By Katharine M. Nohr, JD
Movies and television legal shows give the impression that disputes are resolved in dramatic courtroom battles. The reality is that most litigants, insurance companies, and businesses prefer not to put the power of resolving lawsuits in the hands of judges or juries but would rather seek a settlement before trial. Most judges assigned to cases will hold settlement conferences in an effort to work with both parties to try to come to a settlement agreement. However, judges’ time is often limited and not all judges have the skills to effectively mediate cases. This is where trained mediators come in.
Litigating a case can cost tens of thousands to hundreds of thousands of dollars and can take years to conclude. Complying with discovery demands can take a significant amount of time and stakeholders will likely experience stress from the uncertainty of the outcome. Despite the downside, individuals and companies often seek resolution of conflict through litigation with the hope of remedying a wrong or seeking a favorable ruling on a dispute. They may be seeking an injunction (asking the court to order another party to cease an action) or damages, including monies to make them whole, compensation for emotional distress, and even punitive damages that are usually not covered by insurance.
Are there alternatives to Litigation?
Alternative Dispute Resolution (“ADR”) refers to means of resolving disputes or litigation without the need to go to court. These methods can be used during the traditional litigation process in order to resolve the case early or can be used instead of litigation. ADR includes mediation, arbitration, negotiation and collaborative law. Mediation, the focus of this article, is where both parties choose a neutral person or panel to assist them in coming to an agreed upon resolution. A mediator can also be court appointed.
- Reputations can be preserved. Mediation is confidential (unless the parties agree otherwise). Unlike court proceedings, the actual mediation process and the mediation agreement can be kept confidential.
- Mediation is less costly than traditional litigation. The time commitment required by the attorneys and parties is significantly reduced. Other costs that are typically high, such as those for expert witnesses, court reporters, subpoenaed documents, and support staff will likely be reduced or eliminated. Mediation costs are also much more predictable than the cost of trial, allowing parties and insurers to budget for such costs.
- Increased control of the outcome. The downside of trial is that the parties are essentially putting the power of the outcome of their case into the hands of the judge and jury. Mediation gives the parties greater control over the resolution of the dispute. They negotiate an outcome that they are willing to accept and the chance of dissatisfaction of the result is minimized.
- Mediation is generally voluntary, allowing either party to withdraw at any time.
- Convenience. Another advantage of mediation is that it is more convenient than trial. Each party can weigh in on scheduling and the venue. Now, mediation can be done virtually with the parties and mediator appearing from distant locations by Zoom, or another platform. This further reduces the cost. During the proceeding, the mediator will meet with each party in turn privately in order to hear their positions and work with them to effectuate a settlement.
- Speed. The outcome of mediation is significantly faster than litigation. It can be used early on in a dispute—even before a party files a lawsuit. Oftentimes, mediation can resolve a case in a matter of hours or in a day. A dispute may not be resolved during the first session. However, it can open up channels of communications and allow the parties to exchange offers over time. Such offers and negotiations will provide parties with information that may ultimately lead to settlement.
- Preserve business relationships. It allows the parties to effectively communicate with each other to attain a mutually agreed upon resolution. Such resolution may include a path for the parties to continue to work together successfully in the future. Sometimes, a resolution will not be monetary, but consist of an apology or a promise to cease a harmful action. While litigation can result in verbal attacks against each other, mediation seeks conciliation.
How do Parties enter into mediation?
If there’s a contractual provision requiring mediation (take a look at the policy), then the parties must adhere to this requirement. If not, a party can propose mediation to the other party. If they both agree, then the process of agreeing to a mediator begins. Usually, the parties will agree to split the cost of mediation. The mediator will usually hold a pre-mediation conference in order to schedule the date and venue. If both parties are represented by counsel, the mediator will usually require the attorneys to submit pre-mediation statements with exhibits for review before the mediation. This allows the mediator to understand each party’s position and the likely outcome at trial.
What are the disadvantages of mediation?
- An unwilling party. Although there are many advantages to mediation, it is not always the best means to proceed. Sometimes, a party will not agree to participate. If so, the potential for a resolution is significantly reduced. A court may order the party to participate, but this may not ensure a successful mediation.
- Need to establish precedent. There are cases where a party wishes to establish a legal precedent and can only do this by proceeding to court.
- Decision-Maker is not available. In order to successfully mediate a case, the decision-makers or those with authority for each party need to be available and willing to negotiate. If they are not, the case is not likely to settle. Mediators will often require the claims adjuster or claims manager who has authority to attend the mediation.
- Mediation may not be cost effective in a particular case. This might occur when the amount at issue is minimal or when the likelihood of the parties actually achieving a settlement is low. In this case, the parties may pay for mediation, but end up in court anyway.
Can mediation be used even if there isn’t a lawsuit?
Yes. If there is a dispute and the parties to the dispute feel that they might be able to resolve the dispute with the help of a neutral third party, they can agree on mediation before filing a lawsuit.
Choose the Right Mediator for Your Dispute
In order to successfully mediate your dispute, you’ll want to select an experienced mediator who understands the issues involved. For insurance litigation matters, it is important that the plaintiff or claimant trusts the mediator selected. Otherwise, the chance of settlement are remote.
In short, insurance carriers can save significant time and money by mediating disputes. Consider this option as an alternative to litigation.
About the author:
Katharine M. Nohr, Esq. is an insurance defense attorney, mediator, arbitrator, and former Judge. She’s the author of Managing Risk in Sport and Recreation: The Essential Guide for Loss Prevention (2009 Human Kinetics). Ms. Nohr is a long-time member of the Honolulu Association of Insurance Professionals, served as RVP for Region VIII, and won International Insurance Professional of the Year in 2012. She is available to serve as a virtual mediator for insurance disputes.