Connecticut’s insurance department is proposing a new program that would offer a mediation option to resolve claims disputes between homeowners and their insurance companies that arise from catastrophes, such as hurricanes.
The program was introduced as legislation, House Bill No. 6549, An Act Establishing A Mediation Program for Certain Insurance Policy Claims Arising From A Catastrophic Event. The bill is now before the Connecticut General Assembly.
“Connecticut has seen more than its share of catastrophic storms in the past two years. We fully understand that homeowners are under great stress in the aftermath as they try to put back their lives and navigate the claims process,” Connecticut Insurance Commissioner Thomas Leonardi said.
“This voluntary consumer mediation program would give Connecticut policyholders and the department another key tool for helping resolve catastrophic claims in a more timely manner,” Commissioner Leonardi said.
House Bill 6549 would create a formal mechanism for non-adversarial mediation of disputes between an insured homeowner and an insurer following the major catastrophe, in which the governor has declared a state of emergency.
The insurance department’s property/casualty director George Bradner said the intent of this legislation is for it to apply to loss or damage to real or personal property other than damage to a motor vehicle.
This is the approach taken by the recently adopted New York mediation program that applies to Superstorm Sandy claims, Bradner said during his March 5 testimony before the state legislature’s insurance and real estate committee.
Due to the sheer magnitude of losses from Sandy, the New York and New Jersey insurance departments have implemented catastrophe mediation programs to respond to claim dispute issues that they are seeing in their states, Bradner said. Furthermore, Rhode Island, Florida, Louisiana, Mississippi and North Carolina have all created a mediation process to help consumers resolve claims issues that surfaced after major catastrophes in their states, he told the insurance and real estate committee.
“The insurance department believes that consumers affected by extensive and devastating damage to their homes, such as following a major hurricane, would benefit from having an option to use such a mechanism in appropriate circumstances,” Bradner said.
Under the proposed legislation, mediation would be voluntary for the insured claimants but mandatory for insurer participation. The state’s insurance commissioner would have the right to designate an independent third party organization, such as the America Arbitration Association, to administer the mediation program. Insurers would pay for all costs for the mediation.
Bradner said insurers would not be responsible for the insured’s attorney’s fees or other costs and expenses of any representative they choose to hire for the mediation. It would require that the amount in dispute be at least $500 or more.
“It is important to note that if an insured chooses not to participate in this program or the parties are unsuccessful in reaching a settlement on the claim, the insured will continue to have all rights to attempt to resolve the claim,” Bradner said. “This includes the right to utilize the appraisal process that is set forth in the policy; the right to pursue litigation; or any other dispute resolution procedure available under Connecticut law.”
Bradner also said that while the homeowner’s and condominium association’s insurance policies do provide a provision for an appraisal process, “the department believes that in severe catastrophic events a more streamlined process is needed to help the thousands of consumers that may have grievances with how the company is compensating them for their loss.”
“We believe that the current appraisal process would not be able to accommodate the sheer numbers of complainants that would arise from a catastrophic event.”