Most people battling their insurance carrier over Hurricane Sandy claims have received a notice that they are entitled to participate in a nonbinding mediation process set up by the Department of Banking and Insurance. A recent New Jersey Supreme Court ruling mandates that any settlement reached in this or other mediation program must be reduced to writing to be enforceable.

In the past, parties could attend mediation and reach agreement in a general sense and later hash out a formal settlement agreement. That is apparently what happened in Willingboro Mall, Ltd. v. 240/242 Franklin Avenue,1 This matter involved a dispute over the sale of a shopping mall. The court referred the parties to non-binding mediation which took place before a retired judge. During the mediation, the parties agreed that the matter would be settled for $100,000.00, however no written agreement was made at the mediation. A few days later, when defense counsel attempted to exchange some settlement documents with plaintiff’s counsel, plaintiff’s counsel indicated that his client was no longer willing to accept the settlement offer. The defendant filed a motion to enforce the settlement and the court ordered discovery on the settlement issue and scheduled a hearing. After the hearing, the trial court found that a settlement had been reached and entered an order accordingly.

The plaintiff appealed and Justice Albin, writing for a unanimous New Jersey Supreme Court, reversed the trial court stating,

[I]f parties to mediation reach an agreement to resolve their dispute, the terms of that settlement must be reduced to writing and signed by the parties before the mediation comes to a close.

It is far too early to tell what impact this may have on Hurricane Sandy mediation settlements, however those currently in the process would be well advised to keep in mind that any agreement must be reduced to writing and signed during the mediation to be enforceable.

1 Willingboro Mall, Ltd. v. 240/242 Franklin Avenue, LLC, — N.J. — (August 15, 2013).