Moat Associates

Objectives of Insurance Arbitration:

Alternative Dispute Resolution of insurance conflicts, whether arbitration or mediation, when properly managed and conducted can provide one or more of the following benefits.

• An expeditious process.
• A fair, impartial hearing conducted by an industry experienced hearing officer.
• Limited costs
• A knowledgeable, explicit answer, based on facts and law, to an industry specific issue.

How to Achieve the Objectives of Insurance Arbitration

Selection of the Mediator/Arbitrator:

Guidelines can’t make up for experience. Thus, the first step toward a successful mediation or arbitration is the selection of the mediator or arbitrator(s). Experience comes in many forms, however, and one ignores the differences at one’s peril. Past experience(s) as a mediator or arbitrator can provide counsel with an indication of an individual’s style, fairness and expertise. It is generally recognized, however, that experience with the subject and the subject industry, an understanding of the rules of evidence and experience with the litigation process provide important requirements for controlling and guiding the process and eventually arriving at and enunciating an unprejudiced ruling.

Pre-Hearing Conference:

A successful and efficient process begins with a pre-hearing conference. At this stage the successful mediator/arbitrator can evidence his/her skills by guiding competing counsel to agreement on, but not necessarily limited to, the following key points.

• The rules to be followed.
• The authority of the mediator/arbitrator(s).
• The key issues, especially those that the parties expect the mediator/arbitrator(s) to decide.
• A mutual understanding that this is not an exercise in motion practice. Opposing counsel should be encouraged to recognize that few, if any, issues will be resolved on motion papers prior to the hearing itself.
• The setting of reasonable limitations on discovery and the number of witnesses.
• Stipulations of mutually accepted facts and documents.
• The conduct of the hearing – place, duration, how each side will present its case and the development of an official record.
• The kind of opinion that the parties want. Quick and simple? With or without supporting rationale? One that contains only brief support or one that is complete including references to the law and facts? The more detailed an opinion that is expected the more necessary it is to have a full and complete record of the proceedings.

The Hearing:

If the parties see the mediation/arbitration process as an expeditious, cost-saving way to resolve a dispute, then the hearing provides the greatest opportunity to achieve these objectives. An efficient hearing is likely if, and only if, the mediator/arbitrator takes control from the start, requires counsel to follow agreed upon rules, guidelines and elements of mutual respect and good manners.  These and related issues should have been made clear at the pre-hearing conference and are likely to be easily achieved if the mediator/arbitrator(s) have been effective during this period. As the mediator/arbitrator(s) have limited, if any, opportunities to impose sanctions the importance of selecting strong, well-organized intermediaries becomes immediately apparent.

The Record:

The initial record should recognize the appearance of the parties and their counsel. The mediator/arbitrator(s) should be introduced and counsel given an opportunity to ask questions and raise objections, if any. It should also include a clear statement of the issues that have been agreed to be decided and the rules to be followed. Stipulations of fact should be recorded and documents agreed upon marked for evidence.

Opening Statements:

As opening statement should not be considered evidentiary, this should be an exercise in brevity, be non-argumentative, a simple statement of the facts and law of their case and how it will be presented.

Witnesses and Documents:

Probably nothing wastes more time and money in the ADR process than the use of unnecessary witnesses and the desire of counsel to lay a lengthy foundation for the credibility of a witness or the authenticity of a document.  The ADR process offers a way around lengthy court room requirements. Thus, every effort should be made to circumvent unnecessary formalities. Names of witnesses and documents should be exchanged in advance and, when appropriate, the opportunity given for depositions and further examination. Under such circumstances their introduction at the hearing should be brief and their testimony or authenticity a matter for valuation by the intermediaries.  Above all, there should be no surprises at the hearing.

Many mediators/arbitrators have realized too late that most witnesses, having never given formal testimony find the circumstances somewhat overwhelming and, as a result, are naturally nervous. The mediator/arbitrator should take a few moments to make each witness comfortable by familiarizing him/her with all the people involved, especially the stenographer and the need to speak clearly. It should be noted that as his/her testimony is important thus the witness who is unclear about a question should be encouraged to say so and in responding to a question has the right to take a moment to consider an answer. Witnesses should understand that the best answers are usually a simple “yes” or “no” followed by an explanation if deemed to be clarifying.

Objections:

Witnesses should be alerted to the likelihood of objections being raised by opposing counsel (and occasionally the panel itself) and instructed to stop or interrupt their testimony and await instructions from the mediator/arbitrator.

Objections raised before a witness has had an opportunity to get into his testimony should be resolved before the witness continues. Before ruling, opposing counsel should be given a chance to respond. As the ADR process normally shortcuts strict rules of evidence, the mediator/arbitrator(s) should allow the broadest latitude in admitting testimony – relying on their personal experience and judgment in evaluating the merits of proffered testimony.

As objections raised during a witness’ testimony often arise more from counsel’s disappointment at what he is hearing they should be overruled, the witness allowed to continue and counsel given an opportunity to “move to strike” following the completion of the answer. Again, the mediator/arbitrator has broad latitude and has the opportunity to allow the testimony to continue on the record with the indication that it will be given careful review.

Closing Statement:

Like the opening statement, whether oral, written or both, these should be brief, a clear and concise presentation of the facts and law in support of their case as it involves the issues on which the mediator/arbitrator(s) are expected to rule. Most mediators/arbitrators will find it useful to have a written closing statement particularly if it can be stressed that it is most valuable when it comports with the aforementioned standards.

The Decision:

To avoid disappointment, it must be agreed in advance what is expected. Unless agreed otherwise, the parties expect, and are entitled to, a well-reasoned decision based on the facts presented and the law rendered in timely fashion. This mandates for a stenographic record that includes a clear statement of the issue(s) that the mediator/arbitrator has been asked to decide. Without a formal record, the parties have no basis for expecting other than a simple conclusion. Regardless of the existence of a formal record the parties should expect – nay, demand, a specific and supported opinion not simply an effort to make everybody happy.

Mr. Moat’s  insurance arbitration skills have resulted from having been “in the trenches” of the insurance business and having been called upon to resolve a multitude of conflicts and disputes involving insurance personnel and insurance industry custom and practice.

Other Articles and References Related to Insurance Arbitration

Federal Arbitration Act, Title 9, USC §1-14;
Organizing and Controlling the Arbitration Process, Moat;
Uniform Arbitration Act, 1955, Revised 2000,
American Arbitration Association, www.adr.org
American Reinsurance and Insurance Arbitration Society, www.ARIAS.org