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Law Rules

How we resolve our disputes

Entries in insurance company (2)

Tuesday
Jun292010

Shocking arbitration award reinstated

The ninth circuit court of appeals has reinstated a $6.4 million arbitration award against Lloyds of London for bad faith refusal to pay a medical doctor’s claim for benefits under a disability insurance policy. The case is yet another example of experienced attorneys overplaying their hand. All three arbitrators on the panel agreed that the insurance company had clearly breached the contract, but the company apparently believed its liability was nowhere near what the plaintiff was demanding. The insurance company challenged the award in the federal district court, which set aside the award because it was “shocking.” The ninth circuit held that was not grounds for setting aside an award under the Federal Arbitration Act.

A major 2008 study concluded that plaintiffs tend to make more errors more frequently in their estimates of the value of a case, but defendants do so with greater severity. The study found that when plaintiffs rejected a pre-trial settlement offer that was higher than the ultimate verdict or award, they were off by an average of $43,100. But when defendants rejected a pre-trial settlement demand that was lower than the ultimate verdict or award, they were off by an average of $1.14 million. Lloyds of London and other insurers might want to consider that before taking their chances in litigation or arbitration. A good mediator should be familiar with this study in order to make both parties fully aware of their risks and alternatives to a negotiated settlement.

Monday
Oct052009

Virtual appearance is not reality

My wife, a public relations professional, frequently reminds me that perception or appearance is reality.  With all due respect to my better half, when it comes to court-ordered mediation, the Wisconsin courts disagree.  In Lee v. Geico Indemnity Co., the Wisconsin Court of Appeals has affirmed sanctions against an insurance company whose representative “appeared” at a pre-trial mediation session by telephone rather than in person.  The insurance company’s attorney appeared in person, but both the trial court and the Court of Appeals were miffed by the insurance company’s failure to notify and ask for the approval of either the opposing party or the trial court.   It did not matter to the court that plaintiff did not complain about the virtual appearance during the mediation session.  Plaintiff moved for sanctions in a pretrial motion.  One of the insurance company’s defenses was that it had become standard procedure for insurance company representatives to appear at mediation sessions by telephone.  Without deciding whether this was true or whether it was a good or bad thing, the appellate court said it was within the trial court’s discretion to impose sanctions for violation of the scheduling order’s requirement to be present and participate in the mediation by a person other than an attorney.  The appellate opinion contains no discussion of whether mediation is any more effective when a party is present in person rather than participating by telephone.  The insurance company argued that appearance by telephone was equivalent to being present and participating in person, but the appellate court rejected that argument based upon dictionary definitions of “appear.”  It would be interesting to see if there is any data showing the effectiveness of mediation where one party participates by phone, internet, Skype or other virtual electronic device.  After all, this is the 21st century.  And my wife is not wrong very often.