AboutTimmy Chou Expertise I am a experienced Mediator and a partner in a management consulting firm. As a mediator I work as a third-party neutral and specialize in partnership/shareholder disputes, management/labor issues, company culture difficulties, and family-owned business problems. I can help describe why alternative dispute resolution may be a good choice for you. As an experienced management consultant I may be able to offer creative ideas to help resolve your organizational and business problems and disputes. "If you say conflict, I say opportunity".
This is a case involving underinsured motorist coverage from my primary automobile policy (California) and also my “Umbrella Policy” which had a rider for additional underinsured motorist coverage; these policies were with the same insurance company, State Farm, who was also the insurance company for the adverse.
I was involved in an automobile accident whereas it was determined to be 100% the fault of the adverse, I suffered moderate to severe spinal injury. I was paid the policy limits ($25,000) under the adverse party’s liability policy and my attorney thereafter made claim under both of my underinsured motorist policies.
On November 19, 2007 State farm offered to settle for $125,000 in “new money”, which I rejected. I responded with an offer to settle for $250,000 “without subtraction for any prior payments” by them, which they rejected.
On August 24, 2008 State Farm made a good faith advancement of $50,000 of which my attorney placed $14,000 in his trust account for advanced costs, paid me $24,000 and advanced to himself $12,000 for Attorneys' fees.
On April 23, 2009 we went to mediation in which the matter was converted to a binding arbitration. I began by asking for $225,000 “without subtraction for any prior payments”, but eventually agreed to lower my demand to $200,000 “new money” less a credit of the $25,000 paid by the adverse policy.
At one point during the mediation process I became very frustrated because both the mediator and my attorney were switching back and forth between “new money” and a settlement allowing for credits. Eventually I asked to stop the proceedings so that we could discuss this thing they were calling “new money”. We agreed it meant “without credits for payments already made” and/or a settlement “on top of” payments already made, I made it very clear that from that point forward, we were only talking about “new money”, subject to any specific credits discussed and understood by the three of us.
Following are exact quotes from the award of the arbitrator, which are the subject of my question.
“The parties have stipulated that respondent is entitled to a credit in the amount of $25,000.00, the amount paid by the underlying carrier. … I find the claimant suffered damages in the amount of $200,000. Respondent is entitled to a credit of $25,000 so the award is $175,000 in “new money”.
Yesterday I received the “Total Settlement and Disbursal Statement” from my attorney and was left speechless. Line number one states:
I. TOTAL SETTLEMENT OF UIM CLAIM …………………..$175,000.00
(Includes Advance of $50,000 on 8/24/08)
Followed by a paragraph second from the end of this document:
“The above includes an advance of funds from State Farm in the amount of $50,000, Check Number XXX, dated April 24, 2008, payable to XXXX & XXX."
Do I not have a reason for being concerned?
Bud
ANSWER: Bud,
Thanks for your question!
As you know mediators are trained to assist parties in working out a settlement and do not "rule" on the merits of a matter. I am not a lawyer and cannot give you legal advice. Also, as you may know, the procedures in arbitration proceedings vary widely and it is hard to assess the fairness of any particular matter outside of the venue context.
Nevertheless, I can offer my opinion from my own experience.
IMO you have likely agreed to an arbitrated settlement and the arbiter has "ruled". In arbitration you can suggest positions to the arbiter but he has the authority to render a ruling. In many cases these rulings are binding. In my experience arbitration is often a "split the baby" experience with no one really getting what they want from the arbitration.
You may want to check if the arbitration is binding or not. If it is binding does the ruling specify a time frame for executing the terms of the ruling.
If you were misled by your own counsel somehow about what you were signing up for when you chose arbitration you may wish to consult another lawyer. It could be that the arbitration was the next step in the line required somehow by state law or other mechanism.
Sorry I wish I could be more help!
---------- FOLLOW-UP ----------
QUESTION: Hello again Mr. Chou,
I feel I did not make my question clear and would like to attempt another bite of the apple.
My question was not if I had been properly advised as to if we were entering mediation or an arbitration process, although that might be a question worthy of asking down the line, my question lies purely with the math.
If you wish me to post an abstract of the entire award I would be happy to do so, but please trust that what I have “quoted” is an exact abstract from that document.
In brief, my attorney has indicated I am to be paid $125,000 by the adverse, I clearly read the award that I am to be paid is $175,000; here are the facts:
The arbitrator ruled that he found “the claimant suffered damages in the amount of $200,000, less a credit in the amount of $25,000.00, the amount paid by the underlying carrier.” … “Respondent is entitled to a credit of $25,000 so the award is $175,000 in “new money”.
However, to my surprise, in the “Total Settlement and Disbursal Statement” I received, my attorney took an additional credit for the $50,000 that was earlier advanced by the adverse in addition to the $25,000 ordered by the arbitrator. This was an advancement that was never once discussed during the mediation process as a credit, or otherwise, and absolutely was not ordered as a credit by the arbitrator.
What I am looking for is your opinion as to what I am due, $125,000 or $175,000, and if only $125,000, why? Secondly, who do you see that I have the best recourse against and some hints as to my legal grounds if I don’t prevail on this level?
Thanks in advance for shedding any light on this dilemma.
Bud
Answer Sorry for the delay, it first appeared that your follow-up question was a repeat of the original question.
I understand your question better now. My opinion is that clearly the $50k was considered by the company and the arbiter as being included in the total award. Hence, $200 - $25 - $50 = $125 yet due. The total damage award was $200k and all disbursements to you or to your agents for their expenses are considered to be charged to the total award amount.
As I read your response, you were under the belief that the term "new money" meant that the $200 - $25 = $175k was awarded as "new money" over and above the $50k, hence in that case the total award amount would have been $250k.
This seems to be a very unfortunate situation for you as you may have wished to negotiate further had it been clear to you what the end result was. You will have to consult your lawyer to determine if you still have recourse.
