U.S. MEDIATION PROGRAM LAUNCHED

It might lack the drama of a John Grisham courtroom thriller, but another mediation program is coming to a city near you with the promise of reduced litigation costs.

After a multiyear trial period in two test cities, the National Pre-Suit Mediation Program has elected officers and plans to expand throughout the United States. The organization, founded in 1992 by the defense attorney group International Assn. of Defense Counsel with money from the insurance industry, will establish mediation programs through local bar associations to resolve disputes before litigation erupts.

"We're trying to make the lawsuit the last resort, not the first resort," said James Readey, NPSMP director.

Over the next year, the organization plans to add nine cities, including New York, Chicago and San Francisco, to its programs already existing in Columbus, Ohio, and San Antonio. Within five years, it hopes to run programs in 40 cities. The NPSMP will not supervise the local programs but rather will help establish local programs to be run independently.

Mr. Readey said he hopes that one day 10% to 15% of disputes will be settled through mediation rather than litigated. He acknowledges he faces an uphill battle. "It's hard to get people to change the way they always have done things," he said.

NPSMP works by enlisting insurance companies to sign an agreement calling for mediation of claims before a suit is filed. When a dispute arises over a claim, the claimant can request mediation, and the insurance company will pay 75% of the first $1,000 in mediator's fees. Insurers that enlist in the program do so voluntarily. Signing on to the program is not legally binding. In the two test cities, most of the claimants have learned of this program from the publicity it has received.

The mediator, frequently a former judge, then talks to both sides in hopes of reaching a settlement. If the sides cannot agree, the claimant is free to leave the mediation and pursue a suit. Besides insurance companies, other signatories to the mediation agreement include hospitals, for medical malpractice, as well as utilities and municipalities.

Mediation proponents present the process as able to cure what ails all sides when a case is litigated. Plaintiffs like it, Mr. Readey said, because their claims get resolved faster. Their attorneys also favor it because it allows them to earn a fee in a much shorter time and focus their time on more complicated-and lucrative-cases. Defendants and their insurers like it because it lowers legal fees in defending suits. And the judges like it because each case successfully mediated means one less suit clogging their dockets.

Practically any type of dispute might qualify for mediation, Mr. Readey said. To date, the organization has successfully resolved personal injury, automobile accident, employment, environmental, construction and contract disputes.

"Any kind of case that ultimately might settle before going to trial might qualify," Mr. Readey said. "Ninety-five percent of cases settle, and we're trying to settle them sooner."

Nothing shows the broad support within the legal community for mediation more than last month's meeting, during which the organization's first officers were elected. Edward Schrenk, senior vp/general counsel of USAA Property & Casualty Insurance Co. in San Antonio, was elected president. Also elected were representatives from the plaintiffs bar, the defense bar and the insurance industry.

Of the more than 600 cases mediated so far, about 85% have been successfully resolved. Mr. Readey estimates that each mediated case saves insurers 90% compared with defending a suit.

The hope of savings of this magnitude drove six insurance companies to provide initial financing for the program. The initial sponsors-State Farm Group, Allstate Insurance Co., Nationwide Group, GEICO Corp., USAA Group and Farmers Group Inc.-each provided $25,000 per year for five years.

Insurers expect that they will more than recoup this investment through reduced legal fees, Mr. Schrenk said.

What distinguishes NPSMP from other mediation programs, according to Mr. Schrenk, is going to mediation before the filing of a suit. This greatly increases the savings compared with mediating a case shortly before trial, when most of the legal costs already have been spent.

"This gets people face to face," Mr. Schrenk said. "It gets plaintiffs, the lawyers and a mediator in a room to talk the thing through."