Computerized settlements raise questions about consumers' rights
by Craig Giangiulio
Dot-com entrepreneurs have entered the field of settling
personal injury claims, and the art of legal negotiating may never be the same. The
Internet hasnt made trial lawyers obsolete, but the emergence of online settlement
companies raises new questions about the rights of consumers, the neutrality of online
mediators, the part that insurance companies play in the process, and the role of the
civil justice system in the cyber age.
PaTLA President Timothy A. Shollenberger has appointed a special Committee to study online settlement companies and other potential cyber threats and how they impact consumers and injured workers. The Internet is a useful tool for finding legal information and there are many honest web sites dedicated to helping consumers, but there are also potential threats, Shollenberger said. The purpose of the Committee is to determine the magnitude and precise nature of the dangers potentially posed by these companies, particularly ones that attempt to persuade injured parties that no legal representation is required.
According to Chair Stewart J. Eisenberg and Committee member Gregory J. Pascale, the Committees first goal is to alert members about whats out there and to be cautious. Were advising our members to investigate carefully before you put your clients case into the hands of these companies, Eisenberg said. And attorneys who havent used the Internet yet should get online to find out how consumers may be affected, he added. The Committee will make a report to the Board at the Annual Convention at the Hershey Hotel in July.
According to Eisenberg and Pascale, the rise of online settlements is inevitable, but there are important issues that need to be addressed. Our committee is exploring the potential pitfalls for attorneys and injured claimants who use these online services, Pascale said. According to Pascale and Eisenberg, the Committee wants to hear from members who have settled cases online and for them to share their experiences. For example, whats the success rate? Do they come at a cost to the client? If you have had an experience using one of these companies, Eisenberg and Pascale request that you contact PaTLAs Executive Director, Nancy Mulloy-Bonn ([email protected]).
The Internet has revolutionized buying and selling, with such
examples as eBay, Priceline.com, Yahoo, and Bid.com that incorporate online auctions,
name your own price bidding, and other innovative pricing strategies that take
advantage of the power of the Net. Now trial lawyers with access to the Internet have the
option of resolving claims entirely on the computer. Two prominent
companiesCybersettle and ClickNsettlehave taken the lead in settling personal
injury claims on line, but other sites have popped up as well.
How do such companies work? Generally, they offer some type of a blind-bidding system. The process begins when either party initiates negotiating the amount of settlement by submitting a case. Plaintiffs and defendants next get confidential passwords and can enter bids over secure software anytime day or night. The bid processes are slightly different, but a computer settles the cases. The case is automatically settled if the offers fall within 30 percent of each other.
How much does it cost? With Cybersettle, attorneys using the service pay only if the case settles. The success fees are on a graduated scale, but are between $100 and $1,000. Insurance carriers and other companies fees vary according to volume and length of commitment, according to the companys web site. With ClickNsettle, there is a $100 fee per party for disputes of less than $10,000 and a $200 fee for disputes over $10,000, according to the companys web site.
The technology has been around for awhile. Cybersettle, which was co-founded by a former plaintiffs attorney and a defense lawyer, began processing and settling claims in August 1998. The company boasts on its web site that it is used by 475 insurance companies either directly or through their third-party administrators; there are in excess of 16,000 users currently on the system; and it is responsible for over 37 million U.S. dollars worth of settlements. ClickNsettle, which also offers traditional in-person mediation, came on more recently although the company, originally called National Arbitration and Mediation, was founded in 1992. Last June, it changed its corporate name to better reflect the scope and future direction of the company.
So how do online settlements differ from traditional, in-person dispute resolution? According to Eisenberg and Pascale, the difference is credibility. Eisenberg, who has used traditional alternative dispute resolution (ADR), cited as an example a case where an insurance company recommended an ADR firm from New Jersey. He first checked around and determined that the company was impartial. That particular case did not settle; however, Eisenberg said that the experience was positive and helpful. In addition, the mediator is unknown and attorneys may be unsure about the intentions of insurance companies that use the service, said Eisenberg. Insurance companies are only going to settle because its in their best interests, not the best interests of your client, he said. Pascale added that you rely on statistics that the online companies provide. Theoretically, they could be inaccurate or self-serving. How many of these people really obtain a good result, Pascale said.
According to Eisenberg and Pascale, another concern is the trend by some online companies to invite unrepresented claimants to settle their own personal injury claims. One company does advise consumers to consult with an attorney and another uses a screen example of Joe Lawyer logging in to bid on a case; however, its implied on many sites that consumers can do it themselves. Both Eisenberg and Pascale strongly advise consumers against doing this. Its tempting, I know, especially for injured victims who may need cash in a hurry, but the fact is that consumers have no experience in what their claim is worth and no basis for which to submit a settlement figure, Eisenberg said. Plus the unrepresented plaintiff will likely be going up against someone with more experience. Its taking advantage of people who dont know their total legal rights or have any experience in determining the value of their case at a very early stage after an accident, Eisenberg said. Insurance companies are using these sites because theyre saving money, Eisenberg said. Clients will get less if they settle without a lawyer, but how much less? Eisenberg said that in workers compensation cases, for example, the plaintiff may be giving up a claim for loss of future earnings. Pascale gave an example of a consumer who settles his or her own motor vehicle accident case, but as part of the agreement, signs a general release giving up his or her right to recover underinsurance motorist benefits.
Eisenberg and Pascale point out that these companies will argue that there is no question about the unauthorized practice of law as they have lawyers on their staffs. The Pennsylvania Supreme Court case that set the standard for unauthorized practice of law is Dauphin Co. Bar v. Mazzacaro, 351 A.2d 229 Pa. Supreme 1976. In Mazzacaro, the Court determined that a public adjuster license did not confer authority to negotiate settlements on behalf of injured claimants against alleged tortfeasors or their insurers. The Court also said that stringent requirements for practice of law are intended to protect and secure public interest in competent legal representation.
Since non-lawyers may be involved in the process of handling settlements for online settlement companies, are consumers being short-changed? Probably said Eisenberg and Pascale. Although I am not familiar with any lawsuits involving online settlement companies, I have seen other cases where clients are harmed because they get bad advice from a non-lawyer, Pascale said.
The Committee is still collecting data for its report, but is formulating a recommendation that claims arising from physical injuries, which often involve serious medical conditions, are not suited for computer-generated solutions. Claims take time to evolve and injuries take time to heal and be evaluated, said Eisenberg. There are no good quick solutions yet.
Craig Giangiulio is PaTLAs Director of Publications.
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