To reach the best, negotiated settlement at mediation you must have a clear understanding of your risk factors.  Negotiating a good settlement is not simply a function of tough arguments and small numbers.  The numbers are a merely a backdrop to your recognition and application of leverage, your ability to circumvent settlement barriers, and your willingness to take risk.  To know how much leverage you have requires a careful evaluation of your risk factors.  If you evaluate case value, but not risk value, you never really get to the heart of a strategy and are therefore unlikely to negotiate your best settlement.

From the perspective of a mediation negotiation, there are three risk factors you must evaluate.    

Upside Risk:  Who is more likely to get a judgment at the extreme end of the verdict range?  If plaintiff, your Upside Risk is unfavorable, plaintiff has leverage, and you must negotiate cautiously; if defendant, your Upside Risk is favorable, you have leverage, and can negotiate from a stronger position.

Trial Risk:  What is the strength of your desire to take the case to trial?  Consider the risk to your policy, the personal risk to the insured, your Upside Risk, and other factors that give you a sense of the consequences of trial. 

Negotiation Risk:  Despite the Upside and Trial Risk factors, how much risk can you take in pushing the settlement into the lower end of the verdict range?  Your instincts will guide you at the time of negotiation, but upon whose instincts are you going to rely when negotiating gets tough?  That question must be discussed between the negotiating partners beforehand.

The uncertainty of a jury verdict creates risk for both sides.  The point of arguing liability and damages during the mediation is to convince the other side that they have more risk than you. Following the joint session, after you have evaluated the plaintiff, plaintiff’s counsel, and heard all the arguments, make sure you have a clear understanding of each of these risk factors.

Robert J. Conover

30 Years in Claims and Litigation Management

Independent Mediation Negotiator  &  Claims Representative