Connecticut Enacts Arbitration Reform for Disputed Auto Claims

Connecticut Gov. Ned Lamont has signed a new law that reforms the arbitration process for disputed auto insurance claims, requiring insurers to cover more of the costs and pay interest on unresolved amounts.

House Bill 6435, now Act 25-131, introduces a mandatory arbitration system focused only on disputed claim amounts. It excludes disputes over liability or coverage and applies only when previous mediation efforts through the state’s Division of Consumer Affairs have failed.

A key provision of the law requires insurers to pay the undisputed portion of the claim once notified in writing that the case is headed to arbitration. Claimants can still pursue the remaining amount through the arbitration process.

The state insurance commissioner will prepare a list of 10 arbitrators to oversee these hearings. Arbitrators must issue written rulings within 15 days, which may include awarding the claimant a 15% annual interest rate on the disputed amount, backdated to when the undisputed payment was made. This interest clause is one of the law’s most impactful changes.

Arbitrators may also require insurers to reimburse the state for arbitration costs. However, if the policyholder had previously rejected a settlement equal to or greater than the arbitration award, this reimbursement wouldn’t apply. If the insurer wins the case, the state will continue to cover the arbitration costs.

Historically, each side paid a $20 filing fee since 1989, but arbitration costs have soared. Insurance Commissioner Andrew Mais said the average cost of a hearing is now about $3,075, including $925 for administrative processing, $1,350 in arbitrator fees, and $800 in final administrative expenses.

Though the number of hearings is limited—averaging 29 annually from 2022 to 2024—about 15 of those each year ended in favor of the claimant. Lawmakers expect the new system to generate around $35,000 in reimbursements to the state in 2026, rising to $50,000 annually thereafter, assuming similar caseloads.

Industry trade groups opposed the change, arguing that insurers already finance the state’s insurance department through assessments and that arbitration costs should remain part of the agency’s budget. Still, the groups acknowledged their concerns are limited given the low volume of hearings.

In 2023, 20 arbitration hearings were held, with 15 resulting in awards for claimants. Based on the new rules, insurers would have paid approximately $46,125 in total hearing costs.

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