The state Insurance Department recommended legislation that would create a new mediation process to resolve disputes between homeowners and insurers over claims from catastrophes, such as hurricanes.
The mediation would be paid by the insurer, though mediation would be non-binding, according to the legislation.
Other states where hurricanes are more frequent have a similar mediation processes, and New York Gov. Andrew Cuomo announced last month that his state offers mediation to handle home-insurance disputes related to Hurricane Sandy.
“Mediation offers a speedy, low-cost resolution of insurance claims for homeowners who are unable to reach agreement with their homeowners’ insurance companies on claims from Storm Sandy,” Cuomo said in a prepared statement last week. “It is also much less expensive for insurers than litigation, so it’s a win for everyone.”
Insurers, however, are resisting some of the details, though not the entire idea. The bill allows homeowners to bring any dispute of $500 or more to the mediation process at the insurer’s expense, and that minimum threshold is too low, the Property Casualty Insurers Association of America, a trade group, said in written testimony.
“The costs for the mediation should be shared by the parties rather than being required to be borne entirely by the insurer,” the association said in its testimoney. “In the absence of such shared costs, the policyholder has nothing to lose by going through the mediation process which may result in policyholders seeking mediation just to see if they can obtain additional funds, regardless of whether a legitimate dispute exists.”
The association declined to comment beyond its written testimony.
Unlike disputes in homeowners’ claims, Connecticut has a binding arbitration process for disputed auto claims that is handled by a third-party. When a homeowner has a dispute, he or she can take the dispute to the Insurance Department. Ultimately, it may come to competing appraisers — one for the policyholder and one for the insurer — taking their case to a third party to resolve. In rare cases, a disputed insurance claim can go to court.
State Rep. James M. Albis, D-East Haven, said people in his town were rebuilding a year after Tropical Storm Irene. Some had disputes with insurers — such as one case in which an insurer offered $10,000 to $15,000 for a new roof when the entire second story of a house was destroyed by wind in Irene. That case was resolved, Albis said, but it’s not the only one of its kind.
The Insurance Department is recommending a mediation process to prepare for a catastrophe that could flood the department with complaints and leave policyholders waiting their turn to have it reviewed. After Tropical Storm Irene, insurers paid $235 million on about 60,000 claims in Connecticut and there were 225 complaints of disputed claims submitted to the department. After Hurricane Sandy, there were more than 60,000 claims in the state for a total of $375 million paid by insurers, and that storm resulted in 112 complaints to the department.
“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 B. 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.”
The bill was introduced by the legislature’s Insurance and Real Estate committee. The committee will decide by March 21 whether it will be among the bills it plans to submit to the General Assembly for consideration, according to the Insurance Department.