How To Mediate an Insurance Claim, Part 1

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.

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This entry was posted in Conflict Coaching, How to Negotiate an Insurance Claim, Mediation, Negotiation. Bookmark the permalink.

4 Responses to How To Mediate an Insurance Claim, Part 1

  1. martin holleran says:

    Good morning. I am a mediator and this Am have been researching for strategies to deal with an adjustor whom I have a “gut reaction” will be shall we say “obstreporious”. I would kike to receive Part II of the above “white (black)paper” and any other thoughts you mmight care to share. Also I am interested in your take on a defendant and/or adj. who is insistant upon appearing by phone. My take is that it is a prelude to a failed mediation. Many thanks, if you feel comfortable in replying. If not I understand. Sincerely, Marty Holleran

    • Alden says:

      Marty, part 2 can be found here.

      I’ll be glad to respond to your question, as a former adjuster who often insisted upon appearing by phone. ;-) For me it was usually an issue of being several hours away from the mediation location. However, I would never – unless absolutely necessary – not appear in person for an important mediation. This attitude certainly could be a signal of someone not really committed to the process. However, an adjuster still needs to resolve the claim; it’s their goal. For a defendant, they too want resolution, but perhaps are convinced they have a defensible case, or they may have other issues.

      In any event, assuming you don’t have a court’s authority behind you to mandate attendance, you might consider a pre-mediation conversation with the defendant or adjuster to try to learn what is behind their position. If you are able to connect with them in some way, it may change their attitude. Even adjusters are people (most of the time).

      Good luck!

  2. We have an insurance problem. On January 30 2013 a tornado damage my home and completly blew my garage off the planet. After several weeks the insurance co. Sent us $5000 and thier adjuster took his time on the structure, and the contents lady did also. She would not turn in her copy. Well after so long we got an independant adjuster to do all this. In the mean time i had to sell my mower because it was damaged, could nt use because the steering, o turn was messed up. My boat was also sold, because it had been for sell long before the tornado, and i took a great loss on it. The insurance co said i had no right to sell becauce they owned it. It wasnt, t thier money that bo9ught it and we have recieved nothing. I paid $4300 for the mower i sold, and bought a smaller one new for $1600. The trolling motor on the boat was damaged beyond repair, along with the windshield. I took a $1000.00 less for the boat. Its been over three months now and are still waiting for someone to do something. All the repairs we have done is out of pocket. We will never buy insurance again. What is your view?? Thanx. Phillp

    • Alden says:

      I would never go without insurance, myself. But, there are limitations to what insurance covers, depending upon what insurance you purchased. If you believe you have been mistreated by your insurance company, contact your state’s Dept. of Insurance. They should have a process for reviewing and dealing with consumer complaints.

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