In response to the statewide property damage caused by the high volume of claims resulting from Superstorm Sandy, the New Jersey Department of Banking and Insurance established a mediation program to alleviate the hardship experienced by New Jersey residents for unresolved first-party claims. In doing so, the department aims to encourage swift and amicable resolution of all claims relating to damage from Sandy.
Although the mediation program has been in effect as of March 26, 2013, pursuant to Order No. A13-106, it was not operative until March 28, 2013, when the department issued Bulletin No. 13-07. Under the mediation program, all policyholders with “open and unresolved” first-party insurance claims under homeowners, automobile and/or commercial insurance policies may voluntarily participate in the program. However, the mediation program is limited to claims arising out of damage from Sandy, for policies in effect at the time of the storm made landfall, and for an amount in controversy of at least $1,000. Further, any claims in which the insurer has a reasonable basis to suspect fraud, and which was referred to the Office of the Insurance Fraud Prosecutor in the Department of Law and Public Safety, are ineligible. Flood insurance claims insured through the NFIP are also ineligible.
Under the mediation program, the policyholder is to submit a written request for mediation conference to the American Arbitration Association (AAA) so that they can determine whether a claim is alleged. If the request is granted, the insurer is required to participate in the mediation and must incur the costs of the mediation, generally speaking. An insurer includes all insurance companies authorized to conduct insurance business in New Jersey as well as the New Jersey Insurance Underwriting Association. Participation by surplus lines insurers and risk retention groups are optional. If the policyholder notifies the insurer, the insurer has the burden of notifying the AAA within one business day.
The regulation applies retroactively, even to disclaimers already issued since the mediation program is available to “all policyholders with open and unresolved claims against insurers arising from Storm Sandy.” Further, the insurer is responsible for notifying policyholders for all claims that are open and unresolved of the mediation program by April 4, 2013. The insurer must also notify policyholders who file claims on or after March 28, 2013 of the mediation program within 60 days of the claim.
During the mediation, the parties must negotiate in good faith. Either party may bring documents and/or individuals with knowledge of the issues to the mediation, including counsel or public adjusters. The insurer’s representative must have full authority to settle.
The order and bulletin impose a heavy burden on insurers while concurrently granting an uncontracted for right onto policyholders, raising threshold issues of constitutionality. This is an express attempt by the department to resolve claims arising out of Sandy.