Litigation isn’t the only option for resolving a tricky personal injury, workers’ compensation, or insurance claim. When an agreeable settlement hasn’t been reached and a resolution doesn’t seem to be on the horizon, many claimants believe that their only available option is a lawyer. However, this is not true – mediation can be a more time and cost effective process than litigation in many scenarios, depending on the situation and type of claim. 

What is mediation? Mediation is a negotiation practice that is useful when resolving claims. In mediation, parties use a neutral third party to facilitate communication between them to help find an amicable solution. While this doesn’t mean the parties always avoid going to court, that is usually the goal. Lawsuits are usually filed when one party feels wronged in the insurance payout or case: for example, all settlements have been denied. This becomes a zero-sum game, where one party wins and the other loses – often resulting in a very costly outcome. 

How does mediation work for insurance claims? 

Although insurance companies and the insured are technically on the same side in a case involving a third party, there are often disagreements between them on the payment amount or other terms. Mediation can be particularly helpful in these situations, since the mediator is not intended to force a decision or to fight for a certain amount. Instead, the mediator is meant to be a neutral third party and provide some insight into the case. 

Mediation is non-binding: unlike a court decision, neither party is required to accept the proposed settlement. The mediator’s role is not to make either the insurer or the insured agree to the amount. The mediator simply helps to facilitate an agreement, in the hopes that one can be reached. 

When considering mediation, both parties will consult with a lawyer. The lawyer will ask why you’re considering mediation, as well as get the facts on your case. The lawyer will also want to know how you think your insurance company will present their case, and how much you’re hoping to receive.

Mediation will take place in a lawyer’s office, with your lawyer and your insurance adjuster’s lawyer present. The mediation process can vary in length between a few hours to a few days, where each party will present their case, and all related evidence, to the third-party mediator. Such a mediator will have a solid grasp on insurance law as it relates to your claim, and likely have some idea, once the details are presented, of how much the value should be for the case. 

Offers and counter offers can be made. If both parties can agree on the payout, a binding agreement will be put in place, and the claim will be paid. If not, you’re still free to take the claim to court. 

Why should claimants and insurance companies choose mediation? 

In practice, choosing mediation over litigation often results in a process that is faster and more cost-effective than a litigated claim. Court cases can take years to resolve, since both parties will need to take part in a discovery process, produce additional documents, or hire expert witnesses to support the claim – in addition to the hours spent waiting for the courtroom to set, schedule, and make the decision. 

These hours come in addition to the funds spent on attorney fees while in the process of litigating the claim. While mediation still involves a lawyer, it is usually a far less time consuming process than litigation. Litigation can also be stressful on the claimant, especially if they and their family just faced a life-changing injury. The cost of litigating an insurance case can also give the insurer more reason to aggressively pursue a win. 

Mediation is a cost-effective option for many insurance claims

Unlike other types of arbitration, the insurer most likely did not cause the insured’s accident or play a role in their injury. Although adjusters might be aggressive, it’s usually not because they want to hurt the insured or don’t feel for the insured’s situation. Likewise, the insured, although they may be frustrated or angry with the insurance company, is probably not personally offended by its handling of the case. 

Although insurance claims can be adversarial, there are probably fewer hard feelings than something like a divorce. This gives insurance claims some degree of neutrality, which often makes mediation an ideal solution for the case.