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Online Arbitration Speeds Settlements
By: Lee Uehara, AP
GREAT NECK, N.Y. (AP) - February 25, 2001 - The woman involved in a minor
auto accident demands payment for her injuries. But to save the costs
of a lawsuit, she agrees to arbitration.
Her lawyer makes an initial demand to her insurance
company. The company responds - without a word - with a counteroffer.
After several more exchanges, the case is settled for about $3,000.
Typical of traditional arbitration in many respects, this case had some
important distinctions: It took just 16 minutes to settle and the
parties never saw each other.
It also took place online.
ClickNsettle.com,
the Long Island firm that handled the January case, is among a handful
of companies nationwide trying to take the field of arbitration and
mediation online.
Arbitration has traditionally been seen as a cheaper
alternative to lawsuits because legal costs are lower. But online
arbitration, entrepreneurs say, offers greater speed because cases can
be settled in as few as 10 minutes, and greater ease because no travel
is required.
"It's designed for people who say to themselves, 'It's going to cost me
X amount of money and take this amount of time - and that doesn't make
sense. Why don't we try to resolve it today?'" said Roy Israel, founder
and CEO of clickNsettle.com Inc.
The company was founded in 1992 as a traditional arbitration firm, National Arbitration and Mediation Corp.
But Israel and William Specht, the company's information technology
chief, started to refocus the company three years ago to market its
online dispute services. They launched clickNsettle in June 1999.
The company has 47 full-time employees, and still draws
upon a consulting roster of retired judges to serve as hearing officers
for its in-person services.
Stock in the publicly traded company was trading at
around 80 cents last week; as with many online-based companies, its
price was down considerably, from a 52-week high of more than $9. The
company reports 2000 annual sales of $4 million and $5.6 million cash
on hand.
Israel acknowledged that the company's online division
has yet to break even. "If we can introduce this effectively, at some
juncture it'll just take on a life of its own," Israel said.
Maneesha Mithal, an attorney with the Federal Trade
Commission, says she's seen a notable increase in online resolution
services in the past 18 months.
It's a hot enough topic that seven top companies - AOL
Time Warner, AT&T, Dell Computer, IBM, Microsoft, Network Solutions
and Visa U.S.A. - are working together to propose industry standards,
Mithal said.
SquareTrade.com,
a San Francisco-based firm, has handled about 35,000 online disputes
from about 85 countries since its February 2000 launch. Squaretrade
concentrates on disputes arising from online transactions; one of its
clients is eBay.
"When you get both parties to participate, over 80 percent of the cases
can be resolved through automation," said Steve Abernethy, a
co-founder, president and CEO of SquareTrade.
At clickNsettle, cases involving insurance companies and personal injury claims are the most commonly heard.
Rich King, a negotiator for the Suffolk County law firm Siben &
Siben, said online resolution is worthwhile in cases such as the one
stemming from the car accident. It prevents cases from lingering for
years, he said, ultimately costing as much as the claim is worth.
"It doesn't change the value of the case. It just speeds up the process," King said.
ClickNsettle's proprietary software allows the parties to exchange
offers until the figures are within 30 percent of each other.
The software computes the difference, which is then offered to both
parties as a compromise. If the parties remain at a stalemate, they can
choose a traditional means of settling the dispute, through the
company's hearing officers.
An online case can typically be settled with a $160 to $220 commission
going to clickNsettle, depending on the final offer and the number of
bids the parties make.
Insurers say they are interested in online resolution but still assessing the process.
"We realize that these services can be another way to handle
settlements," said Zoe Younker, a spokeswoman for State Farm Insurance.
Despite its potential ease, online resolution doesn't work in all disputes.
At clickNsettle, about 50 percent of all parties offered the online
option choose to resolve their dispute via computer. And of those
cases, only about 45 percent are actually settled online.
If the percentage seems low, Israel says that's because online resolution is a new tool.
"You know the trust factor hasn't built up to the point where people
rely on it 100 percent," Israel said. "That number will grow as the
product becomes more familiar."
Stanford Law School professor Deborah Hensler, who specializes in
arbitration and mediation, said the impersonal aspect of online
arbitration can be a shortcoming. Plaintiffs often want, in addition to
money, an apology or a public airing of a company's "wrongdoing."
"In personal injury cases, people have very strong feelings about what
might have gone wrong with (things such as) IUDs, silicone breasts,"
Hensler said. "Those people frequently say they are bringing claims
because they care about some non-monetary values."
ToysRUs.com was one company that decided face-to-face mediation is preferable.
"Conceptually, we were interested in the idea," said Jeanne Meyer, vice
president of communications for the company's online division. "But
after a short trial it became clear that the traditional face-to-face
was preferable for us."
Still, online resolution can eliminate other issues, such as the difficulties in addressing international disputes.
"Litigation involving cross-border disputes is not really a viable
option for consumers," said Mithal, the FTC lawyer. "So in these cases,
(online resolution) could help resolve consumer disputes cheaply,
timely and effectively."
On the Net:
http://www.clicknsettle.com
http://www.ecommercegroup.org
http://www.squaretrade.com
http://www.ftc.gov |
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