Self-Insured Claims Mediation Strategies

By: Raul Romaguera
Florida Supreme Court Certified Circuit Civil Mediator
Florida Supreme Court Qualified Arbitrator

Back in the day, I represented both insurance company defendants and self-insured defendants in 3rd party liability cases. In particular, I recall a self-insured risk manager for a large multi-national company who NEVER wanted to hear an opening at mediation. In fact, she refused to hear it (no, an opening is not required by the Florida mediation rules) to the confusion and chagrin of parties and mediators alike. I, myself, would have liked to have heard the openings, but defense lawyers are not in charge.

How can third party liability claims be so different if you’re dealing with an insured defendant or a self-insured defendant? Well, they’re not; it’s just the different way in which they look at things.

Self-insured entities (governments, large corporations, hospitals, long term care facilities, trucking companies, etc.) behave very differently than traditional insurers in mediation. They are not just evaluating risk; they are evaluating budget, precedent, internal politics, and reputational exposure.

This creates a negotiation environment that is more business-driven, less “insurance-formulaic,” and often more flexible if you know how to navigate this situation.

Traditional insurers come with preset authority layers and adjuster constraints. How many times have you heard the insurance adjuster say “let me make a phone call.”? A self-insured party often has a risk manager, a general counsel, or some type of CFO or manager (in some cases even a board or committee) present. This means that-authority may be higher, but it may require internal justification and political cover.

Self-insureds care more about precedent than insurers do. They fear a settlement will “open the floodgates” and lay out a payout pattern which encourages more claims in the future. As a result, they often resist early high numbers even when liability is clear.

Self-insured defendants can be more sensitive to reputation and public optics/scrutiny. They tend to focus more when there is or could be media exposure involving a vulnerable plaintiff and/or there may be a pattern of similar incidents. This can all be leveraged in mediation.

A not uncommon reason mediations fail is that insurers claim they lack information to evaluate damages. Self-insureds are even more prone to this because they may not have easy access to actuarial models, historical claim benchmarks, or adjusters trained in valuation.

The more early and accurate information you can provide, regardless of which side you’re on, the better.

Sticking to the following suggestions might help in resolving the claim:

Strategies:

1. Pre-Mediation Package = Critical

TIMELY, provide a tight, persuasive, business-oriented brief which includes;
1) a liability/summary, 2) a damages model; 3) comparable verdicts/settlements; and 4) an analysis of non-economic factors (e.g. jury appeal, optics, etc.)

Self-insureds need this information to justify authority internally.

2. Identify the Real Decision-Maker

In self-insured cases, the person in the room is often not the one with final authority.

Ask the mediator to confirm that the person in the room sets the ceiling to prevent the classic “We need another meeting” stall.

3. Use Business Language, Not Insurance Language

Self-insureds respond to budget impacts. risk avoidance, cost of defense, and public relations. Try to frame your arguments in those terms.

4. Leverage the Mediator as a Political Shield

Self-insured representatives often want to settle but need cover. Give the mediator the ammunition to say: “this is a reasonable business decision.”; and/or “a jury could easily exceed this number.”: and\or “your company can avoid negative publicity.”

5. Expect Positional Bargaining Early

Self-insureds are similar in ways to plaintiffs in personal injury cases. Sometimes the reactions to demands are emotional. The goal is to try and maintain reasoned discussions on why reaching an amicable agreement is a good result for all involved. Stay patient; the movement usually comes late.

6. Highlight the Cost of Defense

Self-insureds feel defense costs directly so you can use the “you’ll spend $150k litigating this” and/or “trial prep alone will exceed the gap between us.”

This argument is far more persuasive to self-insureds than to carriers.

7. Offer Creative Structures

Self-insureds love structured payouts, fiscal-year timing, confidentiality of settlement, and even non-monetary terms (training, policy changes, apology).

These strategies can possibly unlock stalled negotiations.

Conclusion

In the end, it’s the same claim, just presented differently. It is incumbent on all practitioners to be aware of the audience to maximize productiveness at mediation. A few tweaks can be the difference between success versus failure. To this day, I would have still liked to hear the openings.