TPA Service Agreement

[Medusa]

We are a TPA in the process of re-vamping our service agreement we use with clients.

I am curious as to how many TPA's have arbitration clauses in their service agreements, and as to whether such arbitration is binding or nonbinding.

(I'm not entirely sure what the purpose of nonbinding arbitration would be, but perhaps someone can enlighten me?)

[Ron Snyder]

It's a hot item right now with doctors' offices to make a patient sign an arbitration agreement before the physician will render medical services. But unlike doctors (who hate lawyers) while actuaries and pension administrators don't necessarily, there is little advantage to an arbitration clause. Many of them are not even binding in contracts of adhesion.

Non-binding arbitration means "let's talk until someone gets mad enough to sue", which may occur before or after the arbitrator renders a decisions.

Binding arbitration may successfully avoid going to court, but either requires cross-referencing to AAA (American Arbitration Association rules) which will make it as expensive as litigation, or requires a complicated process to be described in detail, thus bogging down what ought to be a simple, straightforward agreement.

A lot of firms look at this issue as a way of protecting themselves against clients who may sue them. I consider it likelier that I may have to sue a client for unpaid fees, than that a client will sue me for malpractice. Therefore, my perspective is as a potential plaintiff instead of a defendant.

In many jurisdictions small claims courts can handle claims of up to $5,000, $7,500 or even $10,000. The process is simple and inexpensive. I believe that the way to go is to limit clients to a credit limit of whatever the small claims court amount is your jurisdiction, and cut them off when that limit has been reached. I would not wish to tie my hands and force me to go through expensive arbitration when the matter can be handled in small claims court. A simple clause in the agreement can guarantee venue and jurisdiction (both in personam and subject matter).

Since that's what I want as a plaintiff, I am happy to stipulate that that is what I will have as a defendant as well. What's good for the goose, etc.