Connecticut lawmakers have passed legislation requiring insurers to reimburse the state for the $3,075 cost of arbitration hearings in certain auto damage disputes, a move intended to reduce state expenditures and incentivize earlier settlements between claimants and insurers.
The bill was signed by Gov. Ned Lamont on June 16 and will take effect Oct. 1.
The arbitration hearings in question arise when mediation fails to resolve disputes over automobile physical damage or property damage liability claims, provided there is no disagreement about liability or coverage.
Currently, the state Department of Insurance covers the hearing costs, which average $3,075 each. The new measure, championed by Insurance Commissioner Andrew Mais, shifts that cost to insurers if the arbitration decision favors the claimant, unless the insurer had previously made a settlement offer equal to or greater than the final award.
“This proposal will encourage pre-arbitration resolution of automobile physical damage claims, which will result in a more time-effective process for both consumers and insurers,” Mais said.
According to legislative analysts, Connecticut holds approximately 29 arbitration hearings per year, with about 15 rulings in favor of claimants. Based on this trend, the state expects to be reimbursed roughly $35,000 in fiscal year 2026, and up to $50,000 annually beginning in 2027.
While the potential reimbursement represents a small fraction of the insurance department’s more than $35 million annual budget, officials believe the financial responsibility will encourage more insurers to settle disputes prior to arbitration, thereby further reducing costs.
However, insurance industry representatives raised concerns about the precedent of imposing separate arbitration charges. In a joint statement to lawmakers, the Insurance Association of Connecticut, the American Property and Casualty Insurance Association, and the National Association of Mutual Insurance Companies questioned whether any other states impose similar fees on carriers.
“We are unclear as to whether any other state levies such separate charges upon carriers to pay for similar arbitration hearings,” the groups said, adding that insurers already fund the department through regulatory assessments and suggested instead working with the agency to cover such costs within its regular budget.
Under the current structure, arbitration involves a $925 non-refundable fee and $1,350 for the arbitrator when the matter is referred to the American Arbitration Association (AAA). If the case proceeds to arbitration, an additional $800 administrative fee brings the total cost to $3,075.
