Picture Tom Hanks’ character, Forrest Gump, as a claims professional. I believe he’d tell you that mediation is like a box of chocolates—you never know what you’re going to get.
That’s understandable when you consider claims professionals are dealing with policyholders who have experienced a loss. Mediation can be a crucible into which facts, opinions, personalities, emotions, and biases are poured. You might want to stand back while that mixture heats up, as you do not know when things might boil over or explode.
Yet, while each mediation is different, most have common elements that can teach us lessons. Following are seven rules developed over a career spent opening up thousands of boxes of chocolate.
You never know what is going on in the lives of the people in the other room. Making assumptions during mediation can be costly. It is tempting to assume that a case may or may not settle—or if it settles, that it will never get done below a certain dollar amount. There may even be other voices in the mix, such as a plaintiff’s attorney’s remonstrations or a mediator’s early prognostication. The truth is, you will never know unless you explore and test an assumption through negotiation.
In many instances, the last thing claimants want is a trial, yet the message that is often sent is that they are ready to head to court unless an ultimatum is met. You may even walk into situations where the more pressing financial issues rest with the attorney and not the client. And, in some cases, it really is not just about the money; it is also about feeling heard and respected. Sometimes, a well-timed and genuine apology can go a long way.
Positions may also change throughout the day as the other side learns about the strengths of the defense. In other words, there may be a need for a form of catharsis to take place. Remember, people are emotional and may act like a wounded animal that is cornered by someone they view as an attacker. In addition, the attorney may initially believe he has a “career” case and may have to go through a similar form of catharsis.
It is important to remain calm and consistently try to advance your position. Try not to become upset about the other side’s positional stance, particularly in the early stages. In situations where liability is aggravated, creating separation between the actual tortfeasor and yourself may be helpful. You may insure the company that employed the driver who crossed the center line, but you were not driving the truck. You are there to help make things right.
Direct lines of communication are interrupted when litigation takes place and parties become represented. This may be the first opportunity the plaintiffs have to tell their story and to be heard. Listen closely and consider asking some clarifying questions to show you are paying attention and are interested. This is your opportunity to distill what is really important to the people in the other room, which puts you in a better position to address those issues specifically.
Manage emotions, including your own. People often make decisions based on emotions and then support those decisions with reason. It is easy to become upset when the other side is making unreasonable demands.
The goal throughout the day should be to systematically reduce the tension between parties while simultaneously increasing the motivation to settle. Any action has the potential to either increase or decrease those levels. If you sense that an offer will not be well received, include an explanation of the reasoning behind the offer. In other words, use the word “why” liberally to defuse the situation before emotions go the wrong way.
Traditional negotiation often takes the form of a competition. Parties might focus more on numbers than the underlying issues that bear on appropriate settlement ranges, and numerical ping pong can ensue as parties yield and compromise their way to a final number.
Interest-based negotiation looks more deeply at the needs and desires of the other side and provides a platform to address significant damage elements. Consider countering a demand with an offer that addresses a specific need the plaintiffs have identified. For example, they may have a life care plan that calls for 24-hour attendant care at agency level rates. Point out that you agree that some attendant care is necessary, however, your life care planner believes that eight-to-12 hours is an appropriate amount of assistance and that better care can often be found via private hiring, which often costs half that of typical agency rates. You now have a “why” to explain your offer, and at the same time you are showing concern about the other side’s needs. Instead of lobbing a random number over the net, you have progressed in a way that should help limit adverse emotional reactions and foster a continued favorable working environment.
All is fair in love, war, and settlements. Testimony regarding collateral sources is generally not admissible at trial. In mediation, however, using “other people’s money” can be an effective way to reach a compromised resolution. The more that liability and/or causation is disputed, the easier it is to justify looking to alternate sources for funding future needs like Medicare, Medicaid, SSDI, and SSI. Some of these programs are needs-tested, and preserving them may require specialized planning. An experienced structured settlement advisor can be an effective resource to help identify program availability and incorporate benefits into an overall settlement plan.
When attendant care represents a significant damage element, Medicaid waiver programs should be considered. Medicaid is a federal program administered at the state level, so benefits and availability will vary. In a waiver program, states will generally contract with agencies that do independent assessments to determine the level of care necessary. Then they make recommendations to the state as to what is truly needed and what should be funded. In some instances, it may make sense to engage a venue-specific, special-needs planning attorney in advance of mediation to provide credible information about the availability of these plans.
Focus on the problem before imposing a solution. When is the best time to introduce a structured settlement during a mediation? Opinions vary, but one effective method is to gather information during the early stages, then, when a significant impasse is reached, provide the mediator with a well-considered structured proposal that addresses specific needs and concerns. This can demonstrate that you have been paying attention to concerns voiced in the other room. Waiting until later in the day has the added benefit of unveiling this option using higher dollar amounts than those at the beginning of mediation.
It is not uncommon for structured proposals to be met with resistance when introduced. Higher interest rates drive higher future payouts, and plaintiff’s counsel may not want their clients to see how far your settlement dollars can actually go. Demands may be made to negotiate using cash or present value numbers. One way to address this situation is to politely comply, but, as you are reaching the end of the day, convey your “cash offer” along with an example of what it could buy in the form of a structured settlement. The case may not end up structuring, but the benefit of seeing the available future dollars earmarked for specific concerns, like income replacement or future medical funding, can be profound.
The journey is as important as the destination. Ultimately, both sides will be faced with the decision of whether or not to settle. The hours that lead up to that point provide an opportunity to set the stage for a positive choice. Remember that people make decisions largely based on emotions. Every interaction has the potential to either increase or decrease both the tension between the parties and the motivation to settle. Opening sessions or meet-and-greets can provide an excellent opportunity to get off on the right foot. Here are some do’s and don’ts to consider:
• Do express empathy.
• Don’t say you understand what they are going through.
• Do thank them for being willing to meet, and let them know you are there to listen, learn, and to do your best to see if the matter can be resolved to their satisfaction.
• Don’t imply you are right and they are wrong.
• Do practice what you will say in advance.
Are there ways to increase the motivation to settle other than offering more and more money? Yes—in particular by systematically emphasizing the strengths of the defense throughout the day. Effective mediation is like a symphony with everyone playing their part. Defense counsel should be prepared to point out issues to the mediator that they can bring up with the other side. This may represent the first time the plaintiffs in the case have heard a perspective other than their attorney’s.
Make your mediator a believer. Mediators often begin the day in a facilitative manner and transition to being more evaluative as the day goes on. The former is easier than the latter and can represent the path of least resistance. If you want mediators to use their credibility to score points for you in the other room, you need to provide them with ammunition. This requires preparation. Each side has the opportunity throughout the day to move the needle in their direction as mediators become more evaluative.
Many mediations degrade into a simple progression of offers and demands, with little of substance discussed. Every caucus session with the mediator provides an opportunity to help them see things from your perspective. For example, if liability is in question, there may be value in educating the mediator about the scope and availability of collateral sources. Your job is to convince the mediator and let them convince the people in the other room. If the case does not settle that day, you may be presented with a mediator’s proposal. In that instance, all of your preparation and hard work may yield a more reasonable number for the parties to consider.
Unhappy is not the goal. It’s a common statement: A good settlement is one where everyone walks away unhappy. I would suggest a better phrasing: A good settlement is one that everyone can live with. Getting there is a process ideally suited for mediation. What constitutes a livable settlement for a defendant is different than what it is for a plaintiff. If it is a bodily injury case, the injured party will not care about loss ratios or reinsurance attachment points. They will want to feel that they have been heard and that the final offer represents a better solution going forward than going to trial.
Studies in advanced negotiation theory can be helpful, but in my experience the points included here have proven to be effective time and time again. They can be especially effective when used collectively. They may not work every time, but when incorporated into your mediation skills, they should bear fruit in many mediation settings.