TR as Mediator

Mention Theodore Roosevelt and most people conjure visions of action and energy, often with a strong militaristic streak. The charge up San Juan Hill, "Perdicaris alive, or Raisuli dead" and (perhaps most famously) "speak softly and carry a big stick" are some that come to mind. For some of us who are more familiar with a facilitative approach to dispute resolution, this hardly seems the stuff of which mediators are made.

Yet, despite his tough, no-nonsense image, TR was awarded the Nobel Peace Prize in 1906 for mediating the Russo-Japanese War the previous year. For an excellent discussion of this accomplishment, see James E. Fender, Roosevelt, the Mikado and the Czar: Theodore Roosevelt’s Mediation of the 1905 Treaty of Portsmouth, N.H.B.J., Vol. 46, No. 2, Summer 2005, p. 68.

Global Mediation of Tort and Insurance Coverage Cases

The so-called "tripartite relationship" arises when a liability insurance company retains an attorney to defend its insured in tort litigation. For the most part, the three members of the relationship (insurance company, defendant and defense attorney) are able to present a united front against the plaintiff or plaintiffs who brought suit. In such cases the defense attorney has no conflict representing both insurer and insured simultaneously; whatever differences there may be between the insurer and insured are not likely to complicate settlement discussions. The risks associated with not settling are limited to the traditional ones revolving around tort liability and damages.

A new set of risks is thrown into the mix when a tort lawsuit raises questions of coverage; e.g., do the facts of the case give rise to a duty under the insurance contract to indemnify and/or defend the insured? Unless the facts are fairly straightforward and clearly show that the policy does not afford coverage, most companies will not deny coverage unconditionally, but will instead pay for a defense, thereby keeping some control over the litigation, while reserving all rights to deny coverage later on.

While defending a tort action, a company will often retain separate counsel and bring another lawsuit (usually a declaratory judgment action) against its own insured to determine coverage issues. The plaintiff in the underlying tort case may be joined as a party in that action and will thus be bound by the court’s decision.

In such cases, the question arises: "Do we mediate before or after a decision on coverage?" The answer usually is: "It depends." Of course, if mediation comes before coverage issues are decided, the insurer(s), with separate coverage counsel, would have to participate for the process to have any chance of success.

I have heard some involved in such cases say: "There is no point in mediating the tort case until the coverage case is decided." But settlement of tort cases is almost always driven by uncertainty and risk. People and companies settle to avoid risk and uncertainty; therefore, the more uncertainty and risk, one can argue, the more mediation is likely to be successful.

Settlement usually happens when the parties come to grips with reality. If one of the realities is that there might not be any money available to the plaintiff, even if victorious, that is just another risk to be analyzed. Waiting until the coverage issue is decided might make the plaintiff’s case more valuable — or it might not. The effect is similar to that posed by a pending motion for summary judgment in the underlying tort case. Mediation often has a better chance of resulting in settlement if all parties in both cases come to the table before any of the coverage unknowns are decided.

On the other hand, in some cases the coverage questions are so complex — multiple companies, extended periods of exposure, different policy language, choice of law questions, etc. — that settlement is impossible (or extremely unlikely) until some or all of these issues are sorted out. For example, if because of all the unknowns the insurance company (or companies) will commit to paying so little money that the plaintiff feels that there is little to lose by not settling, it is probably best to structure the mediation to allow for advance clarification of some of the coverage issues.

Passing the Torch

In an article I wrote a couple of years ago ("Dealing with Insurance Company Claims Representatives"), I urged plaintiffs’ lawyers in personal injury cases to communicate early and often with the claims rep assigned by the defendant’s insurance company. I suggested they take a leaf from Willie Sutton’s book and "persuade, cajole, and negotiate with insurance companies 'because that’s where the money is.'"

There are other reasons why it’s a good idea to open lines of communication with the company as soon as the case walks in your door. One that is often overlooked is that, by doing so, an alert attorney is more likely to learn useful information as to how the company views his or her case. Company claims reps have varying levels of authority based on their experience, training and time with the organization. Typically, the newer claims people are assigned the cases regarded as routine; the people further up the ladder handle more serious cases, and have authority commensurate with how the exposure is viewed.

If you have been working a case for a couple of months, diligently sending medical bills, records and other documents to your opposite number at the insurance company, and learn that the matter has been reassigned to a more experienced claims rep, that is not an occasion for alarm, but a sign that you have their attention! Don’t sulk because you think you have to start all over again and educate a new person. Believe me, these people are usually quick studies who likely know a lot about your case already. When you learn that such a reassignment has been made, jump on it quickly and establish contact with the new person. Offer to answer any questions he or she may have. Such cooperation is likely to pay dividends when the time comes for serious negotiations.

No Excuse!

It is said in the Army that, when responding to questions put by superiors, there are only three correct answers possible: "Yes Sir,"* "No Sir,"* and "No excuse, Sir!"*

Rather than defend this blog’s AWOL status since last August by telling you how busy I have been, or how traumatized I was when the economy tanked, I will only say: "No excuse!" I’ll try to do better.

* or Ma’am, as the case may be.