California UIM Arbitrator fees [retitled]

Factual Questions
1

About five years ago I was in an accident. I was stopped at a light and a kid rammed me from behind doing about 40mph. Long story short, we are about to go to arbitration. I get a letter from my lawyer telling me that the Arbitrator will cost $5,000 and I am responsible for 50%. My question is, should I be responsible or should the firm representing me. It seems to me that since I’m paying them to handle the matter this shouls come out of their cut. (one third). I understand that court costs wold be paid by me, but they are incidental compared to this. And it seems he will be doing their job, no?

I really do see both sides of this, but it appears to me that my lawyers might be takiing advantage of me.

Any lawyers here that can give me the stright dope on fees for an arbitrator like this?

Thanks.

2

5000 seems like a lot for an arbitrator fee, especially in a simple auto case. Anyway, the custom in many jurisdictions in P/I (personal injury) cases is for the plaintiff’s attorney to advance costs.

However, a lot will depend on what is customary in your area and what the law and rules require. (Auto arbitration is often regulated). It will also depend on the retainer agreement you signed with your attorney.

What I would suggest you do is first ask your attorney for an invoice for the $2500 that specifically says arbitrator fees. It’s a reasonable request (you can always blame it on your accountant) and if your lawyer is doing something sketchy, he may be afraid to put it in writing.

I would also check the retainer to see what it says about costs.

Most importantly, I would consider talking to an experienced attorney in your area. You can usually get a consult with an attorney through your local bar association for 30 dollars or so.

3

An arbitration is like a private court, and an arbitrator like a private judge. So no, absolutely not.

4

$5G is REALLY REALLY REALLY steep for a simple matter such as you describe.

My wife arbitrates state court actions including car accidents, and as a member of a panel of 3 lawyers gets around $100 per case.

The last arbitration I handled, the arbitrator was paid $1400 (plus costs) - $700 for the 1-day hearing, and $700 for 1-day prep and decision-writing. That was a personnel case invovling a federal agency.

If there is somewhere that lawyers can get $5K to arbitrate fender/benders, I (and about a million other lawyers) would love to hear about it.

5

It seems a bit steep to me as well. Just out of curiousity, why is this being arbitrated?

6

Sounds high to me too.

My WAG is that it’s a first-party claim against the insurance company that is being arbitrated and the contract specifies an expensive form of arbitration.

7

Gfactor I think is correct. The policy I have stipulates that any issues be solved though binding arbitration as opposed to a trial, though I don’t think it stipulates that it has to be “expensive”. If it helps, I’m in California.

8

Right. Thing is, some kinds of arbitration just cost more than others.

Is it for Uninsured Motorist or Underinsured Motorist benefits?

9

Underinsured. The kids policy covered just $10,000, which they paid out. So my company, Allstate, is supposed to pay the rest.

10

Figured. No idea what the going rate is in CA. I’ll edit the thread title so we can maybe get some insurance people and CA lawyers here.

You might also try asking here: http://www.lawguru.com/

11

The arbitrator is providing a service to both parties… acting as a private judge, essentially. Your attorney is providing a service to you as well… acting as your advocate and counsel. Both get paid pursuant to separate contracts.

The arbitrator’s pay is typically a “cost” that you have to pay. Your attorney may advance you that cost and then reimburse the advance on the back end of the case once the money is paid by the other side.

“Costs” (i.e., usually amounts paid to others to facilitate a case) are usually separate from “attorney fees” (i.e., amounts paid to your attorney for legal services provided).

The nature of how this works will depend on your fee agreement, which I have not seen, obviously. Typically, if you get a recovery of money, the attorney will be paid the attorney fees (probably 1/3 of the recovery) plus reimbursement for the advanced costs (arbitrator fees, photocopies, faxes, subpoenas, filing fees, postage, mileage, deposition transcripts, etc.).

It depends on your fee agreement whether the attorney takes 1/3 of the gross or 1/3 of the net recovery. My understanding is that 1/3 of the gross is typical.

Therefore, if the arbitrator costs $2,000, plus other costs are incurred at maybe a total of $1,000, then you have $3,000 in costs.

Assume your attorney fees are 1/3 of the gross recovery per your fee agreement.

Assume you have medical bills of $5,000 as a lien on your case.

Assume you recover $18,000 form the defendant.

Attorney fees = $6,000 ($18,000 / 3)
Costs = $3,000
Medical Bills = $3,500 (maybe the attorney can get the medical provider to reduce the lien)

Total deductions: $12,500

Total in your pocket: $5,500

If you recover nothing from the defendant, then the attorney fees would be $0, but you may still have to pay the $3,000 in costs advanced by the attorney… or the attorney might just write the costs off as a cost of doing business.

12

Great. Thanks.

13

Oh, and the arbitrator’s costs probably depends on the arbitrator’s hourly rate multiplied by the number of hours worked. Otherwise, maybe it’s a flat fee. Ask your attorney and get a copy of the arbitrator’s bill if you have doubts.

As another hypothetical analogy:

$450/hr. for an arbitrator is not unheard of. Something like this might take a half-day for the arbitrator.

$450 * 5 hours = $2,250 ($5,000 seems high)

$2,250 / 2 = $1,125 (your share of the cost)

14

Couldn’t find a CA form UIM contract online. In some jurisdictions it could be a three-arbitrator deal. In that case, the parties split the cost of the neutral and pay their own, which makes it even more expensive. No idea if that’s true in your case. I acted as a plaintiff’s arbitrator in one insurance case like that in another state. My fee was $1500–ten years ago–and that was low.

15

I just remembered that I was going off of what I recently paid a mediator. I don’t know if arbitrators cost more.

Another possibility is that your attorney is exaggerating or “puffing” the potential cost to you a little bit so you are not at all shocked later by what turns out to be a $3,000 cost. In fact, you may even be happy with a $3,000 cost since your expectation was $5,000.

16

Another thought: Call the California Department of Insurance. It’s possible that arbitrator fees for UIM are regulated.

17

Right. It could be an estimate, or a cost-retainer. Also, the three-arbitrator panel deal makes arbitrations take longer because the arbitrators have to deliberate and sometimes leads to inflated fees. A plaintiff’s lawyer will pick someone he knows and hopes will give him a better chance of a good award, even if the arbitrator charges a higher hourly fee. I’m not suggesting that this is some sort of lawyer conspiracy. It might well be the best way to do it.

Definitely worth a try.

http://www.insurance.ca.gov/

18

That’s interesting. Wouldn’t the insurance company simply pay it off and subrogate against the kid?

Note- I don’t know much about insurance defense aside from a summer spent at an insurance defense firm many many years ago.

19

No. This is first party insurance. They probably settled for policy limits with the kid. The insurance company can still dispute the amount of damages and maybe even the kid’s liability.

Not a great cite, but this is the gist:

http://www.weinerlawoffice.com/CM/FSDP/PracticeCenter/Personal-Injury/Motor-Vehicle-Accidents.asp?focus=topic&id=3

20

I see. I get the gist of it. I can’t recall if it works the same here since it has been longer than I care to admit since I last dealt with anything similar. I’m curious, how often does this happen in an personal injury practice?