More On ‘Bad Faith’ Mediation In Texas

From the Disputing Blog of Karl Bayer, Victoria VanBuren, and Holly Hayes.

In the Winter edition of the Texas Mediator, Susan Schultz calls for the “mediation community to engage in communal reflection” regarding the passage of the bad faith section of Texas HB 2256 which requires the mediator to report “bad faith mediation”. Overall, the bill provides a procedure for mediation of out-of-network health benefit claim disputes. (read more here)

In her article, ‘Bad Faith Mediation: Bad News for Mediators’, Ms. Schultz states, “while the new law may be a positive step toward the use of dispute resolution processes generally, it raises particular concerns with its structure of the mediation process” raising the following questions for mediators:

“What are the fundamental values of mediation? How do we safeguard these values? What have we done to educate the public/what more could we do? How do we educate legislators and staff members? What are our resources? Are we using them efficiently?”

As posted on Disputing (read the post here), Texas mediators operate under the Alternate Dispute Resolution Procedures (Chapter 154) of the Civil Practice & Remedies Code which provides in Section 154.053(c) that “[u]nless the parties agree otherwise, all matters, including the conduct and demeanor of the parties and their counsel during the settlement process, are confidential and may never be disclosed to anyone, including the appointing court.” Reporting bad faith mediation is in direct conflict with the Code under which mediators operate in Texas.

Ms. Schultz refers also to the subchapter of the Texas ADR Procedures Act devoted to “impartial third parties”. She asks, “How does the mediator build trust among the parties and maintain impartiality when the mediator is also tasked with reporting bad faith based on each party’s conduct? Making the mediator the watchdog for bad faith is not consistent with impartiality.”

What are the next steps in the implementation of HB 2256?

The Texas Department of Insurance (TDI) states in its ‘Implementation Plan for the 81st Legislative Session’, it is required to “adopt rules re: complaint form and processing”. TDI held a public meeting on September 9, 2009, regarding rule making for the bill and is working on a draft rule. On its website, TDI provides information regarding ‘Mediation for Out-of-Network Hospital-based Health Care Provider Claims’ and lists eligibility criteria to request mediation. (read more here)

The Chief Administrative Law Judge of the State Office of Administrative Hearings (SOAH) is charged with appointing a mediator from a list of qualified mediators maintained by SOAH. Mediators are randomly assigned to cases unless the parties select and agree upon another mediator. (read more here)

In the long term, concern with the bad faith section of HB 2256 is that without appropriate feedback from the ADR community, this section may be copied into other bills and may become standard procedure. Ms. Schultz asks, “Questions abound: What should we do?” We welcome your thoughts on the question of the long-term impact of the bad faith section of HB 2256, ways to safeguard the fundamental values of mediation and how to educate the public and legislators/staff members about those values.


Holly Hayes

Holly Hayes Bovio received a Masters in Health Administration (MHA) from Duke University and her undergraduate degree from Southern Methodist University. She holds a certificate in mediation from Texas State.  Holly brings a strong hospital operations background to healthcare mediations including a focus on clinical quality.  Holly managed her own consulting… MORE >

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