IN THE MEDIA
Mr. Eisenberg's article regarding arbitration awards was published in the National Association of Subrogation Professionals' Subrogator magazine.
The article below provides critical insight for adjusters and lawyers attempting to enforce the payment of awards from insurance carriers who fail to timely disclaim coverage.
Money for Nothing: Enforcing Arbitration Awards Against Carriers Who Fail to Properly Deny Coverage in a Timely Manner
Alice’s vehicle strikes Bob’s vehicle and is cited for the incident. Both of their insurance carriers are parties to the automobile forum of Arbitration Forums, Inc. (“AF”). Bob’s carrier, “Proactive” files contentions against Alice’s carrier, “Complacent” for reimbursement of property damages. After Complacent responds with applicable defenses, the arbitrator considers the evidence, finds in favor of Proactive, and publishes an award for damages that Complacent must pay.
Unfortunately for Alice, her insurance lapsed prior to the accident. In response to Proactive’s claim, Complacent pleads a denial of coverage, attaching a copy of the denial letter, but fails to list this defense in the Affirmative Defenses/Pleadings section of its contentions per Rule 2-4. Per Rule 3-5(a), the arbitrator is only permitted to consider defenses raised in this section and issues an award against Complacent.
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Thirty days later, Proactive sends a request to Complacent for payment. Complacent, believing that it had already asserted the no coverage defense, ignores the payment request. Thirty days after the initial request, Proactive sends a letter to AF requesting assistance in payment of the award. AF notifies Complacent, but they fail to respond within thirty days. Proactive is now entitled to statutory interest, legal fees, and costs for pursuing the collection of the award under Rule 5-2.
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Proactive sues Complacent for Breach of Contract to enforce the arbitration award. In moving to dismiss the Complaint, Complacent alleges that Proactive is unable to establish the existence of a breach. Complacent asserts that it raised the issue of no coverage and attached the denial of coverage letter, therefore, AF did not have jurisdiction to order a damages award.
In addition to citing Rule 3-5(a) in its response, Proactive references Rule 3-9, which states that a responding party has sixty days from publication to assert a no coverage defense. The Court denies Complacent’s Motion to Dismiss stating that same failed to raise the coverage issue in a timely manner. The case resolves for the award plus costs and fees.
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Takeaway
Even in simple scenarios, strictly comply with rules to avoid owing money for nothing.