Navigating claims and resolving conflict
Published in October 2024
This month’s Conflict Resolution Day provides an opportunity for organisations to reflect on situations involving dispute or conflict.
We invited Nick Hill, Head of Claims (Financial & Specialty Lines) at Aviva, to share his experiences of resolving conflict including some practical measures to help expediate this.
Introduced in 2005, Conflict Resolution Day encourages “peaceful means of resolving conflict” across the globe, whether in society, business or politics.
Touching on every aspect of life, insurance and claims inevitably coexist. Various issues give rise to claims and not all are straight forward to resolve. This can give rise to conflict scenarios and often leads to lengthy litigation, and huge costs – emotional, financial and opportunity.
Whilst much insurance is in place to protect against damage to assets from perils like weather or fire, increasingly what is insured is the policyholder’s potential liabilities to third parties that may arise in the course of doing business. When these types of insurance claims are made, they almost always involve multiple parties and complex issues.
Often these will involve situations where loss or damage has been caused by negligence, errors, or omissions in the contractual or statutory duties that are owed between different entities, for example where professionals are providing services or where there is a duty to prevent harm or damage to others.
A common area for escalating conflicts is the construction industry. For example, if a large construction project suffers from structural defects, there will emerge a web of potential liabilities – including the main contractor, architect, structural engineer, engineering consultants, sub-contractors and various other specialists engaged. Liability can often be potentially shared across multiple parties or arise from multiple compounding issues, creating a complex matrix of issues as past actions and legal duties are scoured to identify where culpability should settle.
This does mean that it can be difficult to identify an obvious answer or clear line of responsibility. But there are ways and means of seeking to resolve these issues without matters turning into major conflict.
Importance of understanding relationships
Seeking out routes to early resolution, avoiding years of litigation and the associated personal and professional impacts, can see significant benefits. That is provided all parties are committed to doing so.
It’s important to remember that most disputes arise out of a pre-existing relationship between people or corporations, whether that’s through employment, contracts for services, joint endeavours or public obligations. It is fundamental in dealing with conflict to understand and seek to preserve these relationships, but also to leverage them where possible to aid early intervention and mitigate potential losses, narrowing the scope of any dispute.
Early ‘without prejudice’ (meaning without admissions of liability) negotiations can be very productive in avoiding lengthy litigation. Legal support can be necessary to help establish the potential for liabilities to attach, as well as ensuring protection of privileged material, but too early a recourse to a legal battle can lead to increased costs and polarisation between the parties.
If informal approaches aren’t successful in resolving or mitigating issues, there are several ways to resolve a dispute before turning to court proceedings, through various forms of ‘Alternative Dispute Resolution’ (ADR), such as mediation or arbitration. Not only are these routes quicker and cheaper than litigation, they also introduce an unbiased third party who can help unlock any impasse in the progress of a conflict towards resolution.
Clear definitions and operating parameters
My team and I work hard to ensure that all claims are thoroughly investigated and evaluated, allowing us to help clients navigate conflict resolution with pragmatic commercial and tactical advice, supporting loss mitigation where possible and helping preserve commercial relationships. But sometimes this isn’t enough and it’s necessary to robustly defend allegations, not only to protect against an immediate claim, but also to prevent or deter future claim allegations arising in similar circumstances.
A common scenario where conflict can be very difficult to resolve is when losses have arisen due to ambiguity or gaps between duties/responsibilities owed by different parties.
This can make it very difficult to identify or apportion liability and there can be a reluctance for any party to retrospectively accept obligations they did not intend to have, particularly if this may influence future dealings.
This provides a valuable lesson in avoiding conflict in the first place – ensuring there is clarity and transparency over roles and responsibilities on any project, maintaining thorough documentation, diligently acting only within the appropriate remit and ensuring there is effective communication of any change in circumstances or evolution of scope.
Steps to effective resolution
From my experience, finding the best method for resolving conflict requires attention to various factors. This includes carefully considering the specific issues, the people involved (including the wider stakeholders who could influence outcomes), individual or organisational drivers, merits of the claim and potential solutions (which are not always purely financial).
It’s then important to devise a strategy towards resolving the conflict. This should aim to be in a way which produces results satisfactory to all parties. This may not, by any means, result in a happy outcome for all parties – but an outcome which all parties can accept to reach resolution and move forward.
Some key tips to support dispute resolution include:
- Think about the location – if the dispute is international, consider which law applies and whether there are jurisdictional or cultural issues which will determine how the dispute is best approached or resolved. Get local, specialist advice.
- Move quickly – the best chance to mitigate losses or resolve disputes is to act quickly as soon as you are aware of issues. Losses/issues can compound and trying to resolve conflict when the key people involved have since left the business or moved on, can be problematic.
- Seek a neutral viewpoint – bring in someone with objectivity who can give you a private, neutral, and candid view on the situation that has arisen. As conflicts escalate, your narrative can become very one-sided with only the ‘best points’ communicated externally. Don’t fall into the trap of being seduced by your strongest arguments – maintain perspective!
- Remain innovative – think of creative ways to resolve disputes. It’s unlikely that any party walks away happy as even a successful party to a dispute will lose irrecoverable costs, business time and energy. So, always consider if there is a better way to move forwards.
- Stay agile – the most effective route to resolution may evolve during the course of a conflict. Keep clear communication and manage timescales and expectations.
Embracing alternative methods of dispute resolution
Seeking a more refined and considered approach to solving an issue or problem, can have major benefits and see efficiencies at scale: prolonged litigation or an aggressive conflict strategy will almost always have a detrimental effect on a business, and not only from the likely irrecoverable element of costs that are incurred. A key risk to litigation is the public exposure of key documents/activities, as well as the potential for negative press, or an unfavourable reputation for how conflicts are managed. Disputes can be ruinous to commercial relationships, but also risk setting unfavourable future precedents that will govern a future course of dealing. Litigation takes a great deal of time, effort and potentially emotional stress from people across the organisation.
Conciliation, not conflict
After 17 years in the insurance claims business, I’ve encountered many situations where the solution is not straightforward. The most memorable – for their success in effectively resolving conflict – are those where the people involved have adopted a mature and collaborative approach, with structured negotiations, sensible discussions upholding a positive mindset and with the ultimate and agreed objective of achieving reconciliation.
On this Conflict Resolution Day, this is something I’m keeping in mind for future situations.
