Conflict is in the house. The evil fairy surrounded the castle with deadly thorns. The "good" fairy put everyone in the castle to sleep. Will you be the valiant Prince in your own dispute story? Or are you the prize? The beautiful one who would prefer to remain unconscious rather than address the great battle between good and evil represented here? Did you hire a lawyer to resolve your dispute for you? Will he make it to the castle in time? Or will he spend the bulk of his energy erecting more obstacles to prevent your adversary from reaching you. By the time both champions reach the castle, will everyone be too bloodied and broke to rise from your bed and put your house back in order?
It might take me awhile to define the scope of the new blog - meant to address substantive commercial legal ADR issues - and the reduced scope of this blog. In the meantime, I'm likely to refer one to the other on a fairly regular basis.
Best pull quote: “Certainly from a pragmatic viewpoint, it is quite true that in many of the liability insurance cases, the most real dispute is between the injured third party and the insurance company, not between the injured and an oftentimes impecunious insured.” Federal Kemper Ins. Co. v. Rauscher, 807 F.2d 345, 354 (3d Cir. 1986) (quoting 6A J. Moore, Moore’s Federal Practice ¶ 57.19)
Summary courtesy of the Los Angeles County Bar Association and the Metropolitan News-Enterprise
Where insurer brought a declaratory relief action against insured, contending it had no obligation to defend or indemnify against a claim that insured’s employee damaged airline’s airplane because insured failed to give proper notice of the claim, intervening airline had standing to appeal district court’s grant of default judgment in favor of insurer, which court based on default issued against insured for repeatedly failing to appear for deposition. Airline was entitled to defend against action in its own right, and district court should not have entered a default judgment in the action against all defendants based on insured’s failure to appear.
Patrick Deane of Nestlé is senior counsel to the largest food company in the world, and the disputes he runs into involve distributors, retailers, suppliers and consumers in every part of the globe. His ideal mediator combines logic and intuition; a concern for detail; and the knack of an epatheic listener. He noted that commercial disputes — even financial ones — are seldom dry, but instead involve personalities, risk of loss of face, and other human attributes just as much as more personal claims do. The question of subject-matter expertise was of little importance to Deane, compared to these essential qualities in a mediator who must be expert in a process that, at heart, is aimed at cost effectiveness. “A lack of industry expertise has never caused a failure of the mediation process.
Here's my opinion (as if you didn't already know). As Colin Powell says, the most important knowledge to have in international negotiations is the other guy's decision cycle. I imagine the great predictor, the political scientist and Hoover Institute Fellow Bruce Bueno de Mesquitas would say something along the same lines (see TED lecture below). See also the NYT piece, Can Game Theory Predict When Iran Will Get the Bomb?
What is the "other guy's" decision cycle? It is comprised of every interest he must satisfy and every person he is accountable to for the foreseeable (and probable unintended) consequences of that decision. Personal injury attorneys turned mediators are well acquainted with the decision cycles of both Plaintiff and Defense counsel as well as with the interests, needs, and desires of injured Plaintiffs, on the one hand, and insurance adjusters and their supervisors on the other. Employment attorneys turned mediators are also deeply knowledgeable about the decision cycles of counsel on both sides of the table (one usually specializing in employees and the other in employers) as well as with the interests, needs and desires of terminated, demoted, or harassed employees on the one hand and of employers - both large and small - who often feel as if the Plaintiff is little better than a highway robber. Judges turned mediators are better acquainted than anyone else of the decision cycles of juries -- a jury verdict being the alternative to a negotiated resolution.
You knew I'd come to my own "specialty" knowledge. Some of it is industry specific -- insurance and financial institutions, for instance, and the garment, manufacturing, health care, commercial real estate, construction, and technology industries. Though my experience in these fields adds some value to my commercial mediation practice, what I'm most skilled at is knowing the decision cycles of commercial litigators and their business clients. I understand, for instance, the clients' reporting relationships; the metrics against which their performance and that of their corporate superiors are measured; the impact of SEC reporting requirements in "bet the company" litigation; and, the effect settlements in nine or ten figures might have on upcoming plans for mergers or acquisitions.
I can read a financial statement.
At a minimum, I can ask the questions necessary to obtain the knowledge required to ascertain the interests that must be satisfied by both parties to transform the litigation into an opportunity to make a business deal. And I know how to make the commercial clients happy with their attorneys' final resolution of the business problem burdened with the justice issue that brought the case into court in the first instance.
I am also schooled in the "field" of conflict resolution. I understand at depth the cognitive biases -- universal tendencies in the way we think -- that inhibit rational decision making. I know how conflict escalates and, more importantly, how it can be deescalated. I understand the role emotion plays in decision making (particularly the emotion most common among business litigation clients - anger); the gentle (and not so gentle) art of persuasion and, perhaps most importantly, the optimal negotiation strategies and tactics for the business problem at hand.
And, I know in the knuckles of my spine what keeps commercial litigators awake at night, worrying about the next strategic, tactical, legal or extra-legal move to make; how to explain to the client that the case has suddenly gone south; and, how to deliver that bad news to the client in a way he or she can hear it and successfully report it to the GC, the CEO, the Board of Directors or e ven the shareholders.
I know this sounds like a lot of boastful self-promotion (it is). Please don't take my word for it. Anyone charged with finding, retaining and hiring a mediator to assist the parties in resolving a piece of hard-fought, sophisticated, complex commercial litigation would do well to check with his or her peers on any mediator's boastful self-appraisals.
This is what I recall of mediator-hunting, however. I'd send out a list to my colleagues. I'd invariably get back opinions that were all over the board. He/she is great with clients but usually ends up splitting the baby in half. He/she talks too much and listens too little. He/she marginalized the client and made me look bad. He/she charges $15,000 per day and is one of the go-to mediators for this type of case but I was unimpressed, as was the client. This guy/gal can settle anything. Brilliant. Magical.
So what's a beleaguered litigator to do? Ask people you respect both inside and outside your law firm. Ask how the mediator handles the "process dimensions" of the mediation. Does he/she simply carry numbers and rationales back and forth between separate caucus rooms. Can she give bad news to both sides. Can he go beyond positional, zero-sum bargaining and into interest-based negotiated resolutions? Is the client happy with the result and with the process? After you've done this basic research, call the mediator yourself and ask him/her about the way in which she/he might handle the mediation of the particular matter you need to have resolved. You should not only have the best information possible in making your choice, you should get a fair amount of terrific free advice and external brain-storming along the way.
I really just meant to cite the Business Conflict Blog and get back to revising The ABC's of Conflict Resolution - my second draft due on October 30.
So what's my answer to the question whether the mediator should have industry knowledge? That answer lies, as most legal problems do, in the gray zone. Industry knowledge helps. But every commercial litigator knows that we can learn any industry if we have a basic understanding of how commercial enterprises work. That's what I know -- commercial litigation -- and it is the reason I don't mediate personal injury or employment disputes with anyone below the rank of senior executive. I don't know the right questions to ask and I don't know -- at depth -- the parties' or counsel's decision cycles.
My own personal 200-year present spans the life of my maternal grandparents who were nine years old in 1909, and that of my step-children’s children, who (assuming they procreate on a reasonable schedule) should be ninety-five'ish in 2109.
My imagined grandchildren,  born sometime between today and 2014, will not be strangers to any of my grandfather’s technologies. Despite the advent of compact fluorescent light bulbs, the early lives of my step-children's children will likely pass under the glow of the same incandescent lights that brightened granddad’s one-room school house. They will be transported to school in cars with internal combustion engines, learn the same alphabet from the same cardboard and paper books (as well as from the "e" variety)  and play many of the same games he did – hop scotch, jump rope and ring-around the rosy.
Change will etch itself into the lives of my grandchildren as surely as it did my own, my parents' and my grandparents'. Hybrids will give way to fully electric (and perhaps hemp-powered) vehicles (effective or defective) and though electricity will continue to be generated by hydroelectric dams, wind farms and nuclear power plants, some new and unimaginable source of power will surely push back the nights of my grand children's children. 
Law, politics, society and culture also exist in the 200-year present of conflict resolution. In my personal 200-year span, the law seems to have changed the most profoundly. Was it the law first and culture later? Or do they weave our future together?
The first U.S. woman lawyer, Myra Bradwell, was admitted to practice a mere ten years before my grandmother was born. Mrs. Bradwell’s legal career was the subject of one of the sorriest U.S. Supreme Court decisions ever handed down, in which the Court opined,
The civil law as well as nature itself, has always recognized a wide difference in the respective spheres and destinies of man and woman. Man is, or should be, woman’s protector and defender. The natural and proper timidity and delicacy which belongs to the female sex evidently unfits it for many of the occupations of civil life. The constitution of the family organization, which is founded in the divine ordinance, as well as in the nature of things, indicates the domestic sphere as that which properly belongs to the domain and functions of womanhood. The harmony, not to say the identity, of interests and views which belong, or should belong, to the family institution is repugnant to the idea for a woman adopting a distinct and independent career from that of her husband … for these reasons I think that the laws of Illinois now complained of are not obnoxious to the charge of any abridging any of the privileges and immunities of cities of the United States.
My grandparents', parents' and step-children's 20th Century was dominated by genocide on a scale and a technological precision unimaginable to our earlier forebears. Mid-century brought with it the threat of nuclear annihilation but also liberated millions of people enslaved by colonialism. We cured polio in my own lifetime with both "dead" and "live" vaccines (neither of them counterfeit) - a singular moment in scientific history during which no one took ownership of the cure and no one tried to stop others from seeking another, a problem Patently O addressed this week in Reverse Payments.
Whether god or satan, heaven or hell, war or peace "won" the twentieth century, the world's greatest peace-making body was created during it -- the United Nations. And here in the U.S., the “living room war,” Viet Nam, coupled with the largest generation of adolescents ever to grace American society, ended the forcible induction of young men into the military. 
With the recent discovery of our earliest ancestor, Ardi, our biological and social lives exist in a 4.4 million year now. Our physical bodies “evolve” in the womb along the same lines as did our species and, once born, we carry with us our earliest organs.  Most critical of these to conflict escalation and avoidance is our “fight-flight” mechanism – the amygdala. And the most pertinent biological agents to promote the collaborative resolution of conflict are our “mirror neurons” which
provide a powerful biological foundation for the evolution of culture . . . absorb[ing] it directly, with each generation teaching the next by social sharing, imitation and observation.
How we’ve manage to survive despite our tendency to misread one another’s actions, intentions and emotions, is often the subject of those who advise us how to choose and move juries -- here -- Anne Reed at Deliberations (explaining why "they" don't see things like "we" do here); and, the Jury Room (explaining why pain hurts more intensely when we believe it's been intentionally inflicted here).
The Most Effective Conflict Resolution Technology is the Oldest
One of our true original gangsters, Al Capone, is reported to have said that “you can get much further with a kind word and a gun than you can with a kind word alone” and one of our greatest Presidents, Theodore Roosevelt said “speak softly and carry a big stick.”
As Robert Wright, author of The Moral Animal explained, had Tit for Tat been tossed into the game with 50 steadfast non-cooperators, there would have been a 49-way tie for first place. But none of the players' programs failed to cooperate in at least some circumstances, leaving Tit for Tat the clear victor. According to Wright, humans, like the programs in Axelrod's competition, are evolutionarily “designed” to cooperate under at least some circumstances. The engine and benefit of cooperation is present in our neurochemistry. When scientists observed the brain activity of volunteers playing the Prisoner’s Dilemma game, for instance, they found that the participants' “reward circuits” were activated and their impulsive "me first" circuits inhibited when they cooperated. Cooperation, retaliation, forgiveness and a return to cooperation. Tit for Tat.
We don't "dis" lawyers here at the Negotiation Blog. We simply remind ourselves that our primary purpose is the promotion of justice, with a stable societal order closely behind. Most people don't understand, for instance, that Shakespeare's famous the first thing we do, let's kill all the lawyerswas not an insult. In King Henry IV, Act IV, Scene II, Shakespeare's sentiment was not his own, but that of a revolutionary who wished to destroy the social order.
The historic "present" of laws and lawyers is in the thousands, not simply the hundreds, of years. Hammurabi (make of his choice for the memorialization of his laws what you will) was the sixth king of Babylon, remembered for creating -- in his own name (and likeness?) - the first written and systematic legal code.
For the wrongful killing of another, for instance, the victim’s kin were paid according to the social status of the deceased party. Thus the ‘man price’ for killing a peasant was 200 shillings and that for a nobleman 1200 shillings. Payments were not, however, tailored to the loss, but fixed according to types of affront, a distinction we continue to make when we punish intentional torts more severely than negligent ones. >
Lawyers, litigators and trial lawyers are too often demonized by the ADR community as if you could get someone to sit down to negotiate without first pointing the gun of litigation at their heads; I salute you (and myself, for that matter!) for bringing us all to the bargaining table. See Steve Mehta's recent post at Mediation Matters, Factors When Peace Makes Sense for a note that touches upon the symbiotic relationship between litigation and mediation, litigators and mediators.
I shouldn't cite single legal blogs twice, but I cannot resist this quote of Scott Greenfield's on another pundit's view of the future lawyers have in store for them, i.e.,
shucking oysters for a living if we don't accept a future of lawyers being piece workers in factories, sending our work off to Bangalore in pdf files and complementing people on their choice of forms at Legal Zoom.
Which came first? Public civil trials or private arbitrations? You’ll be surprised, I’ll wager, to hear that arbitration was one of the earliest forms of dispute resolution, practiced by the juris consults of the Roman Empire. Roman arbitration predates the adversarial system of common law by more than a thousand years. 
Ah, the glory of Rome! The juris consulti were (like too many mediators) amateurs who dabbled in dispute resolution, raising the question whether they (and we) should be certified or regulated as Diane Levin asks at The Mediation Channel this week. The Roman hobbyists gave legal opinions (responsa) to all comers (a practice known as publice respondere). They also served the needs of Roman judges and governors would routinely consult with advisory panels of jurisconsults before rendering decisions. Thus, the Romans – god bless them! - were the first to have a class of people who spent their days thinking about legal problems (an activity some readers will recall Ralph Nader calling "mental gymnastics in an iron cage").
It was Buckminster Fuller who famously opined that the "significant problems we face cannot be solved at the same level of thinking we were at when we created them." If you keep this aphorism in mind for the remainder of this post, you'll likely have some extraordinarily innovative comments to make in the comment section below.
As the Law Guru wiki reminds us, we can trace the adversarial system to the "medieval mode of trial by combat, in which some litigants were allowed a champion to represent them." We owe our present day adversarialism, however, to the common law's use of the jury - the power of argumentation replacing the power of the sword.
The Act abolishing the infamous Star Chamber in 1641 also granted every "freeman" the right to trial by "lawful judgment of his peers" or by the "law of the land" before the Crown could "take or imprison" him or "disseis[e] [him] of his freehold or liberties, or free customs." Nor could he any longer be "outlawed or exciled or otherwise destroyed." Nor could the King "pass upon him or condemn him."
English colonies like our own adopted the jury trial system and we, of course, enshrined that system in the Fifth, Sixth, and Seventh Amendments. Whether this 17th century dispute resolution technology can be fine-tuned to keep abreast of 21st century dispute creation technology (particularly in the quickly moving area of intellectual property) remains one of the pressing questions of legal and ADR policy and practice, particularly in a week in which a Superior Court verbally punished the lawyers before it for filing The Most Oppressive Motion Ever Presented (see the Laconic Law Blog). The motion?
Defendants['] . . . motion for summary judgment/summary adjudication, seeking adjudication of 44 issues, most of which were not proper subjects of adjudication. Defendants’ separate statement was 196 pages long, setting forth hundreds of facts, many of them not material—as defendants’ own papers conceded. And the moving papers concluded with a request for judicial notice of 174 pages. All told, defendants’ moving papers were 1056 pages.
Mediator, author and activist, Ken Cloke, suggests that interest-based resolutions to conflict must replace power and rights based resolutions if we expect to create a future in which justice prevails. As Ken wrote in Conflict Revolution:
Approaching evil and injustice from an interest-based perspective means listening to the deeper truths that gave rise to them, extending compassion even to those who were responsible for evils or injustices, and seeking not merely to replace one evil or injustice with another, but to reduce their attractiveness by designing outcomes, processes, and relationships that encourage adversaries to work collaboratively to satisfy their interests.
Evil and injustice can therefore be considered byproducts of reliance on power or rights, and failures or refusals to learn and evolve.
All political systems generate chronic conflicts that reveal their internal weaknesses, external pressures, and demands for evolutionary change. Power- and rights-based systems are adversarial and unstable, and therefore avoid, deny, resist, and defend themselves against change. As a result, they suppress conflicts or treat them as purely interpersonal, leaving insiders less informed and able to adapt, and outsiders feeling they were treated unjustly and contemplating evil in response.
As pressures to change increase, these systems must either adapt, or turn reactionary and take a punitive, retaliatory attitude toward those seeking to promote change, delaying their own evolution. Only interest-based systems are fully able to seek out their weaknesses, proactively evolve, transform conflicts into sources of learning, and celebrate those who brought them to their attention.
These are the words I leave with the readers of Blawg Review #234 because they are the ones that informed my personal and professional transformation from a legal career based on rights and remedies to one based upon interests and consensus.
Whatever my own personal 200-year present was, is and will be, it is pointed in the direction of peace with justice, with an enormous and probably unwarranted optimism best expressed by the man after whom my law school was named: Martin Luther King, Jr. - the arc of history is long, but it bends toward justice.
Blawg Review has information about next week's host, and instructions how to get your blawg posts reviewed in upcoming issues. Next week's host, Counsel to Counsel, will devote its round-up of the week's best legal posts to the Great Recession.
 Earlier scientific theory posited that each human embryo (see Embryo Mix-Up at the Proud Parenting Blog) passes through a progression of abbreviated stages that resemble the main evolutionary stages of its ancestors, i.e., that the fertilized egg starts as a single cell (just like our first living evolutionary ancestor); as the egg repeatedly divides it develops into an embryo with a segmented arrangement (the “worm” stage); these segments develop into vertebrae, muscles and something that sort of looks like gills (the “fish” stage); limb buds develop with paddle-like hands and feet, and there appears to be a “tail” (the “amphibian” stage); and, by the eighth week of development, most organs are nearly complete, the limbs develop fingers and toes, and the “tail” disappears (the human stage). It turns out that this one-to-one correlation was too simplistic, but it remains safe to say that our biological development still passes through several stages that “recapitulate” the evolution of our species.
 The amygdala is a region of the brain that permits the formation and storage of memories associated with emotional events. It permits us to “read” the emotional responses of our fellows and is thought to facilitated our ability to form relationships and live and work in groups. It is also the source of our “fight or flight” response to danger.
Studies show that some mirror neurons fire when a person reaches for a glass or watches someone else reach for a glass; others fire when the person puts the glass down and still others fire when the person reaches for a toothbrush and so on. They respond when someone kicks a ball, sees a ball being kicked, hears a ball being kicked and says or hears the word "kick."
“When you see me perform an action - such as picking up a baseball - you automatically simulate the action in your own brain,” said Dr. Marco Iacoboni, a neuroscientist at the University of California, Los Angeles, who studies mirror neurons. ”Circuits in your brain, which we do not yet entirely understand, inhibit you from moving while you simulate,” he said. ”But you understand my action because you have in your brain a template for that action based on your own movements. “
 Looking toward the future, the Neuroethics and the Law Blog predicts that in the “experiential future, we will have better technologies to measure physical pain, pain relief, and emotional distress. These technologies should not only change tort law and related compensation schemes but should also change our assessments of criminal blameworthiness and punishment severity” here.
The adversarial system of medical negligence fails to satisfy the main aims of tort law, those being equitable compensation of plaintiffs, correction of mistakes and deterrence of negligence. Instead doctors experience litigation as a punishment and, in order to avoid exposure to the system, have resorted not to corrective or educational measures but to defensive medicine, a practice which the evidence indicates both decreases patient autonomy and increases iatrogenic injury.
(Iatrogenic, by the way, is a fancy term for “we have know idea whatsoever what the source of this ailment is). Chris is looking for comments so run on over there if you’ve been thinking about medical malpractice litigation during the marathon American health care debates.
This opinion -- Palmer v. State Farm - is wrong on so many levels that it's no surprise the appellate court ordered that it not be published. The opinion therefore controls only the fate of the parties to the case and cannot be cited as authority. The no-publication order does not, however, diminish my distress about the mediator's decision to file a declaration in support of State Farm's motion to enforce a formal settlement agreement that its insured refused to sign as contrary to the handwritten agreement drafted by the mediator during the mediation proceedings.
The appellate court affirmed the trial court's enforcement of the post-mediation settlement agreement based, in large part, on the mediator's sworn declaration that State Farm's formal agreement accurately represented the one signed by the parties during the mediation -- a matter that, if true, should have appeared on the face of both documents. See HANDWRITTEN SETTLEMENT SHOWS PARTIES' INTENT, CALIF. COURT FINDS
for a summary of the Court's decision.
What's wrong with this opinion? Let me count the ways.
In California, a mediator is presumed incompetent to testify under Evidence Code section 703.5. A good thing, too, since mediators are bound by the confidentiality provisions contained in Evidence Code section 1115 et seq. /1
Mediators are also required to be -- ahem -- NEUTRAL. Why was this mediator providing a sworn declaration to support State Farm's case against the policy holder? And does his drafting of the handwritten agreement at the mediation give him a personal or professional stake in its enforcement, thus further undermining his neutrality.
I'm not going to mince words about this. I believe it falls below the standard of care for a mediator to voluntarily provide a Declaration to the Court concerning anything anyone said during the mediation, including his opinion about what the parties an meant to say when they entered into a settlement agreement (an intuition that could only be based upon confidential communications). I also believe that its below the standard of care for a mediator to voluntarily provide a declaration to one party in support of a motion against another party to the mediation.The fact that the mediator provided a declaration in support of State Farm (and not the policyholder) is even more troubling when you consider the fact that insurance carriers are repeat players in ADR circles and hence a better source of business for mediators than single-player plaintiffs.
On the confidentiality issue, it is notable that the mediator-drafted agreement stipulated that:
The parties waive the provisions of [the] California Evidence Code relating to mediation confidentiality, rendering this agreement enforceable pursuant to . . . section 664.6.”(Italics added.)
The language used suggests to me that the purpose of the clause was to render the written agreement admissible in evidence to prove its existence -- "waive . . . mediation confidentiality [to] render this agreement enforceable." I know it doesn't say that. It says that the parties are waiving confidentiality PERIOD. It would surprise me if that's what the parties meant to do, i.e., open up to judicial scrutiny every communication uttered in the course of the mediation - in separate caucus and joint session. Would a mediator be liable for an ambiguously drafted agreement that leads to the loss of mediation confidentiality for the parties? I don't have an answer to the question but mediators might want to ask themselves whether they should be drafting the parties' agreements if they want their malpractice premiums to remain as low as they are today.
David Stern's latest bulletin on insurance and mediation is now available to download on the link above. It aims to set out how mediation is perceived, what drivers there are for change and how these drivers are likely to impact the use of mediation as a dispute resolution technique for London Market disputes in the future.
Though I mediated several big ticket London coverage cases in that fair city while defending environmental insurance claims cases (primarily against the petroleum companies my husband was then representing) the power of most settlement discussions was in the hands of the lead negotiator for Equitas - a master deal-maker who left most mediators in the dust.
I believe that the quality of mediation practice has greatly improved since that time (late 1990's, early 21st century) primarily as a result of attorneys entering the practice (with all due deference to my retired Judge mediator friends). I'm happy to see London giving mediation a higher profile.
This just in from the Insurance Journal -- an infinite regression of insurance coverage. You can now purchase insurance to cover your insurance company's refusal to provide you with insurance coverage.
And if NAS refuses to provide coverage for your coverage dispute with your insurance carrier? Don't hold your breath; we've already entered the house of mirrors.
Encino, Calif.-based NAS Insurance Services has a new insurance coverage that will pay a business' legal expenses to contest denial of coverage by an insurance company.
NAS' Claims Dispute Insurance allows insureds to select attorneys from a panel of insurance specialists to determine if the insured has a reasonable probability of success. If so, the company will provide up to $250,000 for legal expenses to contest the claim denial. If it is determined that the insured does not have a reasonable probability of success, the insurance limit is still available to contest the denial, subject to a 50 percent co-payment.
Claims regarding worker's compensation, medical insurance and some others are not covered by the insurance.
If I had to live my commercial litigation career all over again, I would start by making sure I understood everything I possibly could about the potential for insurance coverage, particularly when reading the terms of coverage makes me believe there is none.
What's the best thing about my tenure litigating environmental liability insurance coverage cases? Besides the great intellectual puzzle they proved to be? Besides the lasting friendships formed with members of joint defense teams? Besides the chance they gave me to appear before some of the best Judges in the State (Judge Carolyn Kuhl, for instance, in the Los Angeles Complex Court)? The way these cases irritated my justice-sensors and led me into a career as a mediator?
No, none of those. What then?
My husband, of course! Steve Goldberg, author of the following article (excerpted with a link to the pricey L.A. Daily Journal) about the case that sent at least two generations of young people to university, graduate and professional school - Stringfellow.
In State of California v. Allstate Insurance Company, 2009 DJDAR 3425 (March 9, 2009), the California Supreme Court reversed a trial court's grant of summary judgment for a handful of insurance carriers who refused to defend the state against and indemnify it for liabilities arising from an infamous toxic waste site - the Stringfellow Acid Pits. Neither this opinion, nor another in the same matter handed down by the 4th Appellate District in January, finally resolves the state's claims. Instead, both courts sent two groups of insurance carriers back to the trial court for further proceedings. In both, the insurers lost significant battles but will no doubt continue the fight on yet another day.
The Stringfellow Acid Pits began operations in 1956, six years before Rachel Carson's "Silent Spring" presaged the modern environmental movement. More than 30 million gallons of industrial waste were deposited there between its first day of operation and its closure by state authorities in 1972. Eight years later, the federal government enacted the Comprehensive Environmental Response, Compensation and Liability Act to clean up industrial pollution and require potentially responsible parties to reimburse the government for its efforts.
Stringfellow was the first major industrial site placed on the Environmental Protection Agency's National Priority "Superfund" List in 1982. The following year, the Department of Justice, on behalf of the EPA, joined with the state to file a federal court suit against many companies that had disposed of toxic waste at the site. Those companies cross-claimed against the state, asserting that it was liable for the entirety of the government's investigation and remediation expenses. Sixteen years later, in 1998, the federal court held the state responsible for all contamination at the site based on findings that it had been negligent in its selection and construction as well as in its failure to prevent, investigate, and remediate pollution there.
While the state, the EPA and waste generation and disposal companies were fighting it out in federal court, the state asked its insurers to defend and indemnify it against the waste companies' cross-claims. The insurers denied coverage for those claims and the state brought suit in state court in 1993.
Allstate should not be confused with the other recent decision involving the state's attempt to obtain insurance coverage for its liabilities at the same Superfund site in the same litigation, State of California v. Continental Insurance Co., 2009 DJDAR 755 (4th App Dist, Jan. 5 2009). Continental rejected the arguments of a different group of the state's insurers, holding that a policyholder is entitled to "stack" (i.e., add together) the limits of insurance policies in effect over multiple years that apply to a single loss spanning those years. Continental also sets forth the analytical framework for determining the number of occurrences that would determine how the carriers' coverage limits would be applied.
Allstate resolves different issues than litigated in Continental. The two decisions together are important not simply for the road map they lay out for lawyers making insurance claims and carriers adjusting them but also as an historic record of the development of two relatively recent and important areas of law - the law governing the protection of the environment from toxic substances and the obligations of insurers to provide coverage for environmental liabilities. Together, these two decisions resolve numerous and complex bodies of jurisprudence.
innumerable young people . . . married into it; [and] innumerable old people . . . died out of it. Scores of persons have deliriously found themselves made parties in Jarndyce and Jarndyce, without knowing how or why; whole families have inherited legendary hatreds with the suit. The little plaintiff or defendant, who was promised a new rocking-horse when Jarndyce and Jarndyce should be settled, has grown up, possessed himself of a real horse, and trotted away into the other world. Fair wards of court have faded into mothers and grandmothers; a long procession of Chancellors has come in and gone out; the legion of bills in the suit have been transformed into mere bills of mortality; there are not three Jarndyces left upon the earth perhaps, since old Tom Jarndyce in despair blew his brains out at a coffee-house in Chancery Lane; but Jarndyce and Jarndyce still drags its dreary length before the Court, perennially hopeless.
The last time I worked on this case -- in 2004 -- it was, in the words of a colleague, "old enough to drive." Another colleague had spent his entire legal career litigating the case and he'd been in practice since 1986.
I was in my second year of college when the State of California discovered groundwater contamination near the Stringfellow waste site and closed it to new deposits. I was in my twenty-fourth year of legal practice when I re-learned the site's factual history for the purpose of taking expert witness depositions concerning investigation and remediation costs that the State's insurance carriers might, or might not, be obliged to pay. I was twenty years old when the contamination was discovered and fifty-two years old when I became (for the second time) a part of the State of California insurance coverage action.
Now, the California Supreme Court has sent the case back down to the trial court to try "material issues of fact" concerning the discharge of pollutants in 1969 before the site was closed and and in 1978, six years after the contamination was first discovered.
These are the cases that made me want to find an alternative to litigation. The cases that sent me back to Dickens' Bleak House. The cases that made me believe there must be a more efficient way of handling disputes of this magnitude.
Law firms spend as much as $40 billion a year on document review . . .
1/ An appellate opinion in the same case concerning the "stacking" of policy limits that came down in January of this year, entitled State of California v. Continental Insurance is here. That case remanded the case against different insurance carriers for the following errrors:
(1) ruling that the State could not recover more than the total policy limits in effect for any one policy period, and (2) admitting certain documents under the ancient documents exception to the hearsay rule (Evid. Code, § 1331).
So far no one has blown his brains out as in Dickens' tale, nevertheless the case still drags its dreary length before the Court, perennially hopeless.
Just in case you wonder what mediators did for a living before they began to help attorneys settle lawsuits, or just why someone might name her mediation business Settle It Now, I bring you the following must-attend coverage seminar on the Stringfellow Litigation - the Superfund site that sent thousands of attorneys children through college, grad school and beyond. As one of my colleagues once said, this case was not tried until it was old enough to drive.
One of the panelists, the brilliant Bill Baron, a former partner of mine at Hancock Rothert (now Duane Morris) understands catastrophic insurance coverage disputes better than anyone else I know (well, other than Mr. Thrifty of course!)
These guys invented environmental coverage and the Stringfellow decision affects all catastrophic insurance claims. If you represent the Fortune 500 and have any CLE funds to spend this year, this is the seminar to spend them on.
Wednesday, March 4, 2009
1:00pm-2:30pm EST, 10:00am-11:30am PST
His principal area of practice is insurance coverage for environmental liability and he represented the state of California in the State of California v. Continental Ins. Co. (2009). He also provides insurance coverage counseling concerning Environmental Impairment Liability Insurance.
He has substantial experience in trying complex insurance coverage actions for corporate policyholders. The Chambers Guide calls him the 'go-to person' in the area of insurance recovery. He served as counsel in the State of California v. Continental Ins. Co. (2009) matter. He has also been engaged on several significant projects by the United Nations as its general insurance counsel.
He concentrates on appellate work and complex civil litigation, including insurance coverage actions. He prepared an amicus brief in the companion Stringfellow case.
In January 2009, the California Court of Appeal (4th Dist.) ruled a policyholder facing long-term property damage or personal injury claims may stack liability policy limits across policy periods to maximize recovery. The decision is hailed as a landmark that could influence other courts nationwide.
The court of appeal overturned the trial court's holding that the policyholder could not stack the limits of multiple policies over an entire period of damage. The court of appeal also expressly rejected a 1998 California Court of Appeal (6th Dist.) decision that limited coverage.
The decision is particularly significant for policyholders in manufacturing, pharmaceutical, construction and chemicals, that face claims for continuous injury with roots in years past.
Listen as [this] authoritative panel of insurance attorneys examines the California court of appeal decision and its implications for insurance practice. The panel will offer their perspectives on best practices for addressing indemnity issues in long-term injury claims litigation.
Because litigation is so often settled with insurance dollars, from time to time we bring you updates on recent judicial interpretations of common policy terms. The following article answers the question in the Fifth Circuit whether CGL policies cover certain types of construction defect claims.
A recurring dispute between insurance companies and Commercial General Liability (“CGL”) policyholders concerns whether CGL policies provide coverage for construction defect claims. In its recent decision in Mid-Continent Casualty Co. v. JHP Development, Inc., No. 05-50796 (January 28, 2009), the Fifth Circuit takes the latest step in Texas jurisprudence on the issue, concluding that the “business risk” exclusions in such policies, at least as currently drafted, do not exclude coverage for damage to a contractor’s non-defective work even if caused by his own defective work.
California Federal Court: Insured Plaintiff Can Seek Treble Punitive Damages For Insurer’s Alleged Bad Faith
The U.S. District Court for the Central District of California recently denied a motion to strike and allowed a plaintiff to pursue treble punitive damages against his insurer for the insurer’s alleged bad faith. Novick v. UNUM Life Insurance Co. of America, C.A. No. 08-02830-DDP-PJW (Aug. 7, 2008).
The insurer issued a long term disability benefits policy to the plaintiff in 1976, providing benefits should the plaintiff become totally disabled due to an accident sustained during the course of his career as a surgeon. In June 1992, the plaintiff filed a disability claim with his insurer after sustaining a spinal injury that allegedly prevented him from performing surgery. The insurer initially paid benefits to the plaintiff, but discontinued making the benefits payments on January 18, 2007. Shortly thereafter, the plaintiff filed suit against its insurer alleging breach of contact and breach of the covenant of good faith and fair dealing.
In his complaint, plaintiff seeks punitive damages pursuant to California Civil Code §3294, which allows an award of punitive damages for conduct that constitutes malice, fraud or oppression. The plaintiff also seeks treble punitive damages pursuant to California Civil Code §3345, which provides for an award of treble damages “in actions brought by, on behalf of, or for the benefit of senior citizens or disabled persons . . . to redress unfair and deceptive acts or practices or unfair methods of competition . . . [when] a trier of fact is authorized by statute to impose either a fine, or a civil penalty or other penalty, or any other remedy for the purpose or effect of which is to punish or deter . . . .”
The insurer argued that §3345 does not provide for the trebling of damages for insurance bad faith claims. The court reviewed the legislative intent behind the statute and determined that the legislature did not intend for the statute to be limited to actions that specifically mention unfair business practices. The court noted that, as bad faith claims redress unfair practices, §3345 applies to insurance bad faith claims. Accordingly, as the plaintiff alleges that the insurer acted in bad faith, the court held that the plaintiff is entitled to pursue his request for treble punitive damages.
BTW Blogger Kevin M. LaCroix, an attorney and a partner in OakBridge Insurance Services, Beachwood, Ohio, writes the most amazingly cogent and exhaustive analyses of insurance coverage issues I've seen anywhere on the internet.
TALLAHASSEE, Fla. -- Florida Insurance Commissioner Kevin McCarty welcomed the First District Court of Appeal's decision affirming the Office of Insurance Regulation's denial of United Insurance Company of America's request to include a mandatory arbitration clause in its life insurance contracts.
Arbitration would have forced disgruntled policyholders to bypass the legal system to settle disagreements. United appealed OIR's action and the court affirmed the denial.
"Policyholders have fewer rights and constitutional protections under the more restrictive arbitration process than they would have in a civil court proceeding," said McCarty. "I'm pleased that the Court made it clear that Florida consumers should not be shut out of the traditional legal system to press their grievances against insurance companies."
Although United argued that federal arbitration law superseded the Florida law that allows policyholders to use the courts for contractual disputes, the Court stated that the matter "specifically relates to the business of insurance" and was, therefore, exempt from being superseded by federal law
This may be the biggest break-down in attorney-client communication in the history of litigation. Because this public statement by Allstate about its former attorney would be highly defamatory if not true, I'm taking Allstate at its word here.
Allstate claimed that it had not deliberately flouted Manners’ orders. Rather, it said, its now-former attorney — then with the firm of Wallace, Saunders, Austin, Brown & Enochs — had failed to respond to discovery requests.
Allstate said it was appalled when it learned last year that it was being threatened with contempt.
“Allstate litigates hundreds of bad faith cases each year,” Allstate stated in court documents. “And it responds to discovery requests — just like the ones in this case — in many of them. There is no reason in the world for Allstate not to participate in discovery — particularly in this case, where there is an underlying judgment of $1 million.”
Allstate said it “immediately removed” the attorney from the case and retained new counsel.
The answer to the question "how to break bad news to my client" can be found at any of the links below. Most of these links are for health care professionals, who have to break bad news to their patients and their families far more often than we have to tell our clients that something went terribly awry. Put that at the top of your attorney gratitude list.
Do not avoid seeing the [client] or leave them anxiously waiting for news. Sometimes anticipation can be worse than even the worst reality.
Treat others as you would wish to be treated yourself.
Get the facts before you start.
Make sure you will not be disturbed. If necessary switch off phones or bleeps.
Be factual but sympathetic. Always be empathetic however you may feel personally.
Give time for the information to sink in and the opportunity to ask questions before moving on. Do not seem rushed.
If the [client] does not seem able to take any more be prepared to end the consultation and to take it up again later.
Look for all the cues, verbal or others. , , , Perhaps they would like you to speak to someone else or to have someone with them for the next meeting.
Never say that nothing can be done or the [client] will lose all hope.
Whilst trying to be positive never lose track of the fact that this is a serious and potentially fatal [reverse in the litigation]. Be optimistic but do not promise success or anything else that may not be delivered.
Allstate, policyholder agree to settle case that centered on insurer's disclosure of records
KANSAS CITY, Mo. (AP) -- Allstate Insurance Co. has agreed to settle an insurance case that had attracted national attention over the insurer's refusal -- and eventual agreement -- to provide key documents on how it evaluates and pays claims.
The company's reluctance to release the records led to more than $7 million in fines from Jackson County Judge Michael Manners.
Manners has scheduled a July 21 hearing on whether to approve the settlement, which is the day the case was scheduled to go to trial.
Attorneys for both sides say the terms of the deal are confidential.
Allstate spokesman Mike Siemienas said the nation's second-largest home and auto insurer was happy to resolve the case. He declined to comment further.
Here I am again hectoring litigators about their obligations to determine whether or not their clients have insurance, to decide whether that insurance might cover the claim or suit against them; and, make a timely demand for coverage, particularly under E& O claims made policies.
Professionals and business people hesitate before tendering "claims" to their insurance carrier because the no. 1 response to conflict is denial. This is particularly true where a professional's or business person's competence has been called into question. You don't want to admit that you might have committed malpractice to yourself let alone to your insurance carrier.
This is a particular problem for professionals because Errors and Omissions insurance generally requires claims to be both made and reported during the policy period. Often, litigators don't see clients until after they've been sued and clients generally don't get sued unless there's a previous demand letter (i.e., a claim).
So what's the very first thing litigation counsel must do? Get a copy of the E&O policy and the first demand letter. Tender the defense and indemnity of the action to the carrier immediately.
You might get a little fudge room by reporting the claim when suit is filed, but if your insured doesn't report the claim in its application for coverage the following year, the carrier will deny coverage on the ground of non-disclosure.
Come to think of it -- transactional attorneys should remind their clients of their obligations to report claims when made, no matter how feeble the claim may look. Take a look at yesterday's ruling on what constitutes a claim with thanks to the Met News for the summary and LACBA for the daily email summaries.
Where policy defined a "claim" as a written demand for civil damages or other relief commenced by the insured’s receipt of such demand, a letter from a third-party claimant’s attorney to insured informing insured that the third-party claimant had been subjected to discrimination and received a right-to-sue letter and suggesting a settlement constituted a claim. Although the letter did not expressly demand payment or refer to any specific amount, the meaning was clear that, absent some form of negotiated compensation, the claimant would sue. Where policy stated that all claims arising from the same events or series of related facts could be deemed a single claim, and third-party claimant filed litigation authorized by the right-to-sue notice mentioned in the letter, the lawsuit was part of the same claim as the letter under the policy. Where insured did not notify insurer of the claim until after the lawsuit was filed, insurer’s notification was untimely, and insurer was not required to tender a defense.
It happened at a settlement conference again just last week. Defense counsel said there was "no insurance" for the defense orindemnity of a professional malpractice claim.
This naturally surprises me. Some professionals are required to have coverage or disclose its non-existence to their clients. No such disclosure had been made in this case.
"No insurance policy?"
"She has an insurance policy; there's just no coverage."
"Why did the carrier deny coverage?"
"The carrier said there was no coverage."
"I don't know. I'm not coverage counsel."
"Is there coverage counsel?"
"No. I told you there's no coverage. Let's get back to negotiating the settlement."
After obtaining (via fax) the policy, the demand and the denial, it turned out that there was a good reason for the carrier to deny coverage for the plaintiff's claim. But the denial letter expressly withheld comment on the existence of coverage for the defendant's principal, who had not failed to make a timely claim for coverage, and who had not yet been sued.
Call me an activist or a "fund raising" mediator if you will, but when there's not enough money to settle a case and the parties continue to wish it could be settled, I start asking questions about sources of available funds.
And, listen. Every litigator must be enough of a "coverage lawyer" to evaluate the likelihood that any existing insurance policy might provide defense or indemnity for the law suit you are defending.
So, if you are a commercial litigator -- or any type of litigator who defends your clients against claims -- you must
ask your clients for all of their insurance policies, even those that seem unlikely to provide coverage;
carefully review the precise wording of the policy's insuring agreements, paying particular attention to the language concerning the defense of claims and the deadlines for submitting those claims to the carrier;
research the case law in the relevant jurisdiction(s) to determine how the courts have interpreted the insuring agreements and other pertinent policy provisions contained in your clients' policies under facts similar to those alleged in the lawsuit you've been asked to defend;
except for some narrow additional protections provided to insureds, be aware that there is no such thing as "the law" of coverage under any particular type of policy -- all coverage flows directly from the precise language of the insuring agreement;
remember that in most jurisdictions, that language -- if ambiguous -- will be interpreted in favor of the insured's objectively reasonable expectations -- that means the law of coverage always favors your client's claim for coverage;
understand that in most jurisdictions the rule of contra proferendum will require a court to construe any ambiguity in an insurance policy against the insurance carrier, once again meaning that the law of coverage will favor your client's claim for coverage;
never accept the carrier's refusal to provide a defense without asking yourself -- or a coverage specialist -- why in the heck you should accept the carrier's word for it when you were born to contradict everything from "good morning" to "let's have lunch";
never conclude your client doesn't have coverage before tendering the claim; the response to the tender will outline the pertinent policy provisions in stark enough detail -- not to mention 12-point type -- and the denial in sufficiently weasley words to activate your B.S. meter;
if you finally accept the fact that your client's policy won't cover the defense of the litigation or indemnify your client in the event of a judgment, continue to keep the carrier informed of the litigation's progress in any event, inviting the carrier to attend all mediations and settlement conferences and to respond to all settlement demands;
remember that the law of coverage changes on a daily basis; read those coverage decisions sent down by your local appellate courts and subscribe to Mealey's on coverage remembering that a really good reason for a client to sue a lawyer for malpractice is your failure to give it reasonably informed legal advice about the availability of insurance coverage; and,
retain coverage counsel If the cost of the lawsuit is beyond your client's means or will deprive it of capital necessary to meet its business goals for the next few years.
The Defendants filed a motion to enforce the mediated settlement agreement [Guess why! Good guess!]. The Plaintiff argued that a “mutual mistake” allowed him to avoid the parties’ mediated settlement agreement.
Not so fast . . . .
Continue reading here. There are two solutions to this problem in any jurisdiction: (1) know your policy limits; or, (2) make your agreement to settle contingent on verifying them.
It is a truism that litigation tends to get worse rather than better over time. This is as true in the law as it is in physics -- things fall apart. Your client's clean and righteous narrative tarnishes over time; grows more complex and filled with contradictions. It's a little like a political campaign. Barack's ground-breaking race relations speech and Hillary's single tear aside, Clinton and Obama tend to look worse, not better, over time. We all do.
Whether the value of your legal "case" is up today or down tomorrow turns not only upon the most recent documents produced, pre-trial motion won or witness deposed, it also turns on those things that fall apart over time -- including currency exchange rates.
The micro-economics of settlement timing include corporate events such as quarterly and year-end financial reporting requirements; potential mergers and acquisitions; and, how much financial bleeding your client's divisional president can take this year before worrying about demotion.
In international disputes, currency exchange rates loom large in the macro-economics of settlement timing. My own last really "big" case before I left practice was potentially worth a quarter billion dollars in "hard" damages -- the total projected clean-up costs for 500 toxic waste sites in every Canadian province.
The Canadian dollar was not only weak at the time, it was weakening. Though the question of whose currency would control was contested, my client was confident that Canadian dollars would eventually govern since clean-up costs by the American plaintiff would be paid in Canadian dollars. I remember a time when the Canadian dollar was tumbling in value so rapidly that every time I saw opposing counsel in court I'd remind him of the day's exchange rate with a warning that "your case isn't getting any better over time."
Settlement timing in that case was motion-driven, however, and the matter did not settle until after the entry of a pre-trial judgment in my client's favor pending appeal.
Though I was (and would continue to be) driven by pre-trial losses and victories, savvy settlement counsel would be keeping an eye on macro-economics -- which would, in any international litigation, require someone to be tracking currency exchange rates.
This post was originally meant to highlight Allstate's (or its consultant's) unfortunate use of the term "Zero Sum Game," when discussing claims handling procedures. My original comment was that "those who continue to play it often get their . . . uh . . . soft parts caught in a wringer."
The Slabbed post highlights the damage done to an admitted "Zero Sum Game Player" who is engaged in a human-harm-cost-benefit analysis. The Pinto punitive damages award came readily to mind because the case was decided while I was in law school learning about negligence.
For my non-attorney readers, I need to stress that it's not wrong to engage in a cost-benefit analysis for the compensation of injury under a negligence system. In fact, this is what the law itself (and injured Plaintiff's attorneys) do, i.e., "calculate" the risk of harm + the potential severity of the injury against the cost of avoiding that harm.
People react badly when they see that type of calculation being applied to human injury or the loss of human life because those losses are considered to be "incommensurable," i.e., no amount of money can recompense someone for, say, the loss of a child. For an excerpt from my own article discussing the concept of incommensurability -- The Cost of a Thing is Your Life, click here.
I'm hoping my non-attorney readers will understand that these formal monetary calculations are routinely made by businesses and governments when making decisions about how much risk to human life is worth taking when they engage in potentially dangerous activities for the purpose of creating a significant benefit for many.
In a previous post that received a notice in the Silicon Investor BB I spoke of insurers and their lawyers using the court system as instruments of institutionalized bad faith. Indeed Allstate has taken much criticism for ignoring lawful subpoenas over these documents as well as substantial fines as noted by Ms St John. This brings me to the beginning of the main story.
For more than a decade, Allstate Insurance Co. kept a secret from its auto policyholders — a national strategy to force customers to accept reduced cash payouts or face years in court.
Thousands of pages of Allstate documents reviewed by the Herald-Tribune detail how the nation’s second-largest insurer systematically cut payments to customers as a way to boost profits.
The documents describe a two-pronged strategy.
First, the company evaluates claims with a computer program designed to reduce payouts by as much as 20 percent of what the company once paid for the same injuries.
Second, Allstate pushes policyholders to accept quick settlements without the help of lawyers. Policyholders who try to fight for more money face Allstate attorneys coached to refuse to negotiate and to drag out litigation.
The approach often forces car accident victims to take what Allstate offers right away or spend years in court while their bills go unpaid — a strategy Allstate spelled out in guidelines for claims adjusters that “forces the claimant and attorney to think about the obstacles they must overcome …”
Indeed it appears we have a road map of how tort reform is being used against us. Limits on damages only make it easier for these large insurers to get away with outrageous behavior. The story continues:
It was a “Zero Sum Economic Game. Allstate gains … others must lose,” declared a consultant’s PowerPoint slide from a 1994 presentation to executives.
During the next five years of Allstate’s claims overhaul, the same consultant, New York-based McKinsey & Co., chose confrontational words to describe the new system. In PowerPoint presentations and discussion papers drawn up for Allstate executives, McKinsey used “boxing gloves” to characterize how Allstate should treat policyholders who balk at settlements. For customers who hired lawyers, McKinsey urged, “align alligators,” adding these instructions: “sit and wait.”
The documents also show:
Allstate removed much of the discretion of local claims agents to set payouts, requiring them to base their recommendations on a computer program called Colossus. Under that program, average payouts for bodily injuries dropped more than 20 percent in the first few years, internal documents show, a big step toward reaching McKinsey’s goal of “establishing a new fair market value” of such injuries.
Allstate recognized that when an injured driver hired a lawyer, the insurer lost money. In repeated presentations to Allstate executives, McKinsey coached tougher and increased legal action. By 1996, Allstate had doubled its legal force, hiring 225 more lawyers. “The bottom line is that Allstate is trying more cases than ever before,” a corporate newsletter said . . .
Allstate Corp., the second-biggest U.S. home and auto insurer, released 150,000 pages of documents sought by opposition lawyers and company critics related to McKinsey & Co.'s review of claims-handling practices.
McKinsey suggested strategies for the company to become more profitable by paying less in claims, according to videotaped evidence presented in Fayette Circuit Court in Lexington, Kentucky, in a civil case involving a 1997 car accident. Lawyers for policyholders said Allstate's previous refusal to release the documents showed the company wasn't treating its customers fairly. The insurer has said the documents include trade secrets.
``Public criticisms by people with a vested interest in creating an inaccurate picture of the company's claim practices have been based unfairly on only snippets from the documents taken out of context,'' the Northbrook, Illinois-based insurer said in a statement today. ``Because of the need to address misunderstandings resulting from the growing misplaced focus by our critics on very small pieces of the whole, we have decided to make the documents public.''
One slide the consultant prepared for Allstate was entitled ``Good Hands or Boxing Gloves,'' and recommended the insurer put on ``boxing gloves'' to deter about 10 percent of claims deemed to be exaggerated, padded, or fraudulent, according to portions of the report shown to the Kentucky jury. For more than 50 years, Allstate has advertised its employees as the ``Good Hands People,'' telling customers they will be well cared for in times of need.
The strategy proposed by McKinsey would ``send a message to the attorneys of our proactive defense stance'' in cases dealing with minor impact soft tissue injuries, the consultant said in the document. Lawyers would have to ``think about the obstacles they must overcome to recover significant settlement or the benefits of a smaller, walk-away settlement.''
Allstate implemented the plan in the 1990s because studies showed more people were submitting claims even though accident rates were declining and cars were safer, Allstate lawyer Floyd Bienstock told the Kentucky jury. The McKinsey report found Allstate was overpaying bodily injury claims by 16 percent, Bienstock said.
``It was never a plan to intimidate people,'' he said.
How important is insurance coverage to your clients' decision to bring or defend or negotiate the resolution of a commercial dispute? It's usually the difference between having options and being entirely out of luck.
And when that decision concerns catastrophic losses? Unless you are an insurance coverage specialist, you make coverage decisions at your peril.
Daily Journal article announcing that Steve Goldberg (yes, Mr. Thrifty himself!) has left Heller Ehrman and joined Dickstein Shapiro below.
LOS ANGELES - Longtime Heller Ehrman attorney Stephen N. Goldberg has left the firm for Dickstein Shapiro in Los Angeles, the latest in a string of departures from San Francisco-based Heller Ehrman. . . . . Goldberg . . . . had been with Heller since 1973 and was a partner in its Los Angeles office. . . . .
Goldberg, who practices insurance recovery and complex commercial litigation, was part of Heller Los Angeles managing partner Nancy Cohen's successful insurance practice, an area of focus for the firm, according to firmwide managing partner Robert Hubbell. . . . .
Goldberg has handled insurance coverage in areas such as product liability claims, asbestos liability, environmental damage, first-party property and business interruption losses, director and officer liability and insurer bad-faith claims. His clients have included Texaco, Johns-Manville Corp., Atlantic Richfield Corp., Millennium Hotels and GMAC Commercial Mortgage Corp., according to Heller's Web site.
Goldberg's practice is well-suited to fit with Dickstein Shapiro's strong insurance coverage practice. Dickstein opened its Los Angeles office in 2005, when it acquired insurance recovery firm Pasich & Kornfeld. Linda D. Kornfeld is now managing partner of Dickstein Shapiro's Los Angeles office, and Kirk A. Pasich serves on the firm's executive committee.
Two short-short stories. Both to acquaint you with who I was as a litigator and how I can help you as a mediator.
A Born Moralist
I was on the telephone with my client talking about a Rand Corp. statistical study that was originally prepared as answers to contention interrogatories (!!) but eventually became the centerpiece of Plaintiff's proof that my client had engaged in a massive conspiracy to drive the Plaintiff out of business. Claimed damages soaking wet: $250 million.
I was talking about how wrong the opposition was on so many levels -- evidentiarily, practically, legally and, yes, morally.
My client said, "I've finally figured out what you are."
"You, Vickie, are a born moralist."
And I took that to be a compliment.
Anything You Can Get Away With
Toward the end of my career all my cases seemed to hover around the quarter-billion dollar mark. This one was an environmental coverage suit for a major petroleum company's potential liablities for 500 + toxic waste sites in every Canadian province. This is one of the few cases in which the insurance carrier can wear a "white hat." My client -- Lloyds of London.
This stuff is complicated. It involves coverage across a couple of decades and up the ladder of excess policies to the billion dollar mark. We use "coverage charts" -- often color coded -- to understand the policy profile at a glance.
At every oral argument in the trial court -- up to the winning summary judgment motion -- I arrived with a clutch of color-coded coverage charts that supported my client's position. On every occasion, plaintiff's counsel complained about the charts. But he never brought competing charts with him. The Judge -- one of the best on the Superior Court bench -- really wanted to understand the issues and get it right. So she spent each oral argument listening to both parties while scrutinizing my coverage charts.
I genuninely believe that this is why I won.
What Does This Have to Do with Mediation Advocacy?
First, if you believe in the very depths of your soul that your client is right -- as I always did -- your mediation advocacy will improve if you begin to understand the principles of mediation advocacy. It's banal, already, to say that these principles are non-adversarial. Yet few litigators are able to shift from a litigation to a mediation model in circumstances in which making the shift would dramatically improve their mediation outcome.
Most attorneys are likely to settle this case at the mediation if they've brought the right stakeholders, properly prepared their strategic and tactical moves, and counseled their clients appropriately. Yet they take their summary judgment briefs or demurrers or complaints, change the title to "Confidential Mediation Brief," make a few editorial changes -- primarily by removing references to the Judge granting their motion or providing them with relief -- send these briefs to the mediator, arrive with one (or more) bottom lines and, too often, a "prove you can settle this case" attitude toward the mediator.
This is not an indictment of the litigation bar nor even a complaint from a mediator. This is the beginning of a series of posts about helping me help you help your client help you win the mediation.
Stay tuned. Really. Your mediation practice is about to go thermo-nuclear. Take it from the "born moralist" who did whatever was (ethically) necessary to win. Usually with pretty darn good results.
. . . the Honorable Sam Cianchetti, Los Angeles Superior Court Judge (ret.) for his decision awarding $8.4 million in punitive damages, for a total $9 million award, against Health Net In the Arbitration between Patsy Bates and Health Net, et al.
I was a commercial, antitrust, IP and securities litigator long before I devoted nearly a decade of my practice to environmental coverage litigation. In the process, I learned enough about Comprehensive General Liability ("CGL") coverage to make me worry about how well I'd served my commercial clients in regard to the insurance coverage potentially available to them.
If you are a commercial litigator -- or any type of litigator who defends your clients against claims for damages or for injunctive or other equitable relief -- you must
ask your clients for all of their insurance policies, even those that seem unlikely to provide coverage;
carefully review the precise wording of the insuring agreements and research the case law in the relevant jurisdiction to determine how the courts have interpreted those insuring agreements under facts similar to those your client's case presents;
except for some narrow additional protections provided to insureds, be aware that there is no such thing as "the law" of coverage under any particular type of policy -- all coverage flows directly from the precise language of the insuring agreement
in most jurisdictions, that language -- if ambiguous -- is interpreted in favor of the insured's objectively reasonable expectations; and,
in most jurisdictions the rule of contra proferendum will require a court to construe any ambiguity in an insurance policy against the insurance carrier
carefully review the exclusions contained in those policies and research the relevant state's case law (as well as federal cases applying state laws) interpreting those exclusions;
before concluding that there is no coverage, read available treatises as well as recent law review articles that may well suggest creative ways of distinguishing adverse authority or extending existing principles to bring your client's claims within the terms of the policy or outside of pertinent exclusions;
if you have any doubt whatsoever about the existence of coverage, tender the claim to your client's carrier and let the carrier do the analysis;
if the carrier denies coverage, read the reasons for denial critically and respond with any reasonable interpretation of the policy that will support a claim of coverage;
if the carrier continues to deny coverage, keep the carrier informed of the progress of the litigation and invite the carrier to respond to all settlement demands and to attend all mediations and settlement conferences.
If the cost of the lawsuit is beyond your client's means or will deprive it of capital necessary to meet its business goals for the next few years, retain coverage counsel for a second opinion.
Have I mentioned that my beloved husband is one of the best coverage attorneys in the country -- having litigated the World Trade Center coverage action on behalf of Larry Silverstein's lender GMAC? And that I formed my opinion about his brilliance while I was representing the London Market Insurance Carriers and he was representing the policy holder? Even if your case does not justify hiring someone like my husband to give you a second opinion, there are lots of good coverage attorneys out there who can so that you can complete your coverage "due diligence" for your client.
At last, to the 2007 Fifty State Environment Coverage Analysis
If your clients have been hit with demands to clean up toxic waste, this is an invaluable resource. A specialist in the field, however, should be consulted to maximize the chances that coverage will be provided.
Have I mentioned that I'm on the Insurance Coverage Mediation Panel of Neutrals with the International Institute of Conflict Prevention and Resolution ("CPR")?And since I'm a former defense coverage attorney currently married to policy holder counsel, you're unlikely to find many other mediators who are both extremely knowledgeable about the law of coverage and deeply neutral!
If you don't have your trial ducks in a row and can't convince the other side that you're prepared to try the case -- and try it to a highly favorable judgment in your client's favor -- you've got -- sorry to use the term -- squat for bargaining power.
"Show me the salesman," said a savvy and seasoned defendant recently, "and I'll tell you what I'm willing to pay him for his case."
And while we're talking sales -- why is it that no one ever brings demonstrative exhibits to a mediation?
Hand me a visual diagram of the parties and the facts (including the facts that are bad for you). The chart or diagram should "connect the dots" in the way that is best for your client.
During the mediation, repeatedly refer me to that diagram.
When I was litigating insurance coverage cases with hundreds of millions of dollars at stake, I arrived at every oral argument with a color-coded coverage chart representing my client's position on the issue at hand -- like whether the policy holder was required to horizontally exhaust coverage before any of the excess carrier limits would be exposed.
For reasons I never understood, opposing counsel chronically complained about this last-minute demonstrative exhibit motion practice of mine but never brought competing charts into the courtroom.
Because the Judge -- one of the best on the L.A. Bench -- needed the coverage chart to make sense of the oral arguments, she always denied Plaintiff's request to disregard them. More importantly, she spent nearly the entire course of both parties' presentations checking my coverage chart to understand their position -- which position the chart contradicted.
This is not rocket science.
I genuinely believe that I won a series of successive motions, culminating in a successful summary judgment motion, against a formidable adversary because of those darn color-coded charts.
Though I'm deeply committed to maximizing the value to be obtained in any settlement for both parties, like that Judge, I am subject to persuasion, fallible human being that I am.
This blog follows insurance coverage issues from time to time because insurance reimburses us for losses; litigation presumes loss; and, the negotiated resolution of litigation requires the parties to understand the benefits and limitations of everyone's insurance policies.
We also talk a lot about ethics here because people and businesses embroiled in litigation are -- contrary to popular belief -- seeking a just or equitable or fair or ethical resolution.
I cannot say this enough -- IT IS NEVER ONLY ABOUT MONEY.
I also have to tell you that I never once, not on a single occasion, in 25 years of legal practice, a decade of which was spent concentrating on insurance coverage issues, did I ever hear anyone ask whether any underwriting or claims practice was ethical!
Before weighing in, I'm going to just let this question percolate in my consciousness for awhile. If you go to the linked article, you'll see some thoughtful answers. Aside from a little predictable judge-bashing, the readers who paused to answer this question -- both from an underwriting and a claims perspective -- did so with a depth of understanding of the issues involved and the history of the clause at issue -- the one that is at the heart of the hurricane damage claims.
If I were allowed to give only two pieces of gratuitous advice to every lawyer and business person in 2008, they would have to be as follows:
1. if you think an insurance policy * will not indemnify you or your client against a particular loss or provide a defense to a legal action, you haven't thought deeply enough unless you have, at a minimum:
researched the law pertaining to the pertinent policy language in the jurisdiction in which the loss occurred or suit was brought;
painstakingly compared the law in that jurisdiction to the precise language contained in the insurance policy;
consulted with a policy holder insurance recovery specialist -- I understand that this attorney -- Stephen N. Goldberg of Heller Ehrman -- who represented GMAC in the World Trade Center coverage action is one of the best in the country.
2. treat others as you would expect to be treated yourself (this is the conflict avoidance part)
Two points worth noting for the health of any small city's fisc.
First, as Kingman resident and Plaintiff Travin Pennington is reported to have said, "communication and accountability, could have prevented a bill for  attorneys' fees that exceeded $40,000 following a seven-month battle with the city for e-mail records."
The Back Story?
In June, Pennington filed public records requests for thousands of pages of e-mail from then-City Manager Paul Beecher and two other employees. He said Beecher took him into the city hall parking lot, and instead of asking how to resolve the issue, Beecher allegedly made some comments that pushed Pennington to "the tipping point."
"I said, 'this guy's out of control. I'm going to take this guy to task,'" Pennington told the Miner. And he did. After the city failed to disclose more than 8,000 pages of e-mail whose contents the city claimed were personal, Pennington filed a lawsuit in the Mohave County Superior Court.
The Conflict Avoidance Point? Be civil; be responsible; be accountable; and if you fail, be willing to course correct.
But when civility, responsibility and accountability haven't worked, check your insurance coverage.
The Kingman story continues:
The city's insurance policy will cover much of the costs of the lawsuit, including the city's own attorneys' fees, which topped $32,000, according to City Attorney Carl Cooper.
Good work on the City's part in tracking down the necessary insurance coverage!
Resolution: Cutting the baby in half.
Pennington's attorneys offered $48,337.65 - 75 percent of the $64,448.50 in the plaintiff's total fees. The city came back with a $32,225 offer, and the two parties settled in the middle, at $40,281.30.
We mediators do try to generate solutions other than the one arising from the descriptive (not prescriptive) rule that any zero-sum negotiation will resolve half way between the first two reasonable offers.
The good news: you don't need a mediator to achieve this result. Even your fifth grader is capable of adding two numbers and dividing them by two. _________________________
Types of insurance include Automobile; Aviation; Boiler; Builder's risk; Business; Casualty; Credit; Mortgage; Crime; Crop; Workers'compensation; Directors and Officers Liability; Disability; Errors and Omissions; Expatriate; Fraternal; Financial loss; Fire; Hazard; Health; Kidnap and Ransom; Homeowners; Renters; Environmental Liability; Professional Liability; Locked Funds; Marine; Nuclear Incident; Pet; Political risk; Pollution; Prize Indemnity; Property; Protected Self-Insurance; Purchase Insurance; Stop-loss; Surety Bond; Terrorism; Title; Travel; Volcano; and, Workers' Compensation.
As the Court itself acknowledged, under its holding,
a plaintiff could settle a disputed insurance claim, keep the money paid, and then sue for fraud (rather than on the released claim) if it was fraudulently induced to settle the claim by a misrepresentation of policy limits.
We must say we're surprised by this holding and imagine the insurance carriers are as well. The "parade of horribles" raised by State Farm, however, was dismissed as exaggerated by the appellate court, stating that the
consequences of applying this principle are not dire. Indeed, to avoid them, the insurer need only avoid misrepresenting policy limits when it settles claims. We seriously doubt insureds who settle their claims can be expected thereafter to assert groundless claims of misrepresentation of policy limits on a routine basis.
Is this a case of bad facts making bad law? Or am I missing something?
In Judiciary's Role in Arbitration Weighed, AP reports on the tea leaves that lawyers and business people will be reading for the next several months as we await the Supreme Court's ruling on this issue -- may the parties to an arbitration agreement contract for judicial review of any resulting arbitration award.
Because the central policy issue supporting arbitration under the Federal Arbitration Act is to allow contracting parties to control their own destiny, I'd wager the Supremes will permit them to do what they want to do here, i.e., allow federal courts to review any arbitration award the parties want them to.
Here are the tea leaves:
Chief Justice John Roberts suggested expanded judicial review is appropriate, noting the two sides negotiated an agreement with court review as an option. But Roberts also questioned whether federal law allows the expanded review the agreement between Mattel and the property owner calls for.
Justice Ruth Bader Ginsburg suggested the property owner is seeking more latitude than the law allows for judicial review of arbitration cases.
Justice David Souter told the lawyer representing Hall Street Associates that "you want to get rid of" the section of the arbitration law that specifies limited circumstances under which courts can step in and overrule an arbitrator's decision.
By the way, I get alerted to articles like this on a daily basis here -- Laywers U.S.A. It's been my best and easiest source for breaking legal news for quite some time now and it appears in my in-box on a daily basis. For curmedugeons like Mr. Thrifty who say they don't have time to read ANYTHING online, it takes about 60 seconds to scan the news items. Then one second to delete if there's nothing there of interest to you. I highly recommend it and give a long belated "thanks" here to the people at Lawyers U.S.A.
Geek heaven!! My two obscure specialties -- environmental insurance coverage and arbitration law -- have converged in a case to be decided by the U.S. Supreme Court this term. To confirm my total nerd credentials, I give you the news not from the New York or L.A. times, but from Yahoo! News, excerpted with link below:
High Court Weighs Role of Judiciary in Arbitration Case Involving Toymaker Mattel
WASHINGTON (AP) -- The outcome of an environmental cleanup dispute now before the Supreme Court could determine the future of arbitration as an alternative to lawsuits.
Tens of thousands of disagreements in the business world are resolved through arbitration each year, a process often regarded by the business community as a cost-saving, time-saving substitute for going to court.
The risk in arbitration is that the losing side cannot appeal to the judiciary except in limited circumstances. That's the subject of Supreme Court arguments on Wednesday.
The Supreme Court will consider whether the parties in arbitration can agree to take their cases to court for review of arbitration awards.
(an image of Snoopy at his typewriter with the caption "gradually a shot rang out" graced the Shell v. Winterthur opinion holding that the term "sudden" meant "quick" and not simply "unexpected.")
Every deal you negotiate must eventually be "reduced to writing."
I haven't talked much about negotiated agreements here. I usually defer the entire topic of contract drafting to the experts, particularly to the meticulous and scholarly Ken Adams over at Adams Drafting.
Although my own response to Ken's ethical question (it's not unethical until you pull the trigger) can also be found on the linked post, it's really the pragmatic question that interests me:
IS IT EVER GOOD BUSINESS OR LEGAL PRACTICE TO INCLUDE IN A NEGOTIATED AGREEMENT AMBIGUOUS TERMS THAT ONE PARTY BELIEVES THE OTHER PARTY WOULD NOT AGREE TO FOR THE PURPOSE OF EXPANDING THE CONTRACT'S REACH AT SOME LATER DATE?
As is often the case, I find it easiest to answer that question with a story -- this time, with one about a word that cost American and U.K. businesses at least a billion dollars in legal fees.
Does Sudden Mean Quick?
This question consumed at least half a decade of my professional life. Why?
Because sudden's story is lengthy and complicated, I’m forced to reduce the tale here today to its bare essentials. If you wish to understand its well-documented journey through the American regulatory and legal system, click here or here. If the pragmatic question interests you, read on.
The Word that Launched an Entire Legal Specialty
Once upon a time, a few creative and persistent litigators of great reputation demanded insurance coverage for the environmental liabilities imposed upon their chemical and petroleum company clients by the Federal “Superfund” law (CERCLA) enacted in 1980. Many equally creative and persistent litigators of great reputation represented the insurance carriers who refused to provide coverage for many reasons, one of which was the presence of the “sudden and accidental” pollution exclusion in the “polluters’” insurance policies. Many of the names of these attorneys are here.
That provision excluded coverage for
any liability of any insured, arising out of the discharge [etc.] . . . of . . . . . pollutants into or upon land, the atmosphere or any . . . body of water unless such discharge . . . . is sudden and accidental.
The 64 hundred million dollar question?
“Does ‘sudden’ mean ‘quick’ or only ‘unexpected’?
Because most environmental contamination took place over decades as the result of the slow seepage of chemicals and petroleum products into the land, water and air, the answer to this question was worth billions of dollars to corporate insureds and to the carriers that insured them. If “sudden” meant only “unexpected,” rather than “quick,” those billions of dollars would likely be paid by Lloyds of London or AIG – two of my clients -- rather than by Texaco or ARCO, two of my husband’s clients.
The petroleum and chemical companies accused the insurance industry of dissembling about their contractual intent when seeking approval of the "sudden and accidental" exclusion language. The carriers, contended policy holders, had represented that the use of the word "sudden" would not narrow existing coverage -- coverage that would have excluded unexpected -- but not "quick" -- releases of pollutants into the environment. (see here, note 5)
Assuming that the insurance industry "gamed" regulators and policy holders by placing narrow language in a contract while simultaneously intending to interpret it broadly, and without addressing the ethical issues raised by that assumption, would it have made good business sense to have done so?
I answer with another story.
When negotiating the settlement of a $250 million environmental insurance coverage action, the General Counsel for one petroleum company said the following to me about the cost of the looming three-month trial:
You don’t seem to understand. We pour hundreds of millions of dollars a day into dry holes searching for oil. We are not risk averse. The expense of litigation does not deter us.
If you and your clients can say that – or something remotely like it – including ambiguous terms in a contract to take advantage of the uncertainty thereby created might make good business (if not necessarily ethical) sense.
If you cannot, I would suggest that contracts be used for the purpose they are intended – to create as much certainty as possible in your clients’ unpredictable future so that their plans today can make them profits tomorrow.
GC boasts aside, even the richest players far prefer planning that profitable future to fighting over an unprofitable past.
(right: key players with a model of Freedom Tower)
Settle in for a long and satisfying read in this stellar article that chronicles six years of litigation, mediation, negotiation and valuation in the World Trade Center case. Here's just the first paragraph and a link to the full article.
Wachtell dedicated more lawyers to helping Larry Silverstein rebuild at Ground Zero than to any other project in its history.
Rebuilding was the developer's dream-and his right, according to his lawyers from Wachtell, Lipton, Rosen & Katz. But after the towers fell, New York city and state authorities seemed to have done everything possible to elbow him out of the way, even as Silverstein ponied up $100 million a year to rent a hole in the ground. Now, at almost midnight, he was huddled in a conference room in the Park Avenue offices of the Port Authority of New York and New Jersey, the quasi-governmental agency that had leased the Twin Towers to Silverstein in July 2001. Executives from his development company and his financial backers were there with him, as were Wachtell partners Martin Lipton and Robin Panovka. Silverstein ordered two cups of coffee. He was ready to stay up all night. "Let's get this thing done," he told the group.
In Catholic Mutual Relief Society et al. vs. The Superior Court . . . , victims sought to learn whether the nonprofit entity, which administers self-insurance funds for more than 300 archdioceses and other Roman Catholic entities in the United States and Canada, could meet its policy obligation should they enter into a settlement with the Archdiocese of San Diego.
In 2004, a Los Angeles County trial court judge said the victims could seek reinsurance information . . . A state Court of Appeal . . . rul[ed] that California law authorizing limited discovery of a defendant’s insurance coverage does not authorize pretrial discovery of reinsurance agreements with a “nonparty” liability insurer.
On Monday, the California Supreme Court agreed. It found that discovery of reinsurance is allowed when a reinsurer’s policy functions “in the same way as a liability policy (fronting arrangement), or where the reinsurance agreement is itself the subject matter of the litigation at hand.”
I'd just been musing on this issue (really! -- listen, only nerds blog) because I think attorneys should use discovery as much as possible to settle litigation as to try it.
Conducting Discovery to Settle the Case
I'm just back from vacation so I haven't yet read this Supreme Court opinion. I have, however, fought the reinsurance issue more times than I care to remember. I also once sought to discover the extent of a privately owned corporation's ability to pay a sizable judgment only to be thwarted by the rule that discovery must be relevant to the subject matter of the action (etc.)
Still, I recommend that counsel find creative ways to learn facts that will assist them in settling the case during depositions (where "background" questions receive less scrutiny than interrogatories).
What information pertinent to settlement is useful to obtain other than the ability to fund an award? Plenty! but since I'm still on Hawaiian time and in an Hawaiian mind, I'll provide only a few -- let your own imagination make far longer lists than the following.
The identity of those making the settlement decision is question number one, not only to assure that you have the proper parties at your first settlement conference, but also because -- as McElhaney recently suggested -- you want to "hip" corporate deciders to some of the dangers of proceeding that the company's attorneys might not have mentioned (or couldn't stress strongly enough).
Where the corporate entity is split into operating divisions, which division is going to take the "hit" if the case settles.
Whether there are any corporate acquisitions or mergers on the horizon -- or any major upheavals in management -- that might suggest that the executive team green-lighting the litigation is on its way out and less litigation-friendly management about to come on the scene.
Whether other litigation on this same issue, product, financial practice, etc. is pending, making the possibility of bad precedent an issue for any eventual settlement "team."
How can you obtain answers to these questions during a deposition when none of them are relevant to the subject matter of the action or likely to lead to the discovery of admissible evidence? The same way you do everything else in your legal practice -- with chutzpah, imagination, creativity, preparation and sheer good luck.
I'd innocently sprinkle most of these questions into the background portion of the deposition when opposing counsel is generally less attentive than during "substantive" questioning. You can also get away with "it's just background, counsel" when s/he begins to awake with his/her morning latte. If it's a big case with less experienced attorneys assigned to less important depositions, I'd first ask these questions of low level corporate representatives who might be, shall we say, under-represented.
Then there's always simple dumb luck. When I was a first year taking one of my first depositions, opposing counsel fell asleep after lunch! He was snoring while his client innocently waited for me to continue questioning him as if this were a normal event!
I genuinely didn't know what to do. Could I legitimately and ethically continue to question my opponent's client in his "absence"? I suppose a more experienced or aggressive attorney might have done so. But because it just didn't seem right to me, I woke him up before continuing with my line of questioning.
Some defenders, however, might just as well be asleep. As I teach my NITA students, you can do that which you can (ethically) get away with in a deposition. And that is quite a lot if you are a skillful poker player who doesn't let on that the questions you're asking might be strategically beneficial even though entirely irrelevant to the substance of the litigation.
It's the beginning of a new "school" year. Go get 'em!
As we noted yesterday, some members of the insurance policy holder bar suggest that coverage counsel hold non-confidential "mediations," either by calling them settlement conferences or by agreeing that no party will subsequently assert the mediation privilege.
Why? Because policy holder counsel is concerned that the insurance carrier will commit acts of bad faith during the mediation without having to answer for its wrongful conduct due to the protections of the mediation privilege.
I propose here that talking about the confidential part of mediation is like talking about the wet part of the ocean.
Why? Because confidentiality is what makes mediation possible. It is what permits the parties to take a time out on the battlefield where everything we say and every move we make can and will be used against us. Private, confidential mediation time is a time when the parties can come together as people rather than as combatants. And this is true no matter how many zeros follow the first number at issue nor how "fictitious" the "people" are. Legal entities like corporations, after all, can and do work only through people who have personal interests at stake in, and genuinely felt emotions in response to, the litigation.
Mediation time is a time when the law allows people to recognize that they share a mutual problem, one that yokes them together. It is a time when they can give up carrying the burden and cost of the dispute alone; a time when they are given the opportunity to realize that by drilling a hole in the other guy's side of the boat, they will sink their own.
But What About the Unremediated Bad Faith?
Mediation commences and ends on dates certain. If the insurance carrier commits bad faith in refusing to accept a settlement offer during the mediation, you can rest assured that it will continue to commit bad faith thereafter. So what if you can't reveal the offer and counter (or refusal to deal) that occurred during the mediation. Make the same offer again after the mediation is over. The carrier will once again respond with the same bad faith counter or the same refusal to deal. Or, to your vast surprise, act in good faith and pay the claim and all damages associated with its earlier refusal to be accountable for the policy terms.
I cannot think of a circumstance in which acts of bad faith that take place during a mediation session couldn't or wouldn't be replicated both before or after that mediation session. The carrier has 365 days of the year, 24-hours in the day and seven days every week in which to commit bad faith. And the plaintiff may gather evidence of that continuing wrongful conduct on every single one of those days other than the day the parties mediate their dispute.
All we're asking -- the alternative dispute resolution squad -- is one day -- a single day -- to assist you in the resolution of your lawsuit according to mediation principles and practices. I don't think that's too much to ask, is it?
A very very long time ago, I defended my first coverage deposition at a firm named Troop Meisinger.
I'd just joined the Buchalter firm and was struggling to learn both the law of coverage and the folkways of the new practice, which were considerably more genteel than I'd previously experienced representing garment industry and entertainment clients. Which is a low-key way of saying that I'd developed a fairly obstreperous defense style before joining the coverage bar.
The morning of the first deposition day, the questioner was a young -- and extremely frustrated -- associate. After lunch, the highly experienced policyholder litigator Kirk Pasich appeared and more or less put me in my place.
The years flew by and that old coverage gang of mine -- both prosecution and defense -- drifted to other law firms. Still, most of them continue to handle coverage cases, including the prolific Mr. Pasich who subsequently founded the Los Angeles office of Dickstein Shapiro.
Though I take issue with Mr. Pasich's conclusion (excerpted below) the article exhaustively and concisely summarizes every important mediation privilege case in California, a great boon for California practitioners in any field. And for which I thank Kirk. For this and for that early kick in the pants of which I was then in need.
Here's his conclusion.
The California Evidence Code provisions regarding mediation clearly place restrictions on the ability to use mediation documents and communications outside the context of the mediation. Those restrictions must be considered. Parties should take practical approaches to ensure that if they need to use any mediation communications and documents, they can do so. Otherwise, parties should engage in a settlement approach that all participants agree or acknowledge is not a mediation or is not subject to Evidence Code section 1119 et seq. However, even in the absence of statutory exceptions or the required waivers, there is a possibility that an insured may be able to use mediation communications and records as evidence of a carrier’s bad faith.
Making Money Talk is a valuable contribution to the conflict field. Andy Little correctly identifies the weakness in traditional needs-based mediation for quite a wide variety of cases, yet shows how the basic value of a facilitative, client-centered, process-oriented, communication-focused approach is still essential to money cases. This guide is well written and presented--it's a pleasure to read." Bernie Mayer, Professor, Werner Institute for Negotiation and Dispute Resolution, Creighton University, Omaha, NE
The publishers say:
Learn how to effectively deal with the peculiar problems of traditional bargaining that you face when negotiating the settlement of civil litigation cases. This new guide written by an experienced litigator and mediator will help you understand why negotiations of insured claims are difficult to get started, why they become increasingly emotional as the parties engage in round after round of proposals and counter proposals, and how they can be settled with models and techniques that have been tested in thousands of civil trial court mediations.
With these proven models and techniques--essential for the novice or seasoned professional--you will:
gain a better understanding of the dynamics of money negotiations
be able to identify the recurring problems of traditional bargaining
learn facilitative tools and models to use when positional bargaining is unavoidable
In addition, this resource provides litigators, negotiators and insurance claims representatives with the strategies necessary to prepare for settlement negotiations and avoid the many pitfalls that exist in the negotiation and settlement of civil litigation. If you're involved in a negotiation that involves a monetary settlement, this book is an invaluable tool to help you reach a favorable goal.
$42.00 regular price; $35.00 [ABA] Section of Dispute Resolution member price
We recently posted a piece about mediators going "green." Now that I've cruised my husband's law firm web site in connection with our last post on D&O coverage, I find that insurance coverage might go "green."
At least that's what policy holder counsel are saying about coverage for losses arising from global warming under CGL and other standard commercial policies. As Heller's January, 2007 article Insurance Coverage for Global Warming notes:
Insurance may be available to cover losses faced by companies as a result of global warming issues. For example:
A company’s existing portfolio of comprehensive general liability (CGL) policies may provide coverage for defending against and paying settlements or judgments in lawsuits brought against a company for causing property damage as a result of alleged contributions to global warming.
Errors and Omissions (E&O) insurance may provide coverage for claims by governmental entities or individuals that a company or its management engaged in wrongful acts by allowing global warming emissions.
Business interruption insurance may provide coverage for a company’s loss of profits stemming from an event linked to global warming.
This is the first I've seen about potential coverage for global warming losses.
Already, however, I can see the coverage complaint and envision the answer to it, followed by discovery, motion practice and decades of litigation.
Maybe this time we'll find a way for the lawyers to commence a collaborative process to resolve these claims early enough to avoid the hundreds of millions of dollars that get eaten up by attorneys, arbitrators, mediators, experts, accountants, engineers and the like.
We're all ready and eager to serve if needed. But if there is a colorable argument for coverage, wouldn't it be better for all of us who understand coverage to sit down and try to knock out agreements that will satisfy party interests better than the adversarial system is capable of providing.
If you want a referral to a member of the "global warming insurance recovery" team here in Los Angeles, you couldn't do any better than to contact the dynamic and brilliant Nancy Sher Cohen.
The Cost of Prevention and Cure
Since posting this brief note on global warming insurance, a reader called my attention to the following post on recent carrier research concerning potential losses from global warming. See Josh Rosenau'sThoughts from Kansas post Global Warming Insurance from May of this year and the following excerpt below. (Mr. Rosenau is graduate student at the University of Kansas, in the department of Ecology and Evolutionary Biology).
What we have both always agreed upon is this -- policy language is far too often vague and ambiguous and sometimes incomprehensible (I once offered my associates a $200 "prize" to diagram one of the lengthier sentences in a prolix and unwieldy pollution exclusion -- no one took me up on the offer).
If you want to protect your business, see your legal G.P., the transactional coverage attorney to avoid the visit with your legal cardiac surgeon, the coverage litigator.
That said, we give you a few hightlights of Burns' advice on purchasing D&O coverage:
PLI: What do "real-life" D&O claims teach companies to keep in mind in purchasing D&O insurance?
TIMOTHY W. BURNS: Remember, D&O insurance is purchased to protect against securities fraud lawsuits. Securities fraud lawsuits typically ensue when a company restates its financials – the same financials that the company may have attached to its insurance policy application.
When a company announces that it is going to restate its financials, its D&O insurer may announce that it intends to rescind coverage – to seek a declaration that the policy is void ab initio. This is perhaps the last thing the company's directors want to hear.
To avoid this scenario, when purchasing D&O insurance, try to get the insurance company to agree not to consider the company's financials statements part of the application for insurance. This often does not fly.
What will work, at least for non-wrongdoing directors and officers, is to insist on "full severability." This means that the policy will include a provision specifying that the wrongdoing and representations of one director or officer will not be imputed to another. Beware, however, as some unfortunate companies have learned, there are many different flavors of severability and what one insurer calls "full severability" might be half empty.
The fraud exclusion: Insist on "final adjudication" language. Insurers will seek to provide something less and will seek to convince you that it is in the directors' and officers' interest to take it. The convincing usually runs along these lines: There are white hat directors and black hat directors; insurers need less than final adjudication language to ensure that black hat directors don't use up all of the white hat directors' policy proceeds. Beware! At the time of claim, if the corporation does not have "final adjudication" language, the insurer may seek to pay the corporation less to settle the claim by asserting that it can deny coverage altogether by proving fraud in the insurance coverage dispute. . . .
[What About Settlement with the Primary Carrier?]
[T]here are many areas of potential dispute between a corporate policyholder and its insurers. As a result, at the time of claim, a corporate policyholder may accept less than the full limits of an insurance policy to settle the disputes. Recently, however, excess insurers have contended that if the underlying insurers do not themselves pay their limits in full, the excess insurer has no obligation to pay at all. In other words, contrary to longstanding law, excess insurers argue that they have no coverage obligation, if the corporate policyholder compromises with the underlying insurers and pays a portion of the claim itself.
To avoid this dangerous claim situation, at the time of purchase, corporate policyholders should insist that their excess policies specifically state that the underlying limits of insurance may be paid by any combination of payments by the underlying insurers and the corporate policyholder or its directors and officers.
In February 2004, CPR received the highest satisfaction ratings in ADR performance in a survey of General Counsel and their Deputies by Corporate Legal Times.
CPR was the first organization to bring together Corporate Counsel and their law firms to find ways of mitigating the extraordinary costs and delays of litigation, while achieving more satisfying and lasting results through appropriate alternatives, like negotiation, mediation, and arbitration.
CPR works around the globe, serving as a primary multinational resource for avoidance, management and resolution of business-related and other disputes.
Most recently, in partnership with The China Council for Promotion of International Trade (CCPIT), CPR established the U.S.-China Business Mediation Center in New York and Beijing.
CPR is a membership-based, nonprofit alliance of global corporations, law firms, scholars, and public institutions dedicated to the principles of conflict prevention and solution through alternative dispute resolutions.
CPR's proprietary Panel of esteemed arbitrators and mediators has provided resolutions in thousands of cases, with billions of dollars at issue, worldwide.
CPR's wealth of intellectual property and published material has educated and motivated corporate legal departments toward an increased reliance on alternatives to litigation. Much of this material is targeted toward specific industries and practice groups.
The Spitzer administration announced the settlement of all insurance claims at ground zero yesterday, ensuring that $4.55 billion will be available for rebuilding the World Trade Center site.
The agreement, which the insurers described as the largest single insurance settlement ever undertaken by the industry, ended a protracted legal battle with insurers over payouts related to the terrorist attack.
New York State and Port Authority officials said yesterday that the deal removed any uncertainty over how much money would be available for rebuilding and would enable them to obtain private financing for the $9 billion project.
You wouldn't think there'd be a legal practice/personal story to go along with this settlement, but because this is the kind of work I did (insurance coverage litigation) during my last decade in practice, and because I met my husband litigating my last major coverage case (Lloyds of London adv. Imperial Oil, Exxon's Canadian subsidiary) this coverage litigation is a very personal story for me.
How's that for a narcissistic world view?
The Legal Practice Angle
On Labor Day 2001, Steve, my beloved, moved to Heller Ehrman's Los Angeles office after 30-plus years at Heller in San Francisco. Five days before September 11.
We both had the same practice problem. These cases -- the Imperial Oil case and soon the WTC coverage litigation -- consume your legal practice for years. When they're over, you often think you'll never work again. It's a little like being an actor in Hollywood. Sure, you were nominated for an Academy Award for The Devil Wears Prada, but will Meryl Streep get another decent role ever again?
So Steve was wringing his hands about where his next case would come from. When your practice depends upon catastrophic events accompanied by ambiguous insurance policies (they're all ambiguous) you don't want to wish too hard for new work.
By Labor Day '01, I'd moved on to antitrust litigation against the entire Southern California workers compensation industry and was busy learning the intricacies of claims adjustment for workers comp claims. My practice had always been more eclectic than Steve's so it was a little easier for me to pick up new work when THE BIG ONE settled.
You can see the rest coming. Steve's daughter called the morning of September 11 and said "America's under attack." The most chilling and difficult to comprehend string of words I've heard since a friend called at 3 a.m. in June of '68 to say "Kennedy's been shot."
The towers came down and the coverage litigation commenced a few weeks later. Steve and I spent our first year of unwedded bliss one week together and one week apart as he shuttled back and forth to New York for the conferences and court appearances; the depositions; and finally the mediation. Because Steve represented Silverstein's lender (a mere $850 million) his client settled out early and we were able to get used to living together on consecutive weeks.
I neither worry about nor wish for Steve to obtain new coverage litigation anymore. I started my neutral practice in '04. Just as there is enough conflict in the world to keep every mediator employed full time through the next century, there will sadly be enough major catastrophic events to keep Steve employed through retirement.
We've been following the case of Simmons v. Ghaderi since the opinion appeared in October of last year. The case went up to the California Supreme Court for review in December '06. The issue, as defined by Dr. Ghaderi is:
whether there can be an enforceable settlement agreement when all evidence upon which it is based is inadmissible under the mediation statutes.
As our previous commentary on this case indicates, we believe this accurately states the matter at issue and the source of the lower court's error. That commentary, along with a mediation analysis using the Simmons' facts as a hypothetical, can be found here, here and here.
Once upon a time (at least 20 years ago) a Superior Court Judge confided in me that if s/he were overwhelmed with work and facing a calendar call, s/he would read the reply brief only "because it contained all the arguments."
This did considerably alter my briefing habits.
Here the Reply covers most of the arguments in the Opening Brief and the responses to the Opposition, which I haven't seen. If anyone wants to send it along to me, I'll post it too.
(The ultimate digression: starting a post with a digression: This beautiful blog was created, and is "hosted," by LexBlog, the only legal blog outfit in town worth talking to when you decide to drop blogger, typepad and the like and go professional).
[Chubb] now says law firms publishing blogs will be covered by their malpractice policy so long as lawyers are not answering specific questions in a way that could be construed to be legal advice.
That from James Rhyner, worldwide lawyers professional manager for Chubb Specialty Insurance, in speaking with Lisa Berman, reporting for the New Jersey Law Journal (pdf of story).
Chubb does insure this new form of communication -- and will continue to do so within select parameters.
Ryhner also acknowledged, as reported by Berman, "[T]hat there have been no malpractice suits against blogging lawyers in the United States over bad legal advice. But he cites a U.K. suit involving Lloyd's of London that he is monitoring.
Anyone representing contractors, developers, sub-contractors or insurance carriers in construction defect or coverage actions should read the most recent California case law on the duty to pay defense costs for complex construction defect cases.
By "complex," I mean those cases where the HOA sues the developer who sues the general who sues the sub's, all of whom seek coverage from their carriers. As any player in these 15-ring circuses knows, defense costs are often paid by an additional insured endorsement contained in the policies of one or two of the sub-contractors.
That's what happened here. The Court does a great job of clearly explaining the difference between equitable contribution and subrogation where the policies at issue provide potential coverage for some but not all of the causes of action. The additional twist here involves excess carriers.
I'm not going to brief this case here (relying on my insurance blogging colleagues to do so). I do want to alert attorneys for the HOAs, developers, contractors, and insurance carriers for whom I mediate construction defect and coverage cases to this important contribution to the most pressing question at any construction defect settlement conference -- "whose got the money to settle this thing?"
Lawsuits involving business or commercial disputes often trigger the coverage provisions of standard form Commercial General Liability ("CGL") policies.
In lawsuits involving claims of infringement, misappropriation or the violation of the right of privacy, the key portion of a CGL policy is the "personal injury" or "advertising injury" coverage found in Coverage B of the current CGL policy form [Insurance Services Office Commercial General Liability Insurance Policy Form, Section I Coverage B (2001)]. That language provides as follows:
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "personal and advertising injury" to which this insurance applies. We will have the right and duty to defend any "suit" seeking those damages…
b. This insurance applies to "personal and advertising injury" caused by an offense arising out of your business but only if the offense was committed in the "coverage territory" during the policy period.
This article explores the scope of, and recent developments concerning, this aspect of CGL coverage. Practitioners should note that coverage for business torts may also be provided under Coverage A of CGL policies. See, e.g., Ericsson, Inc. v. St. Paul Fire & Marine Ins. Co., 423 F. Supp. 2d 587 (N.D. Tex. 2006) (class action claims against cell phone manufacturer for injuries caused by radio frequency radiation fall within Coverage A for "bodily injury"); Prime TV, LLC v. Travelers Ins. Co., 223 F. Supp. 2d 744 (M.D. N.C. 2002) (insurer required to defend insured in class action suit because sending unsolicited faxes constituted "property damage").