In Sandy's Wake, State Launches Insurance Mediation Program
When Superstorm Sandy battered the Connecticut coastline last fall, leaving behind hundreds of badly damaged and demolished homes, many lawyers wondered about how all of those insurance claims were going to get resolved. And to be sure, for many policyholders, the process has been painstaking.
But now, as of October 1, there's a new state program designed to offer a forum for resolving disputes between homeowners and insurers following natural disasters. The fledgling mediation program could add a new wrinkle to insurance law practices at the same time that it keeps some cases out of court.
"This voluntary consumer mediation program will give Connecticut policyholder and the department another key tool for helping resolve catastrophic claims in a timely manner," said Connecticut Insurance Commissioner Thomas B. Leonardi.
However, some lawyers with insurance practices wonder whether the program will achieve its goals. For one thing, the program, which is modeled after similar initiatives in New Jersey and New York, will be voluntary for policyholders. For another thing, the mediator's decisions will be non-binding, meaning policyholders or insurers who don't like an outcome can still go to court.
"It does not appear to have any teeth," said Ryan Suerth, a Madison lawyer who has been involved with mediation to resolve insurance claims following Sandy. Suerth said that an early version of the bill called for binding arbitration.
Under the new law, when a storm or other natural disaster hits the state and the governor declares a state of emergency, the Commissioner of Insurance will be authorized to launch the special mediation program. Even though the results are non-binding, the statute calls for the selection of 10 independent "arbitrators" to lead mediations at each policy holder's request.
At the informal hearings, evidence will be exchanged and a recommendation for settlement made. Although the mediation program is by no means a one-size fits all approach, state officials hope to more efficiently resolve insurance claims. After Sandy, there were more than 60,000 claims in the state, and a total of $375 million has been paid by insurers. The Department of Insurance received more than 100 complaints from policyholder that their policies were not being honored.
Many of the details of the program's operation are still being worked out. Still, some ground rules have been set.
While policyholders who are having a dispute with their insurance companies are not required to participate in the program, insurance companies have no choice but to take part if a request for mediation is filed.
The arbitrators selected by the Insurance Commissioner will have to show they have not been employed by an insurance company or the state for the previous 12 months.