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AAA vs. Home Improvement Contractor Arbitration Program

By Andrea Goldman, Esq.

At one point in time, I would guess that if a contract contained an arbitration clause, it most likely would have included an agreement to use the American Arbitration Association (AAA) for the arbitration itself. Nowadays, AAA has many competitors, but it is still a very popular option for construction contracts. There are pros and cons to choosing arbitration to resolve disputes, but the purpose of this post is to compare two arbitration organizations: AAA and the Massachusetts Home Improvement Contractor Arbitration Program (HIC).

Price: AAA is more expensive. The fees for arbitration are based on the amount in controversy, and the arbitrator is paid by the hour. There is no limit on the amount of time to be spent in arbitration. The HIC program has a fixed price ranging from $450-850.00 depending on the amount in dispute. This fee provides for a half-day arbitration that also includes a site visit if the homeowner so chooses.

Arbitrator: AAA sends out a list of arbitrators to choose from that can be rejected by the parties. The HIC program assigns the arbitrator. As long as the arbitrator has no conflicts, there is no choice (that I know of).

Appealability: AAA arbitrations are binding and final. Generally the only bases for overturning arbitrations are bias of the arbitrator and fraud of the arbitrator. Other states will also consider an appeal for "manifest disregard of the law." HIC arbitrations are appealable to the district or superior court with a new trial. The findings of the arbitrator become evidence in the trial.

Participation: A AAA arbitration can take place without the participation of the other side. The HIC program makes every effort to bring the parties in to arbitrate. Contractors impliedly consent to participate in the HIC arbitration when they register with the state.

Experience of arbitrator: Both organizations offer experienced arbitrators to arbitrate disputes. AAA has a construction panel and the HIC group consists of experienced construction attorneys, engineers, contractors, etc. I am on both panels, and I believe a number of the other arbitrators are as well.

I particularly like the Construction Industry Rules of the AAA. That said, M.G.L. c. 142A (the Home Improvement Contractor Statute) also offers guidelines for the HIC program.

At the end of the day, I would say that AAA is more "high end." The HIC program is intended to help homeowners and contractors to resolve disputes without the participation of attorneys (although many parties to hire attorneys for the process).

What you choose for your contract is up to you. Just make sure you know what you are agreeing to and how that might impact your claim if you end up involved in a dispute.

Full post as published by Home Contractor vs. Homeowner on July 31, 2008 (boomark / email).