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Business Interruption Insurance Coverage- News from the UK

It’s summertime, and temperatures are high. So let’s look at a hot insurance coverage issue: business interruption caused by the coronavirus.

 Do you know about the business interruption insurance coverage test case in progress in the United Kingdom? To create some consistency and avoid a litigation morass, the Financial Conduct Authority (FCA) has brought a test case, something like a declaratory judgment. The FCA regulates the UK financial services industry. Their work includes protecting consumers, stabilizing the financial services industry and promoting competition. Eight insurers have agreed to be bound by the test case decision. Some of those defendants, such as Zurich, Arch, and Royal & Sun Alliance, also do business in the United States. Also bound will be their managing agents and sales brokers and agents. Issues to be considered include what constitutes “property damage” under the policy and the effect of a pollution exclusion, the same issues coming up in lawsuits in the United States.

The outcome will be binding in the UK, but why should United States insurance professionals care?

Of course, the law applicable in the case jurisdiction controls, but this is a public, complex, deliberately considered judicial process interpreting policy language. Therefore, parties can expect other judicial bodies to take notice of it and find the outcome persuasive. To the extent that an insurer’s policy language is substantially similar across various countries, policyholders would reasonably expect their carrier to treat them equally, regardless of geographic location, assuming such an outcome is consistent with local law.
You can follow the proceedings at the test case official website and subscribe to updates.  Trial started on July 20 and at this writing is ongoing.

Quarantine Settlements

You have an opportunity. Right now. While you are working from home. While you are most likely to be able to reach people by telephone and actually engage in a discussion about pending claims.
 

Look over your file inventory. Which are the claims with high monthly expenses?  What about the old dog claims that have been around forever? Would you like to close that in pro per claim?

Reach out to parties about settling pending claims. Offer to participate in a remote mediation. Video mediation lets parties negotiate jointly and also in separate caucus rooms without physically leaving their homes.

In mediation, people need not retreat from their stated negotiation positions, yet confidentially discuss a route to resolution with the mediator.

Claims are down, right? High unemployment means there are fewer people working and fewer people getting hurt. There are fewer cars on the road. Essential workers must still commute, but the rest of the population is mostly sheltering in place. But then there are those COVID-19 claims. Sickened workers are entitled to coverage. Small businesses are making claims on their business interruption policies. Open roads have encouraged reckless driving, which worsens the outcomes of the inevitable collisions.

Eventually, there is going to be an uptick in claims. The time to reduce the pending claims inventory is now.

Align Thoughts, Words & Deeds to Get Results

Having trouble concentrating? Affected by shelter-in-place orders to contain the COVID-19, overlaid with curfews activated by civil unrest following the death of George Floyd? Join the club.

For some cases, nothing is urgent right now. It’s easy to leave those cases on autopilot.

What you focus on is what you get. If what you really want is to avoid the expense and stress that go with delaying case resolution, you need to align these:

Thoughts: Concentrate on one, just one, file and put together an action plan in your mind specifically what you can do right now to bring it to resolution. That may well be mediation. Do you really need that pending deposition when everyone knows pretty much what that witness will say? How about trying to resolve the case now without it?

Words: Document the plan, and communicate it to everyone needed to effect it. Tell your lawyer what you want to happen next. Contact opposing counsel to explain your plan. Set deadlines.

Deeds: Don’t slip back to inaction. Too many so-called action plans are never implemented. Calendar a follow-up date to make sure your plan is moving forward.

People prone to procrastination find that forcing themselves to action on one matter prompts them to tackle another and another. Taking ownership of a situation is challenging. It takes courage. It’s the way to get the result you want.

The Role of Empathy in Settlement

Empathy, the ability to see a situation from a different point of view, is an important negotiation and advocacy skill. You must be able to anticipate and understand your opponent’s position to effectively counter it. Debate trainers assign students to argue the position opposite their personal beliefs to foster this skill.
I’m Fine. To Hell With You
Lately we have seen a stunning lack of empathy in our country. On the same day as a county announced that COVID-19 had become the county’s leading cause of death, one resident yelled, “It’s my body and I want to go to work.” Another defiantly asked, “Why shouldn’t I be able to sit in a restaurant and eat?”

The answer is that many people, perhaps the majority, who are infected with the virus are asymptomatic. COVID-19, unlike collisions, drownings, obesity, heart disease, and cancer, is wildly contagious. There is currently no vaccine and no cure. More than 81,000 Americans have died. Around the world, people are not allowed to work in close quarters or sit in a restaurant because that potentially exposes coworkers, servers and other customers to the contagion. Not everyone reacts to the virus the same way.

Similarly, the television journalist who tweeted that anyone who wants to continue to shelter in place should just stay home lacks any awareness of how most people live. If the boss requires workers to show up or lose their jobs, those workers don’t have the luxury of working from home. There are more people living paycheck-to-paycheck to pay the rent and buy groceries than people pulling in big bucks.

And then there’s the 79-year-old Wisconsin Supreme Court Chief Justice who said “regular folks” were not getting COVID-19. Got that, anyone with a family member in a nursing home?

Negotiators need not have suffered a serious injury or business reversal themselves to empathize with someone who has. Perhaps you have had a personal experience which makes you wonder why your negotiating opponent is apparently so much less resilient that you. Again, not everyone reacts to an event the same way. An inability to concede that these are that person’s feelings, even if you think they are baseless, impedes meaningful settlement discussions.

Why Video Mediations Are Like Early Personal Computers

You may have heard the abbreviation RTFM. As soon as everyday consumers started using computers, telephone customer support staff had to field daily questions about the most basic functions. Perhaps the most infamous is about the user who insisted that a floppy disk drive (remember those?) was a cup-holder. What the tech people wanted to yell was, “READ THE F-ING MANUAL!” 

Read the Mediation Instructions
I send instructions to participants in every one of my mediations. Over time, these instructions have gotten so specific that they even include directions on what topics to include in the mediation brief.

For better or worse, I am no longer disheartened when it is painfully obvious parties have paid no attention to the instructions. We simply carry on.

Instructions for Video Mediations
Shelter-in-Place orders have drastically increased the use of video platforms for remote mediation. It’s really important to prepare for video mediation by READING THE INSTRUCTIONS. These include information about:

  • How to sign in
  • Acceptable remote locations
  • WiFi requirements
  • Device requirements
  • What happens if a computer goes down

Unlike with in-person mediations, failure to read video mediation instructions can prevent the mediation from going forward.

Courts may be closed, but the disputes go on. You can get those disputes resolved during a shutdown with video mediation.

Resolving COVID-19 Coverage Questions

Unquestionably, the COVID-19 pandemic is hurting a variety of businesses. As soon as the extent of financial loss started to become obvious, insurers started seeing lawsuits.

Does the lockdown trigger business interruption insurance? What about pollution coverage? Special event coverage? Does actual notice of circumstance bring later claims within a claims-made policy period? Have workers sickened by the virus sustained an industrial injury? Can you collect on your completion bond? It could take years for the law to become close to settled on questions like these. Unfortunately, many companies will not be able to survive the litigation process.Mediation can provide a quick resolution. Mediation is an appropriate choice when:

• There is a close question

• Parties wish to avoid the risk of creating a legal precedent

•The economics favor resolution for a reasonable amount now as opposed to an extreme result later

Let’s talk now about the best way for you to bypass the litigation process.

Mediator As Filter

There’s a lot of interest lately in filtering out bad stuff. Of course, we use filters all the time: air filters in the ceilings in our houses, filters to keep the coffee grounds out of our drinks, water filters to improve the stuff that comes from our faucets, filtered cigarettes— well, you get the idea.

Think about this. Your negotiations aren’t leading to resolution because of the absence of a filter. A big part of what a mediator does is filter messages between disputing parties.

Self-Filters Don’t Lead to Resolution
Negotiators shape their message to achieve their goal. They might threaten. They might withhold critical information. Negotiators seldom admit the flaws in their position; they’ve filtered those out to make their case look as strong as possible.

In mediation, parties have the opportunity to let their guard down. One of the most powerful features of mediation is caucusing. In caucus, only one side meets with the mediator. By statute, everything that is said is confidential. The mediator cannot disclose anything unless you authorize that disclosure. She cannot be subpoenaed.

Confidentiality promotes candor. Parties can stop filtering their message and discuss the good and bad points of the case with the mediator. Here’s your chance to discuss the case with a professional neutral who can help parties identify the issues and resolve them.

Reframing
Mediating parties make demands and offers, and the mediator conveys them to the opponent. Part of this process often includes the mediator reframing the message to filter out animosity or extraneous issues. The mediator is using her own filters to enhance the likelihood of settlement. This focuses the parties’ attention on what is important for settling the case.

Posturing
Even in caucus, some attorneys will grandstand in an attempt to assure the client of their support, no matter how unreasonable the client’s position.  An experienced mediator understands the dynamic and how to use it to resolve the case.

Maybe you think your opponent is the biggest jerk in the world. In mediation, the mediator can filter out that attitude to get your case settled.

Mediation During the COVID-19 Shutdown

Mediation Is Critical Right Now
Courts are closed. Attorneys and claims professionals are working from home as best they can. But disputes continue. If an employer is responsible for a claimant’s medical care, delivering that care during a “Shelter in Place” order is a challenge. How a dispute is handled now can determine how the case will proceed in the long term.

Because courts are closed, litigating parties should make an extra effort to resolve disputes through negotiation. However, when they are unable to do so, agreeing to mediate is the best alternative. Issues subject to mediation can include conflicts usually resolved by motion, discovery disputes or entire cases. You can contact your mediator of choice by phone or text at 310/889-8165 or by email. She will take it from there.

Two mediation options are available during the shutdown.

Mediation by Video
Your mediator can conduct a mediation while everyone remains at home through several applications, including Free Conference Call, Zoom, or Legaler. This can happen quickly– as soon as parties agree on a time and electronically send the mediator their mediation statements so she knows the basic outlines of the dispute.

Scheduling an In-Person Mediation
If parties insist on an in-person mediation, the time to schedule that is now.

Once courts and mediation venues re-open, scheduling will be a mad dash to secure an available time. Cases already on the court’s calendar for a future date have first priority, pushing litigants with disputes cresting now further back.

In contrast, cases with a date already on the mediator’s  calendar will get first chance for any other date if circumstances allow an earlier date or must be further delayed.

You may be feeling frustrated as you see the conflicts mounting in your email inbox. There is a solution available right now: mediation.

Quid Pro Quo in Negotiation

We’ve heard a lot about quid pro quo lately. But it’s not necessarily a bad thing.

Quid pro quo is Latin for “this for that.” This is what negotiation is all about. In fact, the exchange of something of value, legally termed “consideration”, is a requirement for a contract to be valid. Settlement agreements are contracts.

A good negotiator always seeks quid pro quo. Don’t give away something unless you get something in return. In mediation, parties take turns lowering demands and increasing offers until we reach settlement.

The exception to this rule is if you were legally obligated to do something. Then it is improper to seek compensation for it. For example, an employer is legally required to pay the ordinary and customary medical expenses of an employee who suffers a work-related injury. In an ongoing case, it would be an improper quid pro quo to ask the injured worker for anything of value in return. The thing of value might be money or an agreement to do something in an unrelated context the worker would not otherwise do. That could include sexual favors.

Parties can enter into any contract which is not illegal. Hiring a hit man to kill your enemy is not a legal contract, no matter the agreed amount of compensation.

What About Leverage?
Leverage is different from quid pro quo. A party has leverage in negotiation when that party has the better alternative to a deal. How badly does the negotiator need the deal? For example, an individual who needs money for basic living expenses is likely to accept a settlement of less than full value in order to expedite closure.

In litigation, each party is negotiating to obtain a quid pro quo, a certain amount of money now in exchange for a release of the claim. When one party is in the better position to wait out the full life of the claim, that party has leverage. Frequently that is the insurance company/defendant. However, many insurers are anxious to close “old dog” claims. In that situation, the claimant has leverage and can demand more to settle. Uncertainty about how future events, such as medical treatment, can affect the value of the claim, giving one party more leverage than the other.

Quid pro quo is the very basis of settlement—so long as each side is getting value beyond what the other party was already obligated to do.

Hello 2020