While the State of New Jersey is reporting some impressive statistics regarding the number of non-flood related Sandy claims which have been closed (87% overall), the statistics likely provide little comfort for the unfortunate 13% with open Sandy claims who are still battling with their insurance companies. However, a new State mediation program may provide policy holders (“insureds”) with an expedited and cost efficient way to settle their disputes with their insurance companies.
The program, established through the New Jersey Department of Banking and Insurance, will be open to insureds who have a disputed claim greater than $1,000.00. To be eligible, no fraud on the insured’s part can be suspected. The program will be voluntary for insureds but standard insurance companies will be required to participate if their insureds elect to avail themselves of the mediation. Surplus lines carriers (insurers who typically insure high risk properties or items) will not be required to participate but can elect to do so on a case by case basis. The insurers will be required to notify their insureds of the availability of the mediation program and will be required to pay the mediation fee if their insureds choose to participate. Mediations are expected to begin sometime in April.
This is a step in the right direction for aggrieved insureds because a neutral third party will be available, at no cost to them, to encourage their insurers to settle their claims fairly. If nothing else, this process should at least make strides in keeping the insurance companies honest. Nonetheless, it is advisable that insureds consult counsel and have them available at the mediation. Although participating in mediation is more informal than filing a lawsuit, many, if not most, of the insurance companies will likely have an attorney present on their behalf at mediation. To stay on equal footing, it would be wise for the insured to do the same. Ideally, the legal costs associated with this will still be far less than if the insured has to resort to filing a lawsuit against their carrier.
It is important to note that the State’s mediation program, for the time being, will expressly exclude flood claims. Since the National Flood Insurance Program issues most flood insurance policies, those claims are outside of State jurisdiction. Although the individual NFIP policies are serviced by private insurance companies, the program is run by the federal government and is subject to federal regulations to which the private insurance companies are bound. The State has indicated that it is in talks with the NFIP to possibly include flood claims in the program in the future. This would be a welcome development for insured with unresolved flood claims.
Tara A. Speer works in Stark & Stark’s Lawrenceville, New Jersey office concentrating her practice in Insurance Coverage & Liability issues. For questions, or additional information, please contact Ms. Speer.