In the past two weeks, I have mediated three first party property cases. None of them was alike, and I wanted to share some thoughts on approaching such mediations from the carrier’s perspective, and some comments on the way the insureds have approached the mediation – making it better or worse for fruitful negotiations.  

 

First of all, I think it is most beneficial when both sides have a realistic assessment of their case. I know that some attorneys representing plaintiffs think they have to come into a mediation with a very high number, for fear they will not get very much out of the proceeding. The problem is that it creates a certain client expectation, and the client sometimes becomes immovable based upon these positions. 

It has been my experience that my clients approach the mediation with a fair and accurate, and realistic, assessment of their exposure. When I go into a mediation, I make sure that my client knows what the risks are. In other words, I do not “sugar coat” the client’s exposure. Some lawyers who typically represent insureds think that we “insurance lawyers” dig in on non-meritorious positions because we want to continue the client relationship with the insurance carrier. For those of you who do not practice in this area, let me give you a piece of advice – such a strategy will not work in today’s insurance business climate, and is a poor client development strategy. 

 

The reasons are simple. While no client perhaps likes to hear they are wrong in litigation, there is a time to tell them and a time not to tell them. The time not to tell them is one week before trial, when nothing new has happened for the last four months. That raises the question of — what did you miss four months ago? We had a chance to settle this case at mediation six months ago, and you told me the case was a great case to defend? If you have done your investigation and work correctly, the assessment that you have going into the mediation should be the same that you have four weeks before the trial, and one day before the trial. I have had cases where some “bomb shell” has dropped, but those are rare. 

 

The most successful mediations occur when the insurance carrier comes at it from this perspective, and so does the insured. Let’s take a case where a question exists as to whether a covered water loss resulted in damage. The insured has an expert witness, as does the carrier. Not unsurprisingly they disagree as to the cause of loss. Both sides cannot be right. In assessing who actually is right, one needs to look at the opinions of the experts, qualifications of the experts, and the “common sense” value of the opinion. I spent the Labor Day weekend with my best friend – who happens to be a plaintiff’s lawyer in Louisville, Kentucky who routinely sues insurance companies – and he was telling me about his personal water loss. His insurance adjuster agreed that water came in from an opening created by a storm, and damaged his kitchen. There was water damage in the basement directly below the kitchen, with no other obvious source of water entry into the basement, but that adjuster did not believe the water damage in the basement was related to the storm. You know, there may be a good explanation of that from an engineering perspective, but there is not from a common sense perspective. 

When both parties approach their task at mediation with a realistic assessment of the strengths and weaknesses of the case, the role of advocate shows itself in the negotiations from there. There has to be movement in order for cases to settle, and both sides will always recognize some potential for loss. Being realistic – from either side – is the best representation of your client.