Is high-low arbitration worth it?

June 1, 2007

Malpractice Consult

Key Points

With malpractice awards remaining high and the cost and duration of litigation skyrocketing, plaintiffs and defendants have searched for an alternative means of settling cases. In some instances, "high-low" arbitration is the answer. This is a procedure in which opposing sides agree to binding arbitration to settle their dispute, as well as to the highest and the lowest amounts that can be awarded. That is, the parties agree in advance to maximum and minimum awards.

Here's a hypothetical example: You and your malpractice insurer have agreed to this type of arbitration, and the case is being examined for possible damages. Upon looking at recent jury awards in similar cases that have gone to trial, both sides find that the average award is $150,000. Suppose, however, courts in your jurisdiction have found in favor of the defendant physician at least 70 percent of the time. Moreover, each side knows that malpractice suits-even those that never go to trial-cost from $20,000 to $50,000, which covers everything from filing fees and depositions to expert witness fees.

With these figures and circumstances in mind, the plaintiff and defendant agree that no matter what the arbitrator decides, the "low" payment will be $15,000 and the "high" will be $75,000. In other words, if the arbitrator awards the plaintiff $100,000, he'll only receive $75,000; conversely, if the arbitrator finds for the defendant and awards the plaintiff nothing, he'll still get $15,000. If the award is within the high-low parameters, the plaintiff receives that exact amount. In most cases, the arbitrator isn't told in advance that this is a "high-low" arbitration, and so feels free to decide upon any award.

Is this a viable option in medical malpractice claims? Yes and no. Yes, because although you're surrendering some money and rights, you're getting the case over with quickly and relatively painlessly. Besides, the more this type of arbitration gets used, the lower insurance companies can keep their reserves (since the awards are more foreseeable) and their premiums. On the other hand, even if the arbitrator finds in your favor, you've still agreed to make a payment, so the action might be reportable to the National Practitioner Data Bank and your state licensing board. Such reports, however, can be mitigated if you attach a note stating that in the arbitrator's view you didn't commit medical malpractice.

High-low arbitration is a practical dispute resolution tool, but one you should avail yourself of only after discussing the pros and cons with your attorney.

The author is an internist and a health law attorney in Bala Cynwyd, PA. He can be reached by e-mail at eshore@shoremedlaw.com
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This department answers common professional liability questions. It isn't intended to provide specific legal advice. If you have a question, please submit it to Malpractice Consult, Medical Economics, 123 Tice Blvd., Suite 300, Woodcliff Lake, NJ 07677-7664. You may also fax your question to 201-690-5420, or e-mail it to memalp@advanstar.com
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