Online negotiation – changing the norms

Let’s blame the law and lawyers

Health Secretary Alan Milburn said on 24th April 2002  “I think most people acknowledge our clinical negligence system isn’t working well. It is expensive, it is unfair, it takes far too long to settle these claims, and as far as small claims are concerned all too often we end up paying out more money to lawyers than we do to patients. Now that can’t be right, so I’ve asked the Chief Medical Officer, Sir Liam Donaldson, to now bring forward proposals for a fairer system to settle these sorts of clinical negligence claims”.

Hang On….

• Q.  What do the following have in common? Anderson Strathern, Balfour & Manson, Digby Brown, Drummond Miller, HBM Sayers, Ledingham Chalmers, MacRoberts, Thompsons, Henderson Boyd Jackson, Paul Gebal and Co, Lawford Kidd, Corries, The Anderson Partnership, Quantum Claims, Royal and Sun Alliance Glasgow, AIG Glasgow, Direct Line Glasgow, and….the Scottish Health Service Central Legal Office?
• A.  Eight of them paid to set up Scotland’s “Intersettle” on-line claims negotiation website. And all those named are registered as “Users”. Some use the site rather more than others.

On-line Negotiation sites – Who are the players?

In March 2000 an article appeared in this Journal detailing two of the first on-line negotiation systems which had begun to operate in America. Where other “dotcoms” have crashed and burned, both Cybersettle (www.cybersettle.com) and Clicknsettle (www.clicknsettle.com) remain a success story.

In the United Kingdom there are three on-line negotiation providers. In England, Anne Irving, a personal injury and litigation specialist, set up WeCanSettle (www.wecansettle.com). Another site, E-settle (www.esettle.co.uk), was set up by Judicium, which describes itself as an umbrella company specialising in the application of IT and the Internet to the legal services industry.  In Scotland a unique approach has been followed. Stephen Moore, backed by eight of Scotland’s leading litigation practices, set up Intersettle (www.intersettle.co.uk ) in November 2002. This website has been developed and paid for by Scots lawyers. It incorporates many distinctively Scottish legal features.

On-line Negotiation: Objectives

The objective of on-line negotiation is to provide better service to claimants and compensators by speeding up the settlement process.  This involves changing the medium from hard copy correspondence, faxes, or telephone, to the Internet. Users can eliminate a number of the drawbacks traditionally associated with the negotiation process such as mail delays, voice mail, posturing, ill discipline and reactive valuations.

On-line Negotiation: How it works – Blind Bidding

First, users submit basic details of their claim via the website, and also place an opening offer of settlement. Unlike traditional negotiation or Tenders, the amount of a bid can be kept “Blind”, that is, secret from the other party. So a bidder preserves his position if the case doesn’t settle.  Websites such as Intersettle also have an optional Open Bid format.

Assuming both parties really do want to try and settle the case, they can agree factors such as how long the negotiation period will run for, how close the parties have to get for a deal to be done, and by what percentage each bid must improve over the previous one, to ensure that real progress is made.

The opposing party then places a counter offer. This, again, can be a hidden amount.

This process continues, with each bid increasing or decreasing by a fixed percentage until the pursuer’s demand and the defender’s offer come within an agreed range of each other. Then, the software that works the website automatically declares the claim settled at the mid-point.

These systems presuppose, not surprisingly, that on each side of the dispute there are lawyers or claims handlers with a sufficient degree of experience and maturity to conduct the negotiation process in good faith, with a realistic expectation of the monetary region in which a claim ought to settle. The system encourages the users to go in near this level at an early stage in order to generate a quick settlement.  There is no limit to the number of bids that can be made but clearly the idea is to make quick progress.

What are the benefits?

• Claims demonstrably settle more quickly
• No letters, faxes or phone calls
• Communication is direct to the opposing agent’s PC.
• Postal delays are eliminated.
• Parties have clear notice of when the negotiation period will end.
• In-house administration costs are cut

On-line Negotiation – Current American Position

Cybersettle’s website claims are impressive.

1. Cybersettle has helped its clients settle over $80,000,000 in claims.
2. Over 475 insurance companies use Cybersettle either directly or through their third party administrators.
3. There are in excess of 60,000 users currently on the Cybersettle system

On-line Negotiation – Current English Position

Online settlement has been enthusiastically embraced in England where WeCanSettle.com says it has settled hundreds of personal injury cases via the Internet.  Anne Irving, managing director, says:

“We know that new technologies often tend to follow a pattern of early hype, followed by a more progressive take-up as the initial obstacles to changing working practices are overcome. Whilst there is a long way to go before the potential of online settlement is universally recognised, those firms who are both truly client focused and innovative have been quicker to perceive the benefits to all parties.

“A cost-benefit analysis of one of our earliest pilot projects involving hundreds of cases between a major insurer and large law firm found that using WeCanSettle reduced the negotiation phase from 70 days to 12, reducing internal costs for both parties and accelerating payment of damages and costs.”

On-line Negotiation – Current Scottish Position

Intersettle has been demonstrated to very large numbers of lawyers, judges, conference delegates in Paris and the UK, the Scottish Executive, the Health Service CLO, and Employment Tribunal chairmen. It has also aroused interest from Law Accountants - after all, how much time and expense do solicitors waste on “Judicial Account posturing”? With perhaps the same weary inevitability that dictates 97% of all civil cases will settle out of court usually at the last minute, we can all recognise the certainty that the other side’s judicial account will almost always be agreed the day before the Taxation. After the ritual assertions of excess and pious counter-assertions of reasonableness, most judicial accounts are settled broad-brush at the midpoint of two offers. A method ultimately not dissimilar to the Internet system described above.

“Every single organisation that we have presented to could grasp the objectives which our system seeks to achieve,” says Intersettle director, Stephen Moore. “The system is very straightforward and requires nothing more than the ability to enter figures onto a website. The sole person who was negative towards eventually admitted this was because he felt that he could make more money for himself churning out endless letters and posturing in the traditional way”.

Online Negotiation – Changing the Norms

Using online negotiation tools requires certain shifts in the litigation lawyer’s culture and business norms. This has proved a much more intractable area as Stephen and the executives of Intersettle, E-settle and WeCanSettle have all discovered.

“While these systems require virtually no investment in technology and only minimal training, they do rely upon solicitors, far more than insurers, being prepared to change the way in which they have always worked. They have to value claims much earlier and become more proactive in initiating settlement negotiations,” says Moore. “Some of what I consider to be the better and more dynamic firms embrace this and are always looking for ways to better their service provision. The solicitors involved value their cases early and this means that the client knows where he or she stands early. However, this is perhaps earlier than a lot of solicitors would like to do it. One solicitor stated to me that he felt like Chris Tarrant when he received an offer from the insurer. I imagined him holding the offer letter out like a cheque to his client asking him if he wanted to go for more. This amazed me and gave me an idea of what I would have to overcome”

Online Negotiation – What Scottish Users Say
The Anderson Partnership found success almost immediately with online negotiation. Alan Taylor, a partner in the Anderson Partnership’s Glasgow office, was the very first solicitor to settle a Scottish claim this way.

“I settled a number of cases using Intersettle and I found the system to be intuitive and effective,” says Alan. “I do think that the legal system in Scotland, particularly reparation practitioners, need to make more use of technology to provide better services to their clients and this is a good example of the progress which can and will be made.”

Patrick McGuire, of Thompsons in Glasgow, who exclusively represents the interests of pursuers, echoes Alan’s sentiments:

“Online negotiation, in my experience, is an extremely useful tool. The parameters can be clearly defined and contact is almost instantaneous. You do not encounter secretaries, voice mail, or administrative error. Personally I have settled a number of cases in a very short time frame and I have no doubts that in the future, when other firms and insurers catch up, I will settle a lot more.”

David Bell, who is Claims Technician for Royal and Sun Alliance in Glasgow, hints that solicitors may require to be more assertive and forward thinking in their use of technology.

“I used Intersettle on a number of occasions and I found the system very easy to use. It was also effective. I have been disappointed that solicitors have not appeared to show a great deal of initiative by initiating cases against us and this has got in the way of us using it further.”

Stephen Moore is more forthright: “We have indeed found that the solicitors are by and large slower to initiate the cases than the insurers. The result of this is that insurers then begin to hold back. It would be easy to characterise this as complacency but I think the better view is that fear of change, ingrained work practices, and lack of client pressure are perpetuating the old habits. However, I am aware of one major insurer that has conducted a very favourable cost benefit analysis into on-line negotiation in England. I have no doubt that many claims will be settled this way in time”.

Scotland – The Future
It says much for the vision of Scotland’s lawyers that they were prepared to devote time and resources to establishing a state-of-the-art claims negotiation tool. Intersettle continues to provide its successful online negotiation service and will, from the end of August 2002, be offering all registered users an e-mail service summarising relevant Scottish court decisions direct from the Scottish Courts website (www.scotcourts.gov.uk). The challenge now is to make the profession comfortable with this new way of working, in the interests of everyone. Sir Liam is watching you.

Paul Motion writes here as a non-executive director of Intersettle. Anyone interested in trial use of the website should contact registration@intersettle.co.uk