Settlement of litigation cases prior to trial often requires resolving competing claims for insurance coverage and indemnification between some or all of the parties. Fundamentally, determining who has to pay to settle a suit can be as complex, if not more so, than the underlying dispute. Determining how the issues of risk shifting are going to be handled when setting up mediation is therefore critical to ensuring that such ADR efforts are productive endeavors. Although there is no singular method or formula, there are three general approaches: Resolving prior to mediation; resolving at the time of mediation; and resolving the underlying case contingent on a post-mediation determination of insurance/indemnity obligations. This article discusses some common considerations to make mediation of cases with such concerns most effective.
Pre-Mediation Resolution
Resolution of coverage and indemnity at an early stage would obviously be ideal. Defining who is obliged to pay and what resources they may have to fund settlement (i.e., insurance limits and assets), often shapes a negotiation as much as the issues of liability and damages. However, if the coverage or indemnity dispute centers on the duty to pay, then settling without addressing the underlying case is often not possible.
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