Pre-Mediation Offers: Help or Hindrance?

Do offers made before a mediation help or hinder settlement? 

I recently conducted a personal injury mediation involving a motor vehicle accident where the insurer refused to budge from an offer it had made months before the scheduled mediation session.  In caucus, the insurance representative advised that the offer remained open for acceptance, but cautioned that the insurer would not pay a penny more at the mediation. In the insurer’s view, its offer reasonably reflected the value of the claim and its litigation risk.  The insurance representative insisted that I communicate this message to the plaintiffs so that there was no confusion regarding the insurer’s view of the case coming into the mediation. 

Based on the insurer’s position, I suspected that this might be a short mediation. However, I wasn’t prepared to concede without doing whatever I could to get the parties talking settlement.

I approached the plaintiff family and their counsel in caucus and explained the position taken by the insurer.  I challenged them to consider whether there was an offer they could make that would address their financial needs while being modest enough to grab the insurer’s attention and force the hand of the insurance representative to adjust her sights and seek further instructions from her supervisor. With my assistance, the plaintiffs’ lawyer prepared an offer that he felt comfortable recommending to his clients.  

In the end, the plaintiffs elected not to accept their lawyer’s recommendation and declined to make an offer.  In explaining their reasoning, the plaintiff’s son said the family was offended by the position taken by the insurer.  The family felt the insurer was trying to bully them into accepting an offer without providing a fair opportunity to be
heard and to engage in settlement discussions at the mediation. 

This was an unusual scenario, but I’m convinced that the pre-mediation offer and the insurer’s hardened position
coming into the mediation set the wrong tone for the session and undermined any chance of achieving a settlement.

More commonly, parties use pre-mediation offers to set a benchmark for negotiations at the mediation session.  If a pre-mediation offer is made by a party seeking compensation, the opposing party may view the offer as setting a “ceiling” for settlement expectations.  Conversely, if an offer is made by the party from which compensation is sought, the party seeking compensation may perceive the offer as setting a “floor” for the start of settlement discussions at the mediation.  

What can we learn from these scenarios?  A pre-mediation offer can send a clear message about where a party is at coming into a mediation.  This can be helpful in establishing expectations on both sides of a dispute.  However, it can also foster misconceptions and significant barriers to meaningful settlement discussions.  

While we’ll never know what might have happened in our personal injury scenario had the plaintiffs’ made an offer that was close in value to the insurer’s pre-mediation offer, any movement by the insurer from its hardened position would have required back-tracking and a loss of face, making any movement on its part difficult, and possibly embarrassing.  
 
In another recent personal injury mediation, also involving a motor vehicle accident, the insurer’s view coming in was that the plaintiff’s injuries did not meet the statutory“threshold” of “permanent serious impairment of an important physical, mental or psychological function” and that, accordingly, the plaintiff was not entitled to compensation for “pain and suffering”.  However, the insurance representative was prepared to listen and to be persuaded otherwise.  Left with that small opening, I spoke to the plaintiff and his lawyer and explained the insurer’s perspective.  Their challenge was simple and clear: to convey to the insurance representative during the opening joint session that the plaintiff’s injuries exceeded the threshold.  The plaintiff and her counsel spent a considerable amount of time developing their pitch and they delivered a compelling case to the insurance representative and counsel.  After a brief caucus, the insurance representative and counsel re-emerged; they accepted that the plaintiff’s injuries met the threshold and they had obtained new instructions from the insurance representative’s supervisor. The mediation was on.  The case settled later that day.

Mediation is a process, akin to a negotiation dance, and I find that a significant measure of the success of the
process is not in the ultimate outcome, but rather in fostering meaningful participation in the process. Each
side needs to feel equally empowered and motivated to engage in the dance.  

In my opening remarks to the parties and counsel at my mediations, I explain that the mediation process allows the
parties to take a fresh look at the dispute, to approach the day with an open and curious mind and a fresh set of eyes.  I encourage the parties to let go of what has come before (offers, settlement discussions, hardened positions)and to turn their focus to making the best attempt at settlement. Again, it’s about the process.

I would not discourage anyone from engaging in pre-mediation discussions and making pre-mediation offers to settle.  Any discussions aimed at settlement are positive.  However, if you make a pre-mediation offer, set a deadline on acceptance and ensure that it expires before a scheduled mediation session.  This encourages all participants – disputants and advisers – to arrive at the mediation without baggage, misconceptions and misleading expectations, committed and empowered to participate in the negotiation process with an open and curious mind.