Attorney: Arbitration awards led to investigation

WILKES-BARRE – A local attorney who represents an insurance company in auto crash cases said he was once interviewed by a fraud investigator who was examining why arbitration awards in uninsured motorist cases were significantly higher in Luzerne County than in most other counties in the state.

Robert Panowicz, of Wilkes-Barre, an attorney who has represented Erie Insurance for 30 years, said an investigator from the Northeast Fraud Prevention Authority Task force in Philadelphia contacted him several years ago after receiving numerous complaints from insurance companies who were suspicious of the disproportionately high awards being rendered locally.

“Insurance carriers historically promoted arbitration because they expected it to be quicker and less costly. In most counties it worked out fine,” Panowicz said. “But there were a couple, including Luzerne and Lackawanna, where awards being paid out were getting to be exorbitant.”

Panowicz said the higher-than-expected awards, coupled with questions regarding the fairness of the appointment process for arbitrators in Luzerne County, led insurance carriers to question whether there might be collusion between plaintiffs’ attorneys and some judges.

He said he discussed those issues with the fraud investigator, but he never heard back regarding the outcome of the probe. He does not know if that agency, which is funded by a surcharge placed on the insurance industry, or any other state or federal office is continuing to investigate the issue. Linda Perkins, head of the task force, did not immediately return a phone message Wednesday.

Panowicz said suspicions regarding the arbitration process continued to fester over the years. Those suspicions have heightened in the wake of federal charges that were filed last month against judges Mark Ciavarella and Michael Conahan, who are scheduled to plead guilty today to accepting more than $2.6 million in kickbacks from the owner and builder of a local juvenile detention facility.

President Judge Chester Muroski on Tuesday announced he had ordered a review of the county court’s process for appointing arbitrators to determine if changes need to be made. Muroski said he is not aware of any ongoing investigation.

U.S. Attorney Martin Carlson, who filed the charges against Ciavarella and Conahan, has said the corruption probe is continuing. He declined to comment Wednesday on whether authorities are investigating the county’s arbitration system.

At issue are arbitration panels that hear disputes over the amount of money a person injured in a car crash caused by an uninsured or underinsured motorist is entitled to recoup from their own insurance carrier.

The panels consist of three attorneys who hear evidence and issue decisions that are binding. At least two arbitrators must rule in favor of a plaintiff for them to recover money.

In most instances one arbitrator is named by the plaintiff, the other by the defense. Together they select a third neutral arbitrator. If they cannot agree on the neutral party, that is appointed by the court.

The problem, Panowicz and other attorneys said, is some Luzerne County judges often appointed a neutral arbitrator without giving the defense any opportunity to be heard on the matter. That precluded the defense from evaluating the person to determine any bias.

“Most of the time the plaintiff’s attorney simply goes to the judge with a petition and asks him to pick a name. No one is there except the plaintiff’s attorney,” he said.

Ensuring the neutral arbitrator is unbiased is crucial to the process, Panowicz said, because that person is supposed to be the voice of reason who mediates between the arbitrators chosen by the defense and plaintiff, who might be prone to rule toward the side that appointed them.

Panowicz said once an arbitration ruling is issued, it is virtually impossible to change. The only basis upon which an appeal can be filed is if fraud is alleged. Attorneys are reluctant to raise that allegation because, unless someone admits to it, it’s nearly impossible to prove, he said.

Arbitrations, unlike trials, are held in private. The only parties present are the defense and plaintiff attorneys and any witnesses they might call, so there is little written evidence of the proceeding.

“If you make an allegation against a lawyer or judge you have to back it up with proof. This is extremely difficult to back up with paper,” he said.

Two veteran attorneys who handle many motor vehicle crash cases said they’re not convinced that the situation was as drastic as has been painted by insurance company defense attorneys.

Attorney Joseph Quinn of Kingston and Conrad Falvello of Hazleton said that in most arbitration cases, attorneys are able to agree on the appointment of the neutral and don’t have to go to court. They each said any time they personally sought a court appointment, the defense was always notified.

“I’ve never seen what they’re contending occur,” said Falvello, who also has served numerous times as arbitrator, usually for the plaintiff.

Quinn also questioned the claim that arbitration awards here are significantly higher than in other counties, saying he has never seen any independent data supporting that contention.

“If the trier of fact, whether it be an arbitrator or a jury, decides a case is worth more than the defense thought, what makes that award wrong? The reality is defense lawyers always think a verdict is too high,” Quinn said.

Panowicz said that argument is precisely why it’s so hard to overturn an arbitration ruling. He said he understands there will be disagreements regarding the value of the case, and acknowledges he, a defense attorney, would likely value a case on the low side, versus high side.

He said his view is not based on a single case, but on many he’s seen in the decades he handled uninsured motorist cases.

“If I look at a case, I may put a value of $50,000 to $70,000 on it. If it comes in at $80,000 to $90,000, I’m disappointed, but I’m not shocked,” Panowicz said. “When it comes in at $400,000 to $600,000, you start wondering what’s going on here.”

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