Fight the Good Fight; Nasca v. State Farm
Nasca v. State Farm Mutual Auto Insurance Co., 12 P.3d 346 (Colo.App. 2000).
We are proud of every case we handle. Whether it is one of the thousands of quite settlements we have negotiated over the past 30 years, or one of the many cases we have fought all the way to trial (or on appeal). However, we remain especially proud of our work in the Nasca case. This case was one of our most difficult challenges. We set a nationally recognized precedent prohibiting insurance companies from concealing significant business relationships with the arbitrators who decide cases against them. Many kinds of contracts, including many insurance policies, require that claims be decided by arbitration instead of regular court trials. The parties to these contracts lose their right to a jury trial. Instead, they must present their legal case to an arbitration panel, which is usually three lawyers. The arbitrators have more power than a judge and jury combined. Unlike judges, arbitrators’ legal rulings cannot be appealed to a higher court.
It turned out State Farm was repeatedly using the same lawyers from the same small law firm, to decide numerous cases as arbitrators, and also to testify as paid “expert witnesses” for State Farm in bad faith cases. Mr. Nasca tried his underinsured motorist case to an arbitral panel including one of these lawyers. State Farm had paid several hundred thousand dollars to her law firm over many years. The arbitrators denied Mr. Nasca’s UM claim.
Years after his arbitration, we decided to try to help Mr. Nasca finally obtain justice. The Denver District Court agreed that State Farm violated Colorado’s arbitration law, but State Farm appealed. In a published decision, the Colorado Court of Appeals ruled that the failure to disclose State Farm’s business relationship with its arbitrator constituted “undue means” under the Uniform Arbitration Act.
The Nasca case was very important in reforming arbitrations in Colorado. It also had a national impact. The National Conference of Commissioners on Uniform State Laws cited Nasca in the Official Comments to the 2000 Revision of the Uniform Arbitration Act. The Commissioners cited our case to support their recommendation that the legislation include an explicit, statutory requirement that any arbitrator-party relationship that might indicate bias must be disclosed to the other party. Colorado, and many other states, has since passed this disclosure requirement into law.
These days, more cases are decided in “alternative dispute resolution” than by trials in courts of law. We are proud to have helped restore basic fairness to arbitrations in Colorado and throughout the U.S.