I found interesting a recent blog post by Claire Wilkinson of the Insurance Information Institute (III) reporting that:

In a new record, nearly 520,000 insurance claims disputes valued at more than $2.4 billion were resolved via arbitration in 2011, Arbitration Forums Inc reports.

According to AF, the nation’s largest provider of inter-insurance dispute resolution services, it is saving the property/casualty insurance industry more than $700 million in litigation costs annually.

. . .

Some 98 percent of the arbitration filings in 2011 were made electronically, via AF’s electronic subrogation claims system known as E-Subro Hub – more than twice the percentage of a few years earlier.

. . .

E-Subro Hub significantly streamlines the process by enabling users to electronically send and receive subrogation demands, attach supporting documents, manage subrogation claims and electronically file inter-company arbitration where necessary.

The question I have is whether this kind of positive outcome would extend to arbitrations between insurers and their personal lines insureds.  Regular readers of my blog will recall that I’ve mused on several occasions (see my August 22, 2011 blog post, for example) about whether insurers might increase the use of arbitration, with arbitration clauses that preclude class actions, in order to take advantage of the Supreme Court’s decision last year in AT&T v. Concepcion.  The data recently reported by the III suggests that arbitration can achieve substantial costs savings where there are sophisticated entities (insurers) on both sides and proceedings are streamlined.  Some of that simplification could be used in small consumer arbitrations, and indeed might be welcomed by many policyholders (and by insurance commissioners) as a good alternative to costly and lengthy litigation.  Even as an insurance lawyer I might be more inclined to buy coverage from a company that offers a fair and simple arbitration process for resolving small claim disputes.  But expanding consumer arbitrations in insurance also raises some issues that would not be reflected in the data regarding inter-company arbitration, including:

  • Will there be many more contested and lengthy arbitration proceedings because individual insureds will not operate as rationally as a sophisticated entity on the other side of the dispute?  Will that add substantial cost?  Can that problem be ameliorated through the procedures employed for insured-insurer arbitrations?
  • To what extent will plaintiffs’ lawyers increase indemnity payments and arbitration costs by pursuing arbitrations that they would never bother to pursue in court, if the arbitrations are easier, faster and potentially have a minimum award for a prevailing plaintiff?
  • Will there be more frivolous arbitrations than frivolous lawsuits?  Can a provision be built into the arbitration clause that reduces the filing of frivolous arbitrations by imposing costs on insureds if the arbitrator finds the case frivolous?
  • Will the prohibition on class actions and costs savings generated thereby outweigh any additional costs from the individual arbitrations?

I’d be interested to know if anyone has, or is aware of, any data regarding whether and how cost savings can be achieved by using consumer arbitrations in insurance (if there is any), or other industries that might be somewhat analogous.   

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Photo of Wystan Ackerman Wystan Ackerman

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you…

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you have something to say.  For those looking for my detailed law firm bio, click here.  If you want a more light-hearted and hopefully more interesting summary, read on:

People often ask about my unusual first name, Wystan.  It’s pronounced WISS-ten.  It’s not Winston.  There is no “n” in the middle.  It comes from my father’s favorite poet, W.H. (Wystan Hugh) Auden.  I’ve grown to like the fact that because my name is unusual people tend to remember it better, even if they don’t pronounce it right (and there is no need for anyone to use my last name because I’m always the only Wystan).

I grew up in Deep River, Connecticut, a small town on the west side of the Connecticut River in the south central part of the state.  I’ve always had strong interests in history, politics and baseball.  My heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox).  I think it was my early fascination with Lincoln that drove me to practice law.  I went to high school at The Williams School in New London, Connecticut, where I edited the school newspaper, played baseball, and was primarily responsible for the installation of a flag pole near the school entrance (it seemed like every other school had one but until my class raised the money and bought one at my urging, Williams had no flag pole).  As a high school senior, my interest in history and politics led me to score high enough on a test of those subjects to be chosen as one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified my interest in law and government.  One of my mentors at Williams was of the view that there were far too many lawyers and I should find something more useful to do, but if I really had to be a lawyer there was always room for one more.  I eventually decided to be that “one more.”  I went on to Bowdoin College, where I wrote for the Bowdoin Orient and majored in government, but took a lot of math classes because I found college math interesting and challenging.  I then went to Columbia Law School, where I was lucky enough to be selected as one of the minions who spent their time fastidiously cite-checking and Blue booking hundred-plus-page articles in the Columbia Law Review.  I also interned in the chambers of then-Judge Sonia Sotomayor when she was a relatively new judge on the Second Circuit, my only connection to someone who now has one-ninth of the last word on what constitutes the law of our land.  I graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole, one of the largest Connecticut-based law firms.  At the end of 2008, I was elected a partner at Robinson+Cole.

I’ve worked on class actions since the start of my career at Skadden.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and I was fortunate to have the opportunity to work on some prominent class actions arising from the 2004 hurricanes in Florida and later Hurricane Katrina, including cases involving the applicability of the flood exclusion, statutes known as valued policy laws, and various other issues.  My interest and experience in class actions gradually led me to focus on that area.

In Connecticut courts I’ve defended various kinds of class actions that go beyond insurance, including cases involving products liability, securities, financial services and consumer contracts.

My insurance class action practice usually takes me outside of Connecticut.  I’ve had the pleasure of working on cases in various federal and state courts and collaborating with great lawyers across the country.  While class actions are an increasingly large part of my practice, I don’t do exclusively class action work.  The rest of my practice involves litigating insurance coverage cases, often at the appellate level.  That also frequently takes me outside of Connecticut.  A highlight of my career thus far was working on Standard Fire Ins. Co. v. Knowles, the U.S. Supreme Court’s first Class Action Fairness Act case.  I was Counsel of Record for Standard Fire on the cert petition, and had the pleasure of working with Ted Boutrous on the merits briefing and oral argument.

I started this blog because writing is one of my favorite things to do and I enjoy following developments in class action law, writing about them and engaging in discussion with others who have an in interest in this area.  It’s a welcome break from day-to-day practice, keeps me current, broadens my network and results in some new business.

When I’m not at my desk or flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation (for more on those, see the Seminars/Programs page of this blog), I often can be found playing or reading with my young daughter, helping my wife with her real estate and mortgage businesses, reading a book about history or politics, or watching the Boston Red Sox (I managed to find bleacher seats for Game 2 of the 2004 World Series when Curt Schilling pitched with the bloody sock).  When the weather is good I also love to take the ferry to Block Island, Rhode Island and ride a bike or walk the trails there. If you go, I highly recommend the Clay Head Trail.