ALTERNATIVE DISPUTE RESOLUTION–MEDIATION

(March 2019)

What Is Mediation?

Mediation is a form of alternative dispute resolution (ADR). Specifically, it is an alternative to a lawsuit. Mediation is not litigation, a process that is often adversarial and performed in a courtroom. Further, don’t confuse mediation with arbitration where each party uses a surrogate to resolve a dispute before an arbitration judge.

Mediation can be considered "negotiation plus one." The process involves the disputing parties working through a neutral facilitator.

Mediation and arbitration are alternatives for resolving coverage amounts. With regards to insurance matters, they definitely are ineligible methods for determining whether coverage exists. However, mediation is often a part of the lawsuit process. After a lawsuit is filed and a court date is being established, a judge typically suggests that the parties attempt to resolve disputed amounts through mediation. In most locales, the judge offers a list of experienced mediators for the parties to use.

Mediation Steps

A typical mediation consists of introductory remarks, statement of the problem, gathering information, problem identification, bargaining and generating options, and reaching an agreement.

1. Introductory Remarks

This step involves the mediator formally introducing the parties to each other, usually at a neutral site. The mediator will then offer an opening statement that lays out the ground rules for the process and how the parties are to participate in the process. In some instances, the mediator may present or state his or her outline of the dispute, along with key issues. It is important at this point that the mediator makes it clear that both parties will be given ample time to state their position.

2. Statement of the Problem by the Parties

This part of the process allows each party to share their story about the dispute and to do so without interruption. Besides acting as an opportunity to clarify one’s position in the matter (as well as one’s understanding of key issues), it allows both the other party and the mediator to gain important information on understanding the points of disagreement. This part often gives the mediator insight into the emotional disposition of each party.

3. Information Gathering

In this step, the parties are separated and are independently interviewed by the mediator using open-ended questions. This component is to extract complete information from each party, without the chance of arguments. It also gives the mediator the opportunity to build rapport. The mediator will likely echo and later summarize the party’s statements. It is important for each party to know that their side has been heard and understood by the mediator.

4. Problem Identification

By alternating sessions with each party, the mediator’s goal is to discover points of agreement and to distill the contentious issues. This allows the mediator to identify items that can be resolved first.

5. Bargaining and Generating Options

This step makes use of the information developed in the problem identification step. Usually the mediator continues to work with the parties independently, sharing information, resolving parts of the dispute by settling the items where parties are on common ground.

The mediator, depending upon how the sessions go, may develop a proposal for settling remaining disputed elements. It is up to the mediator, based on the information gathered, assessment of each party’s emotional state and experience to determine what methods to use during the negotiations. By supplying resolution scenarios, each party is given opportunities to consider parameters for reaching an agreement without commitment.

6. Reaching an Agreement

Depending upon the progress made during the bargaining step, the mediator may consider bringing the parties together for final discussions on how to resolve remaining issues. However, the mediator must have first achieved significant successes in resolving other parts of the dispute and must have the trust of each party. Parties that have successfully agreed to resolve other points of their dispute and who have faith that their side has been faithfully heard and respected are ones that are capable of meeting and reaching final agreement.

Mediator Qualifications

Mediators are normally lawyers who have years of experience in resolving tangled situations. The American Association of Arbitration (AAA) reports in its Resolving Commercial Financial Disputes guide that neutrals, a term for disinterested third parties who act as mediators or arbitrators, include lawyers, former judges and financial service professionals specially trained in dispute resolution techniques. The AAA uses the following criteria to qualify persons for inclusion in the National Roster of Commercial Financial Disputes:

· A minimum of 15 years professional or business experience

Note: Within the above, at least 10 years of senior-level business, industry or professional experience

· Successful completion of AAA mediator/arbitrator training programs

· Relevant academic and business/professional credentials and licenses

· Evidence of scholarship and continuing education

· Must have documentation of at least 24 hours of training in dispute management and neutral skills

· A good and sound reputation in the business/professional community

· Commitment and availability to serve as a neutral arbitrator or mediator

· Must have participated in at least five mediation cases in a primary area of expertise

Most judges have lists of qualified mediators available in their jurisdiction and some of those may even be certified in their field.

Not all disputes lend themselves to mediation. As suggested above, mediation is of no benefit when two parties cannot agree about whether a loss should be covered. Only certain lines of business disputes involving loss amounts generally lend themselves to mediation. Common situations mediated involve uninsured and underinsured motorists, no-fault insurance, personal injury protection and professional liability including lawyers, accountants and architects. Mediation is extremely flexible. It focuses on resolving conflict over disputed amounts and is useful for this purpose with any line of insurance. In fact, mediation is frequently used in reinsurance disputes, since that business arrangement is filled with sensitive business relationships that encounter conflicts, such as agent-company, agent-agent, or company-company.

Mediation Clauses

The following are sample mediation clauses.

Sample One - If the contracting parties have a dispute with regard to this contract, they agree to attempt to resolve the matter via mediation in accordance with the mediation procedures of (fill in with info on a named source or jurisdiction). As a component of mediation, each party will share equally in the costs of the process.

The selected mediator will be an impartial party who will work to facilitate a mutually acceptable resolution, but no decision is binding. The parties also agree to be a good faith participant in the process and that mediation will be attempted prior to resorting to either arbitration or litigation.

Sample Two - In case of dispute, the parties agree will attempt to mediate a resolution prior to resorting to any legal action. The mediator will be chosen by and acceptable to both parties from (indicate the source or sources of mediators). The parties agree to equally split mediation costs.

This agreement does not, otherwise, alter or limit either party’s legal rights.

Mediation Agreement

For contracting parties considering mediation, here are some elements that add to its viability:

Status of Mediation Decision–The parties should agree upon the finality of the decision, if any, that comes out of mediation. The parties may agree to it being binding on both parties, or that it can merely be considered and does not affect a subsequent decision to either arbitrate or file a lawsuit.

Confidentiality–Both parties need to have a solid understanding about the treatment of all information that may be used in or which is created by the mediation process. Specifically, since other legal remedies may be pursued, the parties should be on the same page regarding the treatment of such information with regard to other proceedings. Naturally, any agreement regarding handling such information must comply with applicable laws.

Fees–The parties should agree on how fees are to be billed and collected as well as the timing of payments. Another consideration might be an agreement on capping costs. Confusion on this matter could create its own dispute.

Mediator Selection–The parties must have an agreement over the process of choosing an impartial party to facilitate the mediation which should include his or her relationship to the contract parties. Neutrality is the key issue. Neither party should have any control over this person.

Legal Advisor/Documentation–It is important for both parties to realize that the mediator is NOT a legal advisor to either party and that it is each party’s responsibility to preserve its own legal rights as well as to handle any subsequent paperwork regarding possible legal activities. Further, each party should seek credible legal advice prior to finalizing any decisions reached via mediation.

Process Termination–Both parties must agree to the situations (besides reaching a resolution) that terminate the mediation process, such as a decision by either party to withdraw.

Control and Neutrality

The real advantages of mediation are that the disputing parties are active in resolving their own problems or disputes, the process is done within a friendlier setting than a courtroom and it includes a neutral third party. The third party has no agenda beyond helping the disputing parties find agreement. Litigation and arbitration proceedings frequently become frustrating because each party loses control of the process. With mediation, the two parties having the most to gain by resolving their issues and who know the most about the matter keep the responsibility for finding a way to resolve the dispute.

The mediator has no authority to dominate the process and take the decision-making away from either disputing party. In addition, the mediator does not represent any one of the parties against the other. Instead, the mediator is the embodiment of both "communication and resolution." Initially, the mediator exists to perform a duty often ignored by both sides of a dispute…the duty to listen. The first real benefit of mediation is that each party gets the opportunity to completely explain his/her position while the mediator and the other party both just listen.

After both disputing parties have explained their positions, the mediator usually asks both parties questions needed to clarify the critical issues in the dispute. Before meeting with the disputing parties, the mediator usually receives written information from them that explains the situation. In that way, the mediator should have a good understanding of what each party wants after asking each of them just a few questions.