An insurance policy is a legal contract that exchanges an insurance company’s obligation to pay for certain losses if the person covered by the policy pays a required premium. This holds true whether the policy covers your home, car, boat, life, airplane, jewelry or business. If there is a serious dispute between you and your insurance carrier regarding the coverage of a loss, a courtroom often becomes the setting for resolving the matter, but not always.
To Sue or Not to Sue?
In many instances, filing a lawsuit is unavoidable. For instance, when a person seeking coverage has his claim denied, a lawsuit may be the only action that is available. But seeking satisfaction in court can be its own problem. Court calendars (dockets) are often backed up so it could take months or even years before a hearing can take place. Trials may be followed by one or more appeals. The legal expense can be staggering, involving court costs, filing fees, attorney costs, research costs, fees for expert witnesses and a host of other expenses. Time and cost considerations are great incentives for finding other methods to resolve disputes.
Alternative Dispute Resolution
When disagreeing about the amount that should be paid for a loss, mediation and arbitration are popular alternatives to suing your insurance company. Each is a form of Alternative Dispute Resolution (ADR) since they are alternatives to going to court.
• Mediation – This process involves the two parties meeting to discuss their situation with the help of a mediator. The mediator typically has special training and a legal, financial or similar background. As a disinterested party, the mediator studies information from both sides of an argument.
Mediation sessions begin with each party fully explaining their position to the other party and the mediator. It is critical that each party is able to explain their side of the issue without interruption. The mediator then discusses each party’s position in private. Afterwards, the mediator shuttles between the parties and tries to negotiate a settlement. The most important features of mediation are that the process is voluntary and the disputing parties are actively involved in reaching a solution.
• Arbitration – This is a method that is frequently required by an insurance policy provision. Under arbitration, you and the insurance carrier each select a representative (arbitrator). Once the arbitrators are selected, they agree on another arbitrator who acts as the arbitration judge. The three persons discuss the merits of the situation and, once any two of the three persons agree on a settlement amount, the process ends.
Arbitration differs from mediation in two important respects. First, the disputing parties are bystanders, waiting for a decision to be made by their selected representatives. Second, arbitration is (generally) binding on both parties.
If you are in a dispute with your insurance carrier, no course of action is perfect. Considering the cost and time involved with lawsuits, it makes sense to take advantage of other options to handle high-stakes disagreements. If you need more information, Peoples First is able to navigate you towards an advisable way to reach agreement with your carrier.