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A Tool for Multi-Party Insurance Litigation Mediation with “Additional Insureds”

Advocates and mediators alike are all too familiar with the challenges that multi-party cases present. Among the most frustrating situations are those in which warring defendants or multiple plaintiffs place conflicting conditions on the negotiation that cannot be satisfied. Most commonly, parties will insist that their financial participations bear inconsistent relationships to other parties’ participations. So, for example, Defendant A in a multi-party case may insist that it will not contribute 100 percent to a settlement fund unless Defendant B first contributes 125 percent. Meanwhile, Defendant B may insist that it will not contribute its 125 percent unless Defendant C first contributes 150. Defendant C then almost invariably insists that it will not put in its 150 percent unless Defendant A agrees to match it. Clearly, these conditions cannot all be satisfied at the same time.

In other cases, Plaintiff 1 announces that it will not state its demand unless it first knows Plaintiff 2’s number. When that happens, you can count on Plaintiff 2 making the reciprocal announcement.

Variations on these themes are endless. Problems of these types are sufficiently common, though, that all mediation participants need as many Alexandrian Solutions as they can get for these Gordian Knots. The goal is to encourage simultaneous movement and hence eliminate the paralysis that the inconsistent conditions can create.

The Surowiecki Ballot

Here’s one tool that can help with this dilemma: The Surowiecki Ballot. In a multi-defendant mediation, this ballot has three columns: the first column would list each defendant; the next, “Percentage of Fault”; and the third, “Percentage of Financial Responsibility.”

Each defendant gets a ballot and is instructed to indicate, for each defendant, the percentage of fault and the percentage of financial responsibility each should bear in a settlement. The two numbers may be different—sometimes dramatically so—because of the financial resources of the parties, the availability of insurance, the existence of additional insured endorsements on insurance policies, indemnification agreements between the parties, or other reasons. In any case, though, the percentages in each column should total 100. The ballots are not to be signed. The defendants are instructed to complete the ballots without consulting with each other.

The defendants are also told in advance that the information on the ballots will be compiled as follows: The mediator will collect the ballots and tabulate the averages. The mediator will then distribute to each defendant a summary sheet which reports those averages, and a complete set of copies of the ballots cast. (In this example, of course, the plaintiff neither votes nor learns the results.) The results are not binding but are designed to give the defendants valuable information regarding how to move forward.

Every time I’ve used the Surowiecki ballot system, it has worked. It breaks the impasse and the defendants are able to make a collective offer, with the defendants almost always contributing in exact compliance with the average percentage of financial responsibility numbers.

Why Does It Work?

To answer that question, we must first ask why is it called the “Surowiecki Ballot”? The Surowiecki Ballot is named in honor of New Yorker business reporter James Surowiecki and his 2004 New York Times Business Bestseller, The Wisdom of Crowds. Mr. Surowiecki’s thesis is well-stated on the back-cover blurb of the 2005 Anchor Books paperback edition:

(The Wisdom of Crowds) explores a deceptively simple idea: Large groups of people are smarter than an elite few, no matter how brilliant—better at solving problems, fostering innovation, coming to wise decisions, even predicting the future.

To prove his thesis, Mr. Surowiecki begins with a whimsical example, based on a review of every episode of “Who Wants To Be a Millionaire.” On that program, when a contestant was stumped as to the right answer to a question, two of the contestant’s possible “lifelines” were to call a friend or to poll the studio audience. According to Mr. Surowiecki, calls to friends (presumably the smartest people the contestants knew) yielded correct answers 65 percent of the time. Polls of the studio audience, “those random crowds of people with nothing better to do on a weekday afternoon than sit in a TV studio,” however, gave a staggering 91 percent of correct answers.

Mr. Surowiecki follows this analysis through a dizzying array of examples, ranging from jellybean counting to stock market predictions to ascriptions of responsibility for the disastrous Challenger spacecraft disaster. Although counterintuitive, Mr. Surowiecki’s evidence shows that “each time, the crowd did just as expected: its collective guess was very accurate, and was better than the vast majority of individual guesses,” even the guesses of most so-called experts.

For the crowd’s wisdom to shine through, certain preconditions must exist. According to Mr. Surowiecki, those are “diversity, independence, and a particular kind of decentralization.” In the use of Surowiecki Ballots in mediation, each of these preconditions are met.


First, the crowd must represent diverse viewpoints and perspectives, because “the best collective decisions are the product of disagreement and contest, not consensus or compromise.” In the litigation context, “disagreement and contest” are usually not in short supply. Each defendant vigorously advocates its own position and is rarely shy to put its best foot forward or point out weaknesses in the positions of others. Mr. Surowiecki cautions that “collective wisdom” generally does not arise from “a group of diverse but thoroughly uninformed people.” Again, in the litigation context, this is usually not a problem.


Independence results from the fact that the defendants are not allowed to consult with each other when they complete their ballots. This allows the true diversity of viewpoints to be expressed. It does, however, also create an incentive to mark one’s ballot strategically, to minimize one’s own share of financial responsibility. Two factors mitigate against this possible abuse of the system.

First, each defendant is allowed to record “Percentage of Fault” before “Percentage of Financial Responsibility.” If its temper at work, some of that steam can be blown off in the prior column before being asked to cast a vote in the latter. And, indeed, there is generally greater variation in the percentage of fault numbers than in those which ascribe percentages of financial responsibility.

Second, the ballots are both unsigned and distributed to the group after votes are cast. The initial anonymity of the ballots is designed to protect each defendant from the fear that an honest but “politically incorrect” vote will subject the voter to unjust retaliation. The eventual distribution of the ballots to the group encourages each defendant to allocate a fair share of financial responsibility to itself. If a defendant wants to retain its anonymity, it cannot try to skew the results by letting itself off easy. Everyone will know. And, there’s a risk that everyone will retaliate, perhaps by leaving our hypothetical strategist out of a settlement that gets everyone else a release. There’s not much worse in multi-party litigation than to be the “last player standing,” having to bear the full costs of litigation alone and being the only defendant left at trial. So, there’s an incentive to vote honestly.


Finally, the necessary decentralization refers generally to the way the wisdom of the crowd is aggregated. In the mediation of litigated cases, the aggregation of averages, plus the distribution of all underlying ballots to each defendant, generally results in a simultaneous move by all parties to those average “Percentage of Financial Responsibility” allocations. It’s just obvious, and the negotiation can proceed.


In time, smart advocates will probably figure out ways to outsmart the Surowiecki Ballot, and its effectiveness may diminish. But for now, it is a tool that can help. Although this example discusses defendants who want to make a joint offer, the concept can easily be adapted to multiple plaintiffs who want to make a joint demand, multiple insurers for one defendant, or other contexts.

The key, though, is for advocates and mediators alike to remember that the collective wisdom of the crowd will be superior to the insights that any one of them may have. The opportunity to harness that wisdom, in whatever way or by whatever means, should not be overlooked.


Jeff Kichaven

Mr. Jeff Kichaven is one of California’s leading mediators of insurance coverage and bad faith cases. He practiced business litigation for over 15 years before he began his full-time mediation practice in 1996. Today, Mr. Kichaven mediates approximately 200 cases per year. Mr. Kichaven also has a distinguished record of… MORE >

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