Proper Use of Mediation
Mediators Should Be More than Traffic Cops!
Alexander Robertson IV
In this era of impaired or exhausted policy limits, deductibles that cannot be satisfied by insolvent insureds, large SIR's, and AI's on the endangered species list, many mediators have been relegated to mere traffic cops trying to deal with settlement gridlock. What happened? The underlying dynamics of a construction case haven't changed. However, the funding mechanisms that were traditionally available to resolve these cases has changed dramatically.
The current recession in the housing market has forced some homebuilders and hundreds of subcontractors out of business. Those once thriving companies are now insolvent and unable to satisfy their deductible or SIR's when a claim arises. Developers and Plaintiffs are now faced with an ever decreasing supply of potential contributors to a settlement. Insurers are taking a harder look at coverage, often pursuing declaratory relief actions contemporaneously with the underlying case. Developers are also filing a third round of lawsuits against subs who ignore or refuse their Crawford defense obligations. It may take a village to raise a child, but it seems to definitely take multiple lawsuits to resolve the underlying CD claim these days.
So what's the solution?
- Mediators need to act more like a Special Master than a "neutral" presiding over dozens of mediation sessions. The mediator should be engaged early and help counsel for the Plaintiff and Developer craft a protocol for successful resolution. The initial mediation should include only the Plaintiff and Developer and problems such as coverage disputes, AI's, burning limit policies and insolvent subs should be discussed. A target settlement range between the Plaintiff and Developer needs to be agreed upon prior to the Developer serving settlement demands upon the subs to avoid "pass-through" demands. Often, the use of an independent expert (whose work product is inadmissible at trial) may be necessary to flesh out the realistic settlement range.
- The second mediation should focus on scope of work issues between the developer and subs;
- Realistic settlement demands, based upon actual scope of work, should be served by the Developer on the subs;
- If there are Crawford defense costs being sought by the Developer against non-participating subs, proof of defense costs incurred by the Developer need to be provided to the subs in a timely fashion;
- The Developer should promptly resolve any outstanding AI disputes, including the timely filing of any necessary "dec" action to resolve disputed AI's;
- Rather than the traditional cattle-call omnibus mediation sessions where dozens of attorneys, insurance professionals and coverage counsel sit around waiting for their fifteen minutes with the mediator, the mediator should schedule separate mediations for discreet defect categories (e.g. windows, mechanical, soils, etc.) to avoid wasting time and money;
- The mediator should schedule realistic deadlines for deliverables by counsel, their experts and coverage counsel on issues which are pivotal to global settlement of the case. The mediator should follow up with the responsible parties to ensure accountability for these deadlines;
- The devil is always in the details. The mediator should insist counsel for the Plaintiff and Developer begin drafting the settlement agreement early in the case to identify potential pitfalls. Often the non-monetary terms of the settlement require more time and negotiation than the dollar amount. Once the template of the written settlement agreement is in place, the monetary terms can be added later and no delays will occur documenting the deal once the final mediation is concluded;
- If discovery on a discreet issue is necessary to resolve a critical issue (e.g. statute of limitations), the mediator should recommend leave of court be granted by the trial court so the mediation process isn't stymied;
- Don't let the mediator's schedule control the pace of the case. Be careful to select a mediator who isn't over-booked and cannot schedule follow-up sessions for months at a time. Momentum, memory and money will be sacrificed.
SOURCE: www.rmediation.com