There's More to Arbitration Than You Think (2007)

By Thomas C. Hays

Anyone who does insurance defense/personal injury work for any period of time will be faced with an underinsured/uninsured motorist arbitration, or some other case involving an insurance policy or contract that has an arbitration clause. One observation I have made recently is that the arbitration process is taken for granted, with attorneys on both sides failing to adequately prepare. In defense of the ill-prepared, there is no bench or jury trial to prepare for, so many take a rather "laid back" approach: showing up with copies of medical bills and records, a police report, some photographs and a single witness, usually the plaintiff. All too often, the attorneys fail to execute an agreement up-front setting out which rules of arbitration, if any, will be followed, whether the rules of evidence will apply at the hearing, and any stipulations between the parties. Many even fail to exchange arbitration submissions beforehand. These "failures" are simply a lack of preparedness; but can cause embarrassment, or create delay when an arbitrator is presented with unexpected information from counsel.

Take this one very simple example: Defense counsel does not want the arbitrator to know the policy limits in question, so as to avoid any possible prejudice in deliberating, but counsel for the plaintiff includes those numbers in its' pre-arbitration submission. If these parties had actually prepared, by exchanging and reading each other's submissions before the arbitration hearing, the inevitable dispute that will arise at the very start of the arbitration would never occur. It would be discussed and settled, in one way or another, prior to the start of the arbitration. There is no excuse for failing to prepare a pre-arbitration submission, and the fact that it is not required should not provide any respite. In fact, as advocates, we are each required to "act with commitment and dedication to the interests of [our] clients." IND. R. Prof. C. 1.3, comment 1. It is our job, as a representative of our clients, to be "competent, prompt and diligent." IND. R. Prof. C. Preamble (emphasis added). Diligence requires preparation. So, prepare.

The Pre-Arbitration Agreement

When faced with the possibility of arbitration, counsel for all parties must create some sort of pre-arbitration agreement, setting forth general rules for the arbitration, including the extent of discovery, pre-arbitration deadlines, and whether the arbitration will follow a specified set of procedural rules. The pre-arbitration agreement must include what type of award the arbitrator will make, i.e., a total gross or net award, and whether or not the arbitrator should take into account any liens or set-offs for med-pay. If the arbitration is before a panel, the pre-arbitration agreement should also contain a provision concerning whether the panel's decision is unanimous or a simple majority. One should always know whether the arbitration is binding or non-binding, understanding the ramifications of each, and subsequent procedures should your client receive an adverse decision. If the arbitration is required by an insurance policy or contract, read the insurance policy or contract in advance of arbitration. While these suggestions seem like common sense, for too many of us they are not commonplace. Ironing out these issues before the process actually begins will avoid unnecessary problems at the hearing.

Indiana's Rules for Alternative Dispute Resolution

Despite the fact that many of us pretend it does not exist, arbitration is a recognized form of alternative dispute resolution in Indiana. The Uniform Arbitration Act governs arbitrations in Indiana in the absence of certain agreements. Indiana litigants should also familiarize themselves with the arbitration procedures discussed in the Indiana Rules for Alternative Dispute Resolution. There is a detailed discussion of the arbitration procedure in Rule 3.4. This discussion includes notice requirements, rules of discovery and evidence, submission of materials, and confidentiality. It also discusses the deadline for determination by the arbitrator and subsequent objections to the determination. Perhaps most important to this article is Rule 3.5 which deals with sanctions. This rule sets out that a court "may" impose sanctions, in an amount up to the costs and attorney fees related to the arbitration process, "against any party or attorney who fails to comply with the arbitration rules." IND. R. ADR. 3.5.

Determining the Role of the Arbitrator

Arbitrators are chosen for many different reasons, just like we choose mediators and judges. Counsel must discuss the desired role of the arbitrator: Will they advocate for the party that hired them? Will they remain neutral? Will they base their award on what a jury would do or what their own judgment or experience will be? May they entertain their own bias or prejudices when making their decision? Will the arbitrator be allowed to ask questions at the hearing? Will they be able to resort to sources outside what is presented at the arbitration hearing? Will there be a panel of arbitrators or an individual arbitrator?

Again, absent an agreement or understanding, the Uniform Arbitration Act examines all of these issues and provides guidance to resolve these questions and more through arbitration.

With a little planning and cooperation, the opportunities for surprise, delay, embarrassment, or unexpected results in your arbitration process can be curtailed. Arbitration, just like mediation, can and should be tailored to fit the circumstances of your case. Don't lose the valuable opportunity to create a solution for your client through arbitration. Don't plan to fail. Prepare. Good luck!

Contact Tom Hays with questions concerning this article and the questions related to it.