An exposure that generally has a finite outer limit. Unlike tort claims for personal injury, or defamation cases, where the outer limit can often be as high as the imagination will go, LTD claims simply do not have the “damages at large”  component to them. That is a good start;

An environment where the parties do not have to battle over liability or fault. In the normal instances, there is no debate over duty of care, standard of care, breach of the standard of care, and/or contributory negligence. This said, this does not eliminate other arguments that can lower an insurer’s exposure, such as an alleged failure to mitigate or misrepresentation;

An exposure that is typically mathematically driven. Again, this avoids the vagaries of importing values for nebulous things such as damages for pain and suffering, or ethereal future loss of income claims based on purported career changes over time, etc. This does, however, ignore the fact that disability insurers can be required to pay “pain and suffering”  type damages for mental distress arising from a breach of contract if the insurer’s conduct was egregious (seems to be currently hovering in the $15,000.00 to $100,000 range), however, this is rarely a commodity at mediation, other than perhaps a motivating factor to resolve the dispute before control over the matter is relinquished to the court “where anything can happen.”   This said, on the rare occasion I have seen an LTD carrier contribute a modest sum toward the bad faith exposure, but it would typically only occur if the file handling was very questionable, and motivated by malice.  Although it goes against the grain for a disability carrier to make such a contribution as part of a settlement, it may be wise to do so in cases involving flagrant mismanagement of the claim – or in the words of the Supreme Court of Canada, in those instances where “… the denial was the result of the overwhelmingly inadequate handling of the claim, or the introduction of improper considerations into the claims process.” (Fidler v. Sun Life Assurance Company of Canada,  [2006] S.C.J. No. 30., at para 71).  In my experience, the amount paid toward this exposure is typically quite modest during mediation, and it is apt to pale in comparison to what would likely be awarded at trial, and hence it should be palatable to the insurer, even if distasteful. Put another way, placing a few pennies in the punitive damages ledger after negotiating a beneficially high discount rate is possibly a better strategy than refusing to make any contribution towards punitive or bad faith damages, in those extreme cases: indeed, this would be simpatico with an apology, and often apologies gain more traction in the negotiations than the dollar;

A situation where there is reasonable prospect of mediation long before expensive litigation ensues. Well before a long term disability dispute crystallizes into a full blown civil action there is typically a good developed factual matrix. By the time a lawsuit is started, the parties have likely exchanged a lot of information – medical documentation, interviews, assessments, policy documentation, notes, etc. Contrast this with a motor vehicle accident claim, where often the parties know nothing about the strength and/or weakness of their case at the time the claim is issued – it takes another year or two for the factual matrix to start crystallizing. Because of the manner in which LTD claims unfold, mediation is actually a tool that should be considered early: even at the adjuster level (and well in advance of the commencement of a formal civil action).

The potential for a tripartite relationships between claimant, employer, and the insurance company.  There are times when an employer and the insurance company are at the mediation table, and in those instances, it is important to understand their roles. For instance, is the insurer providing the “coverage,” or is the employer self-insured, with the insurance company providing administrative services only? In those later cases, does the claimant need to keep the insurer in the action, or can they be released? Not an easy answer, and the case law is not well settled. Indeed, an entire paper could be devoted to this topic alone. Some decisions consider the plan administrator immune from liability to the claimant because there is no privity of contract between them. Other decisions depart from this, and maintain that an administrator can indeed be held accountable to the claimant in a bad faith tort, if the administration of the benefits was done negligently or recklessly. Yet other decisions have held that the administrator is simply the employer’s agent, such that the employer remains responsible for the negligence of the administrator, although it remains open for debate whether this is sufficient to completely insulate that administrator from judgment against them as well. In any event, these are issues that are generally quite unique to LTD claims;

The potential for an LTD claim to resolve with an “on claim” settlement. Unique to LTD claims is the fact that the parties can actually come to a settlement whereby the claimant stays on claim – perhaps with an agreed upon monthly amount, or some agreement on the period the benefits will be paid into the future, etc. There is no such equivalent discussion at mediation in the context of a personal injury claim. This said, however, the vast majority of LTD mediated settlements are of the lump-sum variety, and understandably so, because most parties want to buy piece of mind. Indeed, a lump sum payout in a LTD claim is only available through a negotiated settlement: a court cannot render judgment for future entitlement (although in one very unreasoned decision (Brito v. Canac Kitchens  [2011] ONSC 1011, upheld on appeal 2012 ONCA 61) the court did make an award for future benefits in deference to the more established body of case law that says a judge cannot award a lump sum payment of future benefits);

The existence of the nebulous discount rate. For the vast majority of LTD disputes, the parties will have to come to terms on what discount rate to apply for future payments. Ironically, because the courts do not make awards for future entitlement, there is no jurisprudential guidance on the correct rate to apply. For the time being, the applicable discount rate simply has to be negotiated, and the mediation can fail on this singular issue alone. It is noteworthy that even a half-a-percentage point can create large swings, especially for a young claimant. So what are the guide posts? Claimants prefer lower discount rates, and migrate to rule 53.09 which at the time of this article, was set at 0.1% for the first 15 years, and 2.5% thereafter: essentially leading some claimant’s to demand a blended rate hovering around 1%. Insurers lobby for discount rates in the 4% – 5% range, arguing that this is what investments are capable of returning in today’s environment. Typically, both extremes enflame the room, and things work out better if the parties quickly find their way to an agreeable compromised discount rate somewhere in the middle;

The requirement of proof that the claimant was disabled as of the end of the qualifying period. This is often not a hotly debated issue, but in cases involving claim tardiness (disability claims initiated “after the fact,”) there can be legitimate arguments that the claimant cannot establish the presence of a disability by the end of the qualifying period;

The offsets. The offsets are largely governed by the contractual wording of the policy. Most policies today have tailored their wordings to recapture CPP Disability payments, and all should seem straight forward, but complications do arise by such things as whether CPP Disability is actually being received, or whether this benefit is under appeal, or whether an application was even submitted by the claimant/plaintiff. In the case of an appeal, how is that risk allocated? What about severance payments received post-disability? Again, typically contractually driven. What about receipt of a structured settlement payout in the tort case? Generally, if there is compelling evidence that the payouts are for damages (and not income), then there ought to be no deduction (Stitzinger v. Imperial Life,  SCC), but conversely, if it is characterized as income, it is possibly deductible (Carter v. New Brunswick).  What about wrongful dismissal damages following the termination of the disabled employee? The decision in Nichol v. Wray  concluded no, but left the door open to possibly yes if the policy wording had been different: very contract driven;

Issues of Taxation. Where the claimant pays the premiums, the benefit is often considered non-taxable. In other cases, where the premium is paid for by the employer, those benefits are typically taxable. That leads to a whole quandary of issues in a lump-sum settlement, as the parties then need to determine how the lump sum amount will be reasonably attributed between past and future losses, and how much is applicable to costs and disbursements, etc. This becomes incredibly important because only the portion intended to replace past disability benefits is subject to tax, and not any sums paid towards legal costs, disbursements, future potential claims, damages for bad faith or aggravated damages (as per R. v. Tsiaprailis,  [2005] S.C.J. No. 918). Also, the parties have to decide how the “tax” is going to be dealt with: is it going to be withheld, or will the full amount be paid such that the claimant receives a T4A in the spring of the following year and the claimant accounts for the tax during income tax completion time. Finally, the parties can also discuss, and negotiate, whether the insurer will issue a Form T1198 so that the settlement for past disability benefits is attributed over a number of years, and the claimant can spread out the tax burden over a number of years. Indeed, on the claimant side, the legal costs are a proper deduction that may be used to off-set the tax liability associated with taxable benefits;

The terms of the settlement agreement and release. Although settlement agreements and releases are not unique to LTD claims, they tend to be, for some reason, more detailed in LTD settlements, and perhaps rightly so, as the parties are best served to address all the little nagging issues that tend to surround LTD claims, such as how do the parties deal with any future claim to CPP Disability benefits if they are subsequently awarded? Are other group benefits being released or just the LTD and life premium waiver? ls the release only for the subject policy or for all other LTD policies issued by the insurer? Does the release contain a “claw back” if the plaintiff breaches the confidentiality covenant? Does the release include a certificate from plaintiff counsel and has it been carefully explained to their client? Will the insurer pay the full cost of the mediator? Parties are ill advised to leave the mediation without the terms of the release being fully negotiated and agreed upon, because anything short of that can lead to disputes later on, and if these disputes are sufficiently serious, there may be no enforceable settlement at all.

Prepare a well drafted mediation brief. No one will be convinced that there is an alternative way to see things if the opposing party cannot succinctly and persuasively put forth a symbiotic thesis of their case in their brief. Occasionally we receive mediation briefs that look like they were drafted by someone unfamiliar with the file: often a closer inspection of the documents attached to the brief can reveal many supportive facts and elements that were not raised in the written component of the brief. At worst, the mediation brief is simply a regurgitation of reams of paragraphs taken from various reports, with no effort to tightly connect the facts and excerpts into a cohesive and simple-to-understand thesis or theory. If the mediator and/or opposing party has to “dig” for the theory of your case, you have simply made it easy for your opponent to become entrenched that their interpretation of the meds-and-creds is the only one. Also to be avoided are briefs laden with sarcasm and vitriol. Lengthy diatribes on punitive damages should not be a part of any brief, unless the conduct of the insurer unequivocally passes the Rubicon of malice. Conversely, lengthy diatribes about misrepresentation voiding the policy should be avoided unless the conduct verges on fraud that can be proven beyond a reasonable doubt (and not mere speculation). In the end, a well reasoned narrative supported by tight connections to the evidence is the best (and some would argue the “only”) way to persuade: leave the angst behind;

Deliver timely mediation briefs. All the effort behind preparing a good mediation brief is essentially wasted if the brief is served at the 11th hour. The benefit of the work invested in crafting a first-class mediation brief can only be realized if the brief itself is delivered several weeks before the mediation. This is not for the mediator’s benefit – indeed, it makes little difference to the mediator. This piece of sage advice is for the benefit of the parties. Although timeliness relates to both parties, it is more the claimant’s burden than the insurer’s burden: however, reciprocity should be exercised. Timeliness remains more the claimant’s burden because unlike a claimant who can typically adjust their position “on the fly,” this is rarely, if ever, the case with an insurance adjuster who may require weeks to alter the settlement authority or reserves on the file: especially if the authority has to come through channels of command. Delivering a mediation brief a day-or-two before the mediation is going to essentially ensure that little-to-no effort will be made for upward adjustment, if such was warranted. From a claimant’s perspective, this will mean their claim will not settle, or if it settles, it will be for an amount less than what might have been gained with better planning. Given that the time to prepare a mediation brief is the same regardless of whether it is done a day before, or a month prior to, the mediation, there is really no excuse for tardiness. Indeed, in those instances where an expert failed to tender their “report” a month or two before the mediation, it is still a better practice to deliver the mediation brief early, without the expert’s report, and then send an addendum when the report is available – indeed, the first brief can contain inferences that a report is forthcoming or anticipated. In this manner, and in the interim, the LTD claims adjuster will have a better feel for whether there is a need to seek out more authority, and perhaps have people in stand-by mode to react more quickly when the report is made available (provided it too does not come at the 11th hour);

Participate in-person. Although video conferencing and teleconferencing mediations are possible, there is no substitute for an in-person mediation. The claimant, perhaps for the first time, gets to hear an articulated explanation for why the insurer views their case differently. The insurer, for the first time, has the opportunity to get a tactile feel for the claimant: sure on paper the claimant may come across as undeserving, but that may not play out during a personal one-on-one interaction. Exchanges with family members (who will likely be witnesses) are also helpful for an insurer, and one that would not be possible absent an in-person mediation. Insurance representatives should be pleased to find out during a mediation that the spouse is really nice and credible (unlike the claimant): after-all, the spouse can uplift a case that otherwise looked quite damaged, and it is better to find out, and react to this contingency, at mediation, rather than to remain oblivious to this contingency heading into a costly trial;

Manage client expectations before the mediation. Often the most time consuming part of the mediation process stems from having to convince parties to readjust their settlement objectives in real time, as the mediation unfolds. It can happen with either party: an adjuster who comes to the table with an ardent view that they will steamroll over the claimant with a next-to-zero offer, only to find out later that they simply and needlessly bought themselves an expensive trial because that assessment was way-off-the-mark, or a claimant who comes to the table with expectations that they will leave with enough money to buy a house, and are gravely disappointed to discover that their case is likely not even worth a down-payment for a house. At mediation, condensed into a few hours, it is difficult, and in some cases impossible, to alter these expectations. Clients are never well served by lawyers who advise in absolutes. All cases are inherently risky and unpredictable. Comments like “my client can’t lose this” is mind numbing. By way of illustration, how much liability should be fixed against a defendant who pleads guilty to making an improper left hand turn in front of a plaintiff’s vehicle, leading to a car crash? Most would likely say 100% against the defendant. Some might say the “plaintiff can’t lose this case.” Well, in one case a jury concluded that the plaintiff was 100% at-fault, on the basis that despite the defendant making an improper turn, the turn was done early enough that the plaintiff could have reacted to it and avoided the collision. Surely this was a perverse finding and upset on appeal: the “plaintiff couldn’t possibly lose this on appeal!” Well, the trial decision was upheld on appeal, and leave to appeal to the Supreme Court of Canada was denied! (Olszynko v. Larocque, [1998] O.J. No. 5281 (G.D.); [1999] O.J. No. 4563 (C.A.); [1999] S.C.C.A. No. 607). This is just one cogent illustration for why it is foolhardy to take positions like “my client can’t lose this.” This does not mean that an otherwise poor case for the claimant warrants a high settlement, or a great case for the plaintiff deserves a low settlement: it simply means that the parties need to account, in some reasoned manner, that “my client may lose this,” and do their best to quantify what those risk factors may be. If expectations are well managed prior to the mediation, then the mediation process becomes more streamlined, and more importantly there is a lot less client angst which is, needless to say, an absolutely bonus for the lawyers;

Prepare a short, persuasive, and compelling opening submission. Openings should stay true to the facts, weaved into a compelling thesis for why your position ought to be favoured. Openings should be devoid of any personal mud-slinging. This is a time when a party can perhaps tip the scales a little: a 10% swing in a $350,000.00 case is $35,000.00, which is not bad for a well rehearsed 10 minute opening statement. Indeed, this is time well spent, whether it yields a savings of $35,000.00 for the insurer, or an additional $35,000.00 in recovery for the claimant;

Unless there are significant minefields, encourage the parties to speak during the opening session. Often this is a cathartic experience for the claimant – a chance to be heard – a chance to feel they are not a number. It is a chance for the adjuster to get a different perspective about the claimant (that doesn’t come out on paper). In the case of the adjuster, it is a time for the claimant to see that there is a human on the other side, and ideally one that shows a little empathy. Even if there are minefields for the claimant’s case, these “risks” can be somewhat ameliorated through the use of a prepared written statement – not as effective as a “from the heart” statement, but one that nonetheless is better than no statement at all;

Approach the negotiations sensibly. It is hard to tell why things have strayed to the point where insurers open with close-to-zero opening offers, and plaintiffs open with offers beyond policy limits. There is little to gain through outer limit offers, both from the defence and claimant’s perspectives. It creates angst, and it wastes time. But it seems to be the flavour of the day, and it shouldn’t be. Regardless, and fortunately, things typically, and eventually, get on track, when reason eventually prevails;

Don’t approach the mediation as a testing ground to see what value the other party places on the case. This is not the purpose of mediation, and the strategy will typically backfire, because to get to an opponent’s true number, you have to negotiate in good faith. Indeed, an “outrageous” offer typically yields an equally “outrageous” counter-offer. Why? Because the party on the receiving end doesn’t want to tip their hand on what they may be willing to pay. Indeed, imagine the difficulty a mediator will have with the party on a receiving end of an outrageous offer when the mediator convinces the party to respond with a realistic offer, and the mediation comes to an end shortly thereafter– in this scenario, the responding party feels duped by the mediator – they put their cards on the table as requested by the mediator, but their opponent did not. The responding party leaves the mediation in distress. By way of example, in a situation where both parties view the case to have a settlement value of $300,000.00, but have been posturing for years that it is a zero case on the defence side, and a multi-million dollar case on the claimant’s side. Claimant opens with an offer for $1.2M, plus costs and disbursements. The mediator convinces the insurer “to do the right thing” – ignore the claimant’s hyperbole, and tender what you think is fair, in this case, $225,000.00 to give you some wiggle room to $300,000.00. The claimant storms out, perhaps immediately or a round-or-two later, absolutely pleased that the insurer tipped their hand to a willingness to contribute something close to their target, but the insurer leaves empty handed, and potentially angry at the mediator. The anger isn’t justified, because the insurer lost nothing: but it is perception over substance. Tomorrow the case will likely settle for something close to everyone’s target, but that mediation experience will leave a bitter taste for the insurer, even though the mediation was the catalyst for getting the deal done a short while later;

Let the mediator help. Take advantage of the knowledge and experience of the mediator.  The mediator has no affinity to one side or the other, and will assist the parties through impartial lenses.