Up the resolution

Engaging mediators to help resolve personal injury disputes has met with resistance, primarily due to allegations of disproportionate cost. But its proponents continue to claim such third-party intervention can speedily and fairly conclude cases to the benefit of insurers, lawyers and clients alike. Edward Murray reports

Never go to bed on an argument, says the old adage. Unfortunately the speed at which the British justice system moves makes this impossible and despite legislative changes designed to resolve cases more rapidly, alternative dispute resolution is still a relatively uncommon course of action in personal injury claims.

The Personal Injury Pre-Action Protocol has been in existence for the best part of a decade, encouraging the use of ADR since 1999. To strengthen this 'encouragement', amendments came into force in 2006 making specific reference to mediation. This states that judges may require evidence to prove such alternatives to trial had been actively considered and compels them to have regard to this when determining costs. In effect, parties can be penalised for not trying to mediate.

Nevertheless, ADR has yet to become the standard that insurers operate when it comes to PI claims. But how much of the blame can justifiably be laid at the feet of insurers and what part do claimant solicitors and the courts have to play?

If any commercial sector should understand the benefits of settling claims quickly, it is insurers - and for the most part this seems to be a lesson learned. Peter Gallagher, claims director at Highway Insurance, comments: "As a sector I believe the insurance industry does try to resolve cases as quickly as possible as we understand that the longer they go on, the more expensive they become."

Benefits of resolution

Peter Ashdown-Barr, chief executive officer of Inter Resolve, is convinced insurers are not the ones erecting barriers to mediation - even if he is a little perplexed by the resistance of other parties. "Insurers are waking up to the obvious benefits for them and for claimants, whereas lawyers have been slower," he says. "This is odd when most injury claims are in the motor sector and most lawyers' fees are fixed under the predictable cost regime scale. Therefore, the earlier lawyers can settle claims without unnecessary delays and time input, the more profitable it is for them and the better it is for their clients."

As for insurers, there is more at stake than simply keeping costs down; there is also professional pride to consider. If insurers do not know how best to handle and settle claims, particularly straightforward ones, who does? Mike Noonan, head of strategic claims management at QBE, makes the following point: "It would almost be a sign of failure if we couldn't use our technical and commercial skills to resolve cases that were really only about the settlement."

It is these two points that lead us closer to understanding why the take of mediation in PI claims remains slow. There is no real argument over whether mediation works, but there is debate as to where and when it works best and whether turning to it immediately as the solution is always the best course of action.

Introducing a third party to proceedings inevitably brings added cost, so the nature and size of the dispute will determine if that cost is an economic one to bear. According to Terry Renouf, partner at Berrymans Lace Mawer: "More than 95% of the standard PI cases go through a process that will achieve a settlement. So we are supporters of mediation but at the right place and the right time."

Others believe, however, the 'adding an extra layer of cost' and 'extending case length' argument is an over-used excuse against mediation; and that there are too many instances where it would genuinely help if only there was more understanding of the role it could play.

Tony Allen, director of the Centre for Effective Dispute Resolution, claims the reasons behind the reluctance are threefold. First, he believes there is an inability in the insurance sector to introduce new policy in this area because so many firms are prey to continual commercial reorganisation and lack the consistency of approach required.

Second, he feels there is a lack of knowledge in the legal sector as to the role mediation could play and comments: "Outside of the big firms, there is undoubtedly a lot of ignorance - if not fear and resistance - to doing something out of the ordinary."

Finally, he rounds on the courts, saying there has been a "sloppy and imprecise enforcement of the protocols" - despite the power given to them to put a greater focus of mediation.

But even if the argument over disproportionate cost is well-founded in some circumstances, there are now cheaper options available to both sides to undermine such objections. Mr Ashdown-Barr explains that because the vast majority of PI claims are small - valued at under £2000 - his firm decided to develop a telephone mediation scheme to specifically cater for these claims.

With the scheme available "for as little as £175 per party", Mr Ashdown-Barr believes the cost problem is countered. "It has also resulted in insurers offering to pay both sides' mediation fees in many cases, so there is no downside for lawyers and their clients," he adds. "As a result we have seen a rapid rise in the use of our injury claims mediation scheme over the last year. And I believe it is only these types of commercial approaches that will improve the use of mediation. The key is not greater enforcement, it is greater incentive."

Court compliance

Arguably, the courts could also sharpen their focus on its use and this seems likely in the coming months - now that both Sir Anthony Clarke, Master of the Rolls, and Lord Phillips, Lord Chief Justice of England and Wales, have extolled the virtues of mediation in speeches made during the course of this year.

Given his position, it is not surprising Mr Allen is such a staunch supporter of mediation. But others in the industry do not disagree with its potential - they simply have not yet reached a consensus on when and how it can best be deployed.

As an example, rather than immediately engaging a third party to come in and oversee settlement discussions between the parties, QBE has been trying to create an interplay between itself and the claimant to resolve things through what Mr Noonan describes as an "informal mediation process".

Highway also uses a variety of approaches over and above formal mediation and has established a number of protocols with the legal firms it deals with regularly to try and keep the cost and time of dealing with cases to a minimum.

The challenge in using mediation seems to lie in determining where it is appropriate and then getting past some of the ignorance and fear that exists as to how it will actually work.

Where insurers, solicitors and claimants can engage in a way that allows each side to put their case forward and discuss their concerns, most are happy to avoid the litigation process.

Neither the legal nor insurance sectors are famed for their speed of action and so perhaps there should be little surprise mediation is taking its time to become established.

However interested parties working towards a 'mediation code' should help. In time, guidance should be produced as to where and when it can be put to best use to help lawyers and insurers hone their activities and work towards a more formalised outcome.

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