Should Mediators Be Obliged to Insure Their Civil Liability?

Pic Credits – https://www.ipwatchdog.com/

Introduction

The civil liability of mediators is not a favoured topic among the mediators’ community and it can easily be overlooked. Over the last few decades, many countries have started to promote the use and recognition of mediation as an alternative dispute resolution method. Unlike other professions, mediation is a profession that has not been subjected to the supervision of governments over matters such as training, licensing, professional standards and discipline. People from different backgrounds and professions practice as mediators, however, they are not subjected to the code of conduct of their particular professional conduct as they did not strictly perform as members of that profession when they acted as mediators. Further, there is no set of standard professional indemnity insurance (i.e. covering civil liability claims) for mediators due to the absence of a single professional association that represents and governs mediators. This blog post aims to examine the question as to whether mediators should mandatorily insure their civil liability and whether it should be regulated by law.

Mediators’ Liability

Mediation is purely a voluntary process and parties have the right to choose their mediator. The outcome of the mediation is entirely dependent on the parties’ discussion. The role of the mediators is to facilitate this discussion and, if possible, help the parties reach an agreement. Mediators are impartial and have no interest in the outcome of the mediation. They are not lawyers or judges. Therefore, they do not advise any party or adjudicate the case. Mediators should have no opinion regarding the issue at hand, coupled with no judgment or bias. The role of the mediators is solely to facilitate the settlement of the dispute and manage the mediation process.

The relationship between the parties and the mediator is governed by private law due to its contractual nature. Potential civil liability of mediators might arise under mainly four circumstances, including conflicts of interest, breaking the duty of confidentiality, improper conduct before and during the mediation process, and the mediators’ involvement in drawing up the settlement agreement. One of the most predominant negligence-based claims against mediators is pure economic loss, for instance, when the mediator’s behaviour in the mediation process results in unfavourable terms towards one of the parties.

Usually, a mediation agreement will be adopted to limit the liability of the mediators. The current situation of mediators’ regulations at the international level can be considered a patchwork and uneven, and there are numerous debates regarding the feasibility and necessity of an international mediators’ regulatory framework. Even though mediators are not regulated, several organisations provide sets of code of conduct for mediators to follow, for example, mediation providers and accreditation organisations such as the Centre for Effective Dispute Resolution (CEDR) and the Hong Kong Mediation Accreditation Association.

Although the topic of mediators’ immunity has been identified as one of the essential legal issues across different jurisdictions, not many court cases and legislations have touched upon this issue. For example, the Mediation Ordinance of Hong Kong[1] does not mention anything about the liability of mediators. Rather, Section 104 of the Arbitration Ordinance of Hong Kong[2] provides that a mediator is only liable if it is proved that the act was done or omitted to be done dishonestly. Further, the Mediation Ordinance[3] is silent about the indemnity rules. Hence, there is no provision for mediators in Hong Kong to consider whether it is appropriate to consider professional indemnity insurance.

Under English law, mediators are generally immune and not bound under civil liability, since there has not been an enforceable Mediation Act in place. Nevertheless, in many areas, such as Tort, the mediator will have to act under the reasonable care standard and the English law is slowly being developed to cover any specific duties that mediators should have in practising mediation as a profession. There are also assumed duties for mediators, since they might need to undertake particular acts under the contract, and might be held responsible if these acts are not undertaken. To summarise the position under English Law; Civil liability of a mediator can arise only if the mediator has recognised a duty towards one or more parties, has failed to perform that duty and that failure has caused harm to the parties.

Should Mediators Be Obliged to Have a Professional Liability Insurance?

For the time being, in most of the jurisdictions, it is up to the mediators to decide whether they should obtain professional indemnity insurance. However, many mediators do not obtain professional indemnity insurance due to the high cost of the coverage and the relatively low risk. For instance, the Model Mediation Agreement 2020 of the CEDR states that:

‘Neither the Mediator nor CEDR shall be liable to the Parties for any act or omission in relation to the Mediation unless the act or omission is proved to have been fraudulent or involved wilful misconduct.’[4]

Furthermore, the New Zealand Court of Appeal in the landmark decision of McCosh v Williams,[5] stated that:

‘The parties jointly and severally release, discharge and indemnify the mediator in respect of all liability whatsoever (whether involving negligence or not) which may be alleged to arise in connection with or to result from or to relate in any way to this mediation.’[6]

Even though mediators suffer relatively low risk in professional indemnity, there have been cases that show that mediators might need to pay for any of their wrongful actions during the process of the mediation. To state an example, in the landmark Australian case, Tapoohi v Lewenberg,[7] a mediator had to settle with the disputing parties over his alleged professional negligence. According to the CEDR code of conduct, mediators are obliged to obtain a professional indemnity insurance of an adequate amount with a responsible insurer to deal with the risks that may arise when the mediators perform their duties in the mediation process.

However, a mediator should not be obliged to insure their civil liability, rather, it should be done voluntarily. This is because compulsory civil liability insurance would not be feasible for the mediators due to the relatively small number of lawsuits against mediators, and the high cost for the mediators to obtain an insurance.

Conclusion

Undoubtedly, lawsuits against mediators on civil liability are uncommon and most of them would not proceed to trial. Mediators might think that they do not need to obtain a professional indemnity insurance because of the relatively low risk of legal action against them. Due to this uncertainty, mediators should not mandatorily insure their civil liability and it should not be regulated by the law (on an international level). Mediators should obtain their professional indemnity insurance voluntarily, for their own good.

(This post has been authored by Charles Ho Wang Mak and Konstantina Zariou. Charles is a Ph.D. candidate in International Law at the University of Glasgow and Konstantina is a law graduate from the University of Sussex)

 

References

  1. Mediation Ordinance. (Cap. 620).

  2. Arbitration Ordinance (Cap 609), Section 104.

  3. Mediation Ordinance. (Cap. 620).

  4. Centre for Effective Dispute Resolution, ‘Model Mediation Agreement’ (2020), para 3.

  5. McCosh v Williams [2003] NZCA 19.

  6. ibid.

  7. Tapoohi v Lewenberg [2003] VSC 410.

 

Cite as: Charles Ho Wang Mak and Konstantina Zariou, ‘Should Mediators Be Obliged to Insure Their Civil Liability?’ (The Contemporary Law Forum, 14 August 2020) <https://tclf.in/2020/08/14/should-mediators-be-obliged-to-insure-their-civil-liability?> date of access.

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