Disputes, be they between companies, agents, insureds, cedents or reinsurers, cost large dollar amounts, exhaust significant time and emotional energy, damage important relationships and often now require the use of expensive electronic discovery experts to locate and preserve discoverable documents. Legal expenses for a material dispute can readily top $1 or $2 million per side. Add to this outside legal expense the internal time and e-discovery expense and one can readily see that total dispute costs for both sides for a material, but relatively small dispute, can easily exceed $5 million.
One would think that sophisticated reinsurance partners would fully appreciate the impact of these financial and non-financial costs, and find a way to either reduce them voluntarily in ongoing proceedings or reach out and resolve them via negotiation. Sometimes they can; but often, they don’t have the tools or experience necessary to make this happen. Moreover, neither side wants to be the first to suggest a streamlined procedure, because the parties now cannot agree on anything, or raise the topic of settlement, fearful that it is a sign of weakness.
AIRROC has developed several important tools to reduce both the friction and financial costs of disputes while preserving important relationships between the parties. The first AIRROC Dispute Resolution Procedure (DRP) tool was a simplified, single-umpire arbitration process. The DRP arbitration tool has been the subject of numerous AIRROC education roll-outs and mock umpire presentations, making members and nonmembers fully aware of its advantages and “user friendly” procedures. The DRP simplified arbitration tool has become a fairly well-recognized, well-utilized (and well-copied) process which emphasizes its usefulness. It covers all of the elements necessary to initiate, run, and conclude a streamlined, effective arbitration at a small fraction of traditional arbitration costs.
Taking a very similar approach, AIRROC has now endorsed a simplified mediation process as a further valuable tool for members and non-members to narrow and resolve apparently unresolvable disputes. On September 24, 2014, the AIRROC Board of Directors adopted a resolution approving the endorsement of a streamlined mediation process for use by AIRROC members and nonmembers. The AIRROC simplified mediation procedure, like its DRP twin, includes the following key characteristics:
Initiation of AIRROC Mediation Proceedings form
Available AIRROC mediator selection
Suggested basic mediation procedures to include specifically permitted ex parte communication with the mediator
AIRROC fees ($1,000 for members, $2,000 for non-members)
Mediator fees of $150/hour
Entirely confidential discussions
For the full article, refer to page 25 in the Spring 2015 issue. https://www.airroc.org/assets/docs/matters/airroc%20matters.%20vol%2011%20no%201%20spring%202015.pdf
