The Arbitration Process

The Canadian Insurance Claims Managers Association (CICMA) aims to promote the Inter-Company Arbitration Agreement (ICAA) process as the most cost effective method of settling disputes. Membership in the ICAA is available to all property and casualty insurers licensed to do business in Canada. Upon signing the agreement, the insurer must submit to any dispute involving physical damage subrogation claims, including business interruption, up to $50,000. Exceptions are those claims for which a lawsuit has been initiating, if a company asserts a defense based on lack of coverage, or specialized coverages including boiler and machinery, aviation, and ocean marine. Only insurance companies are entitled to arbitrate, whether signatory or non-signatory.

The CICMA is the body responsible for making rules, regulations, prescribing territorial jurisdictions, controlling financing, approving applications for membership and terminating membership for failure to comply to rules and making changes to regulations of the Agreement. Each chapter of CICMA appoints an arbitration chairman to administer the agreement and to appoint panels to arbitrate matters in dispute within their jurisdiction.

Arbitration panels consist of a chairman and two other members. If the amount in dispute is less than $1,000 the chairman can act as sole arbitrator. Panel members are selected on the basis of their experience and qualifications, and they serve without compensation. Panelists cannot arbitrate cases in which their own companies are directly or indirectly involved. The chairperson is responsible for inform claims managers of respective companies when pre-arbitration has not taken place, since that is a requirement of arbitration. The chair also compiles arbitration statistics and distributes the results accordingly.

Files sent to arbitration will be sent back if not noted who, when and what the result of pre-arbitration was. The pre-arbitration and arbitration persons should not be the same person. Cases should take place by the chapter in the province where the accident or other insured event took place, except where there is agreement to do otherwise. Fees to file as the applicant company are $200. The respondent fees are $200 as long as there is a counter claim.

In order to commence the arbitration process, the applicant and respondent must both take part in pre-arbitration discussions. Pre-arbitration as defined is a discussion between senior claims staff of controverter companies, and it must be duly noted. The applicant is the company that imitates the proceedings. They file a request for arbitration by filling out seven copies of the Inter Company Arbitration Statement (ICAS )and distribute as follows: one is retained by the applicant company, five are forwarded to the senior claims official of the respondent insurer and one copy is sent to the arbitration chair with the filing fee and four copies of the relevant file documents. Statements filed by the applicant must include the following information: name of applicant and respondent company together with names and addresses of local representatives having supervision over the case in controversy; the names of the respective insured’s of both applicant and respondent; claim file numbers of applicant and respondent; kinds of coverage involved under applicant’s insurance policy, and also respondent’s insurance policy if known; date and place of alleged accident, loss or other insured event; amount of company’s claim payment and amount of any applicable deductible interest of its insured; a statement describing any pending litigation and its proposed disposition; a certification that settlement efforts have been unsuccessful and that the respondent company has agreed to arbitrate; brief statement of allegations solely as to the issue of controversy; signature of the applicant’s representative and date signed; and a diagram showed how the accident occurred, if applicable.

The respondent is the company or companies against which such proceedings are asserted. The respondent will be required to retain one copy of his own submission, forward one copy to the senior claims official of the applicant company, forward three copies to the arbitration chair along with four copies of the relevant file material, as well as the fee if a counter claim is being presented. Answers filed by respondents shall set forth the following information: supplement if and as necessary the information furnished by applicant as the to the respondent company’s name and address, name of senior claims representative, name of insured, file number and kind of policy coverage; state whether coverage and liability as alleged by applicant is admitted; amount of applicant’s alleged damages conceded by the respondent; amount of respondent insured’s interest in the case, such as deductible property damage coverage, if any; description of any pending litigation and its proposed disposition; whether there is an objection to arbitration. If so, the grounds on which the objection is based should be fully stated; brief statement of allegations as to the issue in controversy; signature of respondent’s representative and date signed; and a diagram showing how the accident occurred, if applicable.

This procedure is also applicable to counter claims. The ICAS should clearly indicate it is submitted as a counterclaim and the original arbitration case to which it pertains shall be identified.

If a respondent company fails to submit its answer within 30 days after receipt of the applicant’s contentions, the arbitration chair will follow up and request reasons for the delay. If the company fails to submit its answer, after being requested to do so, the chair shall refer the pertinent fact to the CICMA. The head office of the signatory company will then be informed of its representative’s failure to conform to the prescribed arbitration procedure.

The hearing date shall be determined by the arbitration chair and representatives of the controverting companies shall be notified at least one week in advance of the hearing date, when personal representation at such hearing has been requested.

All signatory companies are bound by the same limits as litigation with respect to the statute of limitations, but cases that have passed over this time limit can be ruled on as long as all controverting companies agree to have it heard. In the event of disagreement, the chairperson ruling is final. Arbitration panels are authorized to make their findings on the law of the locality in which the accident, insured event or loss occurred. A finding as to the amount of damages in issue is based upon the facts presented to the arbitrators. The decision of the majority of the panel shall be final and binding without the right to rehearing or appeal. If the applicant wishes to withdraw because the file settled, that company must notify the chairperson. The fee is nonrefundable.

The decision of an arbitration panel shall include the following: date and place of hearing; names of arbitration panel members; brief statement for the basis of the findings, such as lack of proof, degree of negligence of the respective parties, other controlling principles of law at the discretion of the arbitration panel; and signature of the panel chairman.

The arbitration process has proved to be very beneficial. The process provides a quick resolution of disputes between insurers and long court delays are eliminated. Policyholders, drivers and witnesses do not have to appear before the panel to bring evidence, therefore the insuring public is not inconvenienced. It is a cost effective, proven method of resolving disputes between companies.

Diane Prendergast is the National Representative for the Canadian Insurance Claims Managers Association, Northern Alberta.