Mediating Professional Liability Disputes

April 16, 2024
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Whether it involves a claim by a multinational corporation against a global consultancy, or an individual suing a high street solicitor or surveyor, professional liability disputes have certain characteristics which seem to crop up time and time again.

In a nutshell, by the time a professional liability dispute reaches mediation, both parties will frequently be extremely frustrated by the way the other side is dealing with the case. In my early contacts with the parties, insurers and their advisers I often hear something along the following lines:

Claimant

“They’re going out of their way to be difficult. It’s obvious that serious mistakes were made and my client has lost £X [a very big number]. They are behaving very badly. They should have made a serious offer by now.”

Defendant

“They’re just not engaging with the issues. They haven’t explained any of the basics and we have serious concerns on all of duty, breach, causation and quantum. The numbers they are throwing about seem to have been plucked from thin air.”

Before we can realistically start to look at the substantive issues, we need to deal with any sense of frustration on both sides. It may already have given rise to anger, antagonism and a sense of hopelessness.

In some (though by no means all) cases, there can be a gap in the level of expertise between the Claimant and Defendant teams. The defence team will normally be retained by insurers and will have many fee earners handling such disputes day in and day out. Sometimes, on the other hand, the team representing the Claimant will only handle the occasional professional liability claim and may not be completely tuned in as to how insurers approach claims.

The Claimant’s view is generally that “it’s obvious there’s been an error and that my loss is £X”. The Claimant sees the matter as very simple and has a misplaced expectation that the facts speak for themselves. They do not know, or do not see the need to deal with, “every single technicality”.  In addition, their view of quantum may be unrealistic in terms of what the law views as recoverable. On occasions, I find that the Claimant’s own assessment of quantum may not have been rigorously tested by advisers. Moreover, it is by no means uncommon for the Claimant’s lawyers to be struggling to have their advice heard, or to get full instructions. They may also be experiencing funding problems. The Claimant may be resistant to the necessary rigorous approach to setting out the claim.

The Defence team may feel they have been pushed into a mediation in circumstances where the material provided has not enabled them to analyse the claim fully or where, in their view, the very basis of the Claim is highly questionable.

How can the mediator help?

Stage 1 – before the mediation meeting

The Claimant may be upset by feeling that the allegedly negligent professional does not care or will not help them. They may not appreciate that the professional’s hands may have been tied and that they have not been able to communicate in any substantive way because of potential conflict of interest and/or the terms of their insurance policy.

The Defendant may feel very aggrieved at the claim and the way they are being blamed for all of the Claimant’s alleged losses.

Delay is often a serious source of frustration and it is true that the defence team may have taken a long time to investigate and respond – and that first response may have led to further rounds of correspondence which, as far as the Claimant is concerned, have got nowhere.

The mediator should be able to recognise these dynamics and, in private pre-mediation discussions, help each party think about why the other side is not behaving as they want them to. Plans can then be made to mitigate the issue.

In the initial pre-mediation calls, I start by trying to take steps to take the heat out of the parties’ respective approaches. I will also explore why there is such a gap between the two sides – what is each side missing? What does each side need to know from the other so they can re-assess their risk and consider settlement possibilities?

I check with the Claimant’s legal team that they are coming ready to deal with the standard requirements for any claim against a professional as well as any specific enquiries raised in correspondence, should the need arise. It will be important for them to be on top of each essential element – duty, breach, causation and loss.

I also discuss whether there are additional documents or information which could usefully be provided before the mediation, just in case there is any new element which might have an impact on insurers’ reserve and any review of it before the mediation meeting. Although phone calls can usually be made to the Claims Manager, it is difficult and in my experience not common for insurers to go beyond their reserve on the day of the mediation, even if new information helpful to the Claimant has come to light.

In speaking with the Defence / insurers’ representatives, I try to discover what their concerns are about the claim but also discuss with them the benefits of keeping in mind and recognising the human side. If a Claimant appears to be unreasonable, it may well be because their business or personal life has been thrown into turmoil as a result of the case and its underlying events, and put on hold because of the litigation. If the defence team can demonstrate to the Claimant that they are listening and absorbing what is presented to them, that can be very helpful.

In summary, pre-mediation groundwork is absolutely vital in achieving a productive – and not too lengthy – mediation.

Stage 2 – At the mediation

Preliminary Meeting with the Claimant

The Claimant often arrives at the mediation anxious, frustrated and without a great deal of hope that the case will settle. As a mediator, I try to encourage the Claimant to take the view that now we have a mediation organised, this is a golden opportunity to bring matters to a conclusion.

I try to reassure Claimants that in my invariable experience, insurers do pay if the Claimant can satisfy them that there is a serious case to answer but that there is a detailed process to be gone through. I explain that this will involve a number of “hoops” because the defence naturally take a rigorously analytical approach. Defence lawyers often bemoan the fact that the Claimant team are working back from loss instead of starting with duty and moving forwards from there.

Preliminary Meeting with the Defendant

The mediator will often encounter an insured individual or firm who is feeling a great sense of unfairness and that the claim is plain wrong. They may think that the insurers’ commercial approach does not sufficiently reflect the strength of the defence. Simply having an opportunity to express this to the mediator can be worthwhile for a Defendant. I will already have ascertained where the Defence team take issue with the claim, but will re-check this so that I can give the Claimant every opportunity to deal with the points raised if they are able to do so.

A joint session can be very useful

In pre-mediation discussions, the mediator should have taken steps to take the heat out of the parties’ respective approaches so that conduct is less of an issue on the mediation day.

Whilst I do not automatically organise a joint session in every mediation, I do find them particularly useful in the context of professional liability disputes. A joint working session offers a chance for the parties to understand fully why they are starting the day some considerable distance apart. Joint sessions can be very useful in allowing the defence/insured team to demonstrate what the Claimant needs to do to persuade them. They can also explain any delays, and acknowledge the upset. If appropriate, the professional can take the opportunity to make a face-to-face apology. This can make a huge difference to the prevailing mood.

A joint meeting gives the Claimant the opportunity to explain the impact of the error or omission, explain how the losses have come about and how the damages are being calculated. It may also be useful to explain some of the factual background if the Defence appears unaware of any salient points.

The Claimant may be suffering effects that the law does not or may not compensate for but which are nonetheless real. Grey areas may emerge which can assist the Claimant in persuading the Defence that potential quantum is higher than they believed.

Rather than set out their own case and state how strong it is, I encourage both sides to adopt the approach of saying “In order to move towards you we would need to understand…” and “at the moment, we do not understand your case on …..”. If the teams feel comfortable, they can discuss some or all of the points there and then. Very commonly, however, they will take them away for private consideration and discussion with the mediator.

The Lawyers’ Role

I would often favour the approach of flagging these points in a joint session but leaving more detailed work and discussions to sub-meetings between lawyers and the mediator. Once the hurdles to settlement are all clear, I find that the parties’ legal representatives can be very realistic in tackling them and can have some robust but productive discussions.

Anything else?

Most professional indemnity claims will boil down to money, but the mediator can explore whether there is anything the Claimant still wants the Defendant to do for them, and whether the Defendant is able to do it. Much will depend on the circumstances – a renewal of personal relations may be important in a small town or village where individuals are involved, but quite unnecessary in a large commercial case.

Time and expectation management

No-one enjoys working long into the evening and proper preparation should mean that the mediation does not run on late. There can, however, be issues in the Defence room which do not directly concern the Claimant. In particular, where there are multiple Defendants, there may be long discussions about apportionment between the various Defendants and their insurers. A chicken and egg situation can arise, with some wanting to agree percentages before negotiating with the Claimant and other wanting to see the result of that negotiation, or at least get into the mediation and hear more from the Claimant, before arguing about apportionment. Similar issues can arise if there are coverage issues between insured and insurers.

It is the mediator’s job to manage all parties’ time as efficiently as possible and to keep a sense of momentum in the mediation. There is no easy recipe for this but maintaining everyone’s concentration on what needs to happen next, keeping discussions moving, and keeping the different rooms informed about timing can all help.

Outcomes

Happily, in my experience, a very high percentage of professional liability mediations result in settlement. All that preparation is clearly worthwhile.


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