An interesting take on ‘bridging the gap’ came to my attention this week. The story has to be told anonymously because of client confidentiality, but the essence was a dispute over the amount of a pay-out between an insurance syndicate and a business owner after the business premises were destroyed by fire. Some of the facts surrounding the fire had made the insurers suspicious, although there was no hard evidence of fraud. Nevertheless, the insurers were reluctant to settle the claim which was close to €10 million, and their tactic of choice was interminable delay and unreasonable demands for detailed information.
Eventually a meeting was convened. Both sides were represented by lawyers from prestigious firms, and a mediator of international repute had been agreed whose job was to bang heads together and try to break the deadlock.
The insurers started by offering nothing. The business owner demanded the full amount. There followed bouts of disagreements and unpleasant verbal altercations between the parties which from time to time resulted in a unilateral concession by one side or the other. Some hours later the gap between the two had been reduced to €1.5m.
The mediator dramatically paused the dialogue, and declared the problem resolved. The parties protested there was still a €1.5m gap.
Turning to the lawyers representing the insurers the mediator asked what their estimate of costs would be if there was no informal deal and the matter went to court. The sum indicated was €800,000. He asked the other side the same question. They said about €1,000,000. So, said the mediator, the cost of not bridging the gap and doing the deal now is bigger than the gap itself. So, logic dictates that we must do the deal now!
I wish I could report a happy ending. In fact the insurers called an adjournment so that they could talk to absent subsidiary insurers who owned part of the risk and they never came back.
What do we learn? Firstly that the mediator should not have allowed the insurers to leave without trying the ‘open door’ technique first. Something like ‘Let’s assume you can get the authority from the subsidiary insurers to do a deal, where might we end up?’ Secondly, that adjournments are not always a good thing – momentum in a negotiation which has previously been bogged down should be nurtured. And finally that the concept of logic often sits uncomfortably at the negotiator’s table; emotion too often becomes the dominant behavior.
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