Articles

18 Feb 2010

Thoughts on Mediation of Personal Injury and Clinical Negligence Claims

Is the US Experience Instructive for the UK?

By Deborah A. David, CEDR Direct Mediator and Litigation Specialist

A shorter version of this article first appeared in the New Law Journal (5 February 2010) under the title "Oceans Apart?"

The vast majority of personal injury (PN) and, to a lesser extent, clinical negligence (CN) cases in America go to pre-trial mediation.  In England and Wales (UK), the use of mediation early in the litigation cycle is increasing in most areas of civil litigation.   Yet, mediation, whether early, on the eve of trial or some time in between, is still not the norm in the UK to resolve those PI and CN cases valued in excess of £25,000.    Are there conditions in the US that make these more suitable for mediation than similar cases in the UK?Should mediation be used more routinely in these cases? Further, will recommendations in the just-released Review of Civil Litigation Costs: Final Report (“Jackson Report”), if implemented, increase the use of mediation in these categories of cases in the UK?

1.            Mediating PI and CN claims in the United States—a bit of history

Long before mediation established itself in America as an accepted form of alternative dispute resolution, the judicial systems in most state and federal courts required that all personal injury cases go to a Mandatory Settlement Conference (MSC) before commencing trial.  MSCs were presided over by sitting judges, though usually someone other than the trial judge.  Although different in format to mediation, MSCs had the same goal:  to encourage settlement and minimize the strain on limited judicial resources. They were time-limited and largely evaluative, often ending without a settlement and with the parties’ positions more firmly rooted  than before.

Mediation as we know it now first emerged in the late 1970s in Orange County, California when a group of retired judges with substantial experience conducting MSCs founded JAMS (formerly Judicial Arbitration and Mediation Services).

As mediation sought its place in the litigation tool kit, it did so amongst lawyers and claims adjusters who had a long history and comfort level with settlement conferences.  While requiring some market adjustments, the basic concept of meeting in an effort to resolve a case without trial was a very familiar one.  As private mediation services became increasingly available, several benefits over MSCs quickly appeared: the advantage of having more time meant that more matters settled; the use of a relatively facilitative approach led to more settlements without causing often serious harm to those cases which did not settle; the ability to select the mediator gave participants an added degree of confidence in the process; the availability of private mediators relieved court congestion by freeing MSC judges to do other things.   The only initial disadvantage was that MSCs were free, while private mediations were not.  It did not take long, however, for the market to conclude that one gets what one pays for. 

For those cases in which the parties could not afford the cost of private mediation, the courts established court-based mediation systems using volunteer lawyers with significant litigation and mediation experience.

Over the years, both judicial systems and legislatures in the US championed the merits of mediation, creating a situation in which failure to mediate is generally not an option.  There was a time when many assumed that cases forced into mediation wouldn’t settle—that the compulsory nature of the process would create insurmountable resistance.  In reality, that did not occur: in fact, regardless of how the parties came to the process, once dialogue began in the safe environment of mediation, resolution became the norm rather than the exception.   Currently, nearly every personal injury case in the US goes through a mediation process, either court-provided or private, and the vast majority resolve as a consequence.

US mediation resolution rates vary depending on the organization doing the reporting and the types of cases surveyed.   For all cases, the reported rates range for the most part between 80% and 85% (though, as the complexity of cases increases, many do not settle on the first day of mediation). The rate is higher for personal injury cases, in the range of 90% (excluding clinical negligence, which I will discuss further below).

2.            Mediating PI and CN cases in the UK

My own experience both as a lawyer and a mediator is that mediation is a very sensible and effective means to resolve PI and CN disputes. So, I was surprised to find resistance in the UK to mediation in these cases.  Over the years, I have had a number of discussions with UK lawyers and insurance adjusters in an effort to understand the reasons for the difference between the US and the UK.  These conversations have yielded interesting explanations, but nothing conclusive or definitive.

I recall one lawyer from a prominent London firm of litigation solicitors telling me that he rarely mediated cases because he specialised in fraud claims. It was also suggested that mediation was not suitable for cases in which the defence asserted the claim itself was fraudulent.  It escaped me then and it continues to escape me now why neither a fraud nor a fraudulent claim should be mediated.  After all, claims that a witness or party is not telling the truth are a fairly common occurrence in all types of litigation.  Those are the moments any good cross-examiner lives for.

On another occasion, I read an article in which a solicitor specialising in CN claims expressed his opinion that claims of medical negligence should not be mediated because the process is somehow unfair to claimants.  Again, the logic eludes me.  While it is true that mediation often requires the claimant to compromise on uncertain future damages, those damages are subject to a degree of risk at trial as well.  At mediation, the chance exists to obtain compensation for those damages on a discounted basis, while at trial, failure to satisfy the proof requirements will result in no award at all for future loss.

An insurance claims specialist told me that UK insurers resist mediation in the UK because of bad experiences with overly evaluative retired judges in the US.  I have no doubt that such experiences occur and have occurred.  When retired judges and trial lawyers turn to mediation, they frequently find it difficult to leave behind long-held patterns.  In addition, in the earlier years of mediation in America, many “mediators” had vast experience in litigation, but absolutely no training in mediation.  Increasingly, however, US mediators, including retired judges, are trained to use an approach that blends the facilitative and evaluative without being prescriptive.  Moreover, mediation in the UK, in my experience, is far more facilitative than in the US.

Recently, a solicitor representing claimants in PI and CN cases shared that she regularly pushes cases to the brink of trial, on the theory that defendants become increasingly anxious about exposure to a 100% success fee and therefore pay a premium to settle. I wonder first whether defendants can be relied upon to respond consistently in this manner, and second whether the delay and risk are in the best interests of the claimant.

In the US, there was initial resistance to mediation among trial lawyers for a variety of similar reasons: early settlement meant reduced fees for those charging on an hourly basis; there was fear that mediators might interfere with the attorney/client relationship; mediation might signal that a lawyer was afraid to go to trial; agreeing to mediation might be seen as a sign of weakness; and, litigation lawyers prefer trying cases to settling them.   Nevertheless, mediation took hold and is now firmly embedded.

3.         US vs. UK: differences in litigation rules and culture in PI and CN cases

There are various differences between the US and UK which may influence the use and success of mediation to one degree or another.  Having said that, however, these distinctions are insufficient to account for the markedly different rates of mediation in the two legal systems.  There is no reason in either country that a category of cases which often settle on the eve of trial could not be successfully mediated earlier at significantly less emotional and financial cost to the parties.

a.       The US civil jury trial

With a few exceptions, personal injury and clinical negligence cases in the US are tried by a jury.  While I am a big believer in the jury system, there is little doubt that 12 jurors can arrive at unexpected results.  Though these results are subject to correction by the trial judge (often called the 13th juror), when s/he issues a judgment notwithstanding the verdict, a remittitur, an additur or an order for a new trial, the litigation risks are significant.  These risks are a powerful incentive to mediate. 

In most American jurisdictions, there is no limitation on the amount a jury might give in “pain and suffering” damages (though many States limit such damages in clinical negligence cases).  As far as defendants are concerned, the risks of a jury trial in terms of quantum no doubt exceed those in the UK, particularly as UK judges are constrained by established damage guidelines in PI cases.  While there are no jury trials in PI and CN cases in England and Wales (they continue in Scotland), there nevertheless remains a degree of uncertainty and risk when the facts are submitted for determination to any third party.  For every litigant delighted by the results, there is an opposing litigant who had confidently predicted a different outcome.

b.      Clinical Negligence

The healthcare system in the US differs markedly to that in the UK.   With some exceptions, healthcare in the US is not provided by the government.  Apart from health maintenance organizations like Kaiser Permanente, private hospitals do not employ doctors.  They employ only nursing and administrative staff and technicians.  In most US hospitals, doctors are independent contractors with “staff privileges” to work at the hospital.  Hospitals have no respondeat superior liability for the negligence of their staff physicians.   Physicians are privately insured, and professional liability policies contain a clause that no settlement may be entered into without the express consent of the insured professional.  Physicians on whose behalf a payment is made to settle a CN claim are reported to a central data bank where the information is recorded and available to the public including patients, hospitals, insurers and prospective employers.

The consequences of a payment on a CN claim are such that doctors frequently withhold the consent required to resolve a matter.  As a result, relatively fewer CN cases than PI cases go to mediation.  However, in those that do and in those against hospitals for nursing negligence, mediation functions very well, and the settlement rates, while less than those for PI cases, are still in the range of 80%.

In the UK, where a preponderance of the healthcare is government-provided and express consent of the physician is not necessarily required to settle a matter, it would seem that mediation of CN cases would be more frequent than in the US.  That is not the case.  The NHS Mediation Pilot held great promise of increasing mediation in CN cases, but that promise has not been realised.   Under the Government Pledge of 2001, the NHS has committed itself to mediate if asked, but that has not led to an appreciable increase in CN mediations as neither side is prepared to make the ask.   While many CN cases settle, later rather than sooner, there appears to be resistance among CN litigators to include mediators in the resolution process.  There is no reason this category of cases cannot be settled earlier, more efficiently and with less negative impact on the patients and health care providers who are burdened by them.

c.       Attorneys fees and costs

In the US, lawyers’ fees, as distinguished from disbursements, are not recoverable from the other side in PI and CN cases.  Except for contractual terms and rare statutory schemes, the concept of “loser pays” does not exist.  While lawyers’ fees usually do not motivate claimants represented on a contingent fee basis to settle, mounting fees are a constant factor for the defence in PI and CN cases.  As in the UK, lawyers’ hourly fees are high.  They mount up quickly in US litigation because of the cost of lawyers’ time in preparing for and participating in pre-trial discovery—depositions, written interrogatories, requests for production and requests for admissions, these being elaborate procedural activities with little parallel in the UK. The amount of past and future fees is discussed in nearly every PI and CN mediation.

Unlike lawyers’ fees, disbursements are largely recoverable from the losing side, within reason.  Pre-trial discovery expenses, expert witness fees, filing fees, reproduction charges, jury fees, evidence preparation expenses and mediation charges are all recoverable by the prevailing party.  In a complex PI product liability or CN case, these disbursements can be very high, running several hundred thousand dollars. While one might think these charges would not influence an indigent claimant,  that is not always the case.  Most legal systems in the US have provisions similar to UK Part 36 offers.  Claimants who refuse an offer and obtain a lesser amount at trial will not be considered the prevailing party.  They will not recover their own expenses, and either all or part of the defendant’s disbursements will be deducted from the claimant’s recovery.  As a consequence, the expenses of PI and CN cases are a significant factor for both sides in evaluating settlement options.

As in the US, fees and disbursements in the UK are more often than not a significant driver in settlement discussions.  Where a losing party is at risk of paying not only his own fees and expenses but those of the opposition as well, settlement is often the only sensible solution.  Moreover, it is rare, even in the best of circumstances in the UK, for the winning party to recover all its costs and disbursements.

d.      Claimants’ Fee Arrangements

Claimants in PI and CN cases in the US are most often represented on a contingent fee basis.  The lawyer takes a percentage of the recovery ranging from 33.3% to 40% (though some states have restricted the fees in CN cases).  These fees are not payable by the defence; they come out of the claimant’s recovery.  In most cases, the claimant’s lawyer “fronts” all litigation expenses and disbursements.  In the event the case is lost, the lawyer loses both his/her fee and the amounts advanced. 

The existence of a contingency fee agreement only occasionally plays a direct role in whether or not a matter resolves at mediation.  Since the defence will not be paying the fees, the terms of the fee agreement are irrelevant to the settlement issues.  Fees and costs are an issue between the claimant and the claimant’s lawyer.  Typically, the interests of a contingent fee lawyer and his/her client are aligned.  That being said, there are instances where the fee arrangements complicate the mediation process.  The most typical is a claimant refusing to settle unless the lawyer reduces the fee. At this point the mediation often extends to a process between lawyer and client.  Occasionally, a claimant declines to follow his/her lawyer’s advice to settle, wishing to hold out for a higher settlement.  This complicates the process and can break down the lawyer/client relationship to the extent that the mediation must be terminated. Most claimants, however, will not turn their backs on a reasonable settlement. There are also instances in which a lawyer pushes a settlement that may not be in the client’s best interest because the lawyer wants the fee earlier than later or no longer has sufficient economic incentive—or means—to pursue the matter, but this is rare and usually occurs outside a mediation process.

Presently, in the UK, the role of the claimant’s fee arrangements is more complex than in the US, where neither success fees nor After Event Insurance (AEI) exists.  Unless a defendant here succeeds through a Part 36 offer in eliminating its exposure to the claimant’s future costs, it faces payment of those costs.  Additionally, if the claimant is represented under a Conditional Fee Agreement (CFA), the defendant is at risk of paying up to 100% uplift on the claimant’s solicitor’s costs and counsel’s fees together with any AEI premium—and all of that on top of the defence costs.

While the defence is entitled to know that funding is in place, claimants are not obligated to disclose during settlement negotiations, or indeed until the end of a trial, the terms of funding arrangements or of any success fee. The more defendants argue the weakness of the claimant’s case, the less surprised they should be to find a 100% success fee and a high AEI premium after the claim settles.  Moreover, a settlement discounted to reflect risk nevertheless represents a “win” under the terms of the CFA, entitling the claimant’s legal team to marked-up costs, unless (as indeed quite often happens) they are prepared to join in the process of compromise by conceding some of their entitlement to reflect that the claimant has settled on a reduced or discounted basis.  Furthermore, defendants have come to expect that success fee rates and AEI premiums escalate as the case gets closer to trial. 

UK claimants’ attitudes toward settlement are also affected to some extent by funding arrangements.  A claimant proceeding on a “no-win-no-fee” basis with AEI coverage is not burdened with the fear of expenses if he/she loses.  However, the terms of AEI insurance often allow withdrawal of coverage if a claimant ignores reasonable advice to resolve the matter, thereby providing the claimant a counter-balancing motivation to settle.  Additionally, human nature being much as it is in the US—at least on this issue—claimants generally accept a reasonable settlement over an uncertain trial.

In practice, it seems the conditional fee funding arrangements in the UK act to discourage the use of mediation.  Still, the question remains whether these funding differences argue against effective mediation of PI and CN cases here.   I do not believe they do.  If the funding issues paralyze the mediation process, they would equally paralyze any settlement discussions.  As we know that a significant percentage of these cases settle (often as the hearing date looms), it follows that funding complexities do not prevent resolution.   Moreover, costs can be adjourned for later determination, allowing the claimant’s legal team and the defence to preserve and litigate all arguments as to proportionality and reasonableness of costs and expenses.  Mediation offers to the parties the opportunity to agree an early resolution that achieves certainty, reduces risk and eliminates considerable future expenditures.

However, with the arrival of the Jackson Report, existing UK funding mechanisms may become a matter of purely historical interest.

4.  Mediation after the Jackson Report

Adoption of the Jackson recommendations will put an end to funding of claimant’s PI/CN litigation as it now exists.  While CFAs may remain, neither success fees nor ATE premiums will be recoverable from the defendant.  US-style contingent fee agreements will be permitted.  Awards for general damages will be increased by 10%, and the maximum success fee a lawyer may deduct from the recovery will be capped at 25%.  There will be qualified one-way cost-shifting to protect claimants who have acted reasonably and lack sufficient resources to pay defence costs.  Individuals will be encouraged to take out before-the-event insurance to cover litigation costs and expense in the event they bring a PI or CN claim.  The premiums for BTE insurance, while not recoverable, are likely to be significantly less than those for ATE as the risk will be spread over more policy-holders.  Taken together, these changes are likely to remove any advantage to delaying settlement on the claimant’s side.

As for the defence, Lord Jackson recommends that when a defendant rejects a claimant’s offer and fails to do better at trial, the claimant’s entire recovery be increased by 10%.   This would furnish powerful incentive to respond positively to reasonable offers.

While Lord Jackson declines to recommend mandatory ADR/mediation for all proceedings, he describes mediation as an “under-used” means of achieving early settlements that reduce the costs of civil litigation, and he recommends efforts to increase its use.  He expresses the need to educate judges, lawyers and the public about the benefits of ADR generally and mediation in particular.   He further states “… the circumstances in which [ADR/mediation] should be used… will come down to the judgement of experienced practitioners and the court.”  (Jackson Final Report, xxiii).

Implementation of this recommendation may influence the use of mediation in many ways.  Perhaps, pre-action protocols will soon require that lawyers affirm that they have explained mediation and discussed its benefits with their clients. Perhaps, ATE and BTE insurance will include provisions to encourage the use of mediation.  Perhaps judges will exercise their discretion to push mediation more robustly in appropriate cases.

Looking again to America, three factors coalesced to end the early resistance to mediation there.  The courts strongly encouraged its use; judicial task forces suggested, and lawmakers passed, legislation supporting its use; and, finally, clients began to insist on mediation.  It may well be that with the encouragement of the Jackson Report, a similar coalition will lead to increased mediation of PI/CN cases here.

5.         What does mediation offer to the parties in PI and CN cases?

In PI cases, the claimants usually come to the litigation system on a one-time basis.   There is typically an emotional component to their injury claim, and that component is heightened significantly by the stresses encountered in an unfamiliar adversarial context.  They seek monetary compensation, of course, but often something else as well--the opportunity to vent, an acknowledgment from the defence, some form of vindication. On the other side of these claims, the defendants are either commercial firms or, more often, businesses or persons backed by insurance.  They are often repeat users of the legal system (particularly insurers), and they seek a result that minimizes their financial exposure. 

Mediation provides a process that is much more suited to the claimant’s goals than a trial.  The chance to speak directly to the defence does not exist in a courtroom.  The opportunity to tell one’s story without risking one’s legal claim exists in the safe environment of private and joint meetings during a confidential mediation process, but not in a public courtroom.  Mediation furnishes the possibility of remedies unavailable at trial—an apology or an acknowledgement, for instance.  The relative informality of the mediation environment usually lessens the stress, while a formal courtroom increases it.  With mediation comes the chance of an earlier resolution, allowing the claimant future certainty and the ability to move on.

The defence team achieves its goal of saving money if it secures an early and fair settlement that avoids the significant cost of litigation and, in many instances, adverse publicity.  From a business point of view, resolution allows the defendant to “close the books” on the claim, removing uncertain contingent liabilities that consume significant management time and energy and might affect business planning and budgets.

Mediation is particularly effective in CN cases in which both the claimant and the individual healthcare provider are likely to feel aggrieved.  CN cases often follow a breakdown in communication between the patient and physician.  Patients who have had a less-than-satisfactory result following medical treatment frequently seek the assistance of lawyers only after failed efforts to get an explanation from their healthcare providers. Mediation helps restore the lines of communication. Most patients do not want to subject their medical history to public scrutiny in a courtroom:  they are often hugely motivated to settle.  Much as the claimants are worried and concerned about their health, physician defendants are worried about the impact of a claim on their careers; whether they made a mistake; whether they could or should have done something differently.  Healthcare providers rarely want to spend time in a courtroom if they can reasonably avoid it.  In the many CN cases I have mediated, I have seen numerous instances in which both sides felt a huge sense of relief once they were able to speak openly to each other.  Once that occurred, the monetary issues became relatively easier to resolve.

5.            Conclusion

Having mediated PI and CN cases both in the US and the UK, I have tried to communicate my observations as to the feasibility of large-scale mediation of such claims in the UK.  In summary, I see absolutely nothing intrinsic in the nature of these cases that should discourage mediation.  Instead, I see much that recommends it.  Everything I have experienced both as a mediator in the US and the UK and as a lawyer who has represented hundreds of claimants and defendants in PI and CN cases tells me that mediation is a far more effective—and humane—way to resolve these cases than the expensive and stressful uncertainty of trial and appeals. 


Deborah David is an American who practised litigation in California and before a number of United States Federal Courts from 1975 to 2000.  She has been a full-time mediator since 2000 and has been based in London since 2002.  A complete biography is available on the CEDR website.

In the course of her career, Ms. David has acted either as an advocate or a mediator in several hundred mediations involving every aspect of personal injury litigation, including clinical negligence, mass disasters (commercial aviation accidents and toxic exposures), group products liability claims (drug defects, medical device failures, automobile defects, tire failures, etc.), individual product liability claims, auto accidents, work-place injuries, and premises injury claims.

Her UK mediation practice includes commercial, personal injury and clinical negligence cases.

 

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