This post comes from a recent forum discussion Q&A with Glenn Kantor:
Q: My policy states that I can go to arbitration if I disagree with the answer to my appeal of a Long Term Disability claim. But the insurance company only mentioned a civil suit as my option if I want to dispute their denial. What’s the difference between going to arbitration and bringing a civil suit? Won’t arbitration cost less and be less complicated?
A: Bringing a civil suit means filing a lawsuit in U.S. District Court and having a Federal Judge decide your case. Arbitration is outside the judicial system and is private. It can be binding or non-binding, binding with a right to appeal, or totally binding with a waiver of any appeal rights.
In a Federal Court action, other than a filing fee, there are no “costs” associated with proceeding to Judgment — at least no costs which need to be paid to the Court.
A private arbitrator will expect to be paid. Sometimes the insurance carrier or employer will agree to pay the arbitrator. However, do you want to take part in a proceeding where the party deciding the case knows that someone else paid his bill? (Although arbitrators should not have such information, they often do.) The desire for repeat business from the insurer or employer MIGHT impact the decision, even if only subconsciously.
In the world of ERISA litigation, outcomes frequently depend on the judicial temperament of the Judge. If I could PICK the judge to whom my client’s case was to be assigned, I would always suggest a Federal lawsuit. In most jurisdictions, however, cases are randomly assigned to a judge from a pool that can be as small as two Judges or, if you are in a city such as Los Angeles, more than 30 Judges. For that reason, if the defendants are willing to select an arbitrator I have agreed to, I might be inclined to advise my client to agree to arbitration.
No lawyer could decide which option is better without a lot more information about the particulars of the case, and even then, there are so many variables involved that it is impossible to know for sure which dispute resolution methodology will more likely result in your receiving benefits.
If you are at the stage where your appeal has been denied, and you need to either file suit or agree to arbitration, please don’t make any decisions until you have discussed the matter with counsel.