Winning at Arbitration as the Carrier
With our industry still reacting and adapting to the COVID-19 pandemic, the civil litigation process for bodily injury cases has hit a procedural roadblock. It would take an entirely different article to discuss how, when and in what form cases will eventually be litigated. The judges and trial attorneys I have spoken with, indicate that it is unlikely that jury trials will even have a chance of resuming until some time in 2021. For this reason and several others, I believe that binding arbitrations are the best means to secure a favorable resolution for the foreseeable future.
Binding arbitrations do have some perceived drawbacks that we are all aware of. Typical objections we hear are, that there are no appeals, no juries and no outright, banner victories for the “good guys” (your side of course), since every binding arbitration should be entered into with a hi/lo in place. To me, these so-called drawbacks are really benefits, however. The absence of these elements ensure that you will not get slaughtered by the result and that you will not have to worry about an expensive run of appeals before you get to resolution. Of course, this is only true if you have negotiated solid hi/lo parameters before the arbitration proceeds.
Another issue with arbitrations over the past couple of decades or so, has been the almost inevitable “split the baby” result that has become prevalent. While there are several reasons for this trend, there are ways to overcome it.
There are many issues and opinions at play here that could individually be the subject of a seminar or at least an article unto themselves, but we can summarize the following preliminary generalizations for the purpose at hand.
First, look for some neutrals that you are comfortable with and that are willing to handle arbitrations.
Second, make sure you negotiate your best possible hi/lo. If you are the carrier, do not worry too much about the Hi, if you think you have the ammunition to win. Trust yourself and your assessment.
Third, do not hesitate to utilize the mediation format to “set-up” your negotiation for the binding hi/lo agreement. This is an excellent way to get to a resolution within months on a case where the two sides or multiple sides, are simply too far apart to negotiate a settlement.
Fourth, and very important, use the arbitration approach as a program for a bulk of your outstanding claims population. Identify a neutral or two that you like and then use the heck out of them to get your cases “moved”.
Once you have adopted the idea of winning through arbitration, how is that achieved for both your company and your insureds? Here is the roadmap:
1. You really need to adopt a Program Approach:
You will not “win” every case. You will however resolve every case and if you handle the arbitration correctly you will win much more than you lose. Finally, remember that every resolved case accomplishes 3 things;
First, it eliminates any of that pesky negative development that must appear in your annual reports.
Second, your expense will be minimal compared to a full-blown trial and all future ALE goes away; and,
Third, you will have achieved resolution without the threat or realization of a runaway verdict.
Winning at arbitration for the carrier simply means that on the bulk of your resolved cases, you have brought them to resolution on the lower end of the negotiated hi/lo parameters. Think of this as a high-volume business plan approach. For example, if your Claims Team is hypothetically adjusting 1,000 “full liability” BI claims, each with a 100K policy and through an arbitration program you resolve 500 of those claims, saving on average 10K on the decision, you’ve just saved your company millions. This is real money saved, real resolutions and real back end savings off of your negative development numbers. This is a win – win.
2. Preparation on all causation or pre-existing medical issues:
As both a carrier claims professional and now as a neutral, I can see that most of the settlement “numbers” discrepancies between parties generally revolve around case value due to causation issues (the typical MIST accident resulting in surgery, for example). Do your homework and know the issues you can hit effectively. Do not waste any time or effort on issues that you cannot substantiate. In short, you need to handle this program correctly.
3. Prepare a detailed pre-arbitration memo addressing all key points:
Keep in mind the very loose evidentiary protocols for arbitrations and use this to your advantage. Address the key winning or persuasive issues you have identified in item “1” above and “serve” them to the neutral on a platter, in your memo. Use defense counsel as you deem appropriate but remember that the process must involve someone who understands each of the key issues and that this may and should require something of a team effort.
4. Use another set of eyes that understands the issues:
Ok, you think you know your case better than anyone, right? While that may be true, this familiarity is also a trap. You and your team have looked at this case so many times, you know it all by heart. Think of that email response to the CEO that you’ve looked at 20 times before you hit send. It looks perfect, you hit send and then your spouse finds 3 silly grammatical mistakes on their first glance. It happens all the time. The key factual or legal issues that have served as the foundations of your position and your case Reserve, since the very first evaluation may be flawed. Experience has taught me that our early case presumptions are flawed far too often than we would all like to admit. In my last claims director position, I discovered a cure for that condition. I set up an internal department, with personnel that understood the medicine, not necessarily adjusters. This group reviewed every BI case at specified points along the life of a claim and specifically before any case went into ADR. The results were a resounding success. We went into both mediations and arbitrations much better prepared to both attack plaintiff’s positions and to respond to any “new” medicals produced during the mediations. By implementing this new arm of the claim operation, we were able to implement both a successful Early Resolution Program and reduce our overall pending by over 50% in less than a year through aggressive ADR.
5. Hit your key points only, on a brief summation:
Make sure counsel or your claims person hits the same winning points once again on summation. Make it simple, to the point and substantiated by the evidence you have presented. Make it easy for the neutral to hang his or her hat on your arguments.
In my recent experience as a neutral and as a carrier executive, I have seen too many instances where the defense has not been prepared to advance their cause with sufficient ammunition. It has seemed to me that too many defense teams take a somewhat lackadaisical approach, relying on hackneyed and overused arguments to present their case, perhaps taking comfort in the hi/lo in place. Complacency will get you middling results instead of the wins you need to run a successful operation.
For example, here are some recent examples I have experienced or learned of:
In one case, the defense simply surrendered on the liability discussion. While it was pretty clear that the defendant driver was 100% at fault for the subject accident there was a major factual argument concerning the movement (or non-movement) of the plaintiff’s vehicle just prior to impact. There was significant physical evidence that could have supported the factual position of the defendant driver, but the entire issue was overlooked throughout the mediation process. The decision to ignore the factual issue had significant impact on the medical causation issue. Notably, the most significant injury allegedly sustained by the plaintiff in the accident, could not have occurred if the defendant’s version of events were accepted. Since the factual argument was not made, the causation argument was conceded without a fight. Knowledge of the medicine could have resulted in a different approach by the defense.
In another case, the plaintiff had sustained a variety of injuries allegedly because of a car accident. The claim itself did not contain a lost wages component, but the evidence produced revealed that the plaintiff worked in the construction field. Nothing introduced in the evidence or the testimony elicited from the plaintiff himself concerned itself with the actual construction job that the plaintiff held and the length of time he was at any specific job function. Of note, the most significant injury being alleged is a quite common injury to jack-hammer operators. Considering some other related factual circumstances (specifically arthritis present at the injury site just weeks after the subject accident) in the case, this issue should certainly have been advanced. In this case, the defense accepted the existence of arthritis as a claimed damage item to the plaintiff years after the accident, but seemingly missed the presence of the arthritis in a medical record concurrent to the subject accident. The existence of the arthritis at a much earlier date, together with all other factual issues that were present, would have brought more scrutiny to the issue of causation.
In general, just make sure you have checked all available medical records (including nurses notes and consultation reports) for evidence of pertinent prior medical history, preexisting conditions, or prior drug use.
In short, be prepared, know the medicine, feed the information to your neutral and be concise in your arguments and you can really win at arbitration. Please let me know what you think or share some of your own stories that could help us all achieve better results.