04/08/2022
Here's a recent article written for the Ontario Bar Association!
MANAGING DIFFERENT INSURERS' INTERESTS AT GLOBAL MEDIATION
~by Joseph J. Sullivan
In a personal injury case, it is not uncommon to have several insurers responding to the same accident under quite different exposures. Accordingly, management of a mediation must be carefully tailored to these varying interests.
Let’s take a typical motor vehicle accident injury in which a plaintiff has a tort action against an at-fault motorist, a disputed accident benefits claim (AB), and a long term disability lawsuit (LTD). The tort and LTD claims are in the Superior Court and the AB claims’ disputes must be adjudicated at the Licence Appeal Tribunal (LAT).
A global mediation will take place with the tort, AB and LTD insurers in attendance.
These insurers each approach mediation with different interests that legal counsel and mediators must appreciate.
TORT INSURERS
First, tort insurers. These claims are almost always heard by civil juries, but perhaps increasingly, judge alone in the Superior Court. Such trials are expensive and can be unpredictable depending on many factors, chief of which may be the likeability and credibility of the plaintiff. Tort insurers approach mediation with the goal of settling all claims on a full and final basis once and for all. This avoids not only the uncertainty of a trial result but also delay and the extraordinary costs associated trial. Settlement also allows the insurer to close an open pending file and shut down its reserves.
The tort insurer’s interests might be the easiest to understand. In many ways it’s a “one off” case for both sides.
ACCIDENT BENEFITS INSURERS
Next, let’s consider the auto accident benefits’ claim. More often than not, when these cases reach private mediation there are specific benefit denials in dispute and pending at the LAT such as a denial of income replacement benefits, some med/rehab benefits’ denials and perhaps a catastrophic designation. The LAT will adjudicate those claims but it is important to remember there are other open benefit categories such as attendant care or the balance of med/rehab limits.
Almost every time, the AB insurer is looking for a full and final of all past, present and future claims under the policy for that accident. Sometimes the plaintiff’s interest to settle all claims on a full and final basis may dwindle if the insurer’s offer at mediation is paltry. This possibility of leaving some AB policy coverages still open post mediation makes these negotiations quite different from the tort “one and done” type deal making.
AB insurers almost always demand that any full and final settlement includes all past claims whether submitted, approved or incurred to date. In fact, there is a box to be checked on the lengthy Settlement Disclosure Notice indicating whether the settlement includes all past claims or whether there are other past approved but not yet paid claims. For example, all AB claims for med rehab are submitted by a health care provider to a centralized HCAI system (Health Care for Auto Insurance, the electronic system for the transmission of claims and medical forms between insurers and health care facilities in Ontario).
Often times at mediation a plaintiff may have received approved treatment at a medical facility but the invoice has not been paid yet as it winds its way through the HCAI system.
The AB insurer will always want clarity on the issue because sometimes such invoices can be large and the claims’ adjuster may have settlement authority for a fixed sum which includes all invoices for past treatments. If the invoice has been submitted to HCAI, that means the AB insurer had approved it and the AB insurer is obligated to pay it unless some other arrangement is made at mediation .
Legal counsel and mediators must be very precise when passing AB offers at mediation: Does the offer include all “past and approved” or will the insurer pay invoices in addition to the agreed upon cash out of the AB claim?
In my experience, AB insurers are more likely to pay invoices in addition to the cash out settlement figure in catastrophic injury claims as these claimants will be receiving lots of ongoing necessary treatment and the burden of paying the past but not invoiced claims can be large.
AB insurers and legal counsel should come to mediation fully aware of what clinic expenses might be outstanding or winding their way through HCAI. AB adjusters can check with the click of a mouse what’s sitting in HCAI, if anything, but some clinics may not bill regularly and this may be a late breaking barrier to the insurer’s interest in a full and final cash out of all claims with no surprises.
LONG-TERM DISABILITY INSURERS
Lastly, LTD claims are unique. Most often, these LTD insurers are in litigation at a global mediation after a denial of LTD benefits. LTD insurers most frequently seek a full and final of the past claims as well a release of all future claims. Such lawsuits regularly include extracontractual claims for mental distress, and/or aggravated or punitive damages. The LTD insurer will want a release of these claims handling disputes as well. The LTD insurer may suggest mediation pre-discovery to avoid exposing its LTD adjusters to oral discovery and avoid the delivery of large portions of its claims file, which may contain questionable decision-making in the denial.
The LTD insurer may have other coverages open in its policy such as medical, dental or even life insurance benefits in addition to the long term disability benefits. LTD insurers sometimes will ask for a surrender of the policy as part of the negotiations but this is not that common in my experience.
Many LTD claims arise from group policies issued by the LTD insurer to a large employer. During the mediation negotiations, it is commonplace to see an LTD insurer demand a term of settlement that the plaintiff not make any other LTD claims for a fixed period of time, say five years, against it. The LTD insurer’s concern here is that the plaintiff will attempt a return to work, fail and make another LTD claim for essentially the same ailment (like chronic pain syndrome) that was the subject matter of the case settled at mediation.
LTD insurers often have their own forms of Full and Final Releases that they expect to be signed in the event of settlement. As mediator, I enquire about those early in the mediation to see if there are any special terms I ought to draw to the attention of the plaintiff’s counsel. One easy example: Will the settlement be taxable? Some LTD benefits are taxable and some are not. If taxable, can the LTD insurer “spread out” the settlement over several years of the past claims to ease the tax impact? Usually not a problem.
Another example: LTD insurers almost always have a strong interest in obtaining a confidentiality term of the settlement. If this is the case, I like, as mediator, to raise this early in the negotiations so there are no 4:30 p.m. surprises.
Also, bear in mind the LTD insurer has the option of simply putting the plaintiff back on claim by paying arrears and resuming payment of the LTD benefits. When that’s a possible outcome, it is useful for the mediator to understand that interest.
LTD insurers have recognizable interests at global mediation that differ, quite notably in some instances, from the other insurers at global mediation in these cases.
CONCLUSION
In summary, mediators, legal counsel and insurers should be aware of the varying interests of each insurer depending upon their position in the dispute even though, at first blush, it may seem all three insurers are responding similarly to claims from the same claimant for similar injuries emanating from the same accident.
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ABOUT THE AUTHOR
Joseph operates Sullivan Mediations in Hamilton, Ontario www.sullivanmediations.com and mediates across Ontario. After a peer review, he was invited into the Canadian Academy of Distinguished Neutrals: https://ontariomediators.org/joseph-sullivan. He also is a Qualified Arbitrator as recognized by the ADR Institute of Canada.
Any article or other information or content expressed or made available in this Section is that of the respective author(s) and not of the OBA.
© Copyright 2022 The Ontario Bar Association
I have been trusted by major insurers and plaintiffs for over thirty years to handle their litigation at FSCO, the Superior Court, and the Court of Appeal. I am a Certified Specialist in Civil Litigation by the Law Society of Upper Canada.
