Why the insurance industry should consider mediation
When we think about mediation, it is usually in the context of family law – say, when spouses can’t agree upon the terms of a divorce, particularly when there are minor children involved. But mediation is used widely in labour disputes and it’s increasing
What is mediation, exactly, and how can it be applied in the insurance industry?
What is mediation used for?
Mediation is one of a number of alternative dispute resolution methods. It’s mooted as an efficient and cost-effective way of resolving disputes without destroying the relationship that exists between parties, which would be the case if the parties went to court, for example.
In South Africa, 97% of civil disputes are actually settled before a trial, but this often occurs only years after the litigation process has started. Mediation allows the parties to reach a voluntary agreement to a dispute before the matter even escalates to litigation.
Mediation requires an impartial, neutral mediator to listen to both sides – much like a marriage counsellor – and allow the parties to come to an agreement without the mediator finding in favour of one or other party, or controlling the process. “You’re not a bystander in your own dispute,” says Danie Weideman, senior partner at LindsayKeller law firm. “A court process is usually confrontational and others determine your future for you, but here you don’t have lawyers talking legalese at you – the process remains within your control and you do the talking.”
Weideman says we have 49 Acts on our statute books that make mediation compulsory or refer to it as a preferred solution, but we frequently see parties litigating despite the enormous back-logs in court, meaning that the resolution to a matter may only be achieved years later.
Who pays for mediation?
How would mediation be applied in the insurance space? “The insurance industry is actually ideally suited to mediation, because you are able to craft a solution to suit all parties,” says Weideman. “Many disputes that end up with the Ombud could and perhaps should be mediated. Obviously, when it comes to disputing a policy clause, for example, mediation is not the answer. But where parties don’t see eye to eye within a business relationship, mediation is a confidential and less costly process that allows the parties concerned to settle the matter in an informal, creative way that will possibly allow them to work together in future.”
FAnews asked Weideman who would pick up the costs for mediation and if insurance premiums would need to be increased to cater for this. According to the basic rules of mediation, costs are shared between parties, but as with almost everything in the mediation process consensus between parties needs to be achieved. “What happens to costs will follow the deliberations between the parties – there are no rules,” he says.
No time constraints
There are no time constraints when it comes to the process. “If prescription has intervened, then of course at least one of the parties would lose interest in mediation as the underlying cause would have been taken away,” says Weideman. “One would expect that most mediations would occur relatively shortly after a dispute has been identified. If it is to take two to three years for the parties to start talking to each other, it would probably be quicker to litigate. But statistically 78% of all mediations result in a resolution the same day of the mediation.”
If mediation fails – which is extremely rare – litigation or arbitration will follow.
Mediation for third-party excess recovery?
In the case of a knock-for-knock agreement, would mediation take place in the case of third-party claims? Weideman said his understanding of knock-for-knock is that the participants only transfer inter partes the excess of claims. In general, the amount is fairly small, in most cases less than R20 000 and probably closer to R10 000. “This type of money would not justify mediation because you would need to provide a venue and pay the mediation, which would inevitably cost more than the value of the excess,” Weideman says.
Income protection claims ideal for mediation
He says income protection claims are ideal for mediation because the individual has a view of his or her disability and the insurer inevitably has a different view based on the wording of a policy or experience in similar matters. “To marry these differences lends itself beautifully to mediation,” he says.
Editor’s thoughts:
One of the truly appealing things about mediation is the cost (and it’s one of the reasons why many attorneys prefer litigation!). Pre-action mediation costs far less than protracted litigation and in these economically straightened times it’s possible that this is one area in which ‘cutting costs’ can be justified, particularly if a creative solution lies at the end of a discrete process that does no damage to a company’s reputation. Would you consider recommending mediation to your clients and would you ask the Insurer concerned to participate? Comment below or email [email protected].
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