Under the CNA policy, professional service firms can, in a contract, agree to arbitrate any disputes. The decision, however, cannot be unilateral if a claim is in existence—at that point the CNA claims specialist has to approve the procedure.
But even if policyholders can select arbitration, should they? And in what form?
The reasons to select arbitration are as numerous as the advice given by lawyers on the value of arbitrating a dispute. But for very simple disputes—such as fee claims—or very complex situations, many defense counsel recommend arbitration either using the American Arbitration Association or JAMS. There is a significant difference, however, in the two organizations.
JAMS was formerly known as the Judicial Arbitration and Mediation Services and merged with Endispute, a similar private reconciliation service in 1994. At the time, JAMS was a California-based firm that consisted primarily of judges serving as mediators and arbitrators. Endispute was based on the East Coast and primarily used lawyers as neutrals. As JAMS, the private ADR firm tends to be extremely legalistic—basically a private trial of the issue in dispute. The American Arbitration Association was set as the standard for resolving design and construction disputes when the contracts prepared by The American Institute of Architects switched from using AIA procedures and began including AAA arbitration over 40 years ago. A large percentage of AAA’s construction panel is made up of construction industry arbitrators, such as architects, engineers, contractors, developers, and sureties. The rest are construction lawyers. So its arbitrations are seen as going more to the substance of the dispute rather than simply applying applicable law based on the facts presented.
As you consider using arbitration, think about what organization and what rules should be involved. And if a client gives you a contract that calls for arbitration by the law firm that works for the client, be a little wary.