Mandatory Arbitration of Auto Physical Damage Claims Now a Thing Of The Past
The game of musical chairs regarding the Illinois law that requires mandatory arbitration of auto physical damage subrogation claims is finally over. The music has stopped and the statute has been repealed. The needless expense and waste of time associated with the statutory requirement of mandatory arbitration between auto carriers for property damage subrogation claims involving amounts less than $2,500 is now a thing of the past.
On August 25, 2017, the Illinois legislature repealed a statute it has been trying to get right since January 1, 2012. In collision subrogation cases involving amounts less than $2,500, § 143.24d had originally required mandatory arbitration between all auto carriers. This mandatory arbitration was limited solely to the issues of liability and damages, not coverage, and an insurer does not need to be a signatory to arbitration to be compelled to arbitrate, because arbitration was mandatory. The insured’s deductible was not included in the $2,500 mandatory limit.
The mandatory nature of the statute was short-lived, however. On December 18, 2013, § 143.24d was held unconstitutional by the Illinois Court of Appeals. In Interstate Bankers Cas. Co. v. Hernandez, 3 N.E.3d 353 (Ill. App. 2013), the Court of Appeals ruled that the mandatory nature of § 143.24d was unconstitutional because it violated the subrogated carrier’s right to trial by jury. In Illinois, the right to trial by jury attaches to any action where the right being sought existed under English common law at the time the Illinois Constitution was adopted in 1870. Subrogation is essentially a negligence action – not simply a “case within a case.”
To remedy the problem, on January 1, 2015, the Illinois legislature amended § 143.24d and added the following sentence to the statute:
Nothing in this Section shall preclude a party from seeking resolution in a court of competent jurisdiction after a decision has been rendered in an arbitration. Regulation – Insurance – Arbitration of Subrogation Claims. 2014 Ill. Legis. Serv. P.A. 98-864 (S.B. 644) (2015).
The idea was that by removing the “mandatory” nature of the statute’s arbitration requirement, the underlying statute would again by constitutional.
The repeal could be the result of the insurance industry growing tired of wasting its money on mandatory yet non-binding arbitrations that had no meaning or value. Or, it could have been because of the minimal benefit of one party or the other getting an unvarnished look at how a third party receives it’s case well before having to dedicate time and expense of a trial. Either way, the statute no longer exists, and neither does mandatory arbitration.
If you should have questions regarding this article or subrogation in general, please contact Gary Wickert at [email protected].