What should an insurer avoid if negotiations with a claimant are failing and could lead to unpredictable outcomes?

In the context of negotiations with a claimant, the correct approach for an insurer to take when negotiations are failing is to avoid litigation. Litigation typically involves a formal court process, which can be lengthy, expensive, and unpredictable in terms of outcomes. It is often seen as a last resort because it removes the ability for both parties to reach a mutually agreeable settlement.

By avoiding litigation, the insurer can keep the door open for alternative methods of dispute resolution, such as mediation or arbitration. These alternatives are generally less adversarial and can lead to more amicable solutions. Mediation involves a neutral third party who facilitates discussions between the claimant and the insurer, while arbitration allows an arbitrator to make binding decisions based on the merits of the case.

Choosing to engage in less hostile forms of resolution rather than jumping into litigation is strategic, as it can lead to outcomes that better preserve relationships and potentially result in quicker resolutions. In addition, litigation can create more unpredictable scenarios due to the variability of jury responses or judicial decisions, which adds to the risk for insurers. Therefore, avoiding litigation is a prudent choice to mitigate these risks and seek more controllable resolutions.