I needed to have a physical examination done a couple of months ago, so I asked around and found the name of a respected internist in my community. When I appeared for my appointment several weeks later, I was given a clipboard with lots of documents to fill out and to sign.
One of the documents was a binding arbitration agreement. In effect, the doctor – whom I had not even met at this point – was asking me to agree to waive my Constitutional right to a jury trial in order to obtain health care from her. Because I am a lawyer and I understand why a patient should not be required to agree to binding arbitration, I was more than a little offended.
I told the nurse at the desk that no one had mentioned this to me when I made my appointment and that I objected to binding arbitration. She told me that the doctor couldn’t see me unless I signed the paperwork, so I did – knowing that I had 30 days to send a letter to the doctor rescinding the agreement.
I liked the doctor a lot. She seemed genuinely interested in me and my health care concerns. I was impressed by her thoroughness. She reviewed some lab work I’d had done with me and we settled on a treatment plan for a possible thyroid problem. She gave me a prescription and we agreed I would see her again in three months. She also referred me to another doctor for some routine testing I knew I needed.
When I returned to my office, I wrote a letter to her office, rescinding the binding arbitration agreement and three days later, I got a certified letter dismissing me as her patient. Her insurance company would not permit her to treat patients unless they agreed to waive their right to a jury trial, her letter said.
When I went to see the doctor to whom she referred me, I was presented with the same binding arbitration agreement, but this time I discussed my concerns directly with the physician. I asked what he knew about binding arbitration and he admitted he knew nothing, that the form was required by his insurance company and most patients just went ahead and signed it.
I explained to him that the agreement wasn’t even in his best interest. Physicians win in trial more than 80% of the time. Figures for arbitration aren’t readily available, but it is widely accepted that physicians lose in arbitration more often. So, why would the insurance company require binding arbitration? Because arbitrators generally award far less in damages than a jury would be likely to do.
Insurers also prefer arbitration because it has more control over who will be deciding the case. “Neutral” arbitrators are usually paid $300 – 600 per hour for the time they spend hearing and deciding a case. The insurance companies utilize the services of “neutrals” all the time and, thus, are an important source of their income. An arbitrator who expects repeat business from an insurer is unlikely to make decisions that will jeopardize that arrangement.
Consider a case I handled several years ago. The lawyer representing the defendant doctor told me that he would pay $75,000 to settle the case if he could get his client to consent. Unfortunately, the doctor refused, so the case went to binding arbitration. I hired an arbitrator; the doctor’s lawyer hired an arbitrator and we agreed on a “neutral” arbitrator.
I put on my case and I thought it went very well. Then, on cross-examination, the defense expert surprised everyone when he agreed that the injury was such that it could only have occurred if the defendant was negligent. In effect, the expert witness hired on behalf the doctor agreed with my expert, something that happens very, very rarely. My client and I were thrilled. We had just won the case, we thought. I figured that a number of damages that should be awarded probably would range in the $135,000 to $150,000 range, but could go as high as $175,000 to $200,000.
After several hours of deliberation, my party arbitrator came out to talk to me. “Well,” he said, “I have good news and bad news.” I was stunned.
“The good news is that you can win this arbitration,” he explained.
“Win? I’ve already won. Their expert admitted that the defendant was negligent. How could I possibly lose?” I asked, incredulous.
“The bad news is that, unless you agree to an award of $65,000, the neutral arbitrator is going to vote against you on liability and you will lose.”
I ranted and raved at the injustice, but it was a wise move on the part of the “neutral.” He could argue that he was fair in returning a plaintiff’s award, but by bringing the amount in at $10,000 less than the defense lawyer was willing to pay to settle the case, the carrier would be happy with the result and, no doubt, anxious to use his services in the future.
An argument is often made that arbitration is less costly than trial. It’s simply not true. The cost to my client of paying my party arbitrator and half of the fee for the “neutral” for three and days work was $18,000. The cost of jury fees in a trial lasting twice as long would have been a fraction of that amount.
For the arbitrator hoping for repeat business, the ability to earn $4,000 per day is a powerful motivator. Unfortunately, it is one that works to the detriment of plaintiffs, who might be involved in one mediation in a lifetime and, therefore, are not in a position to wield this economic power the way the insurance companies can.
After the arbitrators, experts and court reporters were paid, after I received attorneys’ fees of about $18,000 (for two years of work), my client netted less than $30,000 for a permanent injury to her hand.
The next time you go to a doctor’s office, read the paperwork you are given and, if you object to binding arbitration, discuss it with your doctor. The right to a jury trial is guaranteed you by the Constitution and, if you waive that right know that there may be serious consequences in the event you find yourself needing to make a claim.