Opinion: The Benefits of Mediation

Avoiding the Costs and Hassles of Litigation

Conflicts and disputes are normal in day-to-day business dealings with policyholders, colleagues, and contractors. Generally, we are able to resolve these problems using everyday communication skills and diplomacy. Occasionally, however, these disputes rise to the level where they seriously undermine our ability to maintain these important relationships.

This is where mediation can be a real benefit. Unlike litigation where a judge makes a decision about the outcome of a given dispute, mediation offers the parties the opportunity to control their own fate by crafting a unique solution. Ideally, solutions are developed that benefit both parties.

A recent example of this occurred when a policyholder was involved in a fairly minor auto accident. The insurer had paid for the damage to the claimant’s car and for his medical bills—primarily consisting of chiropractic care. Subsequently, the injured party filed suit against the policyholder, claiming damages for the “pain and suffering” that allegedly resulted from the accident.

Roads to Resolution

The insurance carrier could have taken a couple of different approaches. First, it could have simply have allowed the lawsuit to proceed. In that scenario, if the client lost, then it would have paid the amount of the judgment as a claim. On the other hand, the insurer could have vigorously defended the client and tried to assist her with her side of the lawsuit. Either way, if the client loses the suit, then she ends up with a judgment against her that could have a negative impact on her credit.

Instead, the insurance company elected to participate in mediation between the policyholder and the other party. The result was a negotiated settlement that included a release from further liability for both the policyholder and the insurer. This resolution also served to preserve the insured’s excellent credit rating.

Let’s examine another example: A water main break occurred in condominium building, causing major flooding. To repair the resultant damages, the insurer hired a restoration firm with whom it had a longstanding—and, by accounts, generally productive—working relationship. Beyond the usual negotiations, the insurance company knew that the supplier was dependable and that it could count on the workers to adequately clean up messy floods at a reasonable fee.

This time, however, the process was anything but smooth. The workers arriving at the flood site made one mistake after another. This series of mishaps aggravated in the insured, who then made several angry complaint calls to the insurer. The insured reported that the workers were rude and unprofessional; that equipment malfunctioned; and that a door was left ajar, thereby allowing the resident manager’s beloved cat to escape and consequently suffer a broken leg. In short, the policyholder was disgusted and vowed to cancel the policy as soon as this project was completed.

Calls to the restoration firm yielded only feeble excuses, although it was clear that its owner had been aware of the problems before the policyholder started complaining. This was the point at which many insurers would have elected to cut off a favored supplier relationship with the contractor. Instead, mediation was arranged between the owner of the cleanup company and a representative of the insurance company. Once the groups were able to sit down face-to-face with the help of a trained mediator, both the insurer and the restoration firm decided that the relationship was in fact worth saving.

The small restoration firm could not afford to lose this major client, and the insurance company needed a reliable supplier in that particular market. The involved parties were able to reach a deal that mandated a substantial refund for the condominium project. In addition, the contractor agreed to pay the vet bills and issue an apology to the cat owner. The cleanup company agreed to educate its workers about providing an appropriate level of customer service and professional decorum. In return, the insurer agreed that it would continue assigning the restoration firm cases. In fact, a new claim had just been filed, and the insurer agreed to assign it to the contractor. The groups also decided to keep the lines of communication open so that when problems arise in the future—as they invariably will—then the issues can be addressed and resolved without harming the delicate relationship.

Keeping Costs Low

Mediation offers the opportunity to work with a neutral third party to help resolve a wide range of differences, including those between policyholders and insurers as well as those between contractors and policyholders. If a policyholder is saying is one thing and an insurer or contractor is saying another, mediation helps the policyholder have an opportunity to be heard while also keeping all relationships intact. It provides a safe and confidential environment in which to explore a variety of options to settle disputes.

Considering the high costs of litigation or the even higher costs of leaving problems unresolved, mediation can be an extremely cost-effective solution. It is also a vital option for complex cases in which it is essential to resolve specific issues without incurring high legal fees. Mediators generally charge a lower hourly rate than attorneys, and also generally resolve cases more quickly. Although litigation may be necessary in some particular instances, considering mediation will not take much time or consume a great deal of your company’s resources and it can save you money in the long run. For example, when two business partners recently decided to go their separate ways, mediation offered them an effective way to work out many of the details before having their attorneys draw up the necessary documents to sell the business to one of the partners. Simple conversation may be all it takes to resolve an issue.

Mary Delmege is the founder of Mediation Solutions, which offers an alternative to litigation for resolving conflicts that involve businesses, homeowners, and community associations. She has conducted more than 500 mediations and has trained both adults and youths in conflict-resolution skills.

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