This article is republished with the permission of the CPR Institute for Dispute Resolution.
You have now paid $1000 for the privilege of participating in a mediation of a catastrophic injury case. You have your client worked up over the prospect of settling the case, and you have the right mediator to do it for you. When you sit down for the joint session, you notice that the person attending from the insurance company is not the same person you spoke to before suit was filed. In fact, the person across the table looks like he is right out of adjuster college. You are mildly concerned but figure that they wouldn’t be at the table unless they planned to settle, and decide to go forward with the thought that you might discuss this with the mediator.
As you get into the session, the mediator asks you how much you would like to demand. Recognizing that you are here to settle, you now put a number on the table which is reasonable, expecting a similar response from the insurer. A few minutes later the mediator comes back and starts talking to you about everything under the sun except the number you put on the table. You begin to worry that the adjuster might not have the ability to make a decision. You then ask the mediator what the defense is willing to offer. The mediator deflects the question, saying something about the other side still analyzing the case before they make an offer.
It then hits you like a lightening bolt. The adjuster doesn’t have authority to settle. You have been duped. You confront the mediator, who now looks like a pawn of the insurance company, and s/he confirms your suspicions: the adjuster doesn’t have, or at least claims not to have, full authority to settle.
Why does this happen and what can you do to mange this dynamic in order to reach a fair settlement?
RECOGNIZE THE TACTIC
First off, you need to recognize that lack of authority is not an accidental approach to settling cases. It is a well accepted and effective negotiation tactic. Whether consciously or not, the negotiator is using an age old maneuver that forces you to move closer to the opponent’s position. The reason some negotiators don’t have authority is that many sophisticated companies understand the financial value in institutionalizing this maneuver within claims departments. Tactics are intended to affect an opponent psychologically, causing an opponent to lose confidence in himself so that he will eventually settle for less than he otherwise would. In short, it is a strategic move that can and is used by some companies to improve their bargaining position without having to train their negotiators in any complex negotiation theory.
This tactic can take several forms. One is that the adjuster simply does not have the authority to offer any amount without first running it by a supervisor. Another is that the adjuster is given limited authority, and can offer what might be perceived as a fairly low figure.
Realizing that lack of authority is one of the most popular and successful gambits used by parties in a negotiation is the first step in overcoming the move. At its core it is a “trick” designed to take advantage of the fact that one side assumes its counterpart is acting in good faith. Other tricks you might recognize which fall into a similar category of claiming lack of authority include: making an extreme opening offer; withholding concessions and information; stretching the facts; and playing good guy/bad guy.
Having recognized the tactic, a common response from counsel is something like: “This is going to be a waste of time. I’m out of here..” After some gentle nudging by the mediator, they decide to stay a little while longer to see what happens, which is a good thing. Understanding the reason this tactic is used will help you overcome it.
DEFENDANT’S POINT OF VIEW
Besides the fact that this tactic works to impact the plaintiff’s expectations, it is a simple tool for taking the temperature of opposing counsel to learn how firm they are in their position. This is important to the defendant because if you appear anxious to achieve a quick settlement, defense counsel will recognize that you will likely accept less money rather than waiting for the negotiator to take your demand for more money to a supervisor with higher authority. The real question to ask yourself is whether you are so hungry that you need to take the bait and forego the back and forth negotiation process in order to guarantee a settlement that day.
If you go through the negotiation process and don’t take the bait, the mediator can then diagnose the situation and determine whether the defense will consider asking a supervisor or claims committee to reevaluate their negotiating position, and if appropriate, give the negotiator more settlement authority, i.e. more dollars. If the mediator senses an opportunity for further settlement authority, you’ve just won the first round of negotiations. If the mediator firmly tells you that there will be no more money on the case, then you have a clear decision to make.
The reality is that sometimes the mediation process is the first time the negotiators for the defense have actually looked at the file with an eye toward settlement. Realizing that others might be viewing their work after a deal is cut, they cautiously put a conservative amount of money on the case, while intentionally holding something back.
OVERCOMING THE TACTIC
When you’re working with a resourceful mediator who is trained in spotting negotiation tactics, you can overcome them quite easily by considering three different approaches, depending on your instincts and advice from the mediator. 1) Minimize its significance; 2) Use your own tactics; 3) Merits only. In short, MUM‘s the word.
1. Minimize Its Significance
Resist the temptation to reinforce the belief that the lack of authority has meaning to you. Do this by not reacting whatsoever to the tactic. This might cause your adversary to become vulnerable by letting on what they are willing to recommend to their principal to settle. This could be to your advantage in that their idea of settlement sometimes is higher than what your expectations are. For example, in a catastrophic injury case where the value of the claim exceeds six figures, oftentimes the adjuster has to run any recommended settlement up the flagpole before authority is granted. That doesn’t mean the adjuster won’t be your advocate for a settlement in the range that the case is worth. A skillful mediator can assist you in having an academic conversation with the adjuster that allows you to give informal messages about what amount you would recommend to your client if the adjuster made appropriate recommendations. At the same time, you learn a great deal from the adjuster as s/he tells the mediator what s/he thinks the claims committee might accept.
2. Use Your Own Tactics
An aggressive and often unsuccessful approach is to fight fire with fire. Some lawyers, upon hearing that the adjuster doesn’t have appropriate authority, will storm out of the mediation session in order to send a message to the other side. This generally results in challenging the relationship with the adjuster such that they might lose interest in your case and decide not to push it along at this time. Consider the fact that the adjuster might have 150-200 other cases in his or her cabinet, some of which can be settled. It’s dangerous to go in this direction, but a common theme among plaintiff lawyers who are offended by tactics.
Another approach is to try and reverse the authority. If your client is present, simply let the adjuster know that you can’t make any decisions without the client’s spouse, and since the spouse is not present, you can’t negotiate. Unfortunately, you might get tangled in a web of deception here which compromises your conscience and ability to sleep at night. Nevertheless, some lawyers prefer this competitive approach because it puts the adjuster on the defensive.
Finally, consider putting time pressures on the adjuster. If the other side knows that you cannot stay for the entire session, they are more likely to allow the mediator to float numbers and try and get both sides to commit to ranges that will ultimately settle the case.
3. Negotiate On the Merits Only
The most effective response to overcoming the tactic of lack of authority is simply to point it out and have the mediator let the defendant know that you would like to negotiate on the merits of the case only, without consideration for tactics. You then have made the lack of authority a specific issue in the negotiation so that you can discuss how you will negotiate the case in view of this problem. It forces the defense to take an even higher moral ground than they normally would because they will be bending over backward to prove to you that the lack of negotiating authority is really not a tactic after all. You will improve the relationship with the defense and begin negotiating on the merits after you have decided how to handle the negotiating authority issue.
A good example of this occurred in a bad faith case where the parties were over a million dollars apart during the first session of the mediation. It was obvious that the defense had no authority to settle. Nevertheless, the parties agreed to spend the session examining the facts as each side saw them, and exploring confidentially potential ranges in which the case could settle “if” the decision makers were present. When the mediator concluded that both sides were in agreement on the general range or value of the case, it was recommended that the parties come back to the bargaining table with the decision maker present. The defense agreed to brief the decision maker before the next session, along with the defense recommendations on value. The next session resulted in the case settling in the seven figures.
REASONS PLAINTIFFS SHOULD GO FORWARD
Having now decided which strategy you are going to use to overcome the tactic of lack of authority, there is rarely a disadvantage to going forward with the mediation, even if it is for the limited purpose of setting the stage for a future session. In so doing, you have allowed the defense a chance to work up their claims file in such a manner that encourages the claims supervisor or claims committee to put the kind of dollars on the table that the case is worth. This is truly an opportunity for the defense to make commitments such as coming back to another session with a reasonable offer or making one over the phone. This opportunity to settle will not likely present itself again in the litigation, except perhaps on the eve of trial after everyone has more invested in the case.
As well, you continue to play the role as strong advocate/trial lawyer in front of your client, while the mediator takes the heat as the settlement advocate who is searching for the exit strategy that fits your objectives. A professional mediator will be available to follow up with both sides, thereby taking the heat off of you and allowing you to keep the conversation going without losing momentum.
Finally, you might even narrow the issues such that the next conversation is strictly about damages. For example, in a slip and fall case where “notice” is always an issue, the discussion might focus on identifying what evidence is available to prove notice, and if the adjuster sees that you are confident in your proof, you might have just passed the main threshold that will loosen up the purse strings for the adjuster to get real authority from a supervisor.
From the standpoint of the mediator, the idea of lack of authority might be a blessing in disguise. For example, if the demand to settle is out of proportion to the true value of the case, it provides the mediator with the chance to float numbers by asking the defendants if they feel they can get authority if the demand were in a practical range. At the same time, the mediator will ask the plaintiff to commit to a more realistic range so that the next session results in a quick discussion on damages and an obvious settlement.
By giving the mediator options to move forward, you can also reverse the tactic by using the mediator to play good cop/bad cop with the defense. In other words, while you are perceived by the adjuster as competitive in your position, the mediator becomes the voice of reason who is perceived by the defense as having the ability to convince you to become more realistic.
The tactic of lack of authority is part of the process of negotiation, and ought to be expected by the shrewd plaintiff’s attorney, and, need I say, embraced at times as simply the next step in the process of getting an agreement. To overcome the tactic, remember, MUM’s the word!
A section of my state bar association recently sent a survey to mediators in the state. The section was eliciting statements containing a summary of each mediator’s philosophy of mediation,...By Joshua F. King