The Illinois Statute pertaining to the arbitration of automobile subrogation matters has undergone some important changes over the past few years that impacts the binding authority of arbitration awards received pursuant to the terms of the Arbitration Forum’s Auto Agreement.

In 2012, the Illinois Legislature enacted a statute pertaining to the arbitration of physical damage subrogation claims between insurers for property damage with a value less than $2,500. 215 ILCS 5/143.24d. Specifically, the original statute provided that for all physical damage subrogation claims arising from auto damages incurred on or after January 1, 2012, insurers must arbitrate and settle such claims where the amount in controversy, exclusive of the costs of the arbitration, is less than $2,500. This statute effectively made arbitration mandatory and binding for property subrogation cases between all auto insurance companies, regardless of whether the company was a signatory to the Arbitration Forum’s Auto Agreement.

However, in the Illinois case, Interstate Bankers Casualty Co. v. Hernandez, 3 N.E.3d 353 (Ill.App.1d, 2013) the Illinois Appellate Court held that the subject statute creating mandatory binding arbitration of insurance subrogation claims was unconstitutional because it violated the constitutional right to trial by jury and it eliminated the right to a trial by jury in actions to which that right had historically attached, such as subrogation and negligence actions. The decision was not appealed to the Illinois Supreme Court.

After the Hernandez decision, the Illinois legislature amended the Arbitration Statute to effectively make the arbitration mandatory, but non-binding. This Public Act (098-0864) became effective January 1, 2015. The amendment to the Illinois Arbitration Statute states that: “Nothing in this Section shall preclude a party from seeking resolution in a court of competent jurisdiction after a decision has been rendered in arbitration.” This amendment only impacts disputes involving an automobile insurance carrier that is not a signatory to the Arbitration Forum’s Auto Agreement.

Simply put, the amendment to the Illinois Arbitration Statute makes it mandatory to participate in arbitration for certain subrogation claims under $2,500, but makes the arbitration result non-binding so that the adverse insurance carrier can choose to subsequently seek resolution of the claim in civil court instead of abiding by the arbitration award.

If you have any questions about the changes to the Illinois Arbitration Statute or the impact that the statute has on pursuing automobile subrogation claims for property damage in Illinois, please contact the attorney that you normally work with at Dershow Law Group or Jeremy Dershow.

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