MEDIATION
HANDBOOK
• PREPARATION
• POSITION
• POWER
By: Mark E. Christensen
INTRODUCTION
The exorbitant costs of trial and limited judicial
resources have spawned the mediation industry as an alternative form of conflict
resolution. As a result, just about anyone, lawyers, retired judges, even motivational
speakers have opened up mediation businesses, making a self-proclamation of expertise. The
fact of the matter is that mediation is not the ultimate solution, but one of the
processes used during litigation.
This handbook is designed to put the mediation process in
perspective and provide suggestions on how to use that process to your full advantage. The
principles set forth apply whether the litigation involves coverage disputes, first party
claims, or third party claims. This handbook is written from the insurer’s
perspective, but is equally applicable to self-insured corporations.
Mark Christensen
Table of Contents
I. PREPARATION
A. Understanding
Mediation Procedures
B. Investigate Your
Mediator
C. Obtain Market Consensus
D. Obtain Internal
Company Consensus
E. Request Pre-Mediation Detailed
Report
II. POSITION
A. Meeting with Counsel
1. Our Side
2. The Other Side
3. Rehearse Response
B. Who Will Advocate
C. Determine Opening Offer
III. POWER
A. Identify The
Persuasion Tactics
1. Isolation
2. Accusation
3. Vulnerability
4. Fear of Trial
5. Divide and Conquer
6. Fear of Missing the
Deal
7. Deprivation
B. Make The
Mediator Your Advocate
C. Be Willing to Walk Away
Conclusion
CHAPTER 1 - PREPARATION
"Success is not the child of luck, but of vision and
faithful preparation."
The mediation processes is a combination of negotiation,
stage drama and war. One cannot negotiate without knowing the facts, or perform on stage
without rehearsing their lines, and certainly war will be a disaster without training and
preparation. The same is true for a mediation, one cannot just show up and hope to fell a
giant with a pebble and a slingshot. This initial chapter provides a road map for
preparation. (table of contents)
A. Understanding
The Mediation Procedure
There are essentially two types of mediations, those that are
required by statute or court order, and those that are voluntary undertakings by the
parties. Statutory or court ordered mediations usually have built-in procedures for
preparation of confidential mediation briefs, assignment of a mediator, a negotiation
forum and, in some circumstances, penalties for failure to resolve the litigation. The
problem with court ordered mediations is that one has no control over the selection of the
mediator. If the mediator is incompetent, the process can be a waste of time. Thus, court
ordered or statutory mediations are most effective where the mediators are required to
give their opinion as to the settlement value of the case.
An example of this process is the three member panel
mediation found in the State of Michigan. There, the mediation is not so much an attempt
by the mediators to negotiate the parties to a settlement, but rather a forum to provide
an opinion as to settlement and issue a recommendation at the end of the procedure. If a
rejecting party does not improve upon the mediator’s recommendation by at least 10
percent at trial, that party is responsible for all attorney’s fees and costs of its
opponent from the date of the mediation through verdict. (table of contents)
B. Investigate Your
Mediator
Whether it is a mandatory mediation or a voluntary mediation,
it is essential to investigate the background of the mediator. This includes the
mediator’s litigation and judicial experience, his or her area of expertise, that
person’s conflict resolution skills and, finally, prior relationships or affiliations
with lawyers in the case which may have an undisclosed impact on the negotiations. In a
voluntary mediation, this investigation should be done prior to selecting a mediator. So
often after a frustrating mediation experience, the participants comment that the mediator
was "worthless." This usually means that the mediator did not have the requisite
conflict resolution skills to force the parties into what the participants viewed as a
reasonable settlement range. While absolute control cannot be guaranteed, selecting a
mediator can be as important as jury selection before trial. (table of contents)
C. Obtain Market
Consensus
In preparation, if there are subscription, co-insurance or
reinsurance relationships, it is essential prior to the mediation to obtain full market
consensus as to the positions to be taken at the mediation. This may require a meeting
among various Underwriters to lay out the issues and reach a united front. By doing this,
it is one less issue to worry about when the mediation process begins. (table of contents)
D. Obtain Company
Consensus
As we are all well aware, sometimes there is a lack of
understanding between Underwriters on the placing side of an insurance company and the
adjusters on the claims side over the need for and participation in a mediation. The
presence of market representatives at the mediation can result in considerable expense,
especially with intercontinental travel in the global insurance market. It is important
for the participating adjuster at the mediation to know he or she has full support from
their own company, regardless of the outcome of the mediation. The justification for
participation in a mediation should never be conditioned on obtaining a successful
settlement. We all know there is no guarantee that cases will settle at the mediation.
Thus, the placing Underwriters should be fully aware that the claims adjuster may come
back without a settlement. If the adjuster at the mediation is under pressure to justify
participation by bringing back a successful settlement, this undermines the power needed
to negotiate. A good mediator or skillful opponent will pick up on this issue and
successfully use it against the representative. (table
of contents)
E. Request Pre-Mediation Detailed
Report from Counsel
The late Richard J. Daley was the Mayor of the City of
Chicago from the mid-50s until his death in 1976. As he consolidated power and ruled the
City, his hands of influence were everywhere from state and presidential elections, to the
authority of the Executive Office of Mayor and even to judicial elections. Mayor Daley was
known to say that on election day he hated "surprises," and he worked
consistently to get out his vote. He maintained power by knowing each and every precinct
and who could be counted on for a vote.
One of the most unsettling things that can happen at a
mediation is for the insurance representative to hear bad news about their case for the
first time from their opponents. It is not easy to bring bad news, which may explain why
some attorneys like to gloss over the negatives. Nevertheless, prior to a mediation, a
detailed report should be requested from counsel with the good, the bad and the ugly.
Underwriters should request that a specific section of the report identify the weaknesses
of Underwriters’ position so that there are "no surprises." The preparation
for mediation continues, in part, in Chapter 2 - Position. (table of contents)
CHAPTER 2 - POSITION
"If you don’t know what you stand
for, you may fall for anything."
It is important to develop, prior to the actual mediation,
what the insurer’s position should be, whether this is a first party coverage
dispute, bad faith, straight defense, or excess insurance interest. A good position on
liability should be captured in one or two sentences. The greatest strength for the
position is the truth. A position should not stretch too far from reality or it will lack
credibility no matter how vociferously it is stated. There are procedures for developing
the position, which begin with a pre-mediation meeting with Underwriters’ counsel.
(table of contents)
A. Meeting With Counsel
1. Our Side
Sufficient time prior to the mediation should be set aside to
meet with counsel and other principals who will advocate the position of the Underwriters.
At that meeting, evidence such as photographs, or the product and key documents should be
reviewed and a coherent presentation made to give Underwriters a full flavor of the case.
The issue as to what really happened should be discussed. Plaintiff’s theory of
liability and the law should be addressed as well as the defenses to each of those
arguments. (table of contents)
2. The Other Side
It is often useful to have an attorney from the firm make a
presentation arguing Plaintiff’s position. This role play will assist Underwriters in
anticipating the arguments of their opponents. One of the most important aspects of
preparation is to fully anticipate every argument by Plaintiff’s counsel, and be
familiar with the adverse evidence contained in testimony and documents. Once again, the
goal is to prevent any surprises at the mediation. If there are too many surprises at the
mediation, this may undermine Underwriters’ confidence in their own counsel. (table of contents)
3. Rehearse Responses
In the 1980 presidential election, candidate Ronald Reagan
was vulnerable in debates with then president, Jimmy Carter, because Reagan had made
off-the-wall statements during many of his speeches over the years. For example, the
following statement was attributed to Reagan: "trees cause pollution," and
"we should have bombed Viet Nam into a parking lot."
The Reagan campaign people knew that Carter would attempt to
embarrass Reagan with some of his prior statements during the debates. They rehearsed what
potential responses Reagan could make. Fortunately for Reagan, Carter came across with a
bit of self-righteousness and as a whiner. At one point during the debate, as expected,
Carter began to recall a litany of Reagan statements in an attempt to discredit him.
Reagan just laughed, shook his head and said "There you go again." Carter’s
whole attack was derailed with humor as the audience laughed. What appeared as an
off-the-cuff remark was actually a statement that had been rehearsed and agreed upon prior
to the debate.
We frequently know what arguments are going to be made
against Underwriters’ insured or Underwriters in coverage litigation. While one
cannot prepare for every contingency, it is essential in developing a position to identify
and rehearse responses to key arguments. (table
of contents)
B. Who Will Advocate
At the meeting with counsel, the format and structure of the
mediation and how it will be conducted should be covered. In addition, guidelines should
be set down between counsel and Underwriters as to who will advocate particular positions.
It is preferable that Underwriters not be put in a position where they have to advocate
their own argument, unless there are elements to the position that need to come from the
horse’s mouth.
Generally, the presentation should be left to counsel. If the
mediator ask the Underwriters a direct question, Underwriters can simply defer by
requesting their counsel to respond. This is not meant to demean or restrict the ability
to negotiate, but a typical negotiation strength is to have one person advocate the
position to avoid a divide and conquer technique.
Very often substantial factual and legal work is done by an
attorney in the firm who does not have an immediate relationship with the adjusters
present at the mediation. Of course, there is always a temptation for the partner with the
relationship to want to represent his client’s interests at the mediation even if
that partner is not completely familiar with the case. In these circumstances, it is
helpful and somewhat imperative that the attorney with detailed knowledge about the file
attend the mediation as well to negotiate facts and refute untrue statements from the
opponents. (table of contents)
C. Determine Opening
Offer
There is usually a time at mediations after the initial
presentations are made, when the mediator turns to the Plaintiff and asks for a demand and
receives it. Then the mediator turns to the defendant’s representatives and requests
an opening offer. Whereupon, the attorney, the insured and the insurers look among
themselves with a quizzical expression, confused as to what figure they should declare.
Often they request a brief minute to discuss the matter. The opening position on the value
of the case, and the bottom line that will eventually be offered at the mediation should
be determined well in advance. Whether additional money is offered after the opening
figure is a matter of tactics and negotiation skills as the mediation progresses. But with
respect to the initial figure, it should be stated forthrightly, without hesitation and
without apology and with a brief explanation justifying that amount. (table of contents)
CHAPTER 3 - POWER
"The one who holds the money, holds the
power."
Frequently, one hears complaints after a mediation that the
mediator made no attempt to reasonably resolve the dispute or put no pressure on
Plaintiff’s attorney and that the entire experience left a bitter taste in the
adjuster’s mouth. This is often the comment that arises when more money than had been
anticipated was paid.
This complaint comes from a misconception that mediators are
neutral arbitrators of the dispute. They are not. The purpose of mediation is to get money
out of the insurer’s pockets into the claimant’s pockets. Insurer’s
representatives are requested to be present at the mediation to put pressure on them to
transfer the wealth. A good mediator looks for soft spots in the merits of the case and in
the personalities of the participants and uses all of the persuasion techniques available
to him or her to transfer the wealth and resolve the litigation. A mediator is not a
person to whom Underwriters should confide. In the end, the mediator will use that
confiding relationship and turn it on the insurers to get more money if he realizes that
he has reached Plaintiff’s bottom line. Nothing should be revealed to the mediator
that you don’t want everyone to know.
A good mediator will also look for soft spots in the
Plaintiff’s side of the case. He may sense the Plaintiff’s attorney has a cash
flow problem and needs to settle the case. He may sense that the Plaintiff doesn’t
have the stomach to try the case and is desperate for money because of financial
obligations. He may be aware of problems in the Plaintiff’s side of the case and
certainly would use that as leverage against them to reduce their figure. But, in the end,
the goal is the transfer of wealth.
But no one can make insurers pay money at a mediation. There
is no gun to the head which requires insurers to write a check before they leave. The fact
that Underwriters are the holders of the money gives them more power than they believe
they have at the mediation. That power can be exercised when one has the belief that one
has the power. That power is attacked by the mediator through the persuasion tactics set
out below. (table of contents)
A. Identify The
Persuasion Tactics
A good mediator is more interested in using persuasion to
resolve the litigation than in discussing the merits of the case. Time-honored persuasion
tactics are used by police interrogators, foreign policy negotiators, even standard
employer-employee negotiations over wages and benefits. Below are a few; there may be
others that will come to mind as we begin to discuss these. (table of contents)
1. Isolation
Frequently, after the parties initially meet, the mediator
isolates them into separate rooms. The isolation accomplishes a number of objectives.
First, as a practical matter, it prevents tempers from flaring if there were face-to-face
negotiations. But, more importantly, it allows the mediator to control the flow of
information. It is not uncommon for the mediator to not fully disclose all of the
information that he has from the other side. The mediator attempts to shift the power from
Underwriters, who hold the money, to himself, as the holder of all the information.
Second, isolation creates an illusion of a confidential relationship when the mediator
comes in to meet with one side alone.
The illusion of confidentiality, at times, will cause the
parties to disclose to the mediator more information than they should. The practical way
to break the feeling of isolation is to get up and leave the room when the mediator is not
there, wander around, engage in conversation with other people, visit the water fountain,
and even make mock telephone calls. Show the mediator, and reaffirm in yourself, that you
control your world. (table of contents)
2. Accusation
We all like to perceive ourselves as being reasonable and
fair in the affairs of life and business. Thus, it becomes unsettling when accusations are
made against us during the mediation process such as the following:
"You are not negotiating in good faith."
"Your opening offer is so unreasonable, I think we
should just stop the mediation right now."
"You came all this way and your conduct in the
negotiations simply has been a waste of my time."
The problem with an accusation is that it puts the recipient
in a defensive posture and raises some level of emotional anxiety. Accusation moves the
debate from the merits of the case to the personal conduct or character of the
participants. It is an insidious, but effective tool.
One should walk into the mediation expecting accusations and
be fully pre-prepared to have a tin ear. Moreover, an Underwriter should never have to
defend a personal accusation against him or her. Your defense should come from your
counsel who disagrees with the comment and advises the mediator and/or Plaintiff’s
counsel that personal characterizations as a negotiation tactic will not advance the
mediation and suggest that the mediator return to the merits. Third, and this will vary
with the style of counsel negotiating on Underwriters’ behalf, sometimes it is very
effective to simply state that an accusation will get nowhere and refuse to specifically
respond to the accusation. This silence after the accusation is exposed can shake the
process and put the accuser on the defense. (table
of contents)
3. Vulnerability
In this increasingly global insurance market, it is not
unusual for adjusters to leave their country of origin with its familiar business
practices and culture, and travel to another country to participate in a mediation
process. There is a certain level of vulnerability that always attaches when one is
outside his or her own cultural comfort zone. The mediator is well aware of this element
of vulnerability. A mediator may play on the vulnerability by making statements about the
horrible things that can happen in litigation. Of course the antidote for vulnerability is
confidence in the negotiator on Underwriters’ behalf who neutralizes any feelings of
discomfort. This issue of vulnerability is another reason why, in the preparation and
position phases of mediation, a person is specifically identified to advocate
Underwriters’ position so that Underwriters do not become the primary advocate for
their own position. (table of contents)
4. Fear of Trial
The mediator, at times, will attempt to use the fear of trial
or a potential runaway verdict or the costs of trial in an effort to put pressure on the
insurer’s representatives. This persuasion tactic can be completely neutralized
during mediation preparation, by discussing with counsel the full range of the potential
adverse verdict and by knowing that you have a good trial attorney in place. With this in
mind, an ultimate settlement value for the case has already been determined before
mediation begins. (table of contents)
5. Divide and Conquer
On occasion, a mediator attempts to divide and conquer
between the members of one negotiating team or between co-defendants. I recall one
circumstance where the co-defendants, prior to the mediation, had worked out an agreement,
unbeknownst to Plaintiff, not to take adverse positions against each other during the
mediation procedure. After a day of mediation, the mediator threatened that this
co-defendant was now prepared to cut its own discounted deal with the Plaintiff and go
their own way. Since the negotiating teams for each defendant were isolated from each
other, there was no way to know whether this was true. At that point, one member of the
negotiating team simply got up and went to the room of the co-defendant to ensure that the
deal that had been made prior to the mediation was still in effect -- it was.
The divide and conquer method needs to be exposed for what it
really is. In addition, it has been observed that sometimes mediators will make
disparaging statements about the insurer’s counsel, such as "Your counsel is not
telling you the truth about how big the exposure is." This type of statement should
not be answered on its merits, rather the tactic should be exposed by advising the
mediator that you see it as an attempt to drive a wedge between insurer’s
representatives, the insured and their counsel. Confrontation will neutralize the tactic.
(table of contents)
6. Fear of Missing
The Deal
It is not uncommon after a day of unfruitful negotiations for
the mediator to come into the room at 5:30 p.m. to create an artificial emergency.
Everyone is tired, anxious and hungry, and the mediator alarmingly declares that if the
Underwriters do not put a substantial sum on the table, Plaintiff’s attorney is going
to walk away and the mediation will cease. The mediator is using a fear tactic to wrestle
more money. At this time it is most important to remember the negotiating position and not
to give in to the tactic. Mediation can be a way to see who caves in first. Stand firm and
hold your position. (table of contents)
7. Deprivation
Invariably during the session, the mediator leaves the
negotiating team at 12:30 p.m., advising them he’ll be back in 15 minutes. As the
negotiating team waits, time slips by and before you know it, it is 2:30 p.m., there has
been no lunch and no real refreshment since the early morning when the mediation began. In
addition, it is not unusual for the mediator to insist on negotiating into the evening
hours without dinner. Unfortunately and amazingly, the deprivation of food is an
intentional ploy to wear the parties down. If the mediator says he’ll be back in 15
minutes and it’s time for lunch, a simple response should be made that if he is not
back within 15 minutes, the group will break for a short lunch and be back within an hour.
Because of this issue, site selection for the mediation is important. The site must be
accessible to a cafeteria, small restaurant or a place where someone can run for
sandwiches. It is important not to reach a position where the negotiating team is tired,
hungry and irritable.
Meals can also be used as an offensive tactic. If your
strategy would benefit from contact with the other side, then order food for delivery and
provide enough for everyone. All parties will have to come out of their rooms to serve
themselves from a small buffet, where informal contact can happen. (table of contents)
B. Make The
Mediator Your Advocate
A good negotiating tactic is to turn the tables on the
mediator. When the mediator is not able to move the Plaintiff to a reasonable position,
advise the mediator that you investigated his background and you thought that he had a
better reputation for resolving disputes. Advise him that you are placing confidence in
him to obtain a better deal and to move the Plaintiff. Express disappointment to him with
respect to his own skills when Plaintiff’s counsel remains intransigent. Advise the
mediator that you have high expectations for his abilities, that you expect him to always
tell you the truth and point out to him when he fails to meet the standards that you have
set. (table of contents)
C. Be Willing To Walk
Away
Mediation is not the ultimate or final solution for resolving
litigation. There are occasions when resolution is achieved through mediation. But many
times, the mediation is a process whereby both sides feel each other out and obtain
first-hand knowledge of the strengths and weaknesses in the case. It is not unusual for
cases to settle within 30 days after a mediation procedure once the parties get away and
reflect on the arguments and evidence that were considered. It is essential for the
exercise of power to be willing to walk away from the mediation. One cannot successfully
conduct a mediation if he or she feels they have to resolve it on that day. Underwriters
are not failures if they are unable to resolve the litigation at the mediation. If
Underwriters are not willing to walk, they have given up the majority of their power
because the mediator knows that they will take the final deal offered. I know of one
situation where Underwriters walked away, and the mediator, in desperation, contacted them
by telephone at the airport with a favorable figure to close the deal. It is essential
that Underwriters obtain market consensus as to the position to be taken at mediation so
they have the power to walk away. (table of
contents)
CONCLUSION
Successful mediation, whether the litigation is resolved then
or later, rests upon proper preparation, development of and confidence in a position, and
the exercise of power. It is my hope that, with this information, you will be armed to
skillfully negotiate and perform in the drama of mediation with confidence, and win the
war of litigation. (table of contents)
© Christensen & Ehret, 2000
