RISK ANALYSIS DURING MEDIATION
June 22, 2021 | Joseph J. Sullivan, C.S., Q.Arb.
* Prepared for ADRIO Insurance Section Meeting June 22, 2021
Insurance is associated with the concept of risk. Typically, in the property and casualty field, insured persons pay a premium in exchange for payment of money in the event of a defined loss occurring. As a trial lawyer and now mediator much, but not all, of my experience comes from the automobile insurance field, acting primarily for insurers but also acting for injured parties. The sheer volume of cases in this niche area remains remarkable and after 37 years of practice I have seen almost everything!
In the first party context, insurance claims are contractual and frequently are litigated or arbitrated over issues such as coverage or entitlement to some benefit or ongoing benefit. In the third party world, an outsider commences legal action against the insured person for some act of negligence that is defended by the insurer.
Almost always, there is merit to both sides of these disputed claims. Such cases often find their way to mediation before a final court or arbitral determination. Typically, both sides have legal representation and are assisted by an experienced mediator with suitable knowledge of the subject matter to attempt settlement.
Risk is ever present in litigation. The most experienced trial lawyers tend to be the same crowd that sensibly urge settlement through mediation or by other methods.
In my view at private mediation, the parties are not there to convince each other one side is right and the other side is wrong by the use of persuasive written and oral advocacy. Rather, the parties are at mediation to predict how a court or arbitrator might rule if the matter proceeded to trial or arbitration. Complicating the civil court option is the jury which adds an extra layer of unpredictability.
In participating in mediation, the parties evaluate risk. Let’s stick with Superior Court jury cases for now, but the following remarks apply to arbitration and non-jury Superior Court matters. What are the odds a Superior Court jury would find for the defence or for the plaintiff? That is a key question in the cases I mediate.
Three main areas of risk are:
a. Which side will prevail at trial?
c. Legal costs.
Evaluation of the first risk area requires a serious and objective analysis of the merits of the case at hand. A party doesn’t have to agree with the opposition, but it must fairly assess the potential that party could triumph at trial. This requires mediators with extensive experience before the judges and juries that might hear the case. Nitty gritty questions evolve during my mediations as I point out, for instance, whether a particular doctor’s testimony will be accepted by a jury or whether there are holes susceptible to a withering cross examination.
Likewise, complex legal issues arise that demand the expertise of a mediator with a solid background in the area to most ably assist the parties.
I am not suggesting the mediator take on a total evaluative role, but my style combines facilitative and evaluative techniques by use of my background in the field during mediation.
Delay is a second risk area in today’s litigation management. In the case of injury actions, it is easily understood plaintiffs wish to settle as early as is reasonably possible to put the strain of the process behind them and to receive their monetary entitlement. Avoiding delay can also be important for the defence represented by an insurer. Normally, insurers wish to limit the volume of pending unsettled cases in their inventory; moreover, reserves are tied up as cases remain open and not settled.
Delay problems have been severely affected by the COVID crisis as the courts have been unable to hear hardly any civil jury cases since March 2020. This is important as the vast majority of motor vehicle tort cases are heard by juries.
Legal costs are a third area of risk in litigation cases headed to the Superior Court for trial. Cases are costlier and costlier to try with more complex auto insurance laws, more experts and more “allied health professionals“ permitted to testify .
Reasonably complex cases that I tried in the late 1980’s took two weeks and now, they’d easily take 4-5 weeks. Most times, the total legal fees (both sides, including disbursements) outweigh the value of what’s in dispute. This is easy to calculate in cases with values of several hundreds of thousands of dollars, but this analysis applies in multi-million dollar cases I have mediated. These multi-million dollar cases have many more experts, perhaps multiple parties and might take 12-15 weeks of trial time. And don’t forget the experts who can sometimes bill $12,000.00 - $15,000.00 per day of trial attendance.
In Ontario, usually the loser pays the winners’ legal fees and they can be enormous.
No doubt about it: mediation avoids not only an adverse trial result, but also the risks of delay and unnecessary legal fees that a loser might get stuck with paying.
ABOUT THE AUTHOR
Joseph operates Sullivan Mediations in Hamilton, Ontario and mediates across Ontario. After a peer review, he was invited into the Canadian Academy of Distinguished Neutrals: https://ontariomediators.org/joseph-sullivan. He also is a Qualified Arbitrator as recognized by the ADR Institute of Canada.