Michael Griffin, JD, LCSW
Staff Attorney
The Therapist
November/December 2014

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When a patient contends that he or she was harmed due to the “negligence” of his or her therapist, a malpractice lawsuit is likely to ensue. But a lawsuit is not the only possible outcome. There are alternative approaches and strategies available to individuals that can be used in lieu of litigation to resolve legal disputes. Arbitration is one example of an alternative process that can be used to resolve a malpractice dispute outside of the courtroom.1

The Arbitration Process 
In arbitration, the parties agree in writing, to submit a potential claim of malpractice against the provider to one or more impartial persons (arbitrators), who are authorized to resolve the controversy by rendering a final, binding decision, after the parties had an opportunity to be heard.2 3 A provider may not engage in arbitration with his or her patient, unless he or she has previously entered into an arbitration agreement with the patient which conforms to specific legal requirements.4

Legal Requirements 
In 1976, section 1295 of the Code of Civil Procedure established procedures for health care providers to enter into arbitration agreements with patients, as a means to resolve disputes which might arise with their patients. Basically, these agreements created a mechanism for physicians, health care providers, and clinics to avoid standard litigation in the event of malpractice claims. The statute spells out a set of requirements, which must be strictly adhered to, in order for the agreement to be binding.5

According to this section of law, a contract for health care services which contains a provision for arbitration of professional negligence claims must state the provision as the first article of the contract, in the following language:

“ It is understood that any dispute as to medical malpractice, that is as to whether any medical services rendered under this contract were unnecessary or unauthorized or were improperly, negligently or incompetently rendered, will be determined by submission to arbitration as provided by California law, and not by a lawsuit or resort to court process except as California law provides for judicial review of arbitration proceedings. Both parties to this contract, by entering into it, are giving up their constitutional right to have any such dispute decided in a court of law before a jury, and instead are accepting the use of arbitration.” 6 7

In addition to the foregoing paragraph, the following language must appear in at least 10-point bold red type, immediately before the signature line in the agreement:

“ NOTICE: BY SIGNING THIS CONTRACT YOU ARE AGREEING TO HAVE ANY ISSUE OF MEDICAL MALPRACTICE DECIDED BY NEUTRAL ARBITRATION AND YOU ARE GIVING UP YOUR RIGHT TO A JURY OR COURT TRIAL. SEE ARTICLE 1 OF THIS CONTRACT.”

Arbitration agreements which comply with the requirements stated in the Code of Civil Procedure are neither improper or unconscionable, nor are they considered to be “contracts of adhesion,” which is a type of “take it or leave it” contract that forces a consumer to acquiesce to one-sided terms in order to obtain the desired goods or services. 8An arbitration agreement governs the services, which are subsequently provided to a current, active patient who has signed the agreement. A patient may rescind (cancel) his or her agreement, in writing, within thirty (30) days of signature.9

The Issue of Consent 
An issue that is of special concern in offering arbitration to a patient is the minimal legal requirements for obtaining patient consent to use arbitration. Unlike the criteria for “informed consent,” where a provider would be expected to offer a patient as much information as necessary in order for that individual to make an informed decision about the proposed treatment, the legal standard for consent to arbitration is based upon the lower objective standard that is applicable to the formation of contracts.10 Under the law of contracts, the parties must simply manifest their assent to the formation of an agreement, such as by signing their names on the document or saying certain words that would lead a reasonable person to conclude that they have assented to the terms of the contract.11

There are ethical implications here. In offering an arbitration agreement to a patient, the therapist is asking the patient to consider signing a document that has significant implications for the patient, concerning unknown, future-based events. A therapist is likely to offer such an agreement to the patient based upon a presumption that the agreement will offer some degree of protection to the therapist, in the event of future litigation. Although a low standard is required to obtain the patient’s consent to use arbitration, the therapist should take care to explain the agreement to his or her patient and stress that his or her consent to use arbitration is voluntary, rather than compulsory. It is recommended that a patient not be required to provide his or her consent to use arbitration in order to obtain treatment from the therapist.12

Arbitration vs. Litigation 
The question as to whether or not arbitration is preferable to litigation depends on the intended purpose for using arbitration, and the particular terms of the arbitration agreement. A common theme in studies concerning the use of alternative dispute resolution is that everything hinges upon the details of the agreements used. 13

There are many variations of arbitration, and it may or may not offer an advantage over litigation for every person, in every instance.

It is overly simplistic to subscribe to the “conventional wisdom” that arbitration is a safer bet for health care providers, compared to litigation. Many therapists may be surprised to learn that that the majority of malpractice lawsuits do not result in a judgment against the health care provider.14

Advocates for the use of arbitration in medical malpractice cases often claim that arbitration is likely to be more efficient and less contentious than litigation, and that it avoids the risks that are associated with a jury trial. Typically, the use of arbitration to resolve malpractice disputes is championed by the insurance industry, and criticized by consumer protection groups and plaintiff’s attorneys.15 That is probably because litigation has the potential to be much more costly than arbitration, and a plaintiff who prevails in his or her lawsuit is more likely to receive a large damages award from a jury, than from an arbitrator. 16There is evidence, however, that health care providers may actually have a greater likelihood of success in a traditional jury trial, compared to arbitration. The RAND Corporation, a non-profit think-tank which conducts research on social policy issues, found that physicians are likely to prevail approximately 70 percent of the time in malpractice litigation cases, compared to 60 percent of the time in arbitration. 17 18

The Arbitration Agreement: Key Issues to Consider 
When constructing an arbitration agreement, there are a number of key issues to be considered, including, but not limited to the following: 19

1. Scope of the agreement: Indicate whether the agreement is intended to address financial/payment disputes, in addition to negligence claims.
2. Location: State where the arbitration will take place.
3. Selection of Arbitrators: Describe how the arbitrators will be selected. In malpractice cases, there may be a single arbitrator, or, a panel of three arbitrators, depending on the terms of the agreement. Arbitrators may be selected on the basis of special expertise, such as special knowledge of a particular area of healthcare. The agreement might also specify that the arbitrators will be selected from a particular organization, such as the American Arbitration Association, (AAA), or JAMS (a national organization of retired judges).
4. Rules and procedures: Specify whether the arbitration process will be conducted according to a specified set of rules, such as those used by AAA, or JAMS. Similarly, the agreement may state whether the arbitration is intended to be binding, or non-binding on the parties, or whether the parties will to be provided with an opportunity to utilize non-binding mediation, prior to arbitration.
5. Choice of laws: State that the agreement is subject to the laws of a particular jurisdiction.
6. Costs and expenses: Explain how the costs of arbitration will be handled. It is common for the expenses to be shared by the parties.
7. Discovery/rules of evidence: Describe the nature of the discovery process and the admissibility of evidence.
8. Confidentiality: Delineate the confidential nature of arbitration, as well as any exceptions to confidentiality which may apply.20 21

Pros and Cons of Arbitration 
Therapists in California are free to ask their patients to sign an arbitration agreement. However, before adopting the use of arbitration, one should consider the various positive factors that are typically associated with arbitration, versus the potential problems or limitations that are associated with its use.

Positive factors that are associated with arbitration include:

1. Arbitration is likely to result in lower legal costs, compared to the cost of litigation. 22
2. Arbitration is likely to require less time, compared to the amount of time that is ordinarily required in litigation. 23
3. Arbitration may help to reduce the adversarial nature of a dispute, compared to the process of a civil jury trial.24
4. It may be possible to select an arbitrator who has considerable expertise about the subject matter, compared to a judge or jury.25
5. Generally speaking, the process of arbitration is more flexible, compared to the civil procedures that apply to litigation. 26 27

Potential problems, or limitations of arbitration include:

1. There is no guarantee that a therapist will fare better with an arbitrator than he or she would with a jury. Some evidence suggests that health care providers are more likely to be successful in a malpractice trial, compared to arbitration. 28
2. An arbitrator may be unfamiliar with the practice of psychotherapy, or with the particular type of therapy that is involved in the case.
3. Arbitrators are required to follow the rules that are stipulated by AAA, or JAMS, etc., if one of those organizations is designated to administer the arbitration process, but they are not technically required to base their decisions upon legal principles or rules of law.
4. As a general rule, courts are reluctant to challenge an arbitrator’s decision, even if it is against the weight of the evidence, or if a procedural error affected the decision. 29

In constructing any arbitration agreement, there are many variables to consider, and providers should not attempt to draft an arbitration agreement on their own. Arbitration agreements should be drafted with the assistance of a qualified attorney who is experienced in their use.

Therapists who are contemplating the use of arbitration in their practices should familiarize themselves with the arbitration process and the legal guidelines which govern its use, and should check with their malpractice insurance carriers to inquire whether there are any policies or limitations on the use of arbitration, prior to making a decision.

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Michael Griffin, JD, LCSW, is a Staff Attorney at CAMFT. Michael is available to answer member calls regarding legal, ethical, and licensure issues.

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Endnotes 
¹ Alternative Dispute Resolution (“ADR”) is a general term that is used to refer to various alternatives to litigation. Common examples of ADR include mediation, a private, informal process in which a neutral third person (mediator) helps disputing parties to reach an agreement, and arbitration. Black’s Law Dictionary, West Publishing, 9th Ed., (2004). 
² Id. 
³ “Drafting Dispute Resolution Clauses: A Practical Guide,” Amer. Arbitration Assoc., (2013). 

⁴ Code of Civil Procedure, §1295. 
⁵ Id. 
⁶ Code of Civil Procedure, §1295 (g)(1) “Health care provider” includes licensed marriage and family therapists, licensed clinical social workers, licensed professional clinical counselors and licensed psychologists. 
⁷ Code of Civil Procedure, §1295 (g)(2) “Professional negligence” means a negligent act or omission to act by a health care provider in the rendering of professional services, which is the proximate cause of a personal injury or wrongful death, provided that such services are within the scope of services for which the provider is licensed and which are not within any restriction imposed by the licensing agency or licensed hospital. 
⁸ The term “unconscionable,” in a legal context, means a contract, which is offered by an unscrupulous individual that is unjust, or unreasonable. Black’s Law Dictionary, Supra, at 1664. 
⁹ Code of Civil Procedure, §1295 (c) The statute refers to such services as “open-book account transactions.” If the patient is incapacitated, or a minor, a written notice of rescission may be submitted by a guardian or conservator of the patient. 
¹⁰ Calif. Jury Instructions (“CACI”), §532, Informed Consent: Requires a provider to “…give the patient as much information as [he/she] needs to make an informed decision, including any risk that a reasonable person would consider important in deciding to have the proposed treatment or procedure, and any other information skilled practitioners would disclose to the patient under the same or similar circumstances.”
¹¹ Ware, Stephen, J., J.D., “Arbitration Clauses, Jury-Waiver Clauses, and other Contractual Waivers of Constitutional Rights,” Law and Contemporary Problems, Vol. 67:105, 108-110, (2004). 
¹² Code of Ethics, §1.6, Exploitation: “Marriage and family therapists do not use their professional relationships with patients to further their own interests and do not exert undue influence on patients.” 
¹³ Stipanowich, Thomas, J., “ADR and the Vanishing Trial: The Growth and Impact of Alternative Dispute Resolution,” Journal of Empirical Legal Studies, Vol. 1, Issue 3, 843-912, at 846, Nov., 2004 
¹⁴ Id. 
¹⁵ Id. 
¹⁶ Id. 
¹⁷ “Binding Arbitration Is Not Frequently Used to Resolve Health Care Disputes,” Report issued by the Institute for Civil Justice, RAND Corporation, 1999. 
¹⁸ DeVille, Kenneth, A, Ph.D., J.D., “The Jury is Out: Pre-Dispute Binding Arbitration Agreements For Medical Malpractice Claims -Law, Ethics and Prudence,” The Journal of Legal Medicine, 28: 368, 333-395, (2007). Some data suggests that physicians may prevail in malpractice litigation as much as much as eighty percent of the time. 
¹⁹ “Drafting Dispute Resolution Clauses, Amer. Arbitration Assoc., Supra. 
²⁰ California Civil Code, §56.10(b)(5) states that a provider of health care may provide regarding medical information regarding a patient of the provider, without first obtaining an authorization, when requested by an arbitrator or arbitration panel, when arbitration is lawfully requested by either party, pursuant to a subpoena duces tecum issued under Section 1282.6 of the Code of Civil Procedure, or another provision authorizing discovery in a proceeding before an arbitrator or arbitration panel. 
²¹ 45 C.F.R., §164.512(e)(ii)(A) HIPAA permits the disclosure of protected health information in the course of any judicial or administrative proceeding, in response to a subpoena, discovery request, or other lawful process, that is not accompanied by an order of a court or administrative tribunal , if the covered entity received satisfactory assurance from the party seeking the information that reasonable efforts have been made by such party to ensure that the individual who is the subject of the protected health information has been given notice of the request. 
²² DeVille, Kenneth, A, Supra. 
²³ Id. 
²⁴ Id. 
²⁵ Id. 
²⁶ Id. 
²⁷ Drafting Dispute Resolution Clauses, (AAA), Supra. 
²⁸ RAND Corp., Institute for Civil Justice, Supra. 
²⁹ DeVille, Kenneth, A, Supra.