SOME THOUGHTS ON INSURANCE AND REINSURANCE MEDIATION

by Larry P. Schiffer, Esq. | February 2021

Having served as a commercial mediator for the Southern District of New York mediation program for 28 years, I have some thoughts about the use of mediation to resolve insurance and reinsurance disputes. My perspective is also driven by 38 years as an insurance and reinsurance dispute lawyer, who has seen his share of litigation, arbitration, negotiation and commutation.

In court-annexed mediation, the parties are directed by the court or by court rule to mediation whether they like it or not. Compulsory mediation is not the best way to put the parties in a position to settle, but in many court systems, it is the reality. But guess what? We mediators settle a good percentage of these cases in spite of the compulsory nature of the proceeding.

How do we do it? What I do is make sure the lawyers and the party representatives know that I have put aside my client work for the day solely to help the parties try to resolve their case. I explain that I will not be taking a break and I will not be stopping for lunch. I tell them that I will not stop trying to help the parties negotiate a settlement unless and until I believe that further effort is futile.

Notice what I am signaling to the parties. This their negotiation. This is their dispute. I am not the judge. I am not deciding the case. I am there solely to help them find a compromise that resolves the case.

This party negotiation mindset is perfect for insurance and reinsurance disputes. Insurance companies negotiate settlements for a living. Every claim lead and every in-house counsel has negotiated a settlement, a contract, a business divorce or some other dispute. What insurance and reinsurance companies sometimes need is a neutral who can help cut through the noise and aid the parties in focusing on reaching a resolution based on an objective view of the dispute. 

The key to a successful mediation is that the mediator remains neutral and gains the trust of both sides. If the mediator shows any favoritism or disdain for a side, then the mediation will not be successful. A mediator must listen intently to each party and understand and sympathize with each side's position. But a mediator has to be the objective reality check on arguments that are farfetched or unreasonable.

Today, with the backlogs in the courts, the cost of litigation and the possibility that in-person proceedings may not come back in volume for some time, mediation is an excellent way forward to clear the books of disputes that are ripe for settlement. An objective neutral can help insurance and reinsurance companies move matters from the disputed bucket to the resolved bucket (which helps clean up the company's annual regulatory filings).

A word about virtual mediations. They work. I recently held 5 for the Southern District and resolved 3 of them. Private caucuses work virtually just as well as in a conference room. Social distancing and COVID-19 should not be an excuse to put off resolving a dispute ripe for mediation.

Mediation is not a cure-all. But it is a strong tool for resolving disputes short of litigation or arbitration. No case is perfect, and no cause is so right that a compromise cannot be had. Take a look at your docket of disputes and find the ones that a neutral mediator can help you resolve. 

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Larry P. Schiffer is a member of NAM'S (National Arbitration and Mediation) Hearing Officer Panel and is available to arbitrate and mediate insurance and reinsurance cases throughout the United States.  Mr. Schiffer is one of the foremost authorities on insurance/reinsurance and has a wealth of knowledge and experience that spans both the property and casualty and the life and health markets.  He has provided counsel and advice on a wide variety of insurance and reinsurance issues that include coverage, insolvency, commutations and recaptures, due diligence for corporate transactions and investments, reinsurance audits and inspections, cyber insurance, claims analysis and related issues.

For any questions or comments, please contact Jacqueline I. Silvey, Esq. / NAM General Counsel, via email at jsilvey@namadr.com or direct dial telephone at 646-737-1414 ext. 128