Innovative Conflict Resolution

From Settle It Now: How Attorneys Value Your Claim …

Continuing from here, this post will provide some helpful tips on how to get the best from an insurance claims mediation.  For a very basic introduction to mediation, you can review What Does Mediation Look Like?

One of the distinguishing characteristics of an Insurance Claim mediation is that it is a classic David vs. Goliath scenario.  More than likely, the insurance company is a large possibly Fortune 500 company and you are not. And, there is the simple truth that the insurance company holds the money that you want.  One of the wonderful benefits of a mediation is that it has an equalizing factor; the mediator has promised to treat the parties as equals (to the best of his ability).

In a mediation, you have a couple of other things in your favor as well.  For one thing, in most situations the fact that you have come this far implies that your claim is – at least to some extent – valid.   Another factor in your favor is that the fact that an insurance company is participating in a mediation usually means that they are willing to pay you money; going to a mediation with no intention of compromising is not negotiating in good faith.

Which brings me to Tip #1:

Tip #1: Be prepared to compromise.  Mediations are not a forum for proving you are right.  Mediation is, under any model, a forum for compromising. Even in a problem-solving approach to mediation, the parties must be prepared to give something in order to resolve the claim. (This does not mean that the parties must settle, only that they should be willing to compromise something beyond where they are.)

If you are determined to fight for what you believe you are owed, don’t waste time mediating, just file a lawsuit and fight your way through the system (or as an alternative, request arbitration).   However, litigation is an often dark and treacherous road, fraught with risk; don’t start down that road without first counting the cost.  However, if you believe that settlement is what is best (within reason, of course), then decide prior to the mediation to have an open mind and be prepared to compromise – perhaps significantly.  (Don’t worry, the insurance company is making that assessment, too.)

Tip #2:  Know your bottom line. Make an accurate (to the best of your ability) assessment of your claim and your position, and have a fixed point in your mind (or better yet, write it down) where – given that no new information changes your evaluation – you know you will stop negotiating.  This is often called having a “drop dead” number.  The Claims Person will more than likely have one as well – and may need to go to a manager to go past that number.  As I’ll mention below, if you know what the best alternative to settlement (such as filing a lawsuit) is, you’ll have an easier time knowing what your true “bottom line” is.

Tip #3: Ask the mediator to verify that the adjuster has “full settlement authority.” The adjuster will typically represent that they do indeed have complete authority to resolve the claim (usually up to the policy limits).  However, much of the time they only have the authority which their manager feels is appropriate to resolve the claim.  If the adjuster will need to call someone else to make any decisions, you have the right to know that (and the mediator will want to know, too).

Tip #4: Trust the mediator. Give the mediator a chance; that is what you are paying him for. You may not understand what he is doing, but he more than likely has a plan that is designed to facilitate a resolution. If it appears as though the mediation is at a standstill, tell your concerns to the mediator, who may need to try a different approach. In some ways, a mediator is like your physician; if you’re not being honest with him, he can only do so much.

Tip #5: Don’t put complete trust in the mediator. Yes, I know what I just said.  But, mediators are only human.  You know your claim better than anyone else, and you should always trust your own instincts. At the end of the day, the decision to settle or not settle is always yours.

Tip #6: Many mediators will hate this tip, but here it goes – Don’t reveal your “bottom line” to the mediator too early. Some mediators will instantly go to the bottom line numbers, and push you to go further than you intended.  However, if the mediation has reached a plateau, it may be time to reveal your “drop dead” number. Chances are, the mediator will also sense when it’s “fish or cut bait” time, and ask you for it.

Tip #7: Don’t take it personally if the mediator challenges your position. While you may at times feel like the mediator is taking the insurance company’s side in his conversations with you, the chances are that he is taking your side when he talks to the insurance company.  Playing “Devil’s advocate” with each side, while it can be somewhat frustrating and even disheartening, does help to “test” each side’s position.

Tip #8: Listen. Talk and make sure the mediator understands your position, but don’t forget to listen. Make sure you hear and understand the position of the insurance company.  You may hear something that changes your position, or it may reinforce your position. Even if the claim doesn’t settle that day, you may gain some important information.

Tip #9: Be Flexible. Sometimes the mediator will try a rather unorthodox-sounding approach to settlement; here is where you need to trust the mediator a bit.  For example, one of the more unusual, but effective, mediator “tricks” is the double-blind offer, sometimes called the “mediator’s pick.”  When the parties are too far apart and settlement seems hopeless, sometimes the mediator will pick a number that he thinks the claim should settle for.  This number will be a stretch for both parties, and they will have a day or so to think about it.  If both say “yes,” then the claim is settled. However, if one person says “no,” it doesn’t.  It is surprising how often this will work.

Tip #10: Always keep the alternatives to settlement in mind. What is the alternative to settlement?  Realistically, it is that you give up your claim, or you file a lawsuit and proceed to trial. However, also realize that very few cases actually go to trial. The process is often stressful and expensive, and you will probably end back up in another mediation down the road.  As I’ve said before, litigation may be the best option for you; just be aware of the risks and your options.  Again knowing your best alternative to settlement will be of great help in making settlement decisions.

Tip #11: Don’t be pressured. If you need time to consider an offer, don’t feel pressured to accept it then and there.  Chances are the insurance company will give you at least 24 hours to think about it.  The mediator can be of assistance here, and will probably agree to continue in his or her role as mediator.  If the mediation is making progress but you’re running out of time, chances are you can schedule a continuation of the mediation.

Tip #12: Don’t stress if it doesn’t settle. Claims don’t settle for a number of reasons; sometimes the differences are irreconcilable and you really need an arbitrator or jury to make the decision.  Other times, one or both parties may realize they need additional information.  In the latter case, make sure you leave with a plan for going forward, including scheduling a follow up mediation if that is in order.

If I had to pick the most important tips from the above list, I’d have to say numbers 1 and 2 are probably key in any negotiation, as are 8 and 9.

If you are having difficulty settling your claim, whether it is due to a communication issue, or a difference of opinion, a mediation is a wise investment. Certainly it costs some money – the cost is typically split equally between the parties to ensure the mediator stays neutral – but it is far cheaper than litigation.  If you choose to mediate, be prepared to spend at least 3-4 hours, and be patient with the process.

To conclude my series, How to Negotiate an Insurance Claim, these last two posts will concentrate on Mediation as a settlement tool.  Insurance claims can, at times, be difficult to resolve for a number of reasons.  There may be honest differences of opinion on liability or the amount of general damages. There may be more serious issues involved, including coverage, available policy limits, or the insurance company may actually question the extent of your injuries or damages.  Whatever the issue, mediation is a fairly risk-free and low-cost next step.

Mediation is often referred to as “ADR,” or Alternative Dispute Resolution, because it serves as an alternative to simply filing a lawsuit and heading down the long, pricey road of litigation.  If you’re new to the concepts, here’s a brief glossary of terms:

• Litigation: Litigation is the process between filing a lawsuit and the resolution of the lawsuit, whether it be settlement or a trial.  Typically litigation involves a process of formal discovery, which is the exchange of information including providing deposition testimony.  A trial can be in front of a jury, or before a Judge only.
• Arbitration:  Arbitration is an alternative process to formal litigation.  There are some arbitration forums, like the American Arbitration Association, which follow a process similar to the court system. However, an arbitration does not involve a jury.  Arbitrations can either be binding or non-binding, by agreement of the parties, and are held before an arbitrator (or sometimes a panel of arbitrators) chosen by the parties.  Many contracts have clauses which require disputes to be resolved by arbitration rather than through litigation, as they are typically much less expensive.
• Mediation:  A classic definition would be “an intervention between disputing parties.”  However, the process of mediation has evolved over the years so that a more accurate definition (in my opinion) is “A process of guided or facilitated negotiation or collaboration.”  Under either definition, mediations are informal, non-binding meetings between parties of a dispute under the guidance of an impartial mediator, agreed to by the parties.  (More thoughts on what mediation is here.)

The Judicial Mediation Model

Mediation, being an informal process, can take many forms.  I will focus  here on two general models of mediation.  The first is what I will call the Judicial Model, which is quite similar to how a Judge would conduct a Settlement Conference during litigation, and also the most common form of mediation used in resolving insurance claims.  In this model, the parties are kept separate for the most part while the mediator relays demands and offers back and forth in shuttle-diplomacy fashion.  In this model, the mediator plays devil’s advocate with each side, essentially negotiating each side into where the mediator thinks the case should settle.

In the Judicial Model, it is not unusual for the parties to feel like they have lost control of the negotiation, because in a sense they have.  However, in a situation where one or more parties have entrenched themselves, this might be a necessary approach.

Another downside to this model is that it typically creates what is called a zero-sum negotiation, where a gain by one party is a loss to the other.  With an insurance claim, the issue is typically limited to money, and the parties already find themselves some distance apart.  Obviously, for the Claimant to receive more, the Insurance Company must give more.  To resolve such a claim, typically both sides must move from their position into the the space between; in a sense, both parties “lose” a bit.

I’ve heard many mediators tell parties that if they both leave unhappy, it was a fair settlement.  There is a sense in which this is true, but it reveals another flaw in this model: It lends itself to settlements in which the parties perceptions never catch up with the negotiation.  What I mean is this: You may think your claim is worth $50,000 at the least, and the Insurance Company thinks it is worth $30,000 at the most.  A settlement at $40,000 may be the proper amount, but you may leave still believing you should have received $50K, and the Adjuster leaves feeling they overpaid the claim.  Many mediators using the Judicial Model fail to see the value in negotiating perceptions, focusing only on the dollars.

The Facilitative Mediation Model

The Facilitative Model (also known as the Problem-Solving or Transformational Model) is what you typically find in neighborhood, workplace and small-claims mediation programs.  In this model, the mediator sees his job as facilitating a problem-solving conversation between the parties.  While occasionally it is beneficial to separate the parties for individual caucuses with the mediator, this process only works if the parties are in direct communication.  The model is also called the Transformational model because a focus of the conversation is to transform the parties perception of what is a proper resolution.

One of the theories behind this Problem-Solving Model is that by helping each party see the problem (the Shared Goal) from the other party’s point of view.  Theoretically, the more the Adjuster sees things from the Claimant’s point of view, the more apt he or she is to recommend a higher settlement amount, and vice-versa.

However, this model has it’s share of problems, too, as pointed out by John Wade in this article.

A Creative Approach

A good mediator should have more than one trick up his sleeve, so to speak.  Often a blend of these different models is helpful in resolving Insurance claims.  While an insurance claim is essentially a business issue where the Claimant and Adjuster should have no personal issues between them, it is important to realize that negotiating an insurance claim is still a conversation between two human beings.

If you find yourself mediating an insurance claim, watch the mediator for clues as to his strategy and mediation philosophy; it can be of great help in knowing how to respond to various aspects of the mediation process.

NEXT, some tips and tricks of mediating your claim.

Continuing my thoughts on how to negotiate your own personal injury claim, in this post I will provide some practical tips and tricks (actually, more like advice than tricks, but I went with alliteration) in handling and negotiating your own personal injury claim.  Much of what I say here will also be applicable to all insurance claims, but PI claims, as I’ve explained elsewhere, have the large, unknown, General Damages element and so deserve some specific attention.  First, a few points to consider during the pre-negotiation phase of your claim:

• Begin with a reasonable expectation. Assuming that you don’t believe that an insurance claim is a “get rich quick” scheme, the best thing you can do is to have a reasonable expectation.  If you total your Toyota, the insurance company won’t replace it with a Rolls Royce. Likewise, if your claim is for a stiff neck, you probably won’t settle for anything close to $1 million.

The claims person is legally, contractually and ethically obligated not to overpay your claim.  Overpaying a claim cheats the company and its stockholders, the insurance agent who sold the policy, and the insured.  General Damages are not “profit”; they are meant to be of equal value to your injuries.  Besides, exaggerating a claim is fraud.  Most companies have departments to deal with fraudulent or suspicious claims, and you don’t want your claim to be transferred into that department.

• Lay your groundwork. It is not the claims person’s job to prove your claim.  Gather enough evidence (receipts, reports, etc.) to prove your claim. Make periodic notes on how your injuries feel and how they are impacting your life.  Remember, your job is to make the claims person’s job easier; that is, make it easy for he or she to agree to an appropriate settlement.

• Understand the process. While there are certain payments that an insurance company can make throughout the life of the claim, typically you will not receive any money until you can settle your complete PI claim and agree to a release of any further claims.  You may need to work out some arrangement with doctors in the meantime, but understand that you are primarily responsible for your bills.

• You may owe some of your settlement to others. If, for example, your health insurance has paid your medical bills, they have a right to be reimbursed for that amount if you collect from another source.  Make sure you know who else wants to be paid.

• There are other factors that could impact the amount you will recover. The most common factor is comparative or contributory liability.  In some states, if you are determined to have been 50% at fault, you can only recover 50% of your bills and general damages.  In other states, if you are determined to be 50% responsible, you will receive nothing.  For a discussion of the four different types of negligence laws in the United States, go here.

• Another potential limitation to what you can recover is the applicable policy limits. If, for example, a person only has $15,000 of liability coverage, that is the maximum amount available from the insurance company.  You have the right to seek reimbursement from the policyholder, but he or she may not have any means to pay your claim.  Also keep in mind that if you settle with an insurance carrier and sign a release, you have no further right to seek money from the policyholder.  If policy limits are an issue, you may wish to seek the advice of an attorney.

• If there is no coverage for the claim, the insurance company owes you nothing. The policyholder may, however, still owe your claim, and it may be necessary to file a lawsuit or seek to mediate your claim directly with that person. If there is no coverage, the insurance company will cease to be involved. Depending on the nature of your claim, denial of coverage is a situation in which you may wish to consult an attorney.

• In some states, the insurance company cannot reveal the details of the policy to you. They should have to tell you if the applicable policy limits are not sufficient to cover your claim, but otherwise an insurance policy is a private contract between the Company and the policyholder.  Typically the insurance company doesn’t have to tell you why they may have denied coverage to their Insured, just that they did. (These laws vary from state to state.)

• The insurance company may also conclude their policyholder did not cause your injuries, and deny your claim on that basis. The Insurer is not bound by a police report or your own insurance company’s analysis. However, should they deny liability, it is within your rights to file suit against the policyholder directly (although most likely you will continue to deal with the insurance company). In the event the court agrees with you, the insurance company is bound by that determination. (The Insuring Agreement typically says something to the effect of “We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies.”)
• Collaborate first, negotiate second. Remember my concept of the Shared Goal; both you and the adjuster want to resolve the claim, with as little hassle as possible.  You can even approach the adjuster with, “I know that your goal is the same as mine …,” which will let the adjuster step into a collaborative role.

The Negotiation Process

Once you have submitted all of your claim documents and have given the adjuster a reasonable period in which to review and evaluate them (at minimum, 7-10 working days), you are ready to begin negotiations (even in a collaborative setting you will have differences of opinion, and some negotiation is to be expected).  Following are some tips in how to negotiate your claim:

1. As you are the claimant, it is appropriate for you to give the claims person your Settlement Demand. However, the claims person is more experienced at evaluating claims, so it is also appropriate for you to ask the claims person to first make you a Settlement Offer.  If they have evaluated your claim, they will be prepared to make an offer.
2. Recall that a claims person will have a settlement range within which to negotiate. The offer is most likely at the bottom of that range (however, it should not be below that range, what is often called a “low-ball” offer).   It is appropriate for you to ask for some time to consider that offer. Don’t ever feel pressured to respond right away.
3. In considering how to respond to the offer, consider where you’d like to eventually settle – your target number – then pick a demand sufficiently above this to allow for some room to negotiate.  Don’t pick an unreasonably high number, unless you feel that the adjuster’s offer is unreasonably low.  For example, if the offer is $15,000 and you’d like to settle at $20,000, a counter-demand of $25,000 is reasonable, and will probably signal to the adjust your target number.
4. Countering too high – with something like $50,000 – will signal that you are unreasonable, and you’ll probably get a counter-offer from the adjuster of something like $15,100, and you’ll just slow down the process.
5. However, if your own honest evaluation is in the $50,000 range, then by all means make that demand. Don’t let the adjuster’s offers control your demands.   If an adjuster’s evaluation is very close to yours, you can expect to settle at some point mid-range for both of you.  At times, the adjuster will be low, and you might be high; in this case, expect that you both will have to re-evaluate, and settle outside of both of your original ranges.
6. It is completely appropriate to ask that an adjuster explain the reasoning for the offer being made; this can be of great assistance in crafting your response, as you may be able to put some aspect of your claim in new light. You may also ask that they put their analysis in writing.
7. If you believe your claim is worth in excess of the available policy limits, you may either make a Policy Limit Demand – simply asking for all of the available limits to settle your claim – or make a demand above the policy limits.  If the latter, the insurance company will have to either negotiate the claim down, or seek contribution from their insured.
8. If the company offers you the Policy Limits, accepting it will mean releasing the policyholder from any further liability.
9. Don’t focus on trying to get the maximum settlement from the company. Focus instead on getting what you think is fair. You’ll never know if the insurer would have paid more, but that’s not the point. If you decided prior to the negotiation that you’d be happy with $20,000, then be happy with $20,000.
10. Keep in mind that making a counter-demand is also a rejection of the latest offer. However, “one time only” offers are extremely rare, and are almost never seen in the early days of a claims negotiation.  Typically the “one time only” offers you will see are what is called a “cost of defense” offer, in which the carrier is willing to pay a premium today rather than spend that money retaining an attorney to defend a lawsuit tomorrow.  Theoretically, once litigation begins, that money is “off the table.”
11. Don’t be put off if the adjuster tells you they have to talk to the manager for “more authority.”  This is not a “no” – it could be a tactic, or it could be true. Either way, it’s better than “no,” and signals that negotiations may continue.
12. “No” seldom means “no;”  however, you may find that you have rejected the company’s “final offer,” which is then technically “off the table.”  At this point negotiation may need to be refocused or jump-started; if you feel negotiations are stagnating or have stalled, you can always request mediation. As long as you maintain a willingness to negotiate, there is no benefit in the Company refusing to participate. However, if you find you’ve “hit a wall,” retaining counsel is always an option.
13. Beware the Statute of Limitations: often from 1 to 3 years from the date of the accident, depending on the state, the statute of limitations tells you how long you have to settle your claim without filing a lawsuit.  If you haven’t settled or filed suit within that time, your claim is dead (as is your right to sue the responsible party directly).
14. If negotiations stall, mediation, arbitration and litigation are all options to consider.

Things Insurance Companies Don’t Want You To Know

Following are a few additional tips to assist in handling your claim, should you find that you are dealing with a claims adjuster who is unusually difficult.  Always start with the presumption that your claim will go smoothly.  However, if not, here are a few things that might help:

1. The Department of Insurance is your friend.  If you believe the claims person is not acting in good faith, you may report the claim to your State Department of Insurance.  If there are any violations, the Company may be fined.  Typically, the involvement of the DOI involves managers and upper-level executives, so a DOI report is the last thing an adjuster wants to see happen.
2. Document each conversation, including date, time, and specifics of what you talked about.  It is also not a bad idea to follow up a conversation with a letter (e-mail works as well) to the claims person documenting the call and what was discussed.  Be specific, such as, “This will confirm our conversation of this date, in which you extended an offer of $5,000. I have indicated that I need a few days to consider the offer.” But, always be honest, direct and respectful.  Remember, you catch more flies with honey than vinegar.
3. In some States, you are allowed to sue the other person’s insurance company for failing to appropriately investigate and settle your claim.  If you can document that the Company has violated your state’s Insurance Code, you can contact an attorney who specialized in “Insurance Bad Faith” law for advice.
4. The Adjuster’s most valuable resource is time.  The more of their time you use, the more they want to close (settle) your claim.   You should not only help them give you money, you should help them want to give you money.
5. The Adjuster should return phone calls within a reasonable time.  If they are not returning your calls, ask to speak with that person’s manager or the Claims Manager.  Their time is also valuable.  However, remember again to always be pleasant and respectful. Try not to “lose your cool.” You can be persistent without being obnoxious or abusive.  If you want the Claims Manager or DOI on your side, you want to come off as more professional and above board than the Adjuster.

Collaborate First, Negotiate Second

Bottom line, if you are reasonable, cooperative and direct, chances are you will not have many problems negotiating most insurance claims. If you can take a collaborative approach – work to overcome the shared goal – resolving your claim may be a rather pleasant experience, and you will not feel at risk. Many claims adjusters are just good people, who see their job as helping people.

However, there are often bumps in the road, and sometimes there’s no option but old-fashioned negotiation.  If you are uncomfortable negotiating your own claim, you can always retain an attorney. However, the more combative the process, the greater the risk to both sides.  By preparing your claim carefully and paying attention to the process, you can minimize – but perhaps never totally eliminate – the risks.  That’s life.

Next: Tips on mediating your insurance claim.

Third in the series, starting here.

In my last post, I introduced the concept of the Shared Goal: The claims person and you both have a common goal, which is to resolve the claim by having the insurance company pay you money.  I also introduced the concept that to achieve your goal, you should help the adjuster meet his or her goal, by making it easier for them to pay you money.  That’s called a “win-win” scenario.  The antithesis of this is commonly referred to as a “zero-sum” scenario, where only one side “wins.” (This latter scenario is often romanticized in books and movies, often involving a dramatic courtroom battle; however, this is largely mythological.)

The Claims Person’s Job(s)

The claims adjuster’s main job is not to save the insurance company’s money, although it can’t be denied – nor should be be – that keeping settlements and other expenses are a factor.  The claims person’s main job is to settle a claim on behalf of his or her policyholder (aka “the insured”).  We all buy insurance policies specifically so we don’t have to pay claims ourselves. Looking at it from the standpoint of the policyholder, if someone files a claim against me, I expect the insurance company to protect me, once and for all.  When the claim is over, I don’t want to ever be bothered by that person (“the claimant”) again.  This will mean that the insurance company – besides paying the claim – must get a release from the claimant, releasing me from all liability.

I also would expect that the claims person would not overpay the claim; simple logic tells me that if claims are overpaid, my premiums are going to go up.  In fact, I may prefer that the claimant get nothing at all, especially if I don’t feel if I am not liable to the claimant.  However, there are laws to protect claimants from being treated unfairly, often called “fair claims practices.”  So, the adjuster now has yet another responsibility: to pay claimants fairly.

So, the adjuster now has these responsibilities:

1. Securing a Release of the Insured
2. Controlling costs and claims payments
3. Making sure that claims are not overpaid or paid in error
4. Acting fairly to the Claimant

As you can see, the adjuster has to find the balance between these often conflicting goals; that’s where the word adjuster comes from.  In order to justify what is paid for a claim, the adjuster must do a number of things:

1. Confirm that the insurance policy provides coverage for the particular claim.  This is done by reviewing the policy, the facts of the loss, and the damages claimed.  Until coverage is confirmed, no claims settlements can be paid.
2. Establish that the Insured is legally liable for the damages claimed, by investigating the facts of the loss and determining whether the Insured owed a Duty, whether the Duty was Breached, whether the Breach was the Cause of any damages, and finally, whether the Damages claimed resulted from the Breach.
3. Provided the results of 1 and 2 resulted in a decision that the claim should be paid, establish how much the claim is worth.  This is done by reviewing all applicable records (medical records, financial records, etc.), talking to the claimant, and at times hiring experts to provide opinions on various issues. This could include retaining a doctor to examine the claimant to provide any missing information.
4. Negotiate a settlement, once the value of the claim has been reached.

A lot of time and effort goes in to evaluating a personal injury claim, and everything must be well-documented.  Once the investigation is complete, the adjuster may be required (depending upon his or her experience and the requirements of the company) to confer with a manager to get the authority to offer a certain sum of money.  Generally, a settlement range is agreed to, and the adjuster is only able to resolve a claim for an amount within that range.

Even though from your point of view it might seem like the adjuster is sitting by the phone spinning a large “wheel of fortune,” by the time the claims person is ready to negotiate your claim, a lot of thought has gone into evaluating your claim.

Next:  Tips and Tricks of Claims Negotiation