Q. What is necessary to bring a personal injury action?
A. A personal injury case is nothing more than a negligence claim. The theory is that the person would not have been injured were it not for the negligence of the other party. It is foremost critical to clearly establish that the other party was somehow negligent, i.e., at fault, responsible or liable for the accident. Presenting a credible and successful case is, however, generally considered to be a two-pronged test. Establishing liability without proof of damages will rarely produce a significant offer of settlement from an insurance company and will likely yield a mere nominal judgment after trial. It is necessary, in any successfully negotiated or litigated claim, to both prove liability and clearly delineate your damages. I might, however, suggest that the burden is actually more of a three-pronged test in the sense that meeting the first two prongs may likely produce little or nothing if the responsible party (the “tortfeasor”) or the injured person is not adequately insured.
Compensatory damages seek to place an injured person in the position in which he or she was prior to the accident, i.e., to “make them whole.” A victim is entitled to those damages that fairly compensate for all loss and injuries suffered or that will be endured as a result of the accident. The victim is generally entitled to recover for reasonable expenses incurred for medical care and nursing, lost wages and impairment of earning capacity, general damages for pain and suffering, disfigurement or disability, aggravation of preexisting injury or disease, loss of enjoyment of life, loss of consortium, and wrongful death.
In automobile accident cases where there are no fractures, loss of sight or hearing, permanent and serious disfigurement, significant scarring, loss of a body part or death, a client will not be able to recover against the other party unless the client has met the monetary tort threshold (currently $2,000 in medical bills and funeral expenses) as defined in Massachusetts General Laws Chapter 231, §6D. In addition, the medical expenses must be “reasonable and necessary expenses incurred in treating such injury.” A defendant may properly challenge medical expenses as being unreasonably high, unnecessary or incurred for purposes of treating a preexisting condition not related to or aggravated by the accident.
Some situations arise when parties are comparatively negligent and liability may be assessed on a proportionate basis. Under Massachusetts General Laws Chapter 231, §85, the plaintiff in a personal injury action has the advantage of a presumption of due care that remains until the defendant introduces evidence contradicting the presumption. The plaintiff will be barred completely only where his or her negligence is greater than the total negligence of the defendants against whom recovery is sought. If the plaintiff’s negligence as compared with the total negligence of all the defendants is 51% or more, the plaintiff is totally barred from recovery. If the plaintiff’s negligence as compared with the total negligence of all the defendants is 50% or less, the plaintiff’s damages are reduced in proportion to the plaintiff’s negligence.
The tortfeasor most likely has bodily injury coverage, which is the coverage that applies to all of the elements of damages, including pain and suffering, medical bills, lost wages, lost earning capacity and loss of enjoyment of life. In the event that the tortfeasor has no insurance and if uninsurance is insufficient to cover the damages, the client may have to sue the defendant unless the defendant is judgment proof. See below for a discussion of both uninsured and underinsured motorist coverage.
Q. How will my legal fees be paid in a personal injury case?
A. Unlike other types of civil cases and criminal cases, in which an hourly fee or a flat rate fee might be charged, a contingent-fee agreement is the mechanism that contractually binds the lawyer and client in most, if not all, personal injury cases. Also unlike other types of fee agreements, a contingent-fee agreement is required to be in writing. The customary and standard industry fee is 33.3%, more commonly referred to as a “one-third” fee. Percentages may occasionally vary on a case-by-case basis. The “contingency” upon which compensation is to be paid to the lawyer is the recovery of any sums whether by settlement or litigation. The lawyer bears the risk that if there is no recovery, there is no fee. It is for this reason that the prudent lawyer will carefully evaluate the merits of a personal injury claim prior to undertaking legal representation of the client.
The practice of this law office, unlike many others, is to send the client a monthly bill as the bodily injury case progresses. The purpose is to keep the client periodically informed as to any and all reasonable expenses incurred and disbursements made on his or her behalf. This should eliminate any later surprise and safeguard against an ultimately unaware and dissatisfied client, for every client is entitled to always know for what the lawyer is being paid. The client is not expected to pay these monthly bills upon receipt and all legal fees and expenses will be deducted from the final settlement or judgment.
Q. What is PIP?
A. Personal Injury Protection (“PIP”) is listed as Part 2 on the standard automobile policy and is governed by Massachusetts General Laws Chapter 90, §34M. PIP is a “no-fault” benefit, meaning that it makes no difference who is legally responsible for the accident. Therefore, the policyholder does not incur any subsequent increase in premium or surcharge as a result of benefits paid through the provision. The PIP insurer will commonly subrogate against the legally responsible party. The subrogation process is the responsible party’s insurance company paying back to the PIP insurer any sums it has advanced under the PIP provisions of the policy, effectively being reimbursed.
PIP provides for payment of an injured person’s medical expenses, lost wages and replacement services and generally affords coverage to (1) you, or any other person, if injured while occupying your auto with your consent, (2) you, or anyone living in your household, if injured while occupying an auto which does not have Massachusetts Compulsory Insurance or if struck by an auto which does not have Massachusetts Compulsory Insurance, or (3) any pedestrian, including you, if injured by your auto in Massachusetts or any Massachusetts resident, who, while a pedestrian, is struck by your auto outside of Massachusetts. On the other hand, PIP benefits are not payable to or for (1) motorcycle operators, motorized bicycle operators and moped operators, (2) persons who contributed to their injury by operating under the influence of alcohol or drugs, or while committing a felony or avoiding arrest, or specifically intending to cause injury to himself, herself or others, and (3) anyone entitled to workers’ compensation benefits for the same injury.
PIP will pay for as many people as are injured or killed in any one accident, but the most it will pay for injuries to any one person is $8,000, irrespective of how many autos or premiums are shown on the insured’s Coverage Selections Page. There is, however, a “coordination of benefits” if an injured person has his or her own health insurance policy, e.g., Blue Cross, Harvard Pilgrim, Tufts, Aetna, Cigna, etc.. In these instances, PIP will cover up to the first $2,000 in medical expenses and will thereafter notify the medical provider to submit any unpaid or future bills directly to the health insurer along with a copy of the “PIP 2K exhaustion letter” (lost wages, however, will continue to be paid uninterrupted from the remaining $6,000). PIP will typically thereafter cover any reasonable medical expenses that the health insurer either fails to cover or denies (e.g., deductibles, co-payments, noncovered services, etc.) up to $8000. It is, however, crucial to note that PIP now has the legal right to deny payment of any bill that the health insurer denied payment because a required “referral” was not made. It is therefore always critical for a patient-claimant to promptly obtain any necessary referrals from his or her primary care physician’s office, in accordance with the requirements of the applicable health plan, no differently than if the patient were seeking treatment for a medical condition that was not related to the accident. A coordination of benefits will not generally occur if the other health insurance is an ERISA plan (e.g., most health plans in labor unions) or one issued by the state or federal government, such as Medicaid, MassHealth, Neighborhood Health Plan, Medicare, etc. These types of health plans usually require that the entire $8,000 PIP benefit is first exhausted before it will consider paying any additional benefits. In fairly common cases where a person does not have any health insurance, PIP will pay uninterrupted up to $8000.
PIP benefits are paid only for expenses or losses actually incurred within two years after the accident. In few instances, an insured will elect to pay a smaller premium by choosing a “deductible” where the PIP coverage could exclude yourself or household members. In these cases, PIP will only pay up to the difference between $8,000 and the amount of the deductible shown on the insured’s Coverage Selections Page. For example, if the PIP deductible is $8,000, there is essentially no available PIP coverage. Selecting a PIP deductible is relatively rare and certainly not recommended as the risks always far outweigh the minimal savings.
PIP benefits are paid before any other benefits that may be payable under the same automobile policy, e.g., Part 6 medical payments. PIP will not pay benefits to the extent that those benefits would duplicate expenses or losses recovered by that person in a court judgment or settlement. If an injured person is also entitled to PIP benefits from another auto policy, the total benefits payable will not be more than the highest amount payable under whichever one of the policies would have paid the most (“stacking” of multiple PIP policies is not permitted). In this situation, each insurer will pay only its proportionate share. An insurer will not pay PIP benefits under one policy which duplicate PIP payments made under another auto policy.
Q. How will my lost wages be paid and can I obtain replacement services for things I can no longer do myself?
A. If an injured person is out of work because of an accident, PIP will pay lost wages up to 75% of his or her average weekly gross wage or equivalent for the year ending on the day immediately before the accident. PIP will not pay for the loss of any other type of income. If the injured person was unemployed at the time of the accident, PIP will pay up to 75% of the amount he or she actually lost in earning power (i.e., “lost earning capacity”) as a result of the accident. The claims to and estimation of lost earning capacity is, however, oftentimes the subject of disharmonious dispute. It is important to be able to promptly provide your lawyer with as many pay stubs as possible and copies of tax returns that cover the preceding two years.
Some people have a wage continuation program at work and PIP will pay them only the difference between the total it would ordinarily pay and the amount of the program payments. PIP will, however, reimburse the program if it allows the benefits to be converted into cash or additional retirement credit. In instances where program benefits are reduced or used up because of payments to the person injured in an accident, PIP will pay for lost wages resulting from any other illness or injury that person has within one year of the last PIP payment. The exact amount of the PIP payments will be determined by Massachusetts law.
PIP will also provide replacement services where it will reimburse the injured person for reasonable payments made to anyone outside his or her household for necessary services that he or she would have performed without pay for the benefit of the household, had he or she not been injured. For example, an injured person may now have to pay for a taxi or food shopping service, day care, a babysitter or yard care, whereas this was not necessary before the accident. Beware that the PIP insurer will closely scrutinize which replacement services are reasonable and necessary before making any such payments and it is therefore always prudent to obtain prior written authorization from the PIP adjuster. Remember also that PIP benefits for replacement services may be somewhat limited as the maximum PIP coverage afforded is $8,000, and that the total dollar amount is usually disproportionately disbursed amongst the medical expenses (in combination with any applicable health insurance benefits), lost wages and replacement services.
Any lost wages, lost earning capacity, or replacement services not otherwise paid or reimbursed by PIP can later be asserted in the claim for damages against the legally responsible third party as part of the bodily injury settlement or litigation.
Q. What is an independent medical examination?
A. The standard automobile policy and Massachusetts General Laws Chapter 90, §34M permit the PIP insurer to conduct an independent medical examination (“IME”) of the claimant to determine whether the medical care rendered is reasonable and necessary. I will, in opening this discussion, first state that it is not unusual for the physician’s report to this exam to suggest a cutoff notice for treatment considering the examining physician is hired by, and essentially works for, the insurer. Lawyers and treating physicians commonly refer to these IME physicians as “hired gun” doctors. In order to preserve a client’s right to continuing medical benefits, it is sometimes productive for the lawyer to consult these findings with the client’s treating physicians, to obtain contrary medical reports, and to file a formal written rebuttal to the cutoff
It is important to bear in mind that, although the exam is scheduled by either your own insurance company or that which insures the automobile that you were occupying, and the examining physician may appear pleasant, this exam is rarely to your benefit. Its primary function in the vast majority of cases is to generate a predictably incomplete and unreliable medical report, one which oftentimes lacks any supporting medical records, which will provide a so-called justifiable basis for the PIP insurer to terminate continuing medical benefits on your behalf. A premature termination of your PIP benefits may also effectively serve to terminate or significantly limit your claim for damages with the third-party insurer (the bodily injury claim) if you are thereafter unable to obtain necessary ongoing medical treatment, especially if you do not have health insurance. It is for these reasons that lawyers commonly refer to the IME as the “Insurance Manipulation Exam.”
Most of these exams last only from 10 to 15 minutes, yet the PIP insurer stubbornly upholds its challengeable contention that such a cursory “once-over” can reasonably produce a medically reliable opinion that you are somehow at a medical-end result and that further treatment is not necessary, despite your obvious discomfort and continuing disability. I have represented numerous examinees where pending or subsequent MRI findings clearly indicated that they suffered from a severe nerve impingement or a herniated disc, all following an IME physician’s incredulous opinion that my client did not need further treatment. I have also similarly had a client who needed reconstructive knee surgery, and one that needed back surgery, after bogus IME opinions.
The first part of the exam typically consists of the physician taking a brief five-minute “history” from the examinee. (I do not refer to you as the “patient” because the IME physician is not your treating doctor and really knows nothing about your injury or treatment history.) This history will inquire into various areas including, but not limited to, whether you were seat-belted, subjective complaints of pain and discomfort, hospitalizations, current medical treatment, daily routines, previous accidents, previous or preexisting injuries or conditions, previous surgeries, medications, family medical history, work history, etc. Many examinees have a natural tendency to disclose way too much information to their later detriment. The better practice is to answer only the questions asked and not to volunteer any information that might be misconstrued or misquoted in the IME report. If you disclose that you had a previous accident of any kind, you should make it very clear that you had made a complete recovery from your prior injury and that you are now experiencing a completely new injury, and not an exacerbation of a preexisting condition, even if the new injury is identical to the former injury.
The second part of the exam is the physical examination itself. The physician will require that you perform certain movements to assess your disability and limitations. The physician may press against certain body areas and test your resistance. Amongst other things, your posture, sitting, bending, head and neck movement, and any overly relaxed appearance will be closely critiqued and scrutinized. Remember that some days might be better than others for you and that you might be found here on a good day, one that is maybe not truly indicative of your typical condition. Your level of pain or discomfort might be less during this time of the day and significantly more during the evening, after you perform certain activities, while sleeping, or immediately upon awakening. Be clear about these things with the physician and voice your opinion if something is being missed, dismissed, misleading or unfair … and do not make the physician’s job easier by trying to move about too freely!
It is always a good practice to take an independent witness with you to the exam, notwithstanding that this witness will not be permitted to enter the actual examination room. This witness can be a family member or friend who, if necessary, can later testify as to the briefness of the exam. Time the exam yourself if you cannot bring a witness and immediately write the beginning and ending times down as soon as you get to your car. It is important to immediately provide any information about the exam to your lawyer whether or not you think it is important.
Some examining physicians have been known to sneakily watch an examinee’s arrival, waiting room activities, and departure, and will comment in the IME report on any apparent ease of movement to imply that the examinee was faking injury during the actual exam. Though almost all injured examinees will be capable of spontaneous movement, one must exercise extreme caution not to make sudden and unexpected movements. Remember the old trick where the physician “accidentally” drops his pencil to see if you will jump at the opportunity to politely pick it up. In summary, be smart and, like the examination itself, be brief.
Q. Who can take a lien against my personal injury claim?
A. Hospitals, health maintenance organizations and selected medical providers have a statutory right to assert a lien for benefits paid or charges incurred against a third-party recovery, i.e., the right to be reimbursed. Most health care providers and private health insurance companies will place a lien on the bodily injury portion of the case if they do pay for medical bills resulting from an automobile accident. Massachusetts General Laws Chapter 111, §§70A-70D set forth the procedure whereby a health care provider may perfect a lien. The statute expressly provides that written notice of lien must be sent, via certified mail, return-receipt requested, to the injured party, his or her attorney, and the insurer prior to the third-party settlement. Unlike liens asserted by state and federal government assisted medical benefits programs such as Medicaid, MassHealth, Neighborhood Health Plan, and Medicare, and workers’ compensation liens (see below), written notice of lien is a condition precedent to any recovery by the medical provider.
The lien attaches only to recovery from the liable third party or parties, not to first-party contractual coverage such as uninsured or underinsured motorist coverage or PIP benefits. A health maintenance organization lien can be asserted against the third-party recovery without regard to the amount of PIP benefits paid. Where a lien has been properly perfected, health care providers often compromise the amount of their recovery based on the particular circumstances of a claim. The lawyer will often attempt to negotiate the lien amount during the settlement negotiation process to maximize the client’s net recovery.
Under Massachusetts General Laws Chapter 152, §15, the “sum recovered [from a third party] shall be for the benefit of the [workers’ compensation] insurer, unless such sum is greater than that paid for it to the employee, in which event the excess shall be retained by or paid to the employee.” The issue of a workers’ compensation lien arises when a person is injured arising out of and in the course of that person’s employment, and liability for the injury rests with a third party other than the employer. For example, a driver injured in an automobile accident while working would be entitled to workers’ compensation benefits and to file a third-party action against the responsible party. By virtue of its payment of benefits, the workers’ compensation insurer has a statutory lien on the third-party settlement.
A §15 petition for leave to settle with a third party must be first filed with either the court or the Department of Industrial Accidents (“DIA”), which will hopefully approve the proposed settlement. Approval by the court may be sought when the case is already in suit or if settlement is reached at the time of trial. The DIA may approve the petition whether the case is actually in suit or a suit has not yet commenced. An actual hearing before the DIA is unnecessary in cases that typically involve less complicated injuries, such as where there has been limited or no lost time, and the petition can be submitted by mail for approval. A judge will likely require a hearing for more serious injuries to ensure that the claimant understands the terms and effect of the settlement.
The workers’ compensation insurer is not obligated to reduce its lien nor does the court or DIA have authority to request a reduction. However, a reduction in these liens are generally considered in certain cases in which liability against the third party is questionable or where damages far exceed the available insurance coverage. The result of convincing an insurer to reduce its lien produces a larger net settlement for the client.
Q. What if the other car is not insured, or is stolen, or if I am the victim of a hit-and-run accident?
A. Uninsured Motorist Coverage (“U or U1”) is a mandatory coverage listed as Part 3 on the standard automobile policy and is governed by Massachusetts General Laws Chapter 175, §§113C and 113L. U1 coverage can be crucial in single-car accidents, e.g., in phantom vehicle cases, for passengers who are injured in an uninsured vehicle, or for drivers and passengers not at fault when struck by an uninsured driver. Many people are not aware of this coverage until an accident occurs and this coverage is called into play, and then decide to raise their uninsured limits, unfortunately too late for the case at hand.
Despite Massachusetts laws requiring compulsory coverage, many people are injured or killed in accidents that result from the negligence of the operator of an uninsured automobile. U1 coverage is for the benefit of the victims of uninsured motorists. An “uninsured” case may arise in several ways. One is when the auto causing the accident is stolen. Another is when the auto causing the accident is a hit-and-run vehicle or is unidentified to the extent that no one can determine who owns or is driving it. A hit-and-run vehicle only has to cause the accident and does not have to make actual physical contact with your automobile. For example, a vehicle may cross over the center of the road into the path of the victim’s vehicle, which, to avoid an accident, then turns sharply and goes off the road into a tree, and the operator of the vehicle that crossed the road does not stop to provide identification. The seemingly most common uninsured cases, however, are those when the auto causing the accident does not have any insurance, such as (a) autos in Massachusetts that were never insured or registered at all; (b) autos in Massachusetts that were insured but the insurance was canceled for nonpayment of premium; (c) autos in Massachusetts that were insured but the insurer became insolvent; and (d) autos outside Massachusetts that never had insurance, e.g., from noncompulsory states like New Hampshire and Vermont.
A claimant who is “using” the insured’s automobile must have the owner’s actual consent to use it or U1 benefits may be denied, or otherwise limited such as in instances when the person thinks the owner has consented to use. Guest occupants of autos may recover U1 benefits from the policy of the auto that the guest occupied. The insurance policy provides that there must be “prompt’ notice of any potential U1 claim, as well as notice to the police and insurance company within 24 hours of a hit-and-run accident, or the claim may otherwise be denied. However, the insurer must prove it was prejudiced by a lack of prompt notice in order to successfully disclaim coverage.
A claimant cannot bring a lawsuit against the insurer to litigate a disputed U1 claim as the insurance policy requires these to be decided by arbitration. Unless the parties otherwise stipulate, the arbitrator will decide both liability and damages. There must be a finding of fault against the uninsured driver for U1 to apply, and the rules regarding comparative negligence also apply. The value that the arbitrator assigns to the claim is then reduced by the amount of any PIP payments, any workers’ compensation payments and any damages paid by another joint tortfeasor as a result of a first-party claim, e.g., in a dram shop case against a bar or in a collision with two autos, one of which is uninsured. The statute of limitations for filing a U1 claim is six (not three) years because it is a claim in contract, not tort. The statute of limitations typically begins to run when the insurer violates the insurance contract by refusing to arbitrate, however, an insurer can avoid the delay in time when the statute begins running by compelling arbitration itself.
Q. What if the responsible party does not have enough insurance to pay for my claim?
A. Underinsured Motorist Coverage (“U2”) is an optional coverage listed as Part 12 on the standard automobile policy and is governed by Massachusetts General Laws Chapter 175, §113L. U2 coverage compensates for bodily injuries or death when the responsible party’s automobile bodily injury insurance is insufficient to satisfy the value of the claim. Much of the information regarding uninsurance (“U1”) applies equally to U2 and the reader should refer to the immediately preceding FAQ discussion with regard to U1 coverage, with specific reference being made to the last two paragraphs. However unlike and in addition to the deductions made in a U1 claim, the value of a U2 claim is also reduced by the amount recovered under the bodily injury (“BI”) policy of the responsible owner and operator or the BI limits in the policies covering all responsible owners and operators of insured autos.
The Massachusetts legislature redefined U2 coverage in 1989 by inserting the so-called “trigger” provision, which states that the responsible party’s BI limit has to be less than the nonresponsible policyholder’s limit of U2 coverage in order to collect. This means that there is an automatic offset to the amount of U2 coverage shown on the nonresponsible policyholder’s coverage selections page so that the amount actually available in any particular case is always actually less than the amount listed there. For example, if the available BI limit is $20,000 and the available U2 limit is listed as $100,000, the injured person might be entitled to collect up to $80,000 from the U2 coverage, assuming that he or she has already collected the entire $20,000 from the BI coverage in the first-party claim. The total recovery from both claims, therefore, maybe up to only $100,000, not $120,000. The trigger notably applies even if the U2 limit is equal to a minimal $20,000 BI limit. Therefore, a claimant with only a $20,000 U2 limit really has no U2 coverage at all because, as illustrated in the above example, the claimant is only eligible to collect the difference between a higher U2 limit and a lower BI limit.
The trigger is the sum of all the BI insurance that is available from all potentially responsible parties. Therefore, if the claimant is a passenger in a vehicle involved in a two-car collision where both drivers are at fault, the trigger is the combined BI coverage available to both drivers. For example, if both drivers have $20,000/$40,000 of BI, then the trigger is $40,000, and if the claimant has U2 of $25,000 available, the trigger will eliminate all such U2 coverage.
The automobile policy provides that in order to pursue a U2 claim, the claimant needs the permission of the U2 insurer to settle the primary BI claim(s). This will generally permit the insurer to first perform an asset search to determine whether or not the responsible party has any other available insurance policies or assets, in addition to their automobile coverage, that can potentially be reached and applied to satisfy all or a part of the remaining value of the claim. Any BI settlement made without that permission may eliminate the U2 claim altogether. This is commonly known as obtaining “consent to settle.” An insurer’s consent to settle may not be unreasonably withheld, and the insurer must prove prejudice if it intends to deny a U2 claim against it because the claimant did not first get the insurer’s consent to settle the primary BI claim(s).
Q. Who will pay for my car rental if my automobile is being repaired, replaced or is stolen?
A. Substitute Transportation Coverage (“rental”) is an optional coverage listed as Part 10 on the standard automobile policy that provides reimbursement for renting a substitute vehicle if your automobile is involved in a collision or if there was damage or a loss that is covered by comprehensive insurance and the vehicle is being repaired or replaced. Comprehensive Coverage is an optional coverage listed as Part 9 that covers the physical damage to, or the loss of, a motor vehicle as a result of some incident other than a collision with another vehicle. Examples of such incidents include “vandalism, fire and theft, missiles, falling objects, larceny, explosion, earthquake, windstorm, hail, water, flood, malicious mischief, riot or contact with a bird or animal.” If your automobile is stolen and you have rental coverage and also have comprehensive substitute transportation coverage, then the comprehensive coverage pays first, and the rental coverage pays for the balance of the rental bill.
The usual rental coverage is $15 per day up to a maximum of $450. It is, however, strongly recommended that you purchase the higher available limit of $30 per day up to a maximum of $900. Rental insurance also pays for taxi rides, bus fares and other transportation expenses if a substitute automobile is not rented, but only up to the limit of the $15/$450 or $30/$900 coverage that you purchased on your policy. Finally, if the accident was not your fault and you either do not have rental coverage under your own automobile policy or you are not fully reimbursed under your own policy for your rental bill, you may be able to seek payment of the balance of your bill under the responsible party’s property damage insurance coverage.
Q. When should I consider mediation or arbitration and what is the difference?
A. There are alternative methods of negotiating and settling a claim that can oftentimes prevent courtroom litigation. Alternative Dispute Resolution (“ADR”) is a process often used to obtain resolution of a case short of adjudication by a judge or the rendering of a verdict by a jury. All forms of ADR are predicated on bringing in a “neutral” person to help negotiate or evaluate a claim or to have it ultimately decided. ADR, such as mediation, arbitration or nonbinding case evaluation, might be considered to be a viable option if settlement negotiations between the parties reach an impasse. ADR is generally inexpensive, quick, confidential and civilized and may therefore be in the best interest of a client who does not have the time, good health, mental stamina or money to endure the more so lengthy and expensive litigation process. ADR may also be preferable to the client who resides out of state.
Court litigation may be a client’s only recourse if the case is one of first impression or the insurance company refuses to negotiate at all. A jury trial may be the better option if the plaintiff can attribute great liability to the defendant and sustained significant damages, is eminently likable and the defendant is not. ADR is probably inappropriate where the insurance company has not or will not make a settlement offer, and is inadvisable if the claimant’s lawyer has an educated sense, especially in arbitrated cases, that the neutral will not be partial to the claimant. Some clients also, and for their own reasons, simply want their “day in court.”
The outcome of a case brought before a neutral third party who is a retired judge or an experienced attorney is, however, invariably more predictable than a jury verdict. Professional neutrals understand certain elements of a bodily injury claim that a jury might fail to understand, such as lost earning capacity, joint and several liability, comparative negligence, exacerbation of preexisting injuries and complex medical issues. When selecting a neutral, it is therefore important to focus on his or her expertise, i.e., experience, skills and style. In stark contrast to the lawsuit that seemingly assumes a life of its own and drags out, another significant advantage of ADR is its relative promptness in that it usually occurs when it is scheduled and without continuation.
Mediation is more often used than arbitration because it is, by definition, nonbinding on the parties. Its primary advantage is that you retain control over whether or not you settle the case. Mediation is essentially a negotiation process where the neutral interposes and explores with you the strengths and weaknesses of both sides. The mediator’s job is to persuade the parties as to the merits and value of the claim and to convey demands and offers in an effort to close the gap in order to settle the case.
Mediation can be useful if communications have broken down between the parties. An experienced mediator can be particularly effective in opening the lines of communication and facilitating a settlement. I would, however, typically caution against mediating a claim where the insurance adjuster has made either an extremely low or no initial settlement offer in advance of the proposed mediation; a claimant is better served to come to the mediation table with a somewhat reasonable offer pending. One should beware of an insurance company’s propensity to mediate as a way of potentially obtaining free discovery.
Arbitration, in contrast, is always legally binding upon the parties and generally there is no right for an aggrieved party to appeal an arbiter’s unfavorable or adverse decision. Massachusetts General Laws Chapter 251 delineates the few and very narrow grounds for appeal. Formal courtroom rules of evidence and procedure are usually relaxed to a certain degree depending upon the particular arbiter. Unlike mediation, which is always voluntarily entered into by the parties, arbitration may be required in certain insurance contract matters; see above FAQ discussions regarding mandatory arbitration in uninsured (“U1”) and underinsured (“U2”) motorist claims.
The parties may proceed by way of “straight” arbitration. This is when any amount the arbiter awards is the actual amount that will be paid to the claimant, no matter how unfairly low or preposterously high it might seem. Another common arbitration device is the so-called “high/low” agreement. This is when, in advance and usually without the arbiter’s knowledge (so as to avoid any undue influence and attempt to split the difference evenly), the parties agree to a high number and a low number, often the last demand and the last offer. The high or low number respectively decides the amount of the award if the arbiter either goes above or below it. If the arbiter selects an amount between the high and low numbers, the arbiter’s number is the amount awarded. The high/low process is commonly employed in cases where there is a serious dispute about liability and purports to afford a reasonable and comforting assurance to both parties, needless to say at their own risk of possible miscalculation and lost opportunity. In any event, the claimant avoids the potential of an all-or-nothing result and the insurer avoids the potential of an extraordinarily large award.
In summary, the primary difference between mediation and arbitration is that mediation is nonbinding whereas arbitration is binding. As with a jury trial, representing a client at an ADR proceeding requires careful and thorough preparation with regard to documentation, circumstantial and physical evidence, client and witness testimony, and in the always dubious selection of the proper neutral. ADR, however, can be advantageous in most cases because of the control you retain and its relative predictability.