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Arbitration has been available in New Jersey for many years, yet few take advantage!  Here are some details from a recent article in Medscape:

Your Malpractice Advisor: An Antilawsuit Tactic Takes a Major Step Forward

Michael B. Carcaise

Risk Manager, MDMC, Coral Gables, Florida

Disclosure: Michael B. Carcaise has disclosed the following relevant financial relationships:
Served as an employee for: Medical Development & Management Co.


Two recent rulings from the New Jersey appellate court represent notable progress made toward establishing an alternative to costly and emotionally taxing medical malpractice trials. 

Predispute binding arbitration agreements are contracts that shift the disputes between doctors and patients away from the "slip-and-fall" tort environment of a jury trial to a reliable, efficient system that fairly compensates patients for harm suffered through negligence. The judge and jury are replaced by a panel of three arbitrators who are usually attorneys well versed in medical malpractice law.


Unlike other tort reform proposals, binding arbitration can be pursued without new legislation being passed in Trenton. The laws that give patients and physicians the rights to contractually agree to arbitrate disputes outside of court have existed in New Jersey since before the state's first medical malpractice crisis, but only now have the New Jersey courts been given the opportunity to explicitly apply those laws to medical malpractice issues.

These 2 rulings are only the beginning, and more cases must be heard to "flesh out" the body of law. But the court has provided a blueprint for New Jersey physicians to replace the broken jury trial system with one that works better for doctors and their patients.

Recent Cases Show Clear Progress:

On August 10, 2010, a New Jersey appeals court ruled that medical negligence disputes between nursing home facilities and their residents can be arbitrated despite a state law banning the practice.


The Federal Arbitration Act (FAA) was passed by the US Congress in 1925 to codify support for arbitration as a preferred means of resolving disputes outside of the court system, and the FAA preempts state laws that are inconsistent with its guidelines. The most important of these guidelines requires state courts to enforce arbitration agreements according to the same rules as applied to any other contract.


In 2003, the New Jersey legislature passed the Nursing Home Responsibilities and Rights of Residents Act, which included a provision that bars nursing home facilities from requiring residents to arbitrate medical negligence disputes.


In the recently decided matter Estate of Ruszala v. Brookdale Living Communities, the court ruled that the FAA preempts New Jersey's nursing home law. The court ordered the parties to arbitrate their dispute.


However, the court removed clauses in the agreement that capped compensatory damages, limited discovery, and banned punitive damages on the grounds that such terms were unconscionable and against public policy.


"The lesson to physicians from the Ruszala matter is that serious consideration should be given before limitations on damages and discovery are written into arbitration contracts," said Joel I. Fishbein, Esq., counsel for Brookdale in the Ruszala case.


"While these provisions attempt to provide an upper limit on financial responsibility, eliminating them might cause courts to look more favorably upon arbitration clauses when they are challenged," said Mr. Fishbein.

Another Ruling That's Good for Doctors:

In a separate ruling one week later, in Moore v. Woman to Woman Obstetrics & Gynecology, a New Jersey appeals court ruled that arbitration is a valid forum for resolving disputes between patients and their doctors. This ruling creates an important precedent by suggesting that patient-physician arbitration agreements will be judged in New Jersey on a case-by-case basis to determine whether the agreements meet certain substantive and procedural requirements. If they do, the agreements will be enforced and patients and physicians will arbitrate their disputes.

The Moore court ruled that the patient (the expectant mother) could bind her unborn child to arbitrate the wrongful life claim. However, the court ruled that the father of the child, who was not present in the doctor's office and did not sign the arbitration agreement, was not bound by the terms of the contract and can sue the physician in court.


In Moore, key questions were raised surrounding how the agreement was signed -- was the patient given sufficient notice of the existence of the agreement and provided with a copy after she signed it? The appeals court sent the matter back to the OceanCounty trial court for further discovery on these issues.

Using Arbitration Agreements in Your Practice:

When implementing an arbitration program in your office, you should retain the services of an attorney and/or work with your malpractice insurance carrier or agent. Broadly speaking, an effective program consists of a well-written agreement and a process to consistently collect a "knowing and voluntary" signature of the patient. Consider the following tips:


Drafting an agreement:

  • Create a cover letter to be distributed with every agreement. The cover letter should be written in plain language and:

    • State the agreement is voluntary

    • Explain what arbitration is

    • State that the arbitrators' decision is binding and appealable under limited circumstances

    • Encourage patients to seek the advice of an attorney or to call your malpractice insurance company's toll-free arbitration hotline (if applicable)

  • Include an opt-out provision that gives the patient at least 30 days after execution to cancel the agreement by mailing a copy (certified return receipt) back to your office with the word "CANCELED" written across the front

  • Do not include provisions capping damages or limiting discovery


Distributing the agreement:

  • Incorporate into your office manual a document describing your policy for arbitration distribution

  • Make the agreement look different from other documents given to patients

  • Do not ask patients to sign under emergent conditions when they might feel coerced

  • Give a copy of the agreement to every patient who signs one

Benefits of Medical Malpractice Arbitration:

While only a handful of doctors in New Jersey have been using arbitration agreements since 2007, other states have enjoyed the benefits of an alternative to jury trials for many years.


California managed their medical malpractice crisis 35 years ago by passing a comprehensive reform law that included the use of binding arbitration for medical malpractice disputes. Kaiser Permanente, headquartered in Oakland, California, is one of the nation's largest health systems, and every one of its 6.4 million health plan members in California has signed an agreement to arbitrate future medical malpractice disputes.

Though California has the second-highest cost-of-living standard in the United States, the average insurance premium for OB/GYNs in Los Angeles is less than half of what is paid by OB/GYNs in Miami or Long Island, New York.

The US Supreme Court has noted that arbitration's benefits include simpler rules of procedure and evidence, the opportunity for more cooperation between parties, and more flexible scheduling of times and locations for hearings and discovery. All of these benefits apply to medical malpractice arbitration. However, the greatest benefit to physicians and patients is the replacement of a jury with a panel of arbitrators, which usually consists of attorneys or retired judges who are familiar with medical malpractice law.

Plaintiff's attorneys take advantage of jury members' sympathy and lack of medical knowledge by focusing on the injuries suffered rather than the cause of the injuries.Consider:


  • Jack Olender -- a legendary Washington, DC, attorney famous for suing OB/GYNs -- says that when choosing jurors he "generally looks for have-nots rather than haves, because generally the haves don't want anybody else to have anything."

  • The noted mock-trial case preparation consultant David Ball, Ph.D., coaches plaintiff's attorneys to spend no less than one-third of their time in opening statements, presentation of evidence, and closing statements on damages rather than liability/causation.[1]

  • David Ball says the plaintiff's attorney's best friend is an angry jury.


Binding arbitration switches the focus so that facts -- rather than emotion -- are the most important factors in the outcome. This is a positive step for physicians.


1.      Ball D. David Ball on Damages: A Plaintiff's Attorney's Guide for Personal Injury and Wrongful Death Cases. 2nd ed. Louisville, Colo: NITA; 2005. Medscape Business of Medicine © 2010 WebMD, LLC


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