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Mediation is still the best way to navigate the legal costs minefield

by Matthew Rushton on 23 Oct 2012

mediation and legal costs minefield

One major consequence of the economic downturn has been the rise in redundancies, creating a hefty backlog within the UK's employment tribunal courts system. Recession is costly, and earlier this year the Chartered Institute of Personnel and Development (CIPD) estimated that redundancies had cost UK employers £28.6 billion since the financial crisis began in 2008.

In many employment disputes cases, mediation can be used to reach a fast and fair settlement to bypass long, protracted and expensive litigation. This could be one of the reasons why the number of employment tribunals claims fell by 15 per cent during the 2011/2012 period. Notwithstanding this one-year fall, since 2008, cases filed at employment tribunals have risen by 23 per cent, notably among employees seeking unfair dismissal claims.

Finding neutral ground, where two parties or multiple parties, can meet to air their grievances is why mediation became a popular alternative dispute resolution (ADR) model in acrimonious divorce cases. It is not only evident in the family courts and in civil disputes, but increasingly in the commercial environment, where insurers have used the process effectively in personal injury claims caused by either motor accidents or medical malpractice.

Insurers have for many years spent millions of pounds trying to unclog the courts and find ways to slash their legal bills. The perpetual lament from the policyholder over increased premium price hikes has dogged the industry, and the blame is placed squarely on the inflated claims environment and legal costs incurred fighting fraudulent claims.

Fighting fraud however is a perennial problem for insurers but only one aspect of the claims arena. Legitimate claims can be approached with a new mindset - a more balanced, non-prejudicial view would be the preferred method. A good example is the decision this month by the Intellectual Property Office (IPO) to introduce a 'small claims track' initiative at the Patents County Courts which will simplify the process whereby copyright owners can sue companies or individuals who they believe have infringed their rights.

Where previously the county courts were not equipped to consider this type of litigation, this procedure speeds up the court process and its raison d'etre is to unburden the small and medium enterprise (SME) sector from the fear of heavy legal costs to protect their rights. The IPO small claims track will be open to all copyright, trademark and unregistered design holders. Crucially it says these business entities have the "option of pursuing basic IP disputes through an informal hearing, without legal representation."

Damages will be restricted to £5k or less to ensure they are proportionate to what is at stake. Business minister Michael Fallon has given the scheme the government's backing. He says: "Lower legal costs will make it easier for entrepreneurs to protect creative ideas where they had previously struggled to access justice in what would often be an expensive progress."

The key phrase in his statement is "access justice", and ADR mechanisms like mediation services are practical solutions to avoid court actions including in this case, hearings before an IPO tribunal. Legal action should be regarded as the last resort.

The objective of the insurance industry is to make the claims settlement experience cost effective for the business and beneficial to the customer. How can mediation help? First the mediator gets the parties to agree on procedural matters such as stating that they accept the process completely voluntarily. A formal confidentiality agreement should be established by the mediator who should be an acceptable, independent and reliable individual or entity.

This can still be a lawyer and in many cases, the insurer or broker may have a dedicated panel of solicitors ready to advise on specific classes of businesses or liability cases. A duplication of law firms is not uncommon in very specialist areas such as IP, tort and contract work, medical malpractice or industrial claims. If both parties agree that there is an unbiased source who both groups trust, this can expedite proceedings and avoid any conflict of interest issues.

In complicated medical malpractice cases, however, specialist medical knowledge may be needed and a co-mediation model combining doctors or consultants with a mediator is sometime preferred. Face-to-face meetings should be established where both sides get an opportunity to state their grievance uninterrupted - this can lead to one side understanding the full facts for the first time. For example, medication administered to a sick patient by an unqualified nursing assistant or material evidence of the injuries sustained by a claimant in a car accident.

The claims process may have gone wrong. It could be simply a delay or administrative error but the claims experience has exacerbated asensitive situation. The mediator, to follow best practice, should meet each group or individual privately in the strictest confidence and explore settlement alternatives. This should open channels and gauge whether there is flexibility to discuss offers and counteroffers. Again the non-prejudicial environment allows transparency between the parties involved.

Mediation should not simply be associated with small claims, however. The techniques have proven equally robust in settling complex global programmes with cross-border liabilities. Examples include major project risks schemes involving huge infrastructure works, transportation and various private and public sector works which have a plethora of tax, labour, regulatory and legislative restrictions built into the project placement.

Given that mediation is a confidential process, reputational risk is another factor mediation can mitigate. Failure to secure a settlement, and consequent litigation, may however expose insurers to further actions from multiple groups posing the threat of financial ruin.

More than merely saving costs and enhancing value, ADR offers credible options to enhance the reputation of the insurance industry by improving the claims experience. Anyone who works in HR will tell you that in most employment dispute cases, the employee or individual feels they have been wronged and rather than seek revenge through financial means, just wants someone to say sorry and listen. It really can be that simple.

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Topics: Insurance, Mediation

Matthew Rushton

Written by Matthew Rushton