By Leslie King O’Neal
CLM Construction Conference Features Mediation Panel
It was a great honor to share the stage with two extraordinary mediators: the Hon. Victoria Chaney and Steve Nelson, as well as claims professional, Lee Wright[1] at the CLM Construction Conference[2] held in San Diego, CA, last week. We shared our thoughts on why construction mediations are sometimes inefficient and ineffective, how to improve mediation and dealing with the “elephant in the room” (coverage) at mediation.
4,000 Years of Mediation: Why Aren’t We Better at It?
The first thing Lee asked the panel was: Humans have used mediation to resolve disputes for at least 4,000 years.[3] Despite 4,000 years of practice, we still trip over the same obstacles: information gaps, misaligned incentives and decision-making problems.
Why does this happen? Why are we still showing up for mediation like it’s a Thanksgiving potluck everyone forgot to coordinate? Why are there three green bean casseroles, but no turkey or cranberry sauce? And someone is asking if there are vegan options.
Is Mediation—the Same Old, Same Old?
Perhaps mediation has become as routine and formulaic as 1980’s sitcom reruns. Consequently, parties and counsel don’t feel the need to spend time preparing and planning for it. Some participants show up expecting the mediator to pull out Harry Potter’s magic wand to resolve the case, so they don’t put in much effort. The panelists’ recurring theme was that preparing for mediation is the key to success.
Failing to Plan is Planning to Fail
Successful construction projects require plans and specs and coordination between the designer, the contractor, the subs and the owner. The same is true of successful mediation. Perhaps some parties, counsel and insurers misunderstand the mediation process and how to optimize it for their benefit. Some examples are:
- Conventional wisdom is that mediation is an event, when it’s really a process. Mediation doesn’t start at 9 am in the conference room. Advance preparation is the key to success.
- Mediation is scheduled too soon (or with the wrong people) and without adequate information exchange. Pre-mediation information exchange enables informed decision-making.
- Insurance coverage is the elephant in the room that no one wants to discuss, but knowing what coverage is available is crucial in resolving most construction defect disputes.
A Better Approach: Treat Mediation Like a Project
Construction projects are managed with specific scopes of work and schedules. Mediations can use the same approach. Create a scope and a schedule, then manage to them. Some suggestions:
- Four weeks before mediation exchange a short evidence bundle—contracts, key change orders, key drawings or shop drawings, a defects list, key photos to illustrate causation, summary expert reports on liability and damages (if available).
- Two to three weeks before mediation: all parties provide the mediator a confidential coverage map showing each party’s policy years, limits, forms, deductibles/SIR, known coverage issues (“faulty workmanship,” “your work,” “design,” “mold,” “occurrence”).
- At least two weeks before mediation: all claimants (plaintiffs, counter-plaintiffs, cross-plaintiffs, third party or fourth party plaintiffs) create a confidential damages menu for their claims with options (full replacement; targeted repairs with warranties; diminution in value; cost to cure with betterment credits). For indemnity or AI claims, provide the estimated demand for liability for each defendant, as well as the amount of attorney’s fees and costs.
- At least one week before mediation: all parties exchange concise mediation statements (not a novel). A one- or two-page summary of what’s broken, how it should be fixed and how much that will cost is ideal. Defendants should summarize facts to support their defenses and provide an alternative damages model. Send the mediator a separate statement with confidential information if necessary.
- Before mediation day: counsel and their client should discuss any important non-monetary settlement terms and create a settlement template. If left to the last minute, non-monetary terms can become obstacles to settlement. Things such as timing of payment, the scope of releases, extended warranties, assignments of claims, future business commitments, or confidentiality should be discussed and included in a “cheat sheet” before mediation.
While this is ongoing, the mediator should have conversations (preferably via Zoom or Teams) with the parties (including insurance adjusters) and counsel to discuss settlement goals and possible obstacles.
Discussing the Elephant in the Room (Coverage)
Coverage is messy, confidential and complicated. But pretending it doesn’t exist is like pretending water damage doesn’t cause mold. We all know better and ignoring it just makes things worse. There are some ways to illuminate coverage without a full-blown coverage opinion:
- Each party should know its own coverage. Going to mediation without knowing if your policy will respond is negotiating blindfolded.
- Know the basics: Is there coverage? Is it contested? How much is the retention (SIR)? Is additional insured status contested?
- Work around coverage issues: Consider settlement options: Carrier pays X if covered; insured pays Y if not covered. Coverage to be resolved within 90 days.
- Coverage isn’t the dirty word—Surprise is the dirty word: Don’t raise coverage issues for the first time at 4 p.m. after a full day of negotiations. Mediators can deal with coverage issues—if they know about them early!
Takeaways:
- Advance preparation is key to effective mediation.
- Treat mediation like a project: create a schedule and manage to it.
- Don’t ignore coverage and coverage issues.
Resources:
Prior Construction ADR Toolbox posts discuss some of these topics. See below to learn more.
- Insurance coverage & mediation:
- Mediation preparation
- Mediation statements
[1] Panelists: Hon. Victoria Chaney linkedin.com/in/victoria-gerrard-chaney , Steve Nelson http://linkedin.com/in/steve-nelson-6a9b413 and Leslie O’Neal http://linkedin.com/in/leslie-king-o-neal-b31630a0 . Lee Wright http://linkedin.com/in/jleewright was the moderator.
[2] Mediation Mastery: Insights From the Nation’s Leading Voices, Claims and Litigation Management Alliance (http://theCLM.org). The CLM is dedicated to meeting the professional development needs of the claims and litigation management profession.
[3] Sumer was an ancient Mesopotamian civilization that existed between 4500 – 1900 B.C. in what is now called the Middle East. Sumerians required disputes to be submitted to the mashkin, (a mediator) “whose duty it was to attempt to settle the case by arrangement between the parties without regular process of law.” Leonard Woolley, Sumerians (Archaelogical Survey of India, 1938) at p. 94 (available at http://archive.org).