Mediation Basics:

In the last issue of Claims Canada, Education Forum outlined the main roles and opening steps in mediation. This article follows up with an overview of other key stages in the process.

Mediation Memos

Once a mediation has been booked, lawyers for each side prepare a mediation memo dealing with the arguments that they expect to face from the other party. A well-developed mediation memo can provide a road map to resolution for the mediator. The best memos are concise but thorough and are written in a narrative form, presenting the situation in a way that engages the reader, outlines the issues and analyzes the strengths of the arguments.

Counsel and client should discuss the mediation memo before it is issued. Usually counsel prepares a draft version and sends it to the insurer to invite suggestions; sometimes the claims representative assists in the drafting.

Disclosures

The memo should include a mediation summary disclosing any formal offers to settle that were made before the mediation. If there have been no formal offers but settlement negotiations have taken place, counsel should contact one another directly to communicate any changes in their opinions before the mediation is arranged. Usually this involves a discussion or an exchange of letters between counsel, confirming agreement to enter mediation and acknowledging any change in position.

Opening statements

At the beginning of the session, the mediator introduces all the parties and describes the rules and goals of the mediation, explaining the dynamic of cooperative, interest-based negotiation. This explanation is mainly for the benefit of the claimant, who is usually the only one new to the mediation process. (Counsel for each side and the insurance representative are usually well versed in the principles of mediation.) The mediator does not discuss the claim itself.

After the introductions, opening statements are made by each side to convey the essence of the dispute. The insurer’s opening statement is an opportunity for the claims representative to acknowledge the other party’s injury or inconvenience, express empathy and find common ground. For example, the claims representative might say something like: • “I’m sorry that you were injured” (if the insurer has acknowledged the injury as legitimate) or

• “I appreciate your taking the time and trouble to meet with us to discuss this situation” or

• “I know that I would rather not be in a lawsuit; I hope you feel the same way.”

The claims representative can then summarize the reasons the session is taking place, listing the issues in dispute, for example, a deductible, a threshold, eligibility for income payments, or consideration for collateral payments.

Responses

After the opening statements, each side can address the points made by the other and answer any questions that were directly raised. People entering into mediation may have unrealistic expectations about the validity of their claims. Unsubstantiated claims should be probed, underlying assumptions should be questioned and evidence should be provided to reveal any weaknesses. An objective examination of expectations may lead to a successful mediation.

Caucusing

Private side meetings in mediations are known as caucusing. Mediators often separate the disputing parties after the opening statements, directing claimants and their counsel into one room and the claims representative and insurer’s counsel into another. The mediator speaks to each party confidentially to determine what flexibility exists in their positions.

Caucusing also permits each party to discuss issues openly with their counsel. The claims representative and the insurer’s counsel have an opportunity to reflect on what has been said and to modify their plan if appropriate. They may also take the opportunity to speak privately with the mediator, perhaps about new evidence that might discredit the claimant.

The buffer of caucusing in mediation allows this sensitive information to be put before the other party in private.

Finalizing a mediation

If the claim is resolved, the lawyers draw up minutes of settlement documenting the agreement reached. These include a claim release and a description of next steps: when the claim will be paid, time limits, who will do what, and any further undertakings. The minutes of settlement can stipulate the agreement be kept confidential, thus avoiding negative publicity or the creation of a legal precedent.

A reasonable settlement approximates what a claimant would be awarded at trial less any reasonable amount negotiated to account for the claimant’s saving of time, trouble and expense.

Obstacles to settlement

• Sometimes a claimant feels he or she has a good case and would secure a larger settlement at trial. This “jackpot syndrome” can derail mediation because it is a disincentive to compromise. The defendant insurer, of course, may feel the opposite. When both parties feel they would be better off taking the case to court, the mediation environment becomes adversarial.

• If the parties enter mediation after litigation has begun, many fences may need to be mended. Defending counsel probably issued a boilerplate statement of defence that denied all allegations. The situation may have been further complicated if litigation counsel asked invasive questions at discovery or ordered surveillance and caused the claimant to feel threatened.

• One of the recognized failings of mandatory mediation is the timing: often it occurs too early for effective negotiation and the case cannot be resolved because not enough information is available.

• The mediation can be cancelled if materials or memoranda are delivered at the last minute. The mediation agreement should include a clause that stipulates that whoever is responsible for the cancellation will bear the cost.

• Sometimes when mediation seems close to closure, one party suddenly makes a new demand. Parties then need to explore the underlying reasons for the request. Perhaps an external pressure, such as an adjuster’s supervisor giving difficult-to-follow parameters for the mediation, is the cause.

• The parties present at the mediation must have authority to settle on behalf of their side. An insurance representative may have insufficient settlement authority to reach an agreement if the case turns out to be more serious than was first thought and reserves were set too low.

If mediation is not successful, the parties may choose neutral evaluation, arbitration or litigation.

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.