• Why does mediation appeal to those involved in insurance disputes?

Mediation is a cost effective tool for assisting policyholders and insurance companies to settle claims in an expedited and economical manner, especially in a particularly challenging economic climate. Tough economic times have made it critical for policyholders to pursue claims originally denied by their insurance companies. The money available in a settlement could be essential to cash flow and for some, fiscal survival.

  • What are the most important benefits of insurance mediation?

There are several, and depending on the case, disputing parties might enjoy benefits that other cases do not. Mediation is always less expensive and less time consuming than litigation. Policyholders get the settlement they deserve faster and more efficiently than if they pursued litigation. The settlement is often(though not always) less than they would receive if they went to court, but they save money on legal fees and have the money in their hands faster than they would with a trial.

Mediation also offers non-financial benefits. It provides control to the disputing parties and gives them the flexibility to examine a smaller part of the whole. Insurance mediation can offer a concentrated focus on one or two key issues central to a coverage dispute that can be used as a pressure point for resolution of the larger dispute. Mediation minimizes and often eliminates the toll litigation takes on the parties’ resources, including time spent by staff involved in the litigation through the discovery process or depositions. 

  • When is mediation effective for settling an insurance dispute?

Mediation is well-suited for disputes that do not require an interpretation of policy language or discovery on claims handling. It is particularly effective for disputes that have been essentially reduced to a business decision of settlement amounts or ranges. It is considered the most efficient dispute resolution tool, even more so than arbitration, especially when the dispute centers on the valuation of the loss.

The only limiting factor in mediation is the creativity and interests of the mediator and the disputing parties. In many cases, mediators are able to bring disputing parties that seem far from a resolution together to reach a mutually satisfactory settlement. Mediation provides a number of advantages for both sides of a dispute, but it can only be effective if both sides are willing to participate and negotiate toward a compromise. For this reason, mediators often explain the disadvantages of litigation and the likelihood that both sides would walk away from a trial unhappy with the outcome.

  • What are the most important aspects of insurance dispute mediation?

In order for mediation to be successful, both parties must be willing to actively participate in discussion, negotiate with an open mind, and settle, should a reasonable opportunity arise. In order for this to occur, the insurance provider must send a participant with the authority to settle a claim. Sending legal counsel alone is nothing more than an attempt to gather information and get a better feel for a claim (though the information gathered cannot officially be used in later litigation).

It is essential for the mediator to ensure both parties arrive at the mediation session ready, willing, and able to negotiate and settle a claim. Otherwise, mediation is a waste of time and money for everyone involved. Parties must participate in person at the mediation and not by phone. If at any time, any party feels as if a settlement is unlikely, he or she has the ability to cancel the mediation proceedings.

  • What if a claim has already gone to trial?

It is possible to employ mediation and other forms of alternative dispute resolution after a claim has gone to trial. In some cases, mediation only makes sense after litigation has commenced and a limited amount of discovery was conducted. Every dispute has different considerations as to when the mediation process is appropriate and the timing question is one that the policyholder needs to consider at the outset. Mediation can greatly improve the chances of success, but timing is important.

Mediation, at any point, increases the odds a business relationship can be maintained, despite the dispute. Litigation nearly always ruins the relationship. Often the relationship between the parties to an insurance coverage dispute is one that is long-standing and mutually beneficial. This is especially true of claims involving an insurance broker who understands the policyholder’s business and insurance needs. Litigation all but guarantees the relationship will end, but since mediation geared toward a mutually satisfactory outcome, it increases the odds parties can return to “business as usual” once the dispute is resolved.