This article is a companion piece to this video

In the above episode of On Subrogation: Arbitration Forums for Subrogation Claims, RG attorney Jason Sullivan discusses the intercompany arbitration organization called Arbitration Forums. An invaluable resource for alternate dispute resolution in subrogation claims, Arbitration Forums provides a platform specific to insurers and self-insured entities for settling subrogation demands without a lawsuit.

Subrogating a Case in Arbitration Forums: Cooperation with Limitations 

Arbitration Forums handles well over 1.5 million subrogation cases a year totaling $11 billion in awards annually. Intercompany arbitration services are member-based, but non-member companies can opt to use Arbitration Forums to settle insurance claims if they agree to the AF rules and regulations. 

Because it is specific to the insurance and subrogation field, AF provides advantages to typical arbitration because arbitration panelists are well-versed in the complex and nuanced world of subrogation law. Members can expect short and long-term benefits like reduced time to claims resolution, reduced legal costs, increased predictability, increased finality of settlements, better relationships with opposing carriers, and more.

However, Arbitration Forums is not a magical land where subrogation cases become simple and streamlined; there are limitations to its jurisdiction. Jason discusses affirmative defenses that preclude the use of AF to resolve an insurance dispute as well as important factors to look out for when using Arbitration Forums:

Affirmative Defenses Against AF Jurisdiction in a Subrogation Demand

There are 4 affirmative defenses an opposing carrier may use to undermine Arbitration Forums’ jurisdiction on a claim:

1. A Party is Not a Signatory

Say you are pursuing three potentially-liable parties in a subrogation case. Two of them are members of intercompany arbitration. You may file a subrogation claim in Arbitration Forums, but you will only be able to file against the 2 parties who are members. During the hearing, you essentially have an empty chair in your case. If the judgment is that the 2 member parties have no liability and the 3rd non-member party does, you will not receive an award. This is because the 2 member parties were found not liable and the 3rd party cannot be pursued. 

Because you are an AF member and have agreed to be bound by any decisions, you waive your right to subrogate against the 3rd carrier. In these cases, the subrogating lawyer and client must decide (1) do you want to be bound by the AF decision or (2) should you withdraw claim and proceed to resolve matter in court so you can retain your subrogation rights to recover from all parties.

2. No Coverage

Company A files against Company B, who insured John Doe, who is responsible for the loss. If Company B has sent letter to John Doe denying coverage for the claim before you file in AF, this falls outside their jurisdiction. If there was no letter sent prior to Company A filing their subrogation claim in Arbitration Forums, AF will hear the case and decide on its merits whether there was or was not coverage.

3. Monetary Threshold

Arbitration Forums have jurisdiction only on subrogation claims less than $100000. If the claim falls in the Special Arbitration Forum, the limit increases to $250000.

4. Policy Limits

If the opposing carrier properly argues that the policy limit does not cover the total damages, the award is limited to that amount. I.e. If a subrogation demand is for $45000 but the opposing carrier successfully claims the policy limit is $25000, AF does not have jurisdiction to award anything above $25000. 

This is another factor that subrogation attorneys should analyze: Do you proceed to intercompany arbitration and accept the limits? Or do you withdraw the claim and proceed to a subrogation lawsuit to maximize potential recovery?

Dealing with Obstacles to Subrogation Recovery in Arbitration Forums

Jason discusses two nuances of Arbitration Forums procedure:

Recovering an Award

AF members have 30 days to pay a judgment made against their company. After 30 days:

  1. Send a letter to the opposing carrier demanding payment of the subrogation judgment.
  2. Wait 30 days.
  3. Request that Arbitration Forums notify the opposing carrier to pay.
  4. Wait 30 days.
  5. After 90 days of no payment and the completion of steps 1-4, the pursuing party has the right to file a subrogation lawsuit in court for the unpaid judgment. This process goes through the state court system. Most states have adopted an arbitration enforcement act, which is a separate process in the state courts.

Statute of Limitations

Statutes of limitations are often the dark cloud hovering over every subrogation claim, especially when the other party in the subrogated matter consistently refuses to cooperate and move towards settlement. Statutes of limitations work two ways in Arbitration Forums:

If you file a claim in AF, the SOL on the claim runs out, and then the other party successfully argues an affirmative defense that removes the claim from AF jurisdiction, there is no SOL protection on the right to leverage a subrogation lawsuit.

OR

If a lawsuit is filed, the SOL on the subrogation claim expires, and then the other carrier correctly claims the matter should be handled in AF, there is 60 days of SOL protection in which you retain the right to file a subrogation claim with AF.

Weighing the Benefits of Intercompany Arbitration

A carrier and their subrogation counsel should consider the cost:benefit ratio when it comes to the limitations of Arbitration Forums and factors like statutes of limitations. Sometimes, the smartest way forward may not be the most obvious, and strategy is key, especially when dealing with an uncooperative and/or elusive opposing party.If you would like to learn more about Rathbone Group’s subrogation arbitration services, visit our Practice Areas page. And if you would like more educational material on subrogation law and process, visit our Education page to access our YouTube channel video series and library of On Subrogation podcasts. Have a question? Email us at [email protected].