You are not a party. Arbitrators are claims professionals from member companies and decide from the file, so your evidence must reach your insurer before it files.
• Your deductible is returned through your insurer, and the NAIC model rule and California's regulation call for proportionate sharing of recoveries; check your own state's rule.
• The ruling binds the companies and is not meant to bind you or courts in other proceedings, but whether it changes your insurer's fault coding or surcharge depends on the insurer and state.
• Missing signatories, coverage denials and policy limits push disputes out of arbitration and into negotiation, lawsuits or small claims.