The Crisis in Insurance Coverage for Mediators Part 1: Even Lawyer-Mediators are Going Bare

Abstract

I was drawn to the story of Dr. Resa Fremed, a Connecticut therapist-mediator, wrongly accused of engaging in the unlawful practice of law (UPL). She learned the hard way that she did not have insurance to cover the costs of her defense in a disciplinary proceeding brought against her by a state bar commission. She eventually settled that claim, at least in part, because she could no longer afford further representation by counsel. Her lack of coverage under a policy issued by Underwriters at Lloyd’s, London (Underwriters) only added to the stress of the situation. In addition, without the help of defense counsel appointed and paid for by her insurer, she had little bargaining leverage over the terms of the consent order that she felt compelled to later sign. Arguably, her lack of insurance led her to sign a consent order that reflects a broad interpretation of UPL in the context of mediation. Moreover, the outcome in that proceeding could influence the resolution of other UPL disciplinary proceedings filed against mediators in Connecticut and other states.

The vast majority of mediators pay premiums for professional liability insurance (or “errors and omissions” or “E&O”) coverage under policies they have never read. The vast majority of people reading this article would not know whether their professional malpractice policies would pay any damages, penalties, or fines assessed by a judge or jury in a lawsuit alleging mediator misconduct; by a regulatory authority in a consumer grievance alleging breach of an ethics standard; or by a court, the state bar, or other regulatory body in a disciplinary proceeding alleging that the neutral had engaged in UPL. Nearly all mediators would be surprised to learn that most policies do not cover these types of claims. In addition, most mediators would not know whether the policy covers the cost of defending those claims or the cost of resisting a discovery subpoena, testimonial subpoena, a motion to compel, or a court order seeking the disclosure of confidential mediation communications.

Even lawyer-mediators would have difficulty discovering the coverage gaps and traps that exist in nearly all professional malpractice policies. The policies cross-reference multiple sections of the contract, use specialized terminology, and often fail to define all the terms used in the policy. We cannot expect mediators who enter the field from other professions-of-origin to decipher the technical jargon used in insurance policies, especially when state and federal courts further interpret the terms of art used in the policies through case law that is buried in law libraries or in computer databases.

This article and the other articles in this series, illustrate the complexity of the coverage analysis, outline the many ways in which an insurer could deny coverage for a claim or the costs of defense, show how the language of standard policies invites coverage disputes over the interpretation of policy language, and ask insurers to take greater care in drafting policies that fit the needs of mediators and other persons serving as ADR neutrals.