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What Is Mediation?

When you have a dispute with a person or company, it can be resolved either in court or with something called mediation. You’ll see the word “mediation” included in various contracts or insurance policies, but what exactly is it? 

Mediation is a weird area of the law that exists somewhere between a decision from a judge and a negotiation between the parties involved. It is almost like couples therapy for legal issues. Not all mediation looks the same, but there are two types: court-ordered and voluntary.

Mediation Basics

The basics of mediation look the same regardless of the type: Both parties in a legal dispute take part in negotiation/settlement discussions with an unbiased third-party present. This third party is typically a former judge or experienced attorney with an understanding of the law at issue. 

Mediation is a preferred method to resolve legal disputes because it is a much faster and less expensive process than a civil trial. With mediation, both parties can come to an agreement that results in both parties getting a decent outcome. 

In contrast, a civil trial costs large amounts of money in attorneys’ fees and can take years to get on the trial docket, plus the outcome is more uncertain. After a civil trial, the plaintiff will deduct attorneys’ fees from whatever amount they were awarded. This can significantly cut into the finances, and will often leave plaintiffs with less money than if they would have settled the case early on when expenses were low. Similarly, if the plaintiff doesn’t win, the defendant may counter sue for attorneys’ fees. This not only drags the case on longer, but also could result in major financial repercussions for the losing party of that lawsuit. 

Unlike with a trial, no party is forced into an arrangement they disagree with during a mediation. The mediator will help facilitate negotiations and may aid in tempering expectations, but nothing the mediator says is binding upon either of the parties. This is not the same case with a trial judge, and many choose mediation to avoid the risk of an unfavorable outcome in a civil trial.

Mediation Is Confidential

Mediation is confidential! The parties are in separate rooms with their attorneys, maintaining attorney-client privilege and confidentiality. During mediation, there are points where both sides must come together in the same room and speak in front of the mediator. When that happens, the other side is allowed to take notes. However, the mediator collects those notes at the end of the mediation—regardless of whether a settlement was reached—and the parties cannot keep them. This helps preserve confidentiality around the conversation between parties.

Voluntary Mediation

Voluntary mediation follows the guidelines previously laid out, and is more common. This is simply a mediation that both parties agree to take part in. This means no outside source, such as the court or a contract, is requiring anyone’s participation. If both parties enter into a voluntary mediation, they mutually agree on who the mediator should be and when it should take place.

Court-Ordered Mediation

Even if the involved parties do not want to enter into mediation, a court can order it to occur. This typically happens in one of two ways. If a court believes mediation would be beneficial based on the case details, it can order the parties to take part without any motion. Or, if one of the parties files a motion requesting mediation and the other party objects, the court can side with the requesting party’s motion and order mediation to take place.

Workers Compensation Mediation

Many workers compensation claims go to mediation. In Oklahoma, mediation in workers compensation is governed by specific statutes with guidelines and rules. Under these provisions, all workers' compensation issues may be mediated, except for disputes related to medical care under a certified workplace medical plan or claims against the Multiple Injury Trust Fund. Like with all other forms of mediation, this law expressly states that mediation may be by mutual agreement of the parties or pursuant to court order. Additionally, it verifies that recommendations of a mediator are not binding unless the parties enter into a settlement agreement.

When Mediation Is Over

Once mediation is over and a settlement is reached, the parties enter into a mediation settlement. This mediation settlement is signed by all parties, and is enforceable by law. The mediation settlement is typically drafted by the mediator, removing any bias that might occur if either involved party were to draft the settlement themselves. This prevents anything from being included or excluded that was not mutually agreed to in the negotiations.

How does mediation work with your insurance?

There are a few ways your insurance and a legal dispute can interact. The first is that some insurance policies have a provision that requires you mediate a claim before taking the case to trial in order to ensure your insurance covers the cost of legal fees. Similarly, your contract with a party outside of your insurance policy may have the same provision. You need to ensure that you comply with those contractual requirements in order to take advantage of the legal representation your insurance covers. You also need to know whether your policy covers legal fees, as well as if there is a cap on your legal fees. Your insurance is designed to protect you from devastating financial issues, including lawsuits, but there may be certain requirements you need to fulfill in order to take advantage of your policy’s coverages.

The Bottom Line

Mediation can be an excellent method to resolve disputes without the cost and time of a jury trial. However, you need to know whether your insurance policy covers—or even requires—mediation. If you are facing a lawsuit, it’s important to consult with your insurance agent and your attorney to make sure everyone is on the same page. However, it’s best to get ahead of issues and make sure you are adequately covered before a lawsuit arises. If you believe your business is exposed to a serious risk, give us a call and one of our experts will make sure you are adequately covered in the event of an emergency.

Austin Landes, CIC

About The Author: Austin Landes, CIC

Austin is an experienced Commercial Risk Advisor specializing in property & casualty risk management for religious institutions, real estate, construction, and manufacturing.

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