Mediation momentum

So far as I am aware, statistics are not available as to the amount the market spends on legal services directly associated with dispute resolution, but recent inquiries put the figure at hundreds of millions. While the London Market seems to have revelled somewhat in conventional litigation, participation has never been perceived by underwriters to be particularly good value for money - nor for relationships, a significant factor in successful underwriting.

As a procedure that saves significant legal costs and gives an opportunity for maintaining good relations, it could be thought that the insurance market was a natural for mediation. However, the reality is that alternative dispute resolution (ADR) was almost unknown in the UK until six years ago. Since that time, take-up has been slow, but is now rapidly increasing. But like all change we are suspicious of ADR and there is a continuing need for education in the market.

Mediation initiative
The first step in this educational process came when a number of individuals in the marine market, convinced of the benefits of ADR, established the Market Mediation Initiative. The initiative, comprising presentations and mock mediations, aimed to inform the market about ADR, how it differs from more traditional routes of litigation and arbitration, how it works, why it works, and how to access the system. Supported by the International Underwriting Association (IUA) and Lloyd's Market Association (LMA), about 400 practitioners and market lawyers attended mock mediations over 18 months.

But the legal impetus is only part of the story. Great changes of attitude are taking place in the insurance industry. While the traditionalist view is that a body of case law developed by legal decisions over many years has a value; the cost of achieving that list of precedents, in terms of time, money and delayed finality is regarded as excessive.

More and more is the view developing that effort put into the clarity of wording, together with the introduction of a dispute resolution procedure, is more likely to achieve the objectives of reinsurers, insurers, and their customers.

It is possible to discern an increase in the use of mediation by insurers and assured both from anecdote and changing contractual practice. The IUA technical clauses committee is considering whether or not to recommend in principle a mediation clause and thought is being given to what that clause might be and how it would fit in with existing marine and non-marine contracts.

Mediation clauses are now to be seen in contracts between major international trading houses and a mediation clause will almost certainly appear in the London hull clauses, which are under active review by the IUA/ LMA Joint Hull Committee at the moment.

The introduction of a model mediation clause would give some final legitimacy to ADR in the insurance market.

Over the last 18 months IUA and Lloyd's have supported weekly mediation clinics, held by service provider InterMediation. The clinics are also supported by a number of law firms prominent in the insurance market.

The principle purpose of the clinics is to provide a confidential opportunity for discussion of any uncertainties individuals might have about the process.

Growing confidence
They have played an invaluable role in increasing awareness and although attendance at each one was variable, it was significant that there has been a sizeable growth of interest in the clinics after 11 September. It is planned to continue them for another 12 months.

Mediation is a tough process. It is, however, fast and focused and is a process in which there is ever growing confidence. Moreover, insurers are beginning to see ADR as an important method of improving claims control.

As the mediation momentum within the market continues to gather pace, its use as an alternative to litigation or arbitration will continue to grow.

Marie-Louise Rossi is chief executive of the IUA