Connecticut now requires insurers to cover costs and interest in arbitration disputes.
Connecticut has passed a new law changing the arbitration process around insurance disputes. The law focuses on cases where the parties agree that a payment is owed but not on how much. Now, those disputes must go through arbitration instead of dragging out through other channels. The state will no longer cover all the costs. Insurance companies will now be responsible for some of the process, and in many cases, may have to pay interest on top of what they already owe.
The change became official when Governor Ned Lamont signed House Bill 6435, now listed as Act 25-131. The law says that arbitration process will only deal with how much should be paid—not who is at fault or whether the damage is covered under a policy. Arbitration will only be used if earlier efforts to settle the claim through state-run mediation fail.
The arbitration process will be managed by the Division of Consumer Affairs. If a claim heads to arbitration, the insurance company has to pay the amount they agree is owed right away. That money can’t be held up just because there’s a disagreement about the rest. The law also makes sure that people can still fight for the remaining disputed amount while receiving the part that’s not being challenged.
To keep things moving, the state’s insurance department will create a list of 10 approved arbitrators. They must issue decisions within 15 days of the hearing. If the ruling goes against the insurer, the company may be forced to pay 15% annual interest on the disputed money, dating back to the time the undisputed portion was paid.
The arbitrator can also make the insurance company repay the state for the cost of running the hearing. However, if the person making the claim turned down a settlement offer equal to or higher than what the arbitrator decides, the insurer won’t have to cover the extra costs. If the insurance company wins the case, the state will still pay the bill.
Arbitration fees have gone up a lot in recent years. Since 1989, both sides have paid just $20 to start the process. But hearings now cost much more. According to Insurance Commissioner Andrew Mais, each hearing now averages about $3,075. That total includes about $925 for paperwork, $1,350 for the arbitrator, and another $800 for follow-up work.
Even though the hearings are expensive, they’re not very common. Over the past three years, the state has handled about 29 hearings a year. Of those, about 15 were decided in favor of the person filing the claim.
Lawmakers say that while the number of hearings is small, the financial effects add up. Analysts estimate that the new law will bring about $35,000 back to the state in 2026. That number is expected to rise to around $50,000 each year after that, if hearing numbers stay about the same.
Some insurance trade groups pushed back against the law. They said insurers already pay to keep the department running and that the state shouldn’t charge extra for arbitration costs. A joint letter from several industry groups argued the costs should remain part of the department’s usual expenses.
Still, those groups admitted their concerns were limited because so few hearings happen each year. For example, in 2023, there were only 20 hearings, and 15 were decided in favor of the claimant. Using the average cost per hearing, insurers would have paid about $46,125 under the new system.
The new law makes sure some money moves faster to claimants and gives them a clearer path to fight for the rest. It also sends a message to insurers that delays could come with a price. As interest charges and new rules take hold, companies may think twice before stalling or disputing amounts they likely owe.
Sources:
Connecticut mandates arbitration reform in disputed auto claims
Connecticut Hopes to Curb Auto Claims Arbitration by Shifting Cost to Insurers
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