Alabama Insurance Adjuster Practice Exam

How are mediators typically compensated during a dispute?

1. By a fixed fee paid by both parties

2. By percentage of the settlement

3. By hourly rate paid by one party

4. By a split fee from all parties involved

The correct answer is: By a split fee from all parties involved

Mediators are typically compensated through a method that promotes fairness and shared responsibility among the disputing parties. When they receive a split fee from all parties involved, it ensures that the cost of mediation does not burden just one side, allowing for a more neutral standing during the mediation process. This approach encourages cooperation and helps maintain the impartiality of the mediator since the mediator's compensation is tied to the participation of all parties rather than the outcome of the mediation. In cases where mediators are compensated by a fixed fee paid by both parties or by a percentage of the settlement, the neutrality can be compromised as it may create a situation where the mediator has a vested interest in the outcome. Additionally, an hourly rate paid by one party creates an imbalance, as one side might feel disadvantaged if they are responsible for covering all costs. Thus, a split fee model is generally favored to uphold the fairness and effectiveness of the mediation process.