Pre-approved Agreement Caps Driver’s Liability at $100K

Double_Taxation_Agreement_(5933774697)A driver found liable to the tune of $366,000 managed to escape the bulk of that financial hit thanks to an arbitration agreement that both drivers approved prior to beginning binding arbitration. Both drivers had agreed, in the event of an arbitration award exceeding $100,000, that the injured driver would accept a $100,000 payment as total satisfaction of the obligation. When the defendant driver made that $100,000 payment, he completely satisfied the judgment, regardless of the amount of damages the arbitrator awarded, the California Court of Appeal ruled.

The court decision resolved the case of John Hess and Elsie Horath, who were involved in an auto accident where Hess’s vehicle struck Horath’s in the rear. Horath sued Hess for her injuries, and the two sides agreed to binding arbitration. As part of that agreement, Hess agreed to pay the woman the greater of either the arbitrator’s award or $44,000, while Horath agreed to accept the lesser of either the arbitrator’s award or $100,000.

The arbitrator found Hess liable and assessed Horath’s damages at just less than $330,000. The arbitrator also awarded Horath costs amounting to $36,882. Several months later, Hess asked the trial court to limit the judgment to the agreed-upon cap amount of $100,000. The trial court refused because the law gives parties only 100 days to correct an arbitrator’s award and Hess made his request nearly five months after the arbitrator issued the award.

Hess paid the $36,882 in costs plus $100,000, and then asked the trial court to certify that he had satisfied his obligation to Horath. The trial court refused, calling it an “unauthorized modification” of the arbitrator’s award. The appeals court decided differently, however. The arbitration agreement terms were clear, the court stated, in describing the outcome if the arbitrator arrived at a damages amount in excess of $100,000. In that scenario, Horath agreed to accept $100,000 plus costs. Hess was not obligated to seek to correct the arbitrator’s award, nor was his payment a modification of the award. When he made his payment and sought a certification that he had satisfied his obligation, he was not asserting that the arbitrator’s award was in error. Instead, he was electing a pre-approved option available to him under the terms of the arbitration agreement, should the arbitrator’s award exceed $100,000.

Hess was simply playing by the rules laid out in the agreement both sides approved before arbitration began, according to the court. Each party assumed a degree of potential risk and accepted a degree of potential benefit from the terms of the arbitration agreement. Had the arbitrator found Hess liable but set Horath’s damages at only $10,000, Horath would have benefited, as Hess would have been on the hook for costs plus $44,000.

Arbitration and arbitration agreements like the one in this case can serve as useful tools in helping parties achieve a resolution of their disputes in personal injury cases. The terms of these agreements can be very complicated, and fully understanding the impact of all of their terms often requires the skilled eye of a trained professional. For help with your personal injury case, including a potential arbitration of your case, consult the Oakland injury attorneys at the Law Offices of Stephen M. Fuerch. Our injury attorneys can assist you with ensuring that any agreement you approve adequately protects your rights. Contact us through our website or call our office at (925) 463-1073 to schedule your confidential initial consultation today.

More Blog Posts:

Auto Maker Agrees to $1.2B Settlement to End Federal Probe of Defective Vehicle Accelerators, Oakland Personal Injury Attorney Blog, March 28, 2014

Trucker’s Improper Interstate Stop Results in Fiery Crash, $150M Wrongful Death Judgment, Oakland Personal Injury Attorney Blog, Oct. 30, 2013

Photo credit: Foreign and Commonwealth Office at Wikimedia Commons.