It’s Confidential, So I Can Lie, Right?

An important underlying principle of mediation is that communications made in the course of mediation are not admissible in other civil forums. So, is it okay to make stuff up?

There’s a Rule
California Rule of Professional Conduct 4.1 provides, in part: In the course of representing a client a lawyer shall not knowingly make a false statement of material fact or law to a third person…

Business & Professions Code 6068 requires an attorney “to employ, for the purpose of maintaining the causes confided to him or her those means only as are consistent with truth, and never to seek to mislead the judge or any judicial officer by an artifice or false statement of fact or law.”

It’s the Ethics
The difference may be subtle. Puffing is okay. Lying is not.

Puffing refers to exaggeration, opinions, and representations about future actions. “My client will never settle for less/more than $100,000” is a type of posturing often seen in negotiation. Yet, I have often settled cases for a number both parties had previously rejected as one they would never accept.

Descriptions of pain are subjective. Because these representations are impossible to verify, they can easily be exaggerated or baselessly dismissed. “My client’s chronic pain prevents her from ever working again” may be puffing—or it might not. If, however, the attorney knows the client is clandestinely working a job or has accepted a job offer, this statement is a false representation of a material fact in violation of the ethical rules.

Valuations based on conflicting expert witness reports are the fodder for arguments about what is a proper settlement. Basing a negotiation stance on a hired expert’s report is appropriate. Intentionally failing to disclose pertinent information which would materially affect that expert’s opinion is an ethical breach.

Ethical, But…
While outlandish puffing about the value of a case may be ethical, it may not be in anyone’s interest. Ridiculous posturing and a lack of civility impair fruitful negotiation.

Mediation results in settlement when parties make every argument based on the facts and the law while engaged in good faith negotiations.

Chatting with ChatGPT

I recently attended a webinar where the speaker stated that as facts emerged in mediation, we would be able on the spot to turn to Artificial Intelligence for a case evaluation.

Uh, no.

Don’t get me wrong. I have test-driven ChatGPT. It is a phenomenal tool and search engine. If you are stuck for ideas, a carefully crafted query can produce excellent results. Then it’s up to you to use those results to produce your own work product.

For example, I asked for five reasons to timely notify an insurance company of a loss. Here is an outline of the answer, omitting the full explanations:

  1. Fulfillment of policy requirements
  2. Faster claim processing
  3. Evidence preservation
  4. Compliance with legal obligations
  5. Protection against further damage

I tested the ability of ChatGPT to evaluate a case. I provided a figure for medical expenses and lost earnings and no specific amount for pain and suffering. ChatGPT answered:
As an AI language model, I cannot provide legal advice or determine the outcome of a personal injury case, as these depend on various factors such as the specific circumstances of the incident, the jurisdiction, and the evidence presented.

Similarly, the answer about the value of a workers compensation claim was:
…each case is unique, and the value of a workers’ compensation settlement can vary widely depending on the individual circumstances. To get a more accurate estimate of the value of a settlement for a particular case, it’s best to consult with a qualified workers’ compensation attorney in California.

And those are the right answers. Lawyers and claims professionals supply the human intelligence to evaluate a case based on all the variables. AI is great at collecting available information and presenting it in a requested format. What it can’t do is analyze and evaluate.

In my book Personal Injury Case Evaluation: What’s My Case Worth?, I explain seven specific ways to use your human intelligence to evaluate a personal injury case. AI isn’t going to do it for you. But a mediator can help you figure it out.

Biased? Who, me?

At the Museum of Tolerance in Los Angeles, there are two entrance doors to the exhibits, marked Prejudiced and Unprejudiced.
Try to walk through the Unprejudiced door, and you will find that you can’t. All of us are prejudiced in some way.

Implicit Bias
When we hear a news story about a shooter or a fraudster, the first thing many of us think is, “Was it one of ours?” “What was the race, ethnicity, age, the home town?” We want to know if this person fit into our preconceived notions about “others” or will this reflect badly on ourselves.

The term implicit bias refers to unconscious biases we don’t even realize we hold. Many negotiators are meticulous in their language and actions to make no differentiation among clients or opponents which could reflect bias. And yet, these unconscious concepts can get in the way of settlement.

Perception, Stereotypes, Behavior
You may perceive people of certain groups to be less honest, smart, or cooperative than people in other groups. These perceptions are often based on stereotypes you have absorbed from family, education or other socialization, or from media. You may generalize about people in a certain group based on limited personal experience.

Biased perception and stereotyping can alter your behavior. You may be more or less willing to accommodate, disclose information, or collaborate depending on whether others are from your own or a different group.  You may make lowball offers or outrageous demands because of a preconceived notion of how your negotiating opponent will react.

A Neutral Setting Helps
One way to circumvent the impediments to settlement caused by implicit bias is to use the services of professional neutral. Part of my job as mediator is to guide the parties to negotiate based on the relevant law and facts rather than bias.

Facts can include information about a party’s past behavior. Also important is a person’s family situation and how external threats, such as an insecure employment or immigration status, could affect their bargaining position. Facts do not include assumptions based on factors such as sex or ethnicity.

Timely settlement saves all parties time and money. One way the mediator helps parties reach settlement is to avoid the influence of implicit biases on the negotiation.

Get These Extras Only in Mediation

Sometimes, parties want something they could never get in a courtroom.

The most common provision in a settlement agreement that you can’t get in a judgment is a promise to keep the terms of the settlement confidential. Court proceedings are public; mediations are private, as are most settlement agreements.

Note: minors’ settlements and motions for determination of good faith settlement are not confidential. Neither are workers compensation Compromise & Release documents.

Usually, it’s the defendants who do not want public disclosure of a settlement amount because it sets a standard for future settlements and judgments. They also don’t want any publicity which reflects badly on them or could encourage additional plaintiffs to file claims.

While the benefit to plaintiffs is less, such a clause can protect them from predatory questions about the settlement. These nosy folks are usually family and supposed friends who come around asking for money. The plaintiff can simply say they are legally prevented from discussing the terms of the settlement. Whether they agree to part with any of that settlement money then rests on the strength of their backbone.

Plaintiffs’ attorneys may balk at a complete confidentiality agreement, because they want to publicize a good outcome. There are solutions for that objection. Almost all injury cases settle, so publicity about a specific high-dollar result most likely is about a settlement, not a judgment.

Most settlement agreements explicitly state that defendants admit no liability. Notwithstanding that provision, there are ways to satisfy a plaintiff’s need for emotional compensation. Often, such apologies happen orally at the mediation. Under these circumstances, the communication is protected by the cloak of confidentiality which governs the mediation.

If the request is for a written apology, this can be handled several ways, including as a separate, confidential document or a confidential addendum to  the settlement agreement. Whether oral or written, the apologies are always carefully worded.

Sometimes the plaintiff wants a business to change the practices which caused the alleged wrong. Depending on the nature of the demand, a business may have already implemented the change or has plans to do so. This could be a change in safety, hiring, or compensation practices, or modifying the configuration of the business space. Perhaps a plaintiff wants a contribution to a charity.

Some expensive changes may hinge on a plaintiff’s willingness to reduce their own recovery.

Settlement Is Better
Settling allows a flexibility in the terms of resolution that cannot be achieved in litigation. A willingness of any party to consider such terms can help get parties to settlement quicker.

How Inflation Affects Your Settlement

Prices keep going up for just about every component of expense, including housing, groceries, and medical care. The figure at which your claim will settle is also subject to inflationary pressure. Medical expenses and wages are significant factors in settlement value calculations.
Medical Expense
The June 2023 issue of Business Insurance included an article about the effect of an increase in the Medicare medical service payment rate. California workers compensation medical fee schedules are largely gauged to 120% of Medicare rates. Consequently, the workers compensation community can expect an increase in medical expenses.

Medicare’s move affects civil as well as workers compensation claims. Medicare’s adjustment presages other insurers increasing their payments to medical care providers. Providers are facing increased costs to operate their facilities. More than half of California’s hospitals are losing money. Adequate payment is important for keeping medical services available. Payment increases raise the cost of current medical expenses as well as future treatment.

But wait, you may say, because of the collateral source rule, in most– but not all– liability cases, the amount paid by a health insurer is inadmissible. Care providers’ inflationary pressures are likely to trigger an increase in the billed rates, even though the amount they receive from insurers is much less. This affects not only special damages, but also general damages for pain and suffering which are often tied to the specials. An increase in compensatory damages could also trigger an increase in punitive damages in some cases.

To cover the increased cost of medical care, health insurers are raising their premium rates. According to the California Department of Managed Care, premium increases ranged from a 4.1% increase in 2022 for large group coverage to 7.0% in 2023 for CalPERS (the plan for public entity workers) enrollees. Individuals buying Affordable Care Act policies in 2023 faced average premium increases of 5.6%.

One technique for settling injury cases is to provide a vehicle for providing future health insurance rather than projected medical expenses. That workaround does not avoid inflation-fueled price increases.

To keep up with inflation, workers are asking for wage increases. A low unemployment rate adds urgency to employers’ responsibility to provide adequate compensation. Certainly, there are other economic factors which affect jobs in a specific industry. However, the compensation scales needed to retain necessary employees will rise.

Injury claimants will claim damages for lost wages at a higher level. A cost of living adjustment for future lost earnings will start at this higher base amount and, depending on the prospective disability period, may justify calculating larger annual increases than in the past.

Workers Compensation attorneys are already familiar with annual increases in disability payment rates.

What To Do Now
Most cases settle too late. Parties don’t feel compelled to settle until trial is imminent. Meanwhile, years pass. Well before our current inflationary spiral, I have seen the value of cases dramatically escalate while attorneys insist on turning over every rock in discovery.

Litigation is stressful. Claimants may suffer from a lack of resources which worsens their situation. That does not benefit any party. The smart move is to thoroughly and promptly research your case and then actively pursue settlement.

Closing a case works to all participants’ advantage. Mediation can make it happen.

Are You Really Ready for Mediation?

Make sure these components are in place:

Who will attend the mediation? This should include the person who holds and can modify the authority. That’s the person holding the purse strings on the defense side and important advisors to the claimant, such as a spouse or adult child.

Telephone standby is not good enough. The person on standby is not getting the real sense of what is transpiring. Getting an explanation through an attorney filter can result in a distorted message. This is especially true if the attorney is wary of being removed from the case. Remote mediation allows participation regardless of a person’s geographic location and also allows productive use of the inevitable downtime.

Have you prepared your client/insured? Does that person understand how mediation differs from a court proceeding? Will this participant be comfortable with remote mediation technology? Have you reviewed your strategy and obtained settlement authority?

Have you thoroughly prepared, preferably by steelmanning?

Did you submit your mediation brief in plenty of time for the mediator to read and consider the explanation of your position?

When all the components are in place, you are most likely to achieve the best possible settlement.

Get Your Kryptonite Ready

Most of us have heard of the concept of a strawman argument. Those are the fallacious arguments you can knock over because they distort the premise to make the proponent’s point. A strawman argument might concentrate on something that hasn’t or will never happen or use circular reasoning (our expert is correct because this expert is renown and therefore cannot be wrong.)

In contrast, steelman arguments present the strongest version of your opponent’s case. It is your job to thoroughly investigate your case so you can learn every one of those arguments and figure out the best way to deal with them. Too often attorney and claims people succumb to confirmation bias where they only look at evidence that supports their own position.

Steelman – not Strawman
Whether in negotiation or at trial, in order to get the best result, you must be thoroughly prepared. If you do not take seriously the need for preparation before mediation, you will not be able to settle or to get the best deal. Preparation is not limited to lining up your own arguments. It also includes conceiving your opponent’s strongest arguments and how you will meet them, a technique called steelmanning.

Ideally, you would set up a mock negotiation to force yourself to argue your opponent’s position against another person on your team. Another option is to brainstorm all the possible arguments your opponent could come up with and write each possible argument at the top of a separate page. You’re so smart and know your case so well, you are likely to come up with some that the other side didn’t even know they had. Good! Then—rationally—come up with all the arguments against those positions. This might even require >gasp< legal research. Return to your notes and on each page write the details of how to respond to the position outlined at the top of the page. Remember you are preparing a possible response; don’t mention these issues at the actual negotiation if your opponent hasn’t raised them.

When you have thoroughly explored all the possible arguments against and in support of your case, you are ready for mediation.

A Visit to the Tort Museum

Did you know there is a tort museum? Located in Winsted, Connecticut, the American Museum of Tort Law has several galleries which educate about precedent-setting cases, including a gallery which focuses on dangerous toys, a product liability issue.

You don’t have to travel to New England to see the exhibits. The website offers several options for viewing the museum online.

The Museum’s Founding
Ralph Nader founded the museum in 2017. Nader first became famous for his ground-breaking expose of manufacturers’ indifference to automobile defects, Unsafe at any Speed.

Winsted is Nader’s home town. It is also about 25 miles northwest of Hartford, Connecticut, which bills itself as the insurance capital of the world.

Aftermath of the Big Verdict

Decades ago, I worked on a massive product liability case. I was involved on the coverage side rather than the case in chief.

Defend, No Matter What
The case was national in scope, with hundreds of claims. The manufacturer was in charge of the defense strategy, which was to not give an inch. Its carrier was concerned about the reasonableness of the skyrocketing defense fees, which it was closely monitoring.

The manufacturer insisted that the product could not have caused the alleged serious injuries, and it had a bevy of scientific experts to say so. Of course, the plaintiffs’ experts said the opposite.

The First (and Last) Case
The first case went to trial in front of a Southern California jury.

The verdict in favor of the plaintiff exceeded the 2023 equivalent of $8,000,000, eight million dollars.

After the case ended, the attorneys were allowed to speak with the jurors. “Did you find that the product caused the injury?” they asked. The jurors responded that the expert testimony was conflicting and confusing. One juror explained the verdict: “S/He was just so sick.”

Given the size of the verdict, the number of pending cases, the liability risk potential, and the prospective defense costs (which the carrier was contesting) including possible appeals, the manufacturer was forced to declare bankruptcy.

In the Chapter 11 proceeding, a fund was established to provide compensation for claimants. A hierarchy of claims was developed to determine the amount. The process took years.

The carrier refused to pay the full amount of the defense costs showing that the litigation management was unreasonable. Law firms were not fully compensated.

The Lesson
As among the issues of liability, causation, and damages, causation can be the trickiest.

If a plaintiff, particularly a sympathetic plaintiff, can get in front of a jury, the plaintiff is likely to prevail. In numerous cases, juries have returned large verdicts against a defendant who the jury sees as having deep pockets, even when a shallow-pocket defendant created the primary cause. Jurors often have difficulty following experts’ testimony and may be reluctant to favor one over the other, instead relying on other evidence.

I have personally tried more than one hundred cases. As a mediator, I have often tried to discuss risk exposure and likely outcomes with the participants. Regrettably, on a couple occasions, intransigent parties have taken the stance: we have a perfect case and will not settle. Then, I later learned they suffered exactly the bad result I had warned about.

Parties in mediation are in charge of the result. The mediator can only facilitate the negotiation. That includes raising issues and sharing the benefit of their experience. Just because the amount at issue in your case does not approach seven figures doesn’t mean it’s not subject to the same dynamic at trial as experienced by the memorable product liability defendant.

Inflation Reduction Act Update

Will the Inflation Reduction Act affect your settlement? A prior post discussed that possibility. A year later, there are developments

The First Drug Designation
The Department of Health and Human Services has named the first ten drugs to be subject to negotiation. The chosen drugs represent about 20% of total Part D annual spending, fifty and a half billion dollars.

The drugs are principally used for cardiac disease and diabetes as well as the autoimmune diseases psoriasis and Crohn’s disease. These are not conditions caused by run-of-the mill tort or workers compensation cases. They might occur as a result of medical or pharmaceutical malpractice, but that is not something practitioners are likely to see frequently.

Big Pharma Litigation
Predictably, passage of the Inflation Reduction Act provoked a rash of lawsuits from drug manufacturers challenging the law. Among others, plaintiffs Pharmaceutical Research and Manufacturers of America, Merck, and Janssen Pharmaceuticals have complained that the law unconstitutionally forces manufacturers to sell their products at below-market prices.

Briefing is ongoing, and appeals are sure to follow.

The Conclusion for the Claims Community

There was a lot of hoopla when this law passed about how it would finally tame the high cost of pharmaceutical drugs. However, the evaluation of cases with significant ongoing drug expense appears to be unaffected, at least for now.