Volume 11, Issue 2 - January 2013

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Mass Disaster Mediation: Innovative ADR, or a Lion’s Den?

By Elizabeth Baker Murrill
Summary by Michael Shoenfelt


In the wake of natural disasters or other catastrophic events, relatively unsophisticated victims are often left to negotiate with highly savvy insurance representatives.  The difference in bargaining power between the two creates a proverbial Lion’s Den for victims.

Alternative dispute resolution (ADR) is becoming a favored tool to resolve mass torts or mass claims. Mediation, in particular, has been used as a method to settle many claims in a short amount of time.  Little has been said, however, about the tradeoffs that are made in exchange for this efficiency.  When a preexisting imbalance in bargaining power is added to external pressures and the internal psychological impact of a disaster, there is an increased risk of coercion and lack of informed consent by victims. This problem requires thoughtful process design to minimize bargaining power disparity and protect the integrity of the process.

Mass disaster mediation programs have been put in place for disasters like Hurricane Andrew, the Northridge earthquake, and Hurricanes Katrina and Rita, among others. In mass disasters like these, there are always external pressures: political, cultural and economic considerations that provide the context in which the programs exist.  Further, the victims of the disaster bring their own set of psychological responses to the table, affecting their ability to bargain and make decisions. These external and internal factors have implications that must be addressed by both system designers and mediators in a mass disaster mediation program. As the use of these programs continues, thought must be given to these factors in order to ensure that the programs effectively achieve their goal of speeding up recovery from the disaster.


The American Arbitration Association (AAA) pioneered mass mediation in 1992 in the wake of Hurricane Andrew.  That hurricane caused nearly $30 billion in damage, and generated approximately 25,000 insurance claims. The AAA program, created at the request of Florida’s Department of Insurance, was able to process 2,400 claims.  Of those claims, 92% were settled within one year. Following this example, similar programs were instituted after the 1994 California Northridge earthquake, 1992 Hurricane Iniki, and a 1998 flood in Grand Forks, North Dakota. Hurricanes Katrina and Rita provided yet another opportunity for mass mediation. The hurricanes struck within three weeks of each other in 2005, with significant overlap in the populations they affected.  The states of Mississippi and Louisiana suffered the brunt of both storms, with the result being near total destruction of the states’ Gulf Coast. Both states instituted mass disaster insurance mediation programs during the recovery.


External factors play a crucial role in the dynamics of mass mediation. In the cases of both Katrina and Rita, victims shared common legal issues relating to insurance coverage and whether or not insurers were obligated to cover damages caused by the storms. Litigation ensued in Louisiana and Mississippi. In each state, the uncertainty of the resolution of the legal issues incentivized victims and insurers alike to settle claims through mediation. Even if victims were to win on the coverage issue, they were still confronted with issues of proof of damages. The storm wiped out many homeowners’ proof of ownership and kept them away from their homes for months, making it difficult to prove the value of their property.

Insurance companies, on the other hand, faced nearly 700,000 claims valuing hundreds of billions of dollars. In the face of such staggering numbers, many insurance companies might have fared better in litigation.  This fact reduced the incentive for insurance companies to bargain. Furthermore, the insurance companies could afford a slow and expensive process: luxuries their policyholders  did not have.

Each state’s individual reaction to the coverage issue is another external factor that impacted mediations. In Mississippi, the state sought to void clauses in insurance policies that would exclude hurricane-related coverage. In Louisiana, private litigation posed the coverage question.  Along with these private suits came the risk of conflicting decisions requiring resolution at the appellate level. Thus, while the programs in Louisiana and Mississippi stemmed from the same event, were administered by the AAA, and were structured the same, the different legal environments created different bargaining pressures.


Psychological effects on victims accompany every disaster.  These effects, beyond any public health implications, play an important role in the mass mediation process.  Decision-making capacity and state of mind are altered in a way that, if not accounted for, can compromise the integrity of the mediation process.

While victims of mass disaster are not the only people who suffer from some kind of mental trauma that impairs capacity, they are unique in one sense: a mass disaster can destroy an entire community.  With the physical destruction comes the tearing apart of the whole social fabric; the razing of society. This loss of community further limits individuals’ ability to respond and cope with the disaster. Unlike victims of personal tragedy, those who have had their entire community ripped away from them by a catastrophe struggle to return to any kind of normalcy. Without any support system on which to rely, the effects can be lasting and pervasive.

In mass mediation programs, mediators and insurance representatives enter this psychological arena, and are frequently the targets of enraged, disillusioned, and resentful victims. Mass mediation programs ask people who have lost their property, social relationships, and livelihoods to put their trauma aside and make rational decisions about their future. Regardless of this expectation, the stresses that victims feel impair cognitive and decision-making ability.

The fact that many mass mediation programs design individual mediations to take roughly two hours adds an additional pressure: time. In under two hours, victims are asked to process both emotional and actual information. Individuals can often feel overwhelmed, and their ability to make accurate decisions diminishes. Thus, with the emphasis on speed and efficiency in the mediations, individuals often see outcomes that are less beneficial than they might have been able to realize without the time pressures. The fact that policyholders typically need to reach an agreement (to begin rebuilding their lives) more than the insurance company needs an agreement further exacerbates this time pressure.  Without an agreement, the insurance company puts off their payout and saves money.


Mass mediators and mass mediation designers need to take the trauma of a disaster into account when conducting or designing a mass mediation program. While it is necessary that a system be designed to resolve claims quickly, this cannot be the sole focus of the program. Instead, the process must be designed in such a way to maximize effective and fair decision-making. One additional end goal of these programs must be for the program to contribute to the broader recovery, both at the individual and community levels. It is crucial that parties in the mediation process do not leave feeling that they were, again, victims.

From the mediator’s standpoint, a mediator must be able to recognize when a party is cognitively impaired and know how to adapt accordingly to preserve a fair process. Beyond basic human considerations, the law’s requirement that a contract not be negotiated under duress provides a legal incentive to maximize cognitive and decision-making fairness. In the case of mass mediation programs, this may require advanced training.

One option at a mediator’s disposal when dealing with a traumatized party is to allow the party to ventilate. Though mediators are not trained psychologists or psychiatrists, allowing the frustrated party to vent (either to the mediator or the insurance representative) about his or her losses can often make the mediation more productive. Without this ventilation, mediators may face another challenge: that the impaired party comes to rely on the mediator’s judgment. This challenge, if not properly handled, can compromise the mediator’s neutrality and handicap the entire mediation. At the very least, a mediator in this position should be empowered to end or reschedule the mediation.

Another option would allow parties to use an advocate in mediations at no cost, giving the individual someone other than the mediator on whom they can rely for advice. This advocacy assistance is particularly critical for mass mediation programs. Though it has not been a part of any mass insurance mediation program to date, it should be an included element going forward.  There is an adequate supply of advocates, and the program could reach out to law schools, state agencies that focus on dispute resolution, or non-profit organizations to provide advocates for victims.


Disasters like Hurricane Katrina destroy entire societies.  These disasters push people to the edge of their emotional and cognitive capacities.  As such, designers of mass mediation systems must tailor their systems to these unique environments. Mediators in these programs should be specially trained. Parties should be educated about what to expect in their mediation.  Ultimately, at every turn, the program should be built to compensate for the enormous stress that parties feel.

Law schools are a potential resource in this effort.  Law students could educate parties, act as advocates, and generally gain experience in client relations and negotiation. To date, though, no mass mediation program has taken advantage of the potential for law student and law school interaction.

Finally, there has been little analysis of mass mediation programs following their completion. While the programs have universally good reviews because they settle many claims, there has been no qualitative analysis of their success. Future studies should look to party satisfaction and self-determination.  Above all, the question for these analyses must be whether or not the programs made positive contributions to the recovery at the individual and community level.

With no published studies about user satisfaction after using the mediation programs, it is difficult to fully evaluate the programs.  Still, the programs show much promise despite the potential for power imbalances to negatively affect the outcome of the mediations. With this in mind, it is imperative that the claimants are educated when using mass mediation programs.  Bar associations and law schools could, cooperatively, aid in this process by providing educational seminars, preliminary claims evaluation, and/or advocacy at the bargaining table.  While many of the internal factors that diminish decision making capacity are unchangeable, enhancing education and representation will positively impact the mediation climate, settlement rate, and degree of party satisfaction.

Read full article here.

Posted in: Volume 11, Issue 2

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