Editor's Note: John Gregory Service is an attorney andFlorida Supreme Court Certified Circuit and County Court mediator.He has been involved in mediation and arbitration asalternative methods of dispute resolution for more than 20years.

Insurance companies are businesses and, as such, seek to operateso that they are able to make a profit. So too are oil companies,for example. In the latter case, the company provides a productessential to the functioning of a modern industrial economy,whereas the former also provides something essential to the moderneconomy.

Unfortunately, many businesses and individuals may not recognizewhat is provided by insurers. Neither of these industries isgenerally held in very high esteem by the public, although withoutthem the public and business would find day-to-day life much morechallenging. Just think about trying to deliver products in ahorse-drawn wagon, for instance.

The business of the oil company is to provide energy; thebusiness of the insurance company is in general to provide a degreeof indemnity from financial loss due to risks involved in businessor life generally. There are a large number of activities inbusiness and life that expose companies or individuals to risk offinancial loss in the situation where certain events may occur.Most possible losses that would arguably result in financial lossto the insured because of a certain occurrence may be insuredagainst, although in a given situation finding a company to take onthe risk may require some time.

Without the opportunity to shift the financial loss that mayresult from the possible occurrence of those events, a large numberof activities may very well prove nearly impossible. Of course,virtually no one would purchase insurance if a given event causingpotential loss was perfectly predictable. Thus, often the potentialrisk of financial loss is shifted to an insurer. There are, ofcourse, some situations where an individual or a business may bewilling to self-insure. A person driving an older vehicle mightbelieve the cost of collision insurance exceeds a potential loss ifthe auto is damaged in an accident. Therefore, the driver may needto make a claim against the third party causing the damage,depending on the situation.

Reality v. Perception

Have you read anything that you were unaware of? Probably not.So are we simply just dancing around issues? What about the titleof this piece? We will get to that shortly, but for now we shouldconsider a truism—how others see us and how we see ourselves aresometimes rather different. On occasion, it is beneficial to take along look in the mirror. I think this may well apply to theinsurance industry.

That view of others may not necessarily be deserved but may bein part because of a lack of understanding of the business. Inconducting business daily and perhaps especially in the matter ofclaims handling, consider how things may appear to the other side.The author has seen many situations in which an insurance companyrepresentative attempts to explain to a claimant why a loss is notcovered under the policy. As an example, in a homeowner's claim forwater damage how many readers have run into the situation where asudden accidental occurrence like a burst water pipe must bedistinguished from water damage apparently caused by prolongeddeterioration?

Often the insured initially simply fails to recognize thedifference. Remember that a large number of individuals may nothave ever really looked at the policy they purchased. Instead, theysimply believed they were covered for most losses. The policyitself may provide for certain exclusions and it may well be veryclear in the policy. So when the obvious is pointed out, howeverdelicately, the insured may nevertheless feel a tinge of 'why did Ibuy this policy?'

Thoughtful Explanations Matter

A policy may require some action on the part of the insured tominimize further damage to property. Sometimes the matter (and howto ensure compliance on the part of the insured) may be explained.In other cases, the insured leaves frustrated, sparking an end tothe business relationship. An understanding adjuster can take thetime and a thoughtful approach in fully explaining the insurer'sposition—and that the policy is a contract. While the insured maystill not be particularly happy at this point, he or she may atleast accept the explanation and possibly continue the businessrelationship. At least the adjuster will have tried to salve thewound, so to speak.

The business of settling claims be it by an adjuster orattorney, in a situation where the claim has been made but there isnot any legal action, or where a lawsuit has been filed, is never aparticularly easy process. There are the matters of adequatelyinvestigating the loss, determining if coverage applies, examiningcause of the loss, considering the extent of the loss to name afew. The extent of loss is not always viewed the same by theparties. For example in a property damage situation suppose theinsured's auto or truck was good dependable transportation but thevehicle was reasonably old. What is cost to repair versus totalloss and compensation? That may not be the easiest matter for oneto explain to a claimant. Many readers have been down that road Iam sure. Actual cash value is not always something theclaimant wants to be told, but depending on the company and itspolicies sometimes there is room to negotiate. This may actually bebeneficial in that it may preserve the business relationship withthe insured and also give them a better opinion of theindustry.

Alternative Dispute Resolution

At this point, you've been very patient with a somewhat longlead-in to the real issue addressed here: using mediation to settleclaims. It involves discussion, negotiation, and diplomacy. Similarto negotiations in other areas, such as labor disputes, usually thesides—if they reach an agreement—will meet somewhere in the middleso to speak. What is being asked by a claimant, like selling a usedcar, is often more than he or she is willing to accept. The samecan be said of settlement offers. Again, this is not a novel ideabut is rather one that needs to be emphasized. Give and take,discuss, negotiate, and hopefully reach an agreement that allparties may accept. Does it always work to this stage? No.

In recent years especially, as the volume of litigated claimshas increased, alternative dispute resolution (ADR) has become morefrequently used. One method of this, mediation, has become usedmuch more often in attempting to settle disputes. It may be usedwith a claim or where a lawsuit has been filed. In all likelihood,you are familiar with the process generally, as it is often used indisputed claims before and during litigation.

Depending upon the jurisdiction a number of courts will refermatters to mediation prior to setting trials. This presents anopportunity to reduce the number of cases on a court docket. It isa process much like negotiation, give and take, but somewhatdifferent in that now there is an impartial third party involved ina concerted effort to help the parties reach an amicablesettlement. This of course is vastly different from the tool ofarbitration in which a decision is made by the impartial thirdparty.

In mediation, the third party attempts to bring the partiestogether, making suggestions of possible settlements, pointing outpossible strong and weak arguments and thus hopefully getting theparties to look at possibilities perhaps not previously considered.I have often likened the role of mediator to a catalyst in achemical reaction, the mediator hopefully helping to bring about anagreement to put the dispute to rest.

Value in the Process

Indeed, with this tool of settlement negotiation, mediation,there are a number of matters to reflect on. (Now the readerconnects with the title of this piece. Patience rewarded.) Is thisa technique that will always cause a settlement? Certainly not.There is no one manner of settling disputes. I recall a situationwhere two parties disputed the use of a slogan for business. Ratherthan litigate forever, the two sides sought to settle the matter byhaving an arm-wrestling contest between company leaders. Theoutcome was that the matter settled peacefully with use of theslogan allowed. I carried a copy of that news article to manymediations to illustrate that mediation is one of many ways tosettle disputes. But the process of mediation is a valuable tool,as many readers will accept. If a dispute which goes to mediationsettles, fine, the parties normally believe that the process hasworked, been of value, and the desired end of the dispute has beenreached. If there is no settlement, then once in a while theparties consider that the entire process was simply a waste ofvaluable time.

In cases where mediation does not end with a settlementagreement, there often is still value to having gone through theprocess. With parties facing each other frequently they will leavethe conference at least with a better perspective of how the otherside views issues, and that the opposite party is not simply somekind of irresponsible person. By participating both sides willoften see that the other is serious and acting in good faith butsimply has a different view on issues.

This may even result in later discussions. So even when there isno settlement value from going through the effort on occasion isreward. The process is of course confidential and what is discussedstays in the room with the parties. Thus participants may feel atease speaking freely.

Mediation as a process is also valuable because if a settlementis reached it is an agreement of the parties, not something beingforced upon them. Arbitration and of course litigation aredifferent. The reaching of an agreement is a good manner in whichto settle. Of course as most readers know even when there is asettlement many times neither party is totally satisfied, but thatis not such a bad thing. I rarely have seen both parties leave amediation conference in which a settlement has been reached totallysatisfied. They generally, however, see the value in reaching asettlement and putting an end to the matter and moving on.

The parties should also understand that with a settlement thereis certainty. Where no settlement is reached a matter may move intolitigation, or if in court previously, continue. Perhaps it is notthe best way to phrase things, but in court it is a little likeshooting dice, one cannot guarantee results. Outcomes may indeed bepredicted with some degree of likelihood, but especially where ajury is involved nothing is done until a verdict is given, andsometimes not even then should it be appealed.

So, the purpose in large measure of this relatively generalarticle is to encourage consideration of mediation as a tool usefulin attempting to settle disputes. Even if a settlement agreement isnot reached, consider that valuable views on the matter from theperspective of all parties may have been obtained. This may be ofuse in further decisions.