BOZICH v. KOZUSKO - Arbitration Clause Upheld

[hausdok]

In this 2009 Ohio court case, homeowners Neil and Alicia Bozich hired Bill Kozusko, dba Kozusko's Home Inspection Services, to perform a home inspection. The report that Kozusko prepared did not reveal any major structural defects or signs of water damage in the basement of the home. According to the Boziches' complaint, approximately five months after they moved into their new residence they experienced large amounts of water seepage into the basement in addition to severe cracking and inward movement of the CMU foundation walls.

The Boziches subsequently filed suit against Kozusko, their realtor, their realtor's real estate agency, the sellers, and the sellers' real estate agency, alleging negligence and violations of the Consumer Sales Practices Act ("CSPA") and seeking damages in the amount of $70,000 subject to trebling and punitive damages.

Kozusko filed a motion to dismiss, or in the alternative, to stay the proceedings and compel arbitration pursuant to the terms of the Addendum. The trial court denied Kozusko's motion to dismiss and set a hearing on his motion to stay the proceedings. The trial court subsequently granted Kozusko's motion to compel arbitration; concluding that the arbitration provision was valid and enforceable, but that the limitation of liability clause in the Agreement was both procedurally and substantively unconscionable in that it limited a party's recovery to the amount of the inspection fee - $290.

The Boziches appealed, claiming the lower court had made three substantive errors. Judge Whitmore of the Ohio Court of Appeals for the 9th District and Lorain county affirmed the lower court judgement compelling arbitration, overruled the Boziches' assignmenjudgmentts of error and directed the Court of Common Pleas, County of Lorain, State of Ohio, to carry that judgment into execution, thus compelling arbitration.

To read the entire summation, click here

[Chris Bernhardt]

With regards to the limitation of liability clause, it seems that some states will enforce them and others won't as in this case.

Chris, Oregon

[Bain]

I realize it's less expensive, but is binding arbitration always a good thing? Discovery is limited, and there's typically no means by which to appeal.

Has anyone ever been through arbitration? I haven't. But how does one know if the arbiter is knowledgable, fair, and reasonable? Kozusko may save money on legal fees, but that would be a wash if the arbiter did, indeed, decide that the Boziches were entitled to damages, both real and punitive.

It seems like someone would have a better shot in front of a jury rather than an arbiter with unknown experience, education and knowledge. Like judges, I'm sure there are arbiters who lean toward plaintiffs, or defendants, or who simply figure some money should be spread around in the name of fairness and equality to all.

[Marc]

I'm not well versed in legal issues so perhaps someone could explain to me why jury members would be more educated, knowledgeable and experienced than an arbiter?

Is an arbiter more expensive than defense attorneys plus court costs?

Marc

[Bain]

I'm not well versed in legal issues so perhaps someone could explain to me why jury members would be more educated, knowledgeable and experienced than an arbiter?

Is an arbiter more expensive than defense attorneys plus court costs?

Marc

That isn't what I said. Juries typically have an "entitlement" mentality, and pose problems of their own. What I said is that I'd be reluctant to place my fate in the hands of one empowered individual that I know nothing about.

Arbitration is tremendously less expensive than attorneys' fees.

[charlieb]

I realize it's less expensive, but is binding arbitration always a good thing? Discovery is limited, and there's typically no means by which to appeal.

Has anyone ever been through arbitration? I haven't. But how does one know if the arbiter is knowledgable, fair, and reasonable? Kozusko may save money on legal fees, but that would be a wash if the arbiter did, indeed, decide that the Boziches were entitled to damages, both real and punitive.

It seems like someone would have a better shot in front of a jury rather than an arbiter with unknown experience, education and knowledge. Like judges, I'm sure there are arbiters who lean toward plaintiffs, or defendants, or who simply figure some money should be spread around in the name of fairness and equality to all.

1. It's not less expensive. The arbitrator, his expenses and the company must be paid. Both side still incur legal, expert and other fees.

2. You don't know who it will be. I've worked cases where it was a judge and one case where is was an engineer. It depends on who the arbitration company decides to retain. At best, the judge will know the law.

I prefer a jury. Most people want to do the right thing. The attys simply must get the facts out.

[Scottpat]

Arbitration is good for the side that wins! As Charlie has said, both sides pay the fees. The arbitrator is paid and gets paid not matter what happens, he/she is paid first. I just finished working with an attorney who's client had a really bad roof on their home. They had three arbitration meetings, each one cost $500. On the third meeting the arbitrator found in favor of the homeowner with the bad roof. This could have all been settled in the first meeting, but it was extended and extended at the request of the arbitrator. At the first meeting everyone had my report and photos showing that the shingles were laid directly on the OSB with no felt or moisture barrier of any type. Pretty darn simple, but apparently they needed me to come to the second meeting to verify what I found. This arbitrator was an attorney that just does arbitration's.

Urrrrrrr, I just could not belive that they extended it to three meetings. IMO, it was simply to raise the amount of money the arbitrator received.

[kurt]

Arbitration is jury by ambush.

[arpi]

Bain, I went through an arbitration 3 1/2 years ago. The buyers wanted me to give them $20,000 for a problem that was discovered when they did a remodel. There were no visible signs of damage but there was evidence of insect activity so I recommended consulting a licensed pest control operator which they did not do. The arbitrator found that I could not report what I could not see. I hired an attorney as the buyers had hired one too. It cost me $5000 to win. I ate the $5000 as I didn't want to involve my E & O insurance company.

[Robert Jones]

With some of the E&O insurers, that 5k would have been the deductible. Then they would have jumped your rates the next time it was due for renewal. When I used to carry E&O(2003), I had to contact them concerning a complaint from a client about a siding issue that was mentioned in the report. The E&O rep, had me send them the 5k deductible and then handled everything on the phone and via e-mail. Actually settled, even thought the damage was mentioned as was the recommendation for repair by a contractor on the report. I also had a signed contract as well. It's all a racket, just better hope you have someone with some common sense if you have to go to arbitration or contact your insurance carrier.

Seattle Home Inspection

[Brandon Whitmore]

Bain, I went through an arbitration 3 1/2 years ago. The buyers wanted me to give them $20,000 for a problem that was discovered when they did a remodel. There were no visible signs of damage but there was evidence of insect activity so I recommended consulting a licensed pest control operator which they did not do. The arbitrator found that I could not report what I could not see. I hired an attorney as the buyers had hired one too. It cost me $5000 to win. I ate the $5000 as I didn't want to involve my E & O insurance company.

With FREA, I think they require you to notify them as soon as there is a complaint; I'm not sure about other insurance companies since I haven't used anyone else. Had you lost in arbitration, I wonder if your E&O insurance provider would have paid anything out?

[Bain]

Bain, I went through an arbitration 3 1/2 years ago. The buyers wanted me to give them $20,000 for a problem that was discovered when they did a remodel. There were no visible signs of damage but there was evidence of insect activity so I recommended consulting a licensed pest control operator which they did not do. The arbitrator found that I could not report what I could not see. I hired an attorney as the buyers had hired one too. It cost me $5000 to win. I ate the $5000 as I didn't want to involve my E & O insurance company.

Five grand is pretty inexpensive, though I'm sure it stung when it came time to write the check(s).

I had a claim dismissed on Summary Judgment a few years ago, but not until a slew of motions had been filed and bunches of depositions had been taken. I had to spend $20,000.00 before the judge excused me from the lawsuit.