Many states have strict requirements that any application to stay arbitration must be made quickly after a Demand for Arbitration is filed. The failure to seek a stay in a timely fashion may also waive the right to important discovery. UM/UIM insurance carriers must institute strict mail receipt and mail forwarding procedures so that claim handlers will know immediately when a demand for arbitration has been received. The claim handler must immediately forward any demand for arbitration to defense counsel for the preparation and filing of papers seeking to stay arbitration and compelling any outstanding discovery from the claimant.
A stay of arbitration may be sought where the insurer believes that there is no UM/UIM coverage or that another carrier has the obligation of coverage. Cases have been reported where the failure to timely investigate coverage issues have been found to create estoppel against insurers, creating UM/UIM coverage where none existed.
An application to the court to stay arbitration may be the only way to resolve many threshold issues such as whether the claimant is an insured under the policy, was operating the vehicle with the consent of the insured, whether the vehicle qualifies as a hit-and-run automobile, whether a demand for arbitration had been properly served; whether a hit-and-run accident had been timely reported to the police; whether the insurance policy was obtained through misrepresentation; and whether a general release was executed, which would interfere with subrogation rights of the UIM insurance carrier. Failure to timely file may create a waiver of these defenses. The arbitrator may not be allowed to consider these defenses.