Recently, we’ve been discussing the merits of binding arbitration as a means of resolving consumer disputes. (See here and here.) Lori Crandell, COO of New Home Warranty Program of Manitoba, Inc., finds that the process works well when properly tailored to the nature of the dispute. Lori writes:
Binding arbitration is a key component in my business. We are a 3rd party Warranty Provider for new home construction. Building a home is one of the largest investments a person will make in their life, not to mention costly. After an individual does all the research, sets up finances, meets with lawyers, and makes the final decision to own a house…or any other product or service for that matter….the last thing a consumer wants it to deal with a warranty provider.
Gregory is spot on when stating that the warranty for a product needs to be iron-clad. It needs to be clear and concise, easy to read, and must make sense. And all persons involved in the process of selling and delivering the product, must also understand the warranty.
The converse is also important. The warranty provider MUST understand the product or service that they are backing. Not only that, but we must remain unbiased and be prepared and capable of mediating a situation before it even reaches binding arbitration.
At the heart of everything is education, honesty, and customer service. A warranty provider must be more than a paper-pusher. We have operated since 1976, and over the years have learned the value of education, research, and feedback to our builder members who are the ones offering the product (a new home) and delivering the warranty that we back. A good warranty provider uses education, research, and feedback as a risk mitigation measure. If someone opens a claim on their new home and calls me to discuss why cracks are forming in their hardwood floor, I need to know as much as I can on flooring and have the resources available to do as much research as possible before advising whether or not the issue is covered under warranty.
And it shouldn’t stop there. If a defect is discovered and often repeated, we do the research required to understand why and then educate our builder members. Consumers are more demanding than ever, and warranty providers for all products need to be more involved and better educated.
The best warranty of all is one that is not needed. Of course, things do not always work out well, and sometimes arbitration is necessary. We have saved hundreds of homeowners the frustration and high costs of going to court by having an arbitration method readily available, which can be initiated by either party.
When using arbitration, it is important that the arbitrator be an expert in the field in which he or she is mediating. We always use an Engineer. We also do not impose a cost to the homeowner if the result is in their favour. The method is quick and far less invasive than court. It is also more thorough. A hearing officer or the lawyers involved are not experts in construction, so many hours are spent understanding and getting to the heart of a matter. With every hour or day spent in court, both parties become more agitated and angry. The only ones who win are the lawyers. With binding arbitration, the arbitrator will come to the home and directly view the concerns, listen to both sides of the story, review any contracts and warranty documents, research the building code, etc.
Many homeowners have commented to me that they were very glad they chose arbitration over court even in a situation where it did NOT go in their favour. Why? Arbitration is not confined to the boundaries of a court room, and provides an element of education and understanding that you will not get in court. When pleading their case, a homeowner is speaking directly to someone who understands their concern and can provide immediate feedback about their flooring, windows, etc. The parties can be open with their conversation and not worry about “court order” and racking up lawyer fees.
Arbitration works, when organized properly.