to the High Cost of Litigation Center for Public Resources (CPR) New York, New York Vol. 7, No. 5 March 1989
Contents Pilot Insurance ADR Project Results in Settlements 37 The CPR 88 ADR Awards: Wide Spectrum of Winners 37 ADR is Umpire Off the Field 38 Cal. U.S. Court Makes ADR Plan Permanent 39 Study: Job Forms
Quotation of the Month 40 Successful Mediation in
Conn. Apt. Collapse Showcases ADR in Complex Cases Panel of Judges: 88 CPR Awards Miscellanea Briefs
ADR Taxes Rand Study More Manville Case Appraisal
Drawing by Schwadron
44 44 44 45
45 In Controversial Land- Use Plan, New Jersey Crafts Novel Neg-Reg 47 Events of Note 51
Pilot Insurance ADR Project
The results of a pathbreaking ADR experiment by a group of Connecti- cut insurers were announced in late October, with the project admin- istrators calculating an auspicious 70 to 92 percent settlement rate, de- pending on the type of measure- ment, and with the vast majority of responding participants judging the project an effective one.
Based on an intake of more than 1000 common insurance disputes- from automobile to construction to general liability-from November 1986 to December 1987, the experi- ment yielded much other fruitful data. For example, researchers
Results in Many Settlements found that both defense and plain- tiff camps were usually willing to try ADR. And many disputes were set- tled prior to ADR-on the ADR steps, as it were-often as a result of a simple confidential listening process.
The experiment also underscored the institutional pushes and pulls in claims departments that can work against ADR, and pointed toward some promising solutions.
This issue-the resolution of re- curring insurance disputes-has been of great interest to the ADR community in recent years. In 1987, (continued on page 40)
The CPR 88 ADR Awards: Wide Spectrum of Winners A large city bar association, a For- tune 100 company, a graduate stu- dent in urban planning: This sample suggests the wide range of winners in the CPR Legal Programs 1988 competition for excellence in the use and study of alternative dispute reso- lution.
Culled from scores of entries in four categories, the honorees in the annual CPR event advanced the ADR cause in ways as varied as them- selves. Twojudges won for their me- diation of lawsuits over a major con- struction disaster in Connecticut, for instance, while a student winner mapped a way to greater use of ADR
in hazardous-waste cases. And, in earning their award, some law-firm lawyers and their third-party neutral resolved a high-tech antitrust dis- pute over bank cash machines throughout Texas.
But amid the variety there were some patterns discernible. In a sign of the maturing of the ADR move- ment, for example, several awardees focused on the design of ADR systems in companies, government agencies and other organizations. This devel- opment suggests that, as the legal community becomes more confident about ADR, attention will turn from (continued on page 42)
Vol. 7, No. 3 March 1989 40 Alternatives
Insurance ADR (continued from front page) a CPR committee of expert lawyers completed a major report on the subject, Alternative Dispute Reso- lution in High Volume, Third Party Insurance Disputes. (Alternatives, May 1988.) And the Connecticut ex- periment itself won a CPR Signifi- cant Practical Achievement Award in 1987. (Alternatives, February 1988.)
Project History Conceived of and initially funded by The Travelers Cos. in 1985 and early 1986, the Hartford-based Connecti- cut ADR Project Inc. is supported by a consortium of insurers, originally numbering 14 and later increased to 27. Many of them are sustaining members of the CPR Legal Program.
The project began when Travelers Associate General Counsel Henry Naruk, a former Connecticut state judge, developed the project con- cept in concert with lawyers, claims managers and others. It was to be an independent, nonprofit center that would, for a year or so, test the viability of an institutionalized ADR system for recurrent insurance dis- putes. After the test year, the results were to be scrutinized to see if the program was successful and if it could and should be replicated.
With the appointment of Ex- ecutive Director Donald B. Reder and a board of directors-which in-
Quotation of the Month
No state at war with another state should engage in hostilities of such a kind as to render mutual con.- dence impossible when peace will have been made.
A warning from philosopher Immanuel Kant that is as rele- vant to the courtroom as to in- ternational conflict. Quoted in The Viking Book ofAphorism, by W. H. Auden and Louis Kronenberger (1966).
cluded insurer representatives, a plaintiff lawyer, a law professor and a bar official-the ADR Project took on a more refined form. It was de- cided that the center itself would serve primarily as a marketing orga- nization, promoting ADR and seek- ing agreements for its use. For the substantive ADR work, the Project designated five private ADR com- panies: ADR Inc. of Boston; American Arbitration Association; American Intermediation Service; Dispute Resolution Inc.; and U.S. Arbitration Service.
Cases were sought and gotten pri- marily from the participating insur- ers, but a significant portion-11 percent-originated with plaintiff lawyers. After one side or the other submitted a case, Project personnel would contact the other side, seeking their agreement to use ADR. Willing parties would select both one of the Providers, as the five private ADR companies were called, and one of the available binding or nonbinding ADR procedures. Insurers paid a $75 submission fee upon bringing a case to the Project, and both sides paid it a $375 user fee when an ADR agreement was reached.
As the Project proceeded the initial plan was revised. Early on, for in- stance, the board of directors aban- doned the Project limitation to auto- mobile cases with less than $50,000 at issue. That opened the Project up to all kinds of insurance matters, some with six- or seven-digit sums at issue. Most cases had less than $50,000 in dispute, however.
Another change arose from the realization that, in many cases, an ADR procedure with a hearing of- ficer or mediator was not necessary to achieve settlement, notes the final report. One or both of the par- ties would indicate. . . that there was a good deal of negotiating room in their settlement position but that, for any number of reasons, they did not want to present their actual settle- ment position to their opposing party.
This unanticipated attitude led Project personnel to revamp their original role as only the expediters,
promoters and administrators of ADR. They began to do substantive ADR, mediating some disputes, often through a confidential-listen- ing procedure, for a modest $75 fee.
The discovery of this disputant at- titude was one of the most important of the Project. This experience cer- tainly suggests the value of a neutral third party simply listening to what the opponents have to say about the merits and real value of their cases, says the final report. These real set- tlement positions, if known, often re- sult in early settlement of a signifi- cant percentage of cases lingering in the files of plaintiffs attorneys, claim offices and the courts.
If confidential listening did not re- solve the case, it could be sent to one of the ADR Providers, as originally planned, for either (nonbinding) mediation or (binding) adjudication.
Other Results Realizing that many parties wanted a confidential listener was only one of the dramatic results of the Project. Two others were its high conver- sion rate and its high settlement rate.
The conversion rate is best de- scribed in the context of Project pro- cedure. Simply put, one party in an insurance dispute-usually the in- surer but sometimes the plaintiff- will submit a case to the Project. The next task is to contact the other party about the Project and to attempt to secure its agreement to try ADR. The conversion rate measures the Projects success at gaining these agreements.
That rate was an impressive 80 percent or so, with the Project failing to secure both sides agreement to ADR in only 192 of the total of 1037 submitted cases. Most refusers were plaintiff lawyers. The Project final report divided the 192 into two groups: 43 in which the rejecting lawyer simply refused outright to consider the ADR process in any case, and 149 in which the rejecting lawyer declined to participate based on the characteristics of the par- ticular case or insurance company. (continued on page 46)