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A binding high/ low arbitration simply means that the petitioner will receive as an award, no less than the low dollar amount as stated in the arbitration agreement but no more than the high dollar amount as stated in the arbitration agreement. It is often used when liability is not at issue and the case dispute is over damages. It can be used however, when liability is at issue. This is done by bifurcating the proceeding having the panel first decide the issue of liability before deciding the legal issues of causation and damages.
If the arbitration award exceeds the agreed upon contract "high" dollar amount, the petitioner is bound by contract to accept that high dollar amount in full. At the same time, if the award is less than the "low" dollar amount as stated in the agreement, the petitioner receives the low dollar amount.
The arbitration panel generally does not know the arbitration high/ low as this is confidential and should have no bearing on their award. Often in a personal injury case the arbitration low can be the medical bills incurred by the petitioner. The high can be an insured's policy limits or it may be less than that.
The petitioner must be at all times aware of the associated risks of trying a personal injury case to a jury where complicated issues of liability or causation exist. Where there is such a risk, the petitioner may have to agree to a high dollar amount under the policy limits to get the case to arbitration. A panel arbitration award that exceeds the high as stated in the arbitration agreement does not mean that an unsophisticated jury would see the case valued in the same light. A client should be advised of this before the arbitration agreement is signed.
Additionally, the petitioner may have the potential for an underinsured motorist contract action under the automobile host vehicle liability policy or under his or her own underinsured motorist policy. A binding high/low agreement with a high under the full limits of the negligent party's owner /operator policy will box out the injured petitioner from pursuing the underinsured motorist case. The reason that the petitioner will be boxed out of an additional underinsured motorist claim is that the petitioner is unable to exhaust the full automobile insurance liability limits of the negligent party also known as the tortfeasor.
If the underlying automobile liability insurance carrier for the negligent party won't agree to a binding arbitration high for the full limits of the third party automobile liability policy, the client will have no remedy by way of underinsured motorist benefits. This should be disclosed to the client so the client has proper informed consent when making a decision on whether to fully risk a jury trial in the underlying claim, or to accept binding arbitration with a high under the liability limits of the negligent party.
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Should I Arbitrate for a Bracketed Settlement?
The answer on whether to arbitrate for a bracketed high of less than the wrongdoer's liability policy limits offered by the defendant's liability carrier is made on a case by case basis. The factors the plaintiff's attorney and client consider in decision making would include the appeal of the client to a civil jury, the strength of the plaintiff's liability case, the severity of the impact the client sustained in the automobile collision, the number of prior injuries the client had , whether the client had active degeneration of the body part at issue, whether a doctor has opined in the past that the client needed surgery to a body part at issue, whether the client had surgery to an injured body part in the accident, the length of time the client waited to have surgery, prior impairment ratings, how close to the accident date was the client treating for the same medical condition, the effectiveness of the treating physician as an expert witness, the effectiveness of the defense medical examiner as a witness, wage loss suffered by the client, the client's lifestyle changes after the motor vehicle accident, whether the client had subsequent injuries after the motor vehicle collision and the likelihood of securing an intelligent seasoned arbitration panel that can understand the legal complexities of the case. Additionally, not all factors would weigh equally which makes the decision making for the client and his lawyer that much more difficult.