Skip to Content

October 4, 2011

his article was originally published in the Subrogator, a publication by the National Association of Subrogation Professionals, Fall, 2011. © Copyright 2011 by NASP. All rights reserved. Republished by Butler with permission from NASP. 

A great subrogation recovery can be defined as one that recovers the largest amount of money in the shortest period of time with the least amount of cost.  Disputes between commercial entities are resolved daily, and not all of them require litigation.  There are many ways to resolve a claim.  Some claims are resolved through informal conversations between two adjusters.  Other times, litigation and trial can be both necessary and unavoidable.  However, in these economic times, most companies want to effectuate recoveries and close files as quickly as possible.  

Litigation is not always the best and only answer.  There are many ways to resolve a matter through Alternative Dispute Resolution, or “ADR.” ADR has come a long way, and at this point, has taken on many different forms.  While all forms of ADR may not be appropriate for all disputes, the following are some its benefits:

  1. Informal way to resolve multi-party disputes
  2. Flexibility of procedure
  3. Lower costs
  4. Less complexity
  5. Parties’ choice to select a neutral party to facilitate the resolution
  6. Likelihood and speed of settlement
  7. Practical solutions tailored to the parties’ needs
  8. Durability of agreements
  9. Confidentiality

While there are many different types of ADR, the four most commonly seen in subrogation disputes are: (1) mediation; (2) arbitration; (3) negotiation; and (4) online resolution.

I. Mediation

Anyone who has mediated a case knows that here are many types of mediators. Depending on the nature of your dispute, it is typically a good idea to research the mediator and his/her style of mediating before agreeing to the selection of a mediator.  There is nothing more frustrating than mediating a case with a mediator whose style is one that is actually working against the negotiation process.  Some common characteristics that describe a good mediator are:

  1.  Prepared
  2. A good listener
  3. Patient
  4. Persistent
  5. Hard Worker
  6. Neutral
  7. Thinks outside of the box
  8. Professional

Some mediators are very good at arm twisting and working hard to get both parties to the “right” number.  Other mediators have a reputation for “splitting the baby” and simply working to get the parties to the middle number.  With a good Plaintiffs’ case we would recommend the former.  With a bad Plaintiffs’ case we would recommend the latter.

To give you the best chance for settlement at mediation, we recommend the following:

  1.  A persuasive and informative opening or statement that gives the other side, and equally as important, the mediator, an explanation of your case.  It is important that the mediator understand the case.  You will want to prepare your mediator by advising him/her of the strengths of your case but also addressing your weaknesses, and why they are not as damaging as your adversary will likely make them out to be.  Many times this is accomplished by preparing a pre-mediation statement.  Sometimes you will want this statement to remain confidential.  Other times you will want to share the statement with your adversary.  If you are sharing the statement with your adversary, we recommend requesting in the cover letter that the statement be shared with the person attending the mediation with full authority to settle the case.
  2. Requirement of participation from both sides with someone who has full authority to settle the case.
  3. Many adversaries will take the position up until the 11th hour that they will not pay the true value of the case.  However, at the 11th hour of the mediation, things can change.  So patience and the ability to keep the mediation going is many times necessary to achieve a successful resolution.  Be careful not to allow your emotions to get the best of you.
  4. Understanding the true value of your case.  While you may feel that your case is strong, knowing your case, and more importantly, its difficulties (recoverable damages as opposed to what was paid, legal hurdles, etc.) will help prevent those lengthy arguments and discussions with the mediator that simply eat up the time to talk numbers.
  5. Being prepared.  Like everything else in life, being prepared is the best way to assist in accomplishing your task.

Mediation has become mandatory for most cases which end up in litigation.  Pre-trial orders typically require mediation.  The mediation usually takes place after the close of discovery and prior to the pre-trial conference.  While litigation is typically an option (assuming there is no contract requiring arbitration or another type of dispute resolution), there are many situations that may make it advantageous to both parties to attempt to mediate the matter pre-suit.  Pre-suit mediation should be considered on a case-by-case basis.  While it is certainly an opportunity to settle the matter prior to incurring substantial investigation and litigation costs, many times it will require a decision to be made without all of the facts as the case has not been fully developed through discovery.  There are some cases where this is a good idea, and others where developing the case through discovery is necessary. 

Another advantage of mediation is a neutral party hearing and commenting on your case.  As we all know, it is easy to fall in love with a case and it can sometimes take a neutral party hearing it for the first time to identify weaknesses that may have been overlooked or disregarded.  One concern with a pre-suit mediation is the situation where the Defendant adjuster shows up to the mediation where his/her only purpose was to hear your case and he/she never had any intention of settling the matter for more than a nominal amount.  It is less common to encounter this situation in litigation as most court orders require attendance with someone who has full settlement authority to settle a case.  During litigation courts have sanctioned parties for failure to participate in the mediation in good faith by not having proper settlement authority at the mediation.  While pre-suit this situation can never be totally avoided, before agreeing to mediation, it is many times worthwhile to confirm that both parties are within the same “ballpark” before incurring the time and costs associated with the mediation.

While not for every mediation, it can sometimes be beneficial to have your expert attend the mediation to assist in explaining your theory of the cause of the loss.  If possible, it can also prove extremely beneficial to have the insured attend the mediation to tell his/her side of the story.  Live statements from the insured and/or expert during the opening statements can sometimes go a long way to getting the mediation on the path to settlement.  If the insured and/or expert cannot attend live, it is always a good idea to let them know that the mediation is taking place and asking if they can possibly be available for a phone call to discuss the case should your adversary raise an issue that you are hearing for the first time. 

Prior to beginning most mediations, you are usually required to sign an agreement that everything that is said at the mediation is confidential.  This allows for an open line of communication between you, the mediator and the other party, and alleviates the worry that should the case not settle at mediation, that something said during the mediation will be used against you later during litigation.  To many people, confidentiality is one of the biggest strengths of mediations, and judges are extremely hesitant to ever allow a breach of that confidentiality.

II. Arbitration

This form of ADR is typically called for in a contract between the parties.  Many construction contracts require disputes to be resolved through arbitration pursuant to the rules of the American Arbitration Association (“AAA”).  AAA arbitrations can sometimes be an expensive alternative, but they do provide for the opportunity to have your case decided by a selected arbitrator with a knowledgeable background of your type of dispute (such as an arbitrator with a background in the construction industry).  Arbitration is many times much more informal than litigation, and the evidence rules are not as strict (and many times do not even apply).  For complex cases, arbitration with an educated arbitrator or panel of arbitrators may be a good option to resolve your dispute.

 Arbitration Forums, Inc. is another common form of ADR for insurance companies.  This process is a very cost effective way to get a quick decision on a claim.  If both insurers are members of Arbitration Forums, Inc., submitting the matter to this dispute resolution company can be required if the amount of the claim is within the jurisdictional limits.  If you and/or your opposing insurer are not members, yet you are looking for a quick decision on the claim, you may wish to consider whether agreeing to submit the matter to Arbitration Forums, Inc. is a viable alternative for both parties.

III. Negotiation

Negotiation between two parties is another form of ADR.  Negotiation is the voluntary participation between two parties in an attempt to resolve a dispute without the assistance of a third party to facilitate the resolution.   Before entering into negotiations with an adversary, it is extremely important to know your case, and even more important, to know your weaknesses.  You must ensure that you understand the weaknesses in your case so that you are able to respond to them when raised by your adversary.  Knowing your case, the legal burden you must meet to prove your case, and your damages will assist in allowing you to control the negotiation and be in a better position to respond to your adversary’s defenses.

 It is also important to know your damages, and more important, what is recoverable as you begin the negotiations.  You may not be limited to recovering the actual cash value estimate of your damages, although your adversary will almost certainly allege that you are.  Knowing your damages and being prepared to forcefully argue what you are entitled to, with support for your position, can help you control the negotiation.

Some feel more comfortable negotiating in person or on the phone.  Others need time to formulate their thoughts and are more comfortable putting them in writing.  We feel that handling negotiations on the phone and in writing can both be effective, so choose which method works best for you. 

IV. Online Dispute Resolutions

 There are also various methods to resolve matters through online websites.  One such way is through Cybersettle.   Cybersettle allows parties to submit a number of offers to settle a dispute, and if the offers match, the case is settled electronically.  While this may not be a perfect option for every case, it is another economical form of ADR that can be used to resolve a dispute.

V. Conclusion

There are many forms of ADR to consider as a possible way to resolve your dispute.
There is no one form that works for every case, and in some situations, litigation is truly the best alternative.  However, the costs savings and speedy resolutions which can occur through ADR make it something to consider for every dispute.