FREE ESSAY ON DISPUTES IN THE LEGAL SYSTEM

DISPUTES IN THE LEGAL SYSTEM

Midterm Paper
20 October 1997
Law, Politics & Society
Businesses are formed to make money. In the pursuit of making money, businesses deal with
consumers and customers and other businesses. In all things in life when you have more
than one individual or entity there will be some form of dispute that will arises in the
course of time. This paper will focus on purchasing agents and insurance claim agents on
why they avoid conflicts in the courts. It will also address how purchasing agents and
insurance claim agents access disputes, how they handle disputes and what their
objectives are in avoiding such disputes.
In all businesses one has to look at the bottom line. How does the business make money in
the most productive manner? The usual way is that the business produces a product,
markets that product and sells that product to a consumer. When the consumer purchases
this product they enter into a contract, usually written, with the business. Stewart
Macaulay states there are two distinct elements of a contract, "Rational planning of the
transaction with careful provision for as many future contingencies as can be foreseen,
and the existence or use of actual or potential legal sanctions to induce performance of
the exchange or to compensate for non-performance."
The paradox of the contract is that it is rarely enforced in a court of law. For example
Lawrence H. Ross states that 98% of bodily injury claims in New York are terminated
without adjudication by a court. In a survey in 1980 conducted by Richard E. Miller and
Austin Sarat in the areas of South Carolina, Eastern Pennsylvania, Eastern Wisconsin, New
Mexico and Central California there were only 8.9% consumer grievances filled out of 5147
households surveyed. This suggests that businesses do not like to enforce their contracts
but to negotiate with the consumer.
There are different ways how businesses access disputes. Discussion will only be focused
around purchasing agents and insurance claim agents. Purchasing agents access their
disputes in three ways. Customer satisfaction, business relationships and longevity of
said relationships. All businesses want to produce a product that fits the needs of the
consumer, which enables the company to make money. If the purchasing agent is not happy
with the product then more likely the case the purchasing agent will find another
supplier. Stewart Macaulay states, "Both business units involved in the exchange desire
to continue successfully in business and will avoid conduct which might interfere with
attaining this goal." He goes on to say, "People in a sales department oppose contract.
Contractual negotiations are just one more hurdle in the way of a sale. Holding customers
to the letter of a contact is bad for "customer relations". Suing a customer who is not
bankrupt and might order again is poor strategy." It all boils down to this, if the
customer is happy with his purchase then that customer will use that company again which
means that the business will make money. The only time a purchase agent will file a legal
complaint is if the customer is going out of business or is going bankrupt.
The insurance claim agent access disputes in a different manner. To the insurance claim
agent it depends on the size of the claim and the individual. Lawrence H. Ross explains,
"In small claims, a fair number of denials are successfully made. The adjuster
rationalizes his actions on the basis of formal law and the company is shielded from
reprisals by high processing cost for the claimant relative to the amount at stake. The
adjuster closes his file by denial when he feels the formal law warrants this and also
that the claimant will take the case no father. When he believes that the formal law
favors the claimant, and thus finds himself ethically obliged, or when he believes the
claimant is determined to press the claim, a payment can be made of considerable
magnitude relative to the economic loss involved…In claims based on large loses,
the claimants threat to litigate becomes more creditable, and denial thus becomes more
difficult." Lawrence H. Ross goes on and explains that settlements are also favored by
how affluent, educated, and what race you are. For example a whit male that has graduated
from college is more likely to achieve his claim than an individual with no high school
education and is a minority.
When the purchasing agent and insurance claim agent recognize disputes they are handled
in different ways. The purchasing agent will handle the disputes in negotiations or as
far as waiving the contract agreement in favor of maintaining the business relationship.
The purchasing agent will only resort to litigations when all other options have been
exhausted. The insurance agent handles disputes in a wholesale approach. The insurance
agent is looking for what is best for the company, which does not always coincide with
what is best for the customer. Lawrence H. Ross sums it up nicely, "The company - like a
casino, which is able to translate a large number of gamblers into mathematical certainty
- is indifferent between these outcomes and can demand a concession for the definite
settlement." That is to say, because the insurance agent knows which files to drop and
which ones he has to pay out, he will make money for the insurance company in the long
run. Also the insurance companies have developed a long and drawn out process that might
take years for a claim to settle. The insurance companies know that more than likely the
claimant will opt for a quick settlement for a smaller sum of money.
The objective for the purchasing agent and insurance claim agent in avoiding such
disputes is to make money for their companies. Though their objective is the same their
approach is different. The motive for the purchasing agent is to stay in business by
maintaining good relationships with the consumer. The insurance companies on the other
hand want to process claimants in mass such as a casino does with gamblers. . If you have
1000 claimants and only a hundred take you for money you still collect from the other
900. The insurance companies know that they have a captive clientele. The insurance
companies want to avoid long and lengthy court battles since this would hinder their
operations of processing claims in a productive manner.
Lawrence H. Ross states, "The regulations applicable to conduct business are so numerous
and pervasive that their violation is virtually a way of life to the ordinary
businessman." Businesses have to be able to work around disputes to be able to make
money. Conflict only hinders this pursuit by waylaying the business ability to deal with
customers and clients. So at all costs the businesses will avoid bring disputes to the
courts and handle them per say "In house".