Arbitrate, not litigate: A growing and popular alternative to lawsuits

More doctors and insurers are looking to binding arbitration in lieu of the costly court system. But will the contracts stand judicial scrutiny?

By Amy Lynn Sorrel, AMNews staff. Aug. 27, 2007.

After being sued three times -- fortunately winning each case -- Ridgewood, N.J., ob-gyn Ruth J. Schulze, MD, searched for another way to prevent the threat of what could be that one career-ending lawsuit. She also wanted a way to temper unaffordable medical liability insurance premiums that forced her nearly two years ago to cut her practice to just gynecology.

Her answer: In January, she began using binding arbitration contracts with her patients. "[It] says, 'Here, let's talk honestly, let's say you and I can agree we are entering into a contract together. And if something goes wrong, instead of running down the road to an attorney, let's discuss what went on,' " Dr. Schulze said.

Ninety percent of her patients have no problem signing the contracts, which her staff present along with other routine paperwork, she said. Dr. Schulze continues to treat those who do not agree to sign, but won't perform surgery, unless it's an emergency situation. Instead, she refers those patients to a colleague.

Dr. Schulze is not alone. Insurance industry and legal experts say physicians' use of binding arbitration agreements is becoming a popular alternative to the costly court system, particularly in states where tort reform efforts have not been successful.

In addition to some insurers promoting the idea, the North Carolina Legislature in July passed a $1 million cap on noneconomic damage awards in medical liability cases that would apply only if the parties agree to binding arbitration. At press time, Gov. Mike Easley had not signed the measure, supported by the North Carolina Medical Society and the North Carolina Academy of Trial Lawyers. But he was expected to sign it by the end of August. In Florida, where excessive jury awards drive up rates, many doctors have chosen to go without insurance, and frequently use arbitration contracts, experts say.