The Psychology in Mediating a Personal Lines Insurance Dispute
By Amy Stewart Law
Mediation is the most often used method of alternative dispute resolution. Courts order mediation in almost every case as a means of early resolution, which unquestionably benefits the judicial dockets, but when conducted appropriately, can be an effective tool in resolving even the most complex disputes. Given its popularity and success, many professionals make mediation their sole practice, schooling themselves in the art of negotiation and conflict resolution.
However, not every mediation requires the same technique. For example, a coverage dispute between an insured and an insurance company is most effective when the mediator masters the complexities of insurance law balanced with consideration for the emotional conflict experienced by the insured. The skilled mediator in the insurance dispute must validate and acknowledge the emotional aspects of the insured’s loss while at the same time, use the law to assist the insured toward concessions necessary for settlement. At the same time, it is often necessary to keep the insurance representative aware of the affect the loss and resulting coverage dispute has had on the insured.
The scenario is typical. An insured purchases a personal insurance policy, usually required by law (i.e., auto liability insurance) or a mortgage company (i.e., homeowner insurance). The insured faithfully pays the full premium, month after month, year after year. Then there is a loss – a hail storm damages the roof of the insured home, an automobile accident damages the car or even worse, causes bodily injury. The insured makes a claim under the insurance policy. The insurance company denies the claim based upon the specific terms of the policy. At that point the insured is left with the trauma and expense of the loss, as well as the anger, fear and confusion caused by the declination of coverage.
The mediator in this scenario is faced with two seemingly opposed dynamics – the insured’s emotional plight and the insurance company’s coverage defense, which presumably is based upon terms of the contract subject to the nuances of insurance law. The insured feels cheated and maybe even violated by the rejection of coverage – in the insured’s mind something for which he paid a premium has been stolen – theft has occurred. He is indignant, and demands justice. He is confused – how could he pay a full premium and get nothing? Often, the insured is blindsided by the declination of coverage, never expecting that he will be required to carry the entire burden of a loss that should be insured. And then there is the worry and fretting that sets in – where will the money come from to remedy this loss?
To be effective, the mediator must acknowledge the insured’s emotional considerations. This is mediation 101, to validate and respect the insured by allowing him to express his feelings, without which there will be no movement towards settlement. Then, armed with experiential knowledge of the law, the mediator can educate the insured about the basis for the insurance company’s denial of coverage. However right or wrong the insurance company’s position may be, a skilled mediator will help the insured understand the complexities of the policy terms and the applicable law. In this way, the mediator uses knowledge to help the insured see the dispute from a less emotional perspective. This in no way invalidates the emotional aspect of the loss but can bring clarity that will likely reduce the sting of injustice. It is human nature to want to blame someone or something for injustice. The mediator, if knowledgeable, may use the law as the source of blame.
By balancing the insured’s emotional considerations with the intellectual aspects of the dispute, the mediator taps into that realm of consciousness where the insured will allow himself to concede to some extent, creating movement in the mediation process.
On the other hand, a skilled mediator will use the insured’s emotional status to assist the insurance representative to consider the human aspects of the dispute. The same dynamic occurs. The mediator lessens the focus on the basis for the declination and brings the more personal considerations to light, which causes the same psychological reaction from the adjuster. By acknowledging the insured’s emotional plight caused by the loss and the coverage dispute, the representative is given freedom to make concessions, which again creates movement in the process.
While this scenario may seem elementary and fundamental to successful mediations, it is most effective when the mediator has an experiential knowledge of the complexities of insurance law. It is unlikely that the mediator will educate the insured sufficiently about the ins and outs of insurance when the mediator lacks that specific knowledge and experience. As the great philosopher Plato once said, “Human behavior flows from three main sources: desire, emotion, and knowledge.” The art of balancing emotion and understanding and desire is a necessity in mediating the personal lines insurance dispute.