Press Release June 30, 1997	Contact: Gail Hillebrand or Jeanne Finberg (415) 431-6747 Consumers Union West Coast Regional Office

CONSUMERS UNION STATEMENT ON DECISION

IN ENGALLA V. KAISER ARBITRATION CASE

SAN FRANCISCO, CA -- The California Supreme Court today issued a decision in Engalla v. Kaiser in which it criticized Kaiser's use of delay in its arbitration proceedings. The Court reversed a Court of Appeals decision favorable to Kaiser. It sent the case back to a trial court to determine whether Kaiser defrauded its members by promising a speedy arbitration process. The Court found there was evidence of misrepresentation by Kaiser regarding the speed of its arbitration process. The Court suggested Kaiser's newsletters and other statements were "misrepresenting the actual workings of its arbitration program."

The Court noted that delays in appointing an arbitrator occur in 99 percent of all Kaiser medical malpractice arbitrations. According to statistics discussed by the Court, Kaiser took 2 1/2 years on average before holding an arbitration hearing.

"The Supreme Court's ruling against Kaiser's unfair arbitration process is a victory for consumers," said Jeanne Finberg, senior attorney and policy analyst on health care issues with Consumers Union. "Kaiser, the state's largest and oldest HMO, has an unfair and slow arbitration process court records show. Mr. Engalla died of cancer waiting for Kaiser's arbitration hearing. His wife challenged the process and has succeeded in exposing Kaiser's unfair dispute resolution process for all California consumers. Kaiser enrollees will particularly benefit from the court's decision."

"Although California courts generally uphold arbitration agreements, this Court found that Kaiser went too far by dragging its heels systematically in its arbitration processes," Finberg said. "This decision sends a message to all businesses that they must be fair to consumers in their arbitration processes."

"Arbitration clauses are commonly added to consumer contracts, not only for health care, but also for other services such as banking," said Gail Hillebrand, senior attorney on credit and finance at Consumers Union. "This decision suggests that businesses who insist that consumers arbitrate must provide the benefits promised in their advertising materials."

Legislation scheduled for hearing in the Assembly Judiciary Committee on July 16th addresses a related consumer problem with arbitration. Under current California law, a consumer who is forced to arbitrate can virtually never appeal an arbitrator's decision. SB 19, by Senator Lockyer, would permit consumers to appeal an arbitration award if the award was the result of a legal error by the arbitrator and resulted in a miscarriage of justice.