Many insurance carriers have spent the past four months sorting through a deluge of claims from homeowners for damage to their homes arising out of Super Storm Sandy. Due to the incredible volume, many of those claims remain pending. Governor Andrew Cuomo recently announced that the New York State Department of Financial Services has created a program whereby policyholders can elect to mediate disputes with their homeowner insurance carriers over claims arising out of Storm Sandy. New Jersey’s Department of Banking and Insurance also created a similar mediation program for Sandy coverage disputes with a value in excess of $1,000.
The American Arbitration Association will administer New York’s non-binding mediation program. While New York’s program is voluntary (and free) for policyholders, insurance carriers will be required to not only participate, but to also pay for the costs of the mediation.
According to the new regulation entitled “Mediation,” the program will handle disputed real and personal property claims that arose “between October 26, 2012, and November 15, 2012, in the counties of Bronx, Kings, Nassau, New York, Orange, Queens, Richmond, Rockland, Suffolk or Westchester.” The program will not handle claims for damage to automobiles.
Although an insurer must act in “good faith” an “insurer that does not alter its original decision on the claim is not, on that basis alone, failing to act in good faith if it provides a reasonable explanation for its action.” But, similarly, the policyholder is not bound by the outcome of the mediation, as the policyholder may still utilize any other legal remedy at his or her disposal, including bringing a civil action.
Of significance, the new regulation requires that the insurance carrier provide notice to the policyholder of this new right to mediation with the AAA. This is certain to create additional costs for carriers; whether it results in quicker resolution of open claims remains to be seen.
Thanks to Steve Kaye for his contribution to this post. If you would like more information, please write to Mike Bono.