Mediation Basics: Key Roles And Stages

When the negotiations in the adjustment of a claim break down or when the insurer denies the claim, parties may turn to mediation, mini-trials, arbitration, appraisal, or litigation. Because litigation can be costly and subject to delays, an insurer may choose a less formal dispute resolution method, such as mediation. Methods based on cooperation can help to decrease animosity between the parties, settle the matter more quickly and amicably, and promote opportunities for future business relationships.

However, some cases are not suited for mediation. For example, instances when a legal precedent needs to be established or when a claim is allegedly fraudulent. Moreover, entering mediation does not guarantee that a settlement will be reached, but if one is reached, it is binding.

Mediation theory

Mediation is assisted negotiation — parties in dispute retain control over the situation. For mediation to work, both parties must be open to creative solutions, and each party is expected to actively and cooperatively participate in seeking resolution. The focus is on uncovering the needs and interests of the bargaining parties in a neutral and cooperative environment, not on determining who is right or wrong.

Discussions in mediation may go beyond the legal issues of the case. In insurance disputes, mediation can be used to determine how much damages are worth, what each party should contribute to any settlement, or other rights-based issues requiring a yes or no answer, such as issues of coverage, priority of coverages, or loss transfer.

Mediator’s role

Mediators control the mediation, ensuring that the environment is conducive to cooperative negotiation, but they do not take sides or impose a result. As neutral third parties, mediators help the disputing parties to identify the real areas of dispute, explore possible solutions, generate creative solutions, and negotiate fairly and respectfully. They ask questions to ensure that all necessary information is disclosed, and they must listen intently to be able to accurately summarize the issues.

When emotions are high, the mediator’s role is made more challenging. In these cases, the parties are usually kept apart to prevent needless emotional confrontations, and the mediator shuttles back and forth between them.

Claims representative’s role

In insurance mediation, the claimant attends the session. Sometimes the insured is the claimant and the claims representative represents the insurer. When the claimant is a third party, the claims representative represents the insured. In such a case, the insured may not be required to attend. The claims representative is usually a member of the insurer’s staff (for example, the claims examiner), but occasionally an independent adjuster may be assigned to act as the insurer’s representative during the proceedings.

The claims representative should come to mediation with sufficient authority to settle the claim. Alternatively, arrangements can be made to have a senior claims person on call, ready to increase settlement authority should it be necessary to do so. The claims file should be reviewed carefully before mediation to ensure that reserves are reasonable based on the existing evidence.

During the mediation, the claims representative should be sensitive to the mediation paradigm and acknowledge a claimant’s potentially contentious personal issues. The representative may choose to speak briefly in the opening statement, and a few well-chosen words that seek to find common ground may have a positive impact with the claimant. Non-confrontational communication techniques, such as eye contact and conciliatory body language, should be adopted. The claims representative should face the claimant rather than the mediator since the parties in dispute are trying to persuade each other of their respective positions, not the mediator. The mediator is merely a facilitator.

Over the course of the mediation, claims representatives must be prepared to deal with new information and reassess the claim if required. New evidence submitted or the assessment of the claimant as a witness may convince a loss adjuster to adjust the evaluation of the claim either higher or lower.

Lawyer’s role

The parties in a claims dispute are usually represented by lawyers. Lawyers generally help in the process of selecting a mediator and are involved in the logistics of setting up the meeting. They offer advice to their clients about the law and about how to avoid pitfalls associated with the mediation process.

Counsel participate in negotiations, interpret information, and provide feedback as necessary. Issues in law must be brought to the insurer’s attention and an objective analysis offered of how events will play out in the case. It is usually counsel who will articulate the insurer’s position on the file during the mediation.

When an agreement is reached, counsel draft the Minutes of Settlement to set out the agreed-upon terms in writing. For the Minutes of Settlement to be legally binding, they must be executed with legal counsel and each party must receive independent legal advice about the contents.

In certain centres in Ontario, defence counsel must participate in mandatory mediation as a required step in all litigated cases; in other locations, this may not be required. Adjusters must gain an understanding of the process in effect in their respective territories and their role in it.

Mediation agreement

After the mediation is booked, the mediator sends confirming correspondence, including a mediation agreement, to counsel. The mediation agreement sets out all the terms and conditions of the mediation, including what will happen if the mediation is cancelled or runs into overtime, the confidentiality of the proceedings, and any other terms that might be a source of contention later. The mediator arranges for the agreement to be reviewed and signed by both parties.

The confidentiality condition offers protection to the participants and allows them to speak freely, knowing that what they do or say at the mediation will not impair future litigation. If the case winds up in court, discussions that occurred in mediation cannot be introduced as evidence.

The mediation agreement also indicates who will pay the costs of the mediation. In a commercial setting, parties usually agree at the outset to share the costs: this is perceived to ensure the neutrality of the mediator. In insurance matters, however, the insurer often agrees at the outset to pay. The loss adjuster may query whether this is appropriate in the circumstances of the case or whether the parties should begin by agreeing to share the costs. Some insurers ask the claimant to share the costs of mediation subject to an undertaking that the insurer will pay the full cost if the claim settles at mediation. This approach gives the claimant a stake in the mediation process and an incentive to seriously consider a settlement.

For an overview of the other stages in the mediation process, see the Education Forum pages in the upcoming December/January issue of Claims Canada.

This article is based on excerpts from the study material in the Claims Professional Series of applied courses -a core of the CIP Program that helps adjusters learn the functional knowledge and skills required of their profession.

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The Mediation Team

Selecting the appropriate mediation team can be fundamental to the success of the session. A loss adjuster who has been embroiled in negotiations may be replaced by a claims examiner or a neutral party (but it must be someone with enough authority to authorize the negotiated settlement). Likewise, litigation counsel might be replaced by mediation counsel.