Hypothetical Situation:

Nancy is a business owner that owns a small floral and gift shop on the Gulf Coast. A hurricane has made landfall, and her building has sustained quite a bit of damage. The insurance policy on her shop covers damage from windstorm and wind-driven rain, but not flooding. Thankfully, the water did not rise high enough to flood her shop.

Nancy calls her insurance company, Reliable Insurance, Inc. (Reliable), and schedules an appraiser to come out to survey the damage to her building. When Reliable's appraisal of damages comes back, the appraiser's report says the claim should be covered is $25,000. Nancy is shocked, because she knows that a new roof alone would cost $20,000 and that doesn't take into consideration all the damage to the interior of the building. Nancy hires her own independent appraiser and his report states that the amount of money that will put her building back in the same shape as before the hurricane is $89,000.

Reliable is refusing to pay any amount over $45,000 and their customer services representatives have been quite rude and condescending on telephone calls when Nancy attempts to dispute their appraiser's value. To top it all off, Reliable also raises Nancy's deductible from $5,000 to $15,000.

Nancy thinks that she is ready to file a law suit and retains an attorney. Nancy's main concern is getting her business back up and running, so that she can start making money again. Nancy's attorney files suit against Reliable.

Now Reliable must discuss the costs and benefits of different dispute resolution methods to resolve Nancy's claim with their attorneys. Reliable's main concerns are legal fees and the optics of refusing to pay a claim to an elderly flower shop owner.

1. What are some of the alternative dispute methods that might best suit this situation?
2. Discuss the advantages and disadvantages of each method mentioned in Question 1.
3. Assume that Nancy and Reliable agree to mediate their dispute. Discuss how the seven elements of principled negotiation might apply to this hypothetical.