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Reframing “It’s legalized extortion!”

June 27, 2011

In my mediation practice I must often ask defendants if they could agree to pay something to the plaintiff to make the case go away.  Many times in response I would hear “It’s legalized extortion.”  “I won’t pay; I didn’t do anything wrong.”

Rather than debating the right-versus-wrong argument, which ends up being an endless loop more often than not, I try to shift the discussion to appeal to the person’s business sense, balancing risk against cost.

Often I will suggest an analogy to insurance premium payments.  I suggest that most of us have insurance of one sort or another.  We accept a certain deductible amount.  We accept a premium payment we can afford.  I share that, to afford a $1,000.00/month health insurance premium, for example, I have had to accept a $10,000.00/yr. deductible.  But then I add that I have done this to manage the risk against something worse going wrong … and that I have capped my exposure at about $22,000.00/year.

Then I suggest that making a settlement is not giving in to extortion.  Rather, it is the sensible result of risk analysis,  assuring oneself that the settlement “premium” is just making certain that there’s not a worse result.

Sometimes this works.


From → Mediation

  1. Jeremy permalink

    David, what an incredibly interesting and insightful perspective, one that I have found can actually apply to things other than mediation (but I’m sure you already knew that, haha). I was actually presented with such a “risk vs reward” situation this past week; without realizing it I was forced to make a decision to swallow my pride and succumb to the will of those who had undue control over me. To make a long story short (and trust me, it’s a very long story–a full day wasted dealing with the complicated and intricate web of pure fun that is governmental bureaucracy), here is what happened:
    I was alerted three days ago by a credit report-monitoring service that a piece of “potentially negative information” had recently posted to my credit report. Curiously confused I logged-in to check it out, and found that a company based out of Albuquerque claimed that I was delinquent on a $120 bill. Wondering how in the world I had any connection to ANYthing located in New Mexico I did a bit of research and began to put the pieces together: in the summer of 2009 during my “summer training” at the Naval Academy I was lucky enough to be selected to serve as a ranger at the Philmont Scout Ranch (located many hours north of the Albuquerque airport in NM). During my time there, however, I re-aggravated an injury to my right foot and ankle from earlier that summer and had to go to the hospital for x-rays. Being active duty military, however, and a member of Tricare, the Navy’s medical insurance, I did what I do every time — I handed them my military ID, let them know I was active duty, told them how to reach Tricare, and was then serviced as needed. Tricare was to cover the what turned out to be $94 expense for the x-rays and that should have been that, but I now found that the information I gave them two years ago got lost somewhere. They did find out I was a member of the Philmont Staff, though, and left it up to their billing department—a separate entity from the hospital entirely—to track me down to make good on my bill. They called medical at Philmont, who forwarded them to the Naval Academy, who then told them that I was with Tricare. Upon calling Tricare they told whomever it was that they spoke with that they needed some information about me and Tricare agreed to return their phone call. This agreement was ultimately lost in translation, however, because Tricare never returned their phone call nor did the hospital’s billing department ever follow up with Tricare. Over time the hospital ended up relieving this company with another because of other screw-ups, and so my bill remained unpaid until two years later they looked and saw my account, converted the service rendered to me as a “cash” account, and submitted it as delinquent, which was then forwarded to a collections agency and put on my credit report.
    Mind you this entire time (two years) I was not once personally contacted about my bill, only the people who they supposedly thought were in charge of me were contacted. When I called the hospital a few days ago to see about getting them to admit that they or their billing firm screwed up and to get the delinquency off of my credit report the woman in charge of my “case” refused, and told me that the only way that I could get what I wanted was for the bill to be paid in full. Well, Tricare has a 90-day statute of limitations for cases so I had no recourse there and without any other sort of medical insurance I quickly realized that I was faced with a decision, neither of which I was particularly interested in agreeing to: either I refused to pay the bill and have the bad debt remain on my credit report, or buck up and just pay the bill to get the information removed. After attempting to reason with the stubborn woman but having no success with achieving my ultimate goal I decided on the latter, and I was able to get her to knock the bill down to 50% of the cost and upon paying that “we’re straight,” as she put it.
    I should never have had to pay the bill in the first place, but because of someone else’s lack of attention to detail or simply bad accountability and business practices on behalf of the firm that was contracted by the hospital I was forced to anyway. Fortunately it wasn’t terribly expensive, but it’s the principle of the matter that I was arguing. I decided to balance risk vs reward and knew that the only way to remove the blemish from my credit report was to have the bill paid. It was obvious that the only way to get it paid was if I paid it myself. After thinking about it and talking about it with a few of my colleagues and friends I came to the conclusion that I made the right decision. If not only because it was the risk of having bad debt on my credit report when I’m very close to being in the market to purchase a house, but also because in my opinion it wasn’t worth the hassle of argument to try to win my side to get out of paying a mere $47.

    Thank you again for the perspective, David. I have thoroughly enjoyed reading your blogs thus far and will continue to do so (and hopefully if I comment on another I will not be so long-winded, I just had to tell this story after reading what I read above; I will try my best). On another note, mazel tov to you and your family on the occasion of Hannah’s wedding and marriage a couple weeks ago; I wish you and your family all the best. Oh, and give my best to the boy…I hear he’s doing well for himself since we last spoke 🙂

    • Thank you Jeremy. I had a similar experience, although not at Philmont, with a credit card charge that I had never approved. It also ended in settlement … paying 50 percent to be done with it. It was galling at the time, but a good decision nevertheless. Regards, David.

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