Insurance coverage

Seven tips for mediating complex insurance coverage disputes | Lowenstein Sandler LLP

Mediation can be a viable way to reach a satisfactory resolution of an insurance dispute. When successful, mediation offers a less costly and time-consuming alternative to litigation and often allows for more candor and creativity in crafting a successful resolution. Below are seven tips for arbitrating an insurance case and reaching a resolution.

  1. Decide when to meditate
    Many mediations fail because the insurer claims to lack information about the claim or damages or did not have an opportunity to review the information. Without information supporting your claim, mediation is unlikely to be productive. It may be that an investigation or fact finding is required to bring the matter to a resolution position. To get the most out of mediation, a policyholder should focus on information that can reasonably be gathered to satisfy the insurer’s due diligence when determining coverage. For example, if the insurer has valid questions regarding the amount of a loss, policyholders should consider providing their insurer with factual information to substantiate the amount of the loss prior to any mediation so that the insurer has a better understanding. of his exhibition.
  2. Selection of the mediator
    Mediator selection is often a negotiated process with the insurance company’s attorney. Insurance coverage cases present unique issues, particularly in light of insurance policy construction rules, bad faith damages and claims handling laws. Many of the major insurers have “approved” lists of mediators, and additional discussion may be needed if the insured wishes to use a mediator who is not on the list. But, ultimately, when considering potential mediators, prioritize those who know insurance coverage cases, have a track record of success, and who don’t treat insurance companies as their preferred customer.
  3. Assessing your claim
    Understanding the strengths and weaknesses of your claim – and your insurer’s defense against your claim – is essential for successful mediation. When preparing for mediation, consider creating a list of three to five questions that you think will be difficult for your opponent to answer, and then do the same for your claim. Policyholders should understand that many insurance companies are frequent litigants and will not necessarily be intimidated by the prospect of litigation. Similarly, threats of bad faith claims will rarely motivate the insurer to settle unless the insurer reasonably believes that its exposure exceeds its policy limits. That said, insurance companies, like most businesses, are motivated to find a reasonable solution that reduces legal costs and reduces risk.
  4. Understand how insurers work
    Many policyholders are frustrated during mediation due to the lack of consistent progress throughout the day of mediation. Therefore, an insured should keep two concepts in mind: firstly, claims representatives have only a certain amount of authority, and any sums above this amount must be approved by one or more senior claims handlers or internal committees. . Sometimes this is done before the mediation, but not always. Second, from a tactical perspective, most insurers work slowly during the mediation process, taking long periods of time to respond to offers and negotiating in very small increments. This strategy is often designed to frustrate the insured, as insurers have learned that forcing a long and frustrating day of mediation will cause some insureds to jump on the first decent offer. Being aware of these concepts will help prevent frustration during mediation.
  5. Help the mediator
    It is important to have your key documents and legal authority ready for the mediator. It is virtually guaranteed that your mediator will not have time to memorize key facts, documents or case law prior to mediation. So if a specific decision or document is critical to your case, prepare material to highlight it and hand it to the mediator.
  6. Prepare for critical, non-monetary terms
    It is not uncommon for insurance mediations to get bogged down because the parties cannot agree on the terms of the settlement. Besides the amount of the settlement, the two most common areas of dispute are the scope of the release and whether the insurer will insist on an indemnity clause. The parties should address these terms on the day of mediation so that the settlement does not fall apart during the final drafting process. It is important to note that insurers often accept settlements without compensation or with limited compensation. Policyholders may decline this request by noting that this is not a requirement in most insurance policies.
  7. Have a plan for next steps
    You need to create a realistic goal for the mediation. Make sure you have an ideal settlement amount in mind, with a range of options you will accept; also, create a plan of concrete steps to take if mediation does not resolve the case. If you can’t find a solution, will you file a complaint? Will you encourage the mediator to make a mediator proposal? Or do you want to try another mediation later? Know the answers to these questions before entering mediation so that you arrive prepared to achieve your goals.