How insurer involvement shapes settlement outcomes—and what mediators get wrong

Money fuels settlements. Oftentimes, the person with control over the purse is an insurance professional, not an attorney or a party. While attorneys typically recommend and hire mediators, insurance professionals ultimately decide whether many cases settle. Several insurance professionals provided their insights on what sets the best mediators apart.

Recognizing the Insurer’s Role

Mediators must recognize and respect the importance of the insurance professional. The decision-making power of the insurance professional cannot be understated. In conversations I’ve had with insurance professionals, many shared experiences of being ignored by mediators. “I am sick and tired of being treated like a potted plant,” one professional stated. Another commented that they get frustrated by mediators “who don’t speak directly to me,” who communicate through counsel alone.

Preparation Is Nonnegotiable

Insurance professionals want their voices to be heard, and they want mediators that listen. One recommended that mediators welcome each participant into a virtual mediation individually. This gives the mediator and the insurance representative an opportunity to connect and the insurer a chance to inform the mediator of any unique insurance coverage issues.  

Insurers don’t mind paying for quality mediation services as long as the mediators are prepared. Mediators should do their homework in advance, including reading all briefs. Insurance professionals prefer to work with mediators who have already spoken with counsel and have taken steps to make sure that the parties have the information needed to participate in a productive session before the day of the mediation. Some of them expect the mediator to have a resolution “game plan” and not ask the participants for advice on how to mediate the claim.

Beyond Number-Shuttling: Adding Real Value

A pet peeve of insurance professionals is a mediator who simply shuttles numbers between the parties. Mediators are expected to be well-versed in the applicable law and offer their own perspectives on the merits of the claims and defenses, as well as raise other factors that the parties and the insurers may not have considered. One professional noted that they appreciate it when a mediator has information about verdicts or actual trial experiences involving comparable fact patterns. Also, if significant insurance coverage disputes impact the ability to fund a settlement, insurance professionals prefer mediators who know insurance coverage.

The Need for Credible, Reasoned Analysis

Frustrations arise among insurance professionals when a mediator tells them that they should pay a certain amount simply because they said so, or because the mediator’s number is the midpoint between the last offer and the last demand. Insurers need a rational basis to support the amount to pay for a claim. Adjusters seek settlement authority from their company based upon an evaluation of risk considering the facts of the case, the law and the cost of litigation.

Using Mediator’s Proposals Effectively

Insurance professionals favor the use of mediator’s proposals, but not all such proposals are welcomed. With a mediator’s proposal, the mediator suggests a settlement figure that they believe will resolve the claim. The mediator then informs both parties of that figure separately, hoping that both parties will agree to it. However, the mediator shares each party’s response with the other only if both parties agree. If one party rejects the proposal, neither party is informed of their respective responses. 

In the ideal scenario, the parties agree on a settlement figure without the use of a mediator’s proposal. So, insurance professionals encourage mediators to exhaust all efforts to assist the parties to reach a settlement figure of their own before resorting to a proposal. A few professionals reported instances where a mediator advanced a proposal too soon, which made settlement more challenging. These professionals also prefer that the mediator obtain the blessing of both parties before making a proposal. 

Insurance professionals are vital participants in the resolution of many cases, and mediators should never overlook their role.