Mediation Minute

Mediation Malpractice and Other Oddities

February 3, 2023

I had a thought-provoking conversation with a marketing representative of a carrier who writes lawyer’s malpractice insurance. We were pondering the notion of malpractice at mediation. Is there such a thing? Yes, and it is more common and more subtle than you might think.

The most obvious case of malpractice is when the mediator or the lawyer fails to convey an offer to the client. Anecdotally, this is described to occur where the lawyer is outside of the client’s earshot and the lawyer finds the offer insulting and simply ignores it.

“I am not going to pass that insulting offer on to my client,” says the attorney.

As the mediator, I make sure the lawyer understands why this cannot happen and why the client learns of the offer – eventually.

Notice to carrier

Another disturbing situation is created when the defendant’s counsel has not placed the liability carrier on notice of the claim and proceeds to mediation without the involvement of the insurer/carrier.

This is potentially ruinous for both sides. Not only has the client been paying for a defense that might have been paid for by the carrier, but if you make a settlement of what would have been a covered claim, there is no way to compel the carrier to pay for it later. You will have made a “voluntary payment” or breached the terms of the cooperation clause and “assumed liability” provisions in the insurance policy, thus excusing the carrier from paying the settlement.

Some fault here lies with the plaintiff’s attorney for not investigating coverage. If the claim is tendered late to the carrier and then accepted, the insured is not entitled to reimbursement of expended legal fees. That debt is reimbursable under the language of most standard liability policies. I have seen tens of thousands of dollars expended by defendants who learn too late that the carrier might have afforded a defense from the outset.

The other forms of malpractice are more subtle because they do not necessarily prejudice the potential result or client’s rights, but instead only harm the process. Examples would be failing to bring persons with needed authority, failing to educate the mediator or the other side through position statements, or presenting new damage claims for the first time at mediation.

I also see one or both sides underestimating the costs of trial going forward, the cost of experts, or the time until trial. In these situations, you are not scuttling all chances of settlement, but you create misapprehensions or beliefs in the client which, when relied upon, may lead to impasse.

Optimism bias

Sometimes I see a lawyer or client articulate probabilities with a degree of confidence not supported by data. This is optimism bias and it is pervasive.

One form of optimism bias flows from believing and telling the client the case is better than it is, and the second form is believing you are a better forecaster than you really are.

With fewer trials now, there is less data. We are living in increasingly diverse communities where group decision-making involves cross-cultural communication among diverse jurors. That makes forecasting the collective decisions ridiculously hard.

On those rare occasions when I see lawyers sailing near some rocky shore of mediation malpractice, I speak with them privately to sort things out. Usually, we can get to some higher ground from which we can better see the landscape of the conflict with the mind’s eye of reason.