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Mediation Strategy: Know Your Pecking Order In Multiple Party Matters

June 21, 2011

I do not know the actual historical derivation of the term, “Pecking Order”, but I know (and you must) what it means when planning your negotiation strategy in any mediation involving personal injury and multiple defendant parties.

Simply stated, “pecking order” means, who is most interested, most in charge and in what order or sequence of the parties in any multi-party situation.  And this knowledge is imperative for your strategy in how you must approach the total of these multiple parties.

In personal injury matters, although many believe pecking order means the order of responsibility of the multiple defendants, in reality,  pecking order in such matters ultimately refers to the priority and order of payment of insurance in the event of a judgment against multiple parties.  In short, in what order will the plaintiff likely be paid upon any judgment they obtain.  And, how much coverage will be available and in what order of payment for the actions of any particular defendant.

And, although I strongly urge any Plaintiff’s’ attorney in such matters to study and fully understand the precise terms of such insurance coverage, in detail, I also believe it is just as important for the Defendants’ attorneys to know them, well in advance of mediation,  for developing  their own negotiation strategies.

More mediations fail in multi-party, usually multi-defendant matters, because of  pecking order disputes between the multi-parties on one side, or even the insurers of individual parties, than between the opposing sides.  Mediators will tell you of too many occasions in which the parties may be in agreement upon the resolution value of the matter, but mediation still fails because the multiple parties cannot reach agreement upon how the resolution payment is to be shared.  In other words, who pays first for any particular defendant.  And, if more than one defendant is found responsible, in what order is the insurance coverage to be called upon first?

The reason? There is often greater dispute between interpretation of the intricacies of the pecking order of insurance coverage than between the sides as to the range of settlement proposals once these pecking order issues are resolved.

Oddly, the defense, the side that most often deals with knowing and interpreting insurance and the terms and conditions of their policies, often does not see pecking order as an early consideration. This problem evolves from the usual and generally accepted, and not-so-secret, general defense scheme of “never break ranks” against the Plaintiff.  But such a one-for-all, etc. posture can be disastrous to success at mediation if the Defense is not prepared when those ranks break!.  Or, equally a problem, if they are  misinformed.  And, this is compounded when excess coverage are involved.

One of the significant benefits to the defense, therefore, in a mediation where perhaps no resolution is thought to even be possible, is the opportunity of the multi-defendants to come face-to-face for agreeing upon the ultimate pecking order.  It is never a failed mediation for multiple defendants if they leave knowing only their ultimate pecking order in the event the case must be tried.

Why is this so ultimately important to the Plaintiff?

Because, until the parties sort out the order in which their client will have to pay, it will be difficult to determine who is actually making the decision upon ultimate resolution.  The decision maker may be the obvious “target” defendant and their insurance carrier.  But, it may not be.  It may in fact be another vicarious defendant with personal exposure.  It may be another (and sometimes unknown)  excess  carrier with the most exposure in total dollars, not initial ones.  It may be a carrier or a group of carriers who is/are carrying the burden of the defense cost.   Or it could be a single party that believes, contractually, that they will be ultimately sharing in the payment of any final judgment because of underlying contractual terms, their policy language, or a particular state law interpreting such insurance terms.

Why is this same pecking order also so important to the Defendant’s attorney?

Because, as you might expect, the order of execution and/or ultimate payment of any possible final judgment has a lot to do with the aggressiveness that any particular advocate can recommend.  An attorney who believes that any final judgment will never reach his insured is far more likely to advocate trial than the attorney of the insured who is both paying the defense costs and is likely to be accused of bad faith in the event of a verdict, particularly one likely to exceed his/her insured’s policy.

And, Defense attorneys are just as sensitive to being accused of the “wrong” advice as Plaintiff’s lawyers.  And, both,  of course, have a duty to recommend a posture that is as protective as possible to their individual client, not any group of clients they do not then represent.

Florida has better than average legal means to discover policy limits and terms of any Defendant (or Co-Defendant).  But, practically, unless both the Plaintiff’s and Defense attorneys aggressively pursue full disclosure, including obtaining copies of all applicable policies and demanding that, for example that all excess insurers and all intertwining contracts that allocate insurance risks are produced, the pecking order can easily remain a real mystery.

Even with full disclosure, there are different interpretations that similar attorneys will make to similar policies.  And, of course, some issues may never be fully known until it becomes germane due to actually executing upon a large judgment.  Again, however, at mediation often insurance professionals will, for the first time, be present to help resolve insurance coverage issues.  Questions often are resolved by industry standards as by law.

But, if you have any desire to actively plan your negotiation strategy in a personal injury case with damages that will extend to more than one policy or defendant, it is incumbent, if not imperative, that you start with defining the pecking order of your insurance coverage.  And, it makes no difference whether you are representing a Plaintiff of one of many of defendants in a multi-defendant matter.

In real estate, it is “location, location, location”.  In multi-party mediation, it remains, “preparation, preparation, preparation”.

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