What is intercompany arbitration in a property damage claim in a Maryland Car Accident?
Often when the insurance companies can not agree on who is a fault, instead of simply denying the claim, they agree to submit the property damage part of the claim to intercompany arbitration. While this is a totally separate process than the personal injury part of the case, sometimes an adjustor will agree to be bound by the findings in the intercompany arbitration on the issue of liability with regard to the personal injury part of the claim. If counsel representing an injured party in a contested liability case determines that the adjustor has submitted a claim thru the intercompany arbitration process, counsel should follow the process to its conclusion as there are times once that process is resolved that an adjustor may change his liability decision with regard to your personal injury claim even though the rules of that forum do not require him to do so.
Subrogation is the process through which an insurer assumes the right to pursue a legal action against a party who may be liable to the policyholder.” To better understand what this means and how this works, here’s an example: You were involved in an accident with Mr. At Fault Driver, and your vehicle was totaled. You have collision coverage on your insurance policy covering the vehicle, and opted to allow your insurer to pay you for the actual cash value of the vehicle, less your deductible. Since you were not at fault, your insurer will pursue the At Fault Driver and his insurer to recover the amount it paid out on your behalf, as well as your deductible. What happens if the at fault driver’s insurer refuses to honor the subrogation request?
Under Maryland law, all insurers that issue, sell or deliver motor vehicle liability or physical damage insurance policies in the state are required to enter into arbitration and settle all motor vehicle physical damage claims in accordance with an auto subrogation program sponsored by an arbitration organization chosen by the insurer requesting the arbitration. When the insurers proceed to arbitration, each insurer presents its claim file to the arbitrator, who after review, issues a determination. The determination may indicate that the insurer’s policyholder was responsible for the accident or that the insurer failed to meet its burden of proof with regard to fault. The arbitration decision is binding only for the property damage aspect of the claim.
Md. Insurance Code Ann section 19-514- Authorized insurers that issue, sell, or deliver motor vehicle liability or physical damage insurance policies in the State shall arbitrate and settle all motor vehicle physical damage claims between the authorized insurers in accordance with an automobile subrogation program sponsored by the intercompany arbitration organization chosen by the authorized insurer that requests the arbitration.
©2009 Arbitration Forums, Inc. Reference Guide sets out the rules for such an arbitration.
- The type of claim dispute heard under the Automobile Subrogation Arbitration Agreement
- Is between a member with an automobile physical damage claim and another member(s) who allegedly is liable for the damages. The dispute may concern liability, damages, or both. A claim filed in the Auto Forum may consist of more than just a collision or comprehensive payment. A claim may include an itemized list of losses such as towing, storage, rental reimbursement, and salvage expenses, provided they were paid out of the insured’s policy. However, the disputed claim amount cannot include a company’s normal operating expenses or an insured’s out-of-pocket expenses.
- This article applies when each company provides casualty coverage either as an insurer or a self-insured for one or more parties who are allegedly legally liable for bodily injury and/or property damages to a third party arising from an accident, occurrence, or event resulting in a claim or suit. This occurs when two or more alleged tort feasors cannot agree on the respective allocations of fault or negligence for the damages and could involve any type of casualty or liability coverage.
- Article First, subsection (b) requires member companies to arbitrate concurrent coverage disputes. In this type of dispute, each company provides property or casualty coverage, either as an insurer or as a self-insured company, to the same party or parties. The same accident, occurrence, or event involves these insured parties and results in a first-party or third-party claim or suit for bodily injury or property damage. Concurrent coverage includes primary/excess disputes or disputes regarding the amount and/or extent of coverage provided. EXAMPLE: Company 1 insured an individual under a homeowner’s policy, and Company 2 insured the same individual under an automobile policy. A neighbor injured his arm when it was thrust through a window in an entrance door to the garage on the premises of the insured. The injury occurred when the neighbor tried to rescue the insured who was carelessly working on his car with the engine running in a closed garage. The homeowner’s carrier raised the coverage defense that the automobile policy was answerable to the claimant because the accident arose out of the use of the vehicle. The auto carrier disputed that position. One or both of the carriers settled with the third party. The coverage question between the homeowners and automobile policies was submitted to Special Arbitration. This prevents one party from fronting an entire settlement without waiving the opportunity to cap the third-party damages and to have the arbitrator determine the actual comparative negligence among the parties.
- Article First, subsection (c) provides the avenue for workers’ compensation carriers or self-insured employers to subrogate for the workers’ compensation benefits paid to an injured worker because the workers’ compensation carrier or self-insured employer may recover only its own payments made to and on behalf of the injured worker. Therefore, the workers’ compensation carrier or self-insured employer does not provide a release of the injured worker’s rights against the tortfeasor. The last paragraph of Article First further indicates that settlement of a case is made without prejudice to any party participating in the settlement. The arbitration panel will not consider the amount an insurer paid toward a settlement as an admission of any degree or percentage of liability. The amount of settlement is not an issue unless one of the disputing parties contests the settlement amount. EXAMPLE: An employee of a delivery company is injured when he trips and falls making a delivery, resulting in a workers’ compensation claim. The workers’ compensation carrier makes a subrogation claim for the statutory benefits paid against the premises owner, whose carrier denies liability. The workers’ compensation carrier submits the subrogation claim to Special Arbitration. If further workers’ compensation benefits may be incurred and the statute of limitations is about to run, we recommend Company 1 file in Special Arbitration to toll the statute and request a deferment based on the justification that the amount of the contribution sought is not yet finalized. However, Company 1 may file for supplemental damages after a decision has been rendered if supplemental benefits are paid for the same injury after the original filing. The original decision is res judicata on the issue of liability, and the sole issue in the subsequent filing is causation and damages.
- PIP Forum The type of claim dispute heard under this Agreement is between a member with PIP coverage and another member(s) who allegedly is liable for the damages. The dispute may concern liability, damages, or both. The Personal Injury Protection (PIP) Arbitration Agreement is the only Agreement AF offers that allows a company to select specific states in which it wishes to be signatory. The jurisdiction of this forum is limited to those States that allow for medical payments subrogation recovery.
- Uninsured Motorists Forum The Uninsured Motorists’ Arbitration Forum is the forum in which insurance companies bind themselves to arbitrate coverage questions under automobile liability policies in which a disclaimer results in a claim against another member company under its uninsured motorist endorsement. If one participating company denies coverage to its insured, and if its denial forces the filing company’s insured to look to its own carrier under the uninsured motorists’ coverage for recovery, and if the latter does not agree with merits of the disclaimer, we have a dispute to be resolved between the carriers under the compulsory provisions of this program. The main criterion to determine whether a case is appropriate for the Uninsured Motorists Forum is to establish that a denial of coverage has been issued by Company 2 (the responding company). Company 1 (the filing company) must then present contentions that establish its basis for challenging Company 2’s denial of coverage and the reasons why Company 2 should reimburse the Uninsured Motorists settlement. The coverage denial is the basic argument in the Uninsured Motorists Forum as liability and damages will not be disputed; moreover, any affirmative defense raised must not argue coverage (except limits), liability, or damages. EXAMPLE: Company 1 contends its vehicle was damaged as a result of Company 2’s negligence and questions the validity of Company 2’s denial of coverage. Company 2 doesn’t argue that the vehicle was not involved in the accident but contends its vehicle was stolen and asserts a denial of coverage based on non-permissive use.
- No company shall be required, without its written consent, to arbitrate any claim or suit if a) it is not a signatory company nor has given written consent; or b) such claim or suit creates any cause of action or liabilities that do not currently exist in law or equity; or c) its policy is written on a retrospective or experience-rated basis; or d) any payment which such signatory company may be required to make under this Agreement is or may be in excess of its policy limits.
- Article Second, subsection (a) states a company is not required to participate in arbitration if it is not a signatory to the specific Agreement under which the filing has been made or has not given its written consent. Chapter 7, Article Fourth discusses how a non-signatory can participate by giving its written consent.
- According to Article Second (d), arbitration is not compulsory if the amount sought exceeds a responding member’s policy limit or where a decision could expose one of the responding members beyond its policy’s dollar limit. The filing member may agree, however, to accept an award that falls within another member’s policy limit, even though the amount actually owed exceeds the limits, to keep the dispute within arbitration’s jurisdiction. By doing so, that member waives any right to pursue the balance of the claim afterwards.
- The decision of the arbitrator(s) a) shall be based on local jurisdictional law consistent with accepted claim practices. b) is final and binding without the right of rehearing or appeal except when allowed under the Procedure Section of the Property and Special Forum rules. Arbitrators must consider the written rules, regulations, and statutes established by legislative bodies and previous court decisions within their jurisdiction. A member can also use all of the defenses that are available in a court of law including an affirmative defense. If the courts in a particular jurisdiction recognize the validity of a particular affirmative defense, then the arbitrator must also consider the defense. An arbitrator must place the same emphasis on evaluating defenses plead in arbitration as if it had been raised in litigation. Article Third in the Special Arbitration Agreement also refers to the arbitrators using “equitable considerations” to make their decisions. Equitable consideration is careful deliberation by the arbitrator that results in a fair and just decision. This relates primarily to the apportionment of the settlement amount paid to the claimant among the parties based on the facts pertaining to their respective liability or coverage considerations.
- The decision is neither res judicata nor collateral estoppel to any other claim or suit arising out of the same accident, occurrence, or event except where an applicant seeks recovery of supplemental damages as allowed under the Awards section of the rules. The decision is conclusive only of the issues in the matter submitted to the arbitrator(s) and only as to the parties to the arbitration. The admissibility of the decision in any other proceeding is not intended, nor should be inferred from this Agreement. All matters concerning an arbitration proceeding shall be held in strict confidence
- Compulsory arbitration is applicable to a maximum of – $100,000 Company Claim Amount in the Automobile, Medical Payment, Property, and Uninsured Motorists Forums. – $250,000 Contribution Sought Amount in Special Arbitration Forum. – The limit governed by the statute or endorsement creating the subrogation or direct-action recovery right in the PIP Forum. (a) AF considers claims for separate parties arising out of the same accident, occurrence, or event as separate claims. (b) AF considers a claim and companion claim(s) for different lines of coverage as separate claims. (c) The legal fees are not considered part of the program limit unless the policy limit includes legal fees. (d) The deductible is not included as part of the Company Claim Amount.
- The filing company initiates arbitration by filing via AF’s Web site or mailing a completed application and contentions sheet to AF and any responding companies. For cases filed via AF’s Web site, AF will forward a copy of the application and contentions sheet, as well as any amendments, to the responding parties with notification of the hearing date. Amendment(s) must be made no later than 10 business days before the hearing. In addition, AF must receive all evidence no later than 10 business days before the hearing. Documents not received 10 business days before the hearing will not be accepted. For cases not filed via AF’s Web site, the filing company must forward a copy of the completed application and contentions sheet, as well as any amendments, to AF and any responding companies. Amendment(s) must be made no later than 10 business days before the hearing. In addition, AF must receive all evidence no later than 10 business days before the hearing. Documents not received 10 business days before the hearing will not be accepted. Special Arbitration should be filed within 180 days of payment to the claimant or the delay may be asserted as an affirmative defense if it can be shown to have caused prejudice to the party raising the defense.
- The responding company may answer • via AF’s Web site or • by mailing a copy of the completed application and its contentions sheet to AF and all involved parties. For cases answered via AF’s Web site, AF will notify the filing company electronically or mail it a copy, depending on the filing method used. The answer and any amendments must be received by the date AF posted to allow sufficient time for mailing, when needed. In addition, AF must receive all evidence no later than 10 business days before the hearing. Documents not received 10 business days before the hearing will not be accepted.
- If the responding company has a counterclaim, it must include it when it responds online or check the box on the application clearly showing a counterclaim is being filed if it responds via mail. Regardless of the manner in which it files the counterclaim, it must be received and heard with the original arbitration case or recovery is barred. Filing a counterclaim is the only way a responding company may collect its damages from the filing company.
- The parties must raise and support affirmative pleadings or defenses in the Affirmative Defenses/Pleadings section of the contentions sheet or they are waived. If a denial of coverage is being pled (see Denial of Coverage definition), a copy of the denial of coverage letter to the party seeking coverage for the loss must be provided as part of the evidentiary material submitted.
- The contentions sheet is a mandatory document containing key information about the filing as well as a listing of evidence included in the arbitration file. One of the main entries on the contentions sheet is the Affirmative Defenses/Pleadings section. Rule 2-4 states that this section must be utilized when a party wishes to assert an affirmative defense or pleading for the arbitrator’s consideration. Affirmative pleadings include issues or legal doctrines that could change the allocation of damages (like bailment or joint and several liability) or reinforce the filing company’s position of liability (like res ipsa loquitur). The filing company presents its liability theory in its contentions, but the existence of an available pleading could define the amount of the award if liability is found, or emphasize the responding company’s legal duty in the case.
- If a party contests damages, the amount of damages in dispute must be clearly outlined for the arbitrator in the Damages section on the contentions sheet.If the responding company contests the damages claimed, it must clearly outline its position in the Damages section.
- Any party that participated in the original hearing may appeal a decision in the Property and Special Forums so long as the Company Claim Amount is $25,000 and above (Property); the Total Settlement Amount is $100,000 and above (Special). (a) The arbitration Decision Appeal Form indicating the basis for the appeal and a brief statement regarding the alleged error by the original panel must be received by AF’s Service Quality Department located at corporate headquarters, with a recommended courtesy copy mailed to all parties, within thirty (30) days of the decision publication date. The appeal panel will review only the documents included in the original file, the decision, and the appeal form and response. (d) The appeal panel’s decision will be final and binding with no right to further review, appeal, or inquiry.
- Intercompany arbitration is designed to be an expeditious, easy, and cost-effective claims resolution process. For this reason, most arbitration cases are heard by file submission only. Rule 3-7, however, makes an allowance for party who wishes to personally appear before the arbitrator at the hearing and, if necessary, present witnesses.
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