Top Ten Causes of Impasses in Insurance Coverage Mediations

The reasons why settlement negotiations sometimes break down or stall are well known, and therefore can be anticipated in advance of any mediation. Indeed, prior to the mediation session it is good practice for the participants to appraise these potential “roadblocks” so they may independently game plan how to address these familiar challenges to resolution.

Below, I have listed in no particular order the ten most common reasons why settlement negotiations between insurers and insureds risk breaking down. (To be clear, my perspective is that there is never an “impasse” so much as a sticking point that the mediation process can transcend). My suggestion for present purposes is for us to review this list, not for purposes of ranking the issues, but to consider them from at least two perspectives that further reveal the dynamics in play.

First, for a particular issue, which participant (the mediator, counsel, or a party representative) is best positioned to address this challenge? For example, prematurity of a mediation arguably is primarily (though not exclusively) assessed by counsel, whereas “misconceptions as to the other party’s position” can be avoided by a well-prepared mediator.

Second, which problems are seen by the insured as emanating from the insurer, and which, from the insurer’s standpoint, are seen as emanating from the insured’s side? For example, lack of full settlement authority and unpalatable “terms of settlement” are in my experience primarily viewed by insureds as a hindrance emanating from the insurer, whereas a disconnect in valuation is a common perception for both sides.

I encourage readers to explore the below list with the above questions in mind and see how these perspectives can add depth to our understanding of the challenges we can anticipate may arise in any insurer-insured mediation.

Causes of Impasse Comment

Mediation is premature One or both parties feels it has an information

deficit

Unrealistic valuation by one or both parties “Lowball” offers or “extreme” demands.

Stonewall approach by one or both parties Actual or asserted tactical inflexibility.

Misconception regarding adversary’s position More prevalent when cards are held “close to the

vest"

Interparty hostility / “matter of principle” Corporate policy may constrain flexibility.

Terms of settlement Most often: scope of release.

Lack of settlement authority A persistent, though avoidable, issue.

Fairness concerns E.g., a defendant may be “looking sideways” at

allocation to co-defendants

Loss of confidence in the process / mediator Parties require the process to be objective and

constructive

Lack of time / incentive Party discounting relative value of a

negotiated settlement

Please feel welcome to share your thoughts, experience, and insights.