United States magistrates are federal judges with extensive authority over civil cases. Many policyholders are surprised to learn that magistrate judges can preside over mediation conferences. For example, during initial case management conferences, many districts allow litigants the opportunity to schedule a mediation conference with a magistrate judge. This can be a great option for policyholders when the case appears to have discrete litigation issues, the facts and circumstances of the case are unusual, or the matter is close to settlement.
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A number of public adjusters and contractors have inquired whether I’ve seen recent forms that require the selection of a mediator by the flip of a coin. I was going over a policy sent from a mid-west public adjuster yesterday and came across the following negotiation and mediation condition in the loss settlement portion of the policy:
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If you have been following Hurricane Sandy news, you may already be aware of Judge Brown’s recent November 7th order in Raimey v. Wright National Flood Insurance Company,1 in the Eastern District of New York (EDNY) which requires defendants in all Hurricane Sandy cases to provide plaintiffs by December 12th:2

[C]opies of all reports described in CMO 1 not previously produced – plus any drafts, redlines, markups, reports, notes, measurements, photographs and written communications related thereto – prepared, collected or taken by any engineer, adjustor or other agent or contractor affiliated with any defendant, relating to the properties and damage at issue in each and every case, whether such documents are in the possession of defendant or any third party.


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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.


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Floridians with residential property damage claims have a right to demand participation in the state mediation program if they have a dispute with their insurance company, but are disputes really getting resolved in these non-binding mediations? The Department of Consumer Services, a section of the Department of Financial Services, oversees this alternative dispute resolution process. This form of mediation is not to be confused with pre-trial mediation.


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Policyholders in New Jersey with open Hurricane Sandy claims most likely received an interesting piece of mail in recent weeks: letters from their insurance carriers inviting them to participate in mediation to resolve their claims. This was probably a welcome invitation for many who have not heard from their carrier in a long time; they likely viewed it as a signal their carrier was ready to resolve their claim.


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Mediation is defined as “[a] method of nonbinding dispute resolution involving a neutral third party who tries to help the disputing parties reach a mutually agreeable solution.”1 Appraisal is defined as “[t]he determination of what constitutes a fair price; valuation; estimation of worth.”2 A bit more specifically, appraisement is defined as “[a]n [alternative dispute resolution] method used for resolving the amount or extent of liability on a contract when the issue of liability itself is not in dispute.”3


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Over the years, the appraisal process seems to have become more complicated. Appraisal was meant to be an informal way for an insurance company and its insured to resolve claims. In recent years, appraisal has become a big ordeal in California. In order to properly prepare for appraisal, it’s now advisable to have counsel and an appraiser who is an expert. Selecting an umpire experienced in calculating and handling the damages is also important to the appraisal’s outcome. Essentially, appraisal is now like a mini-trial. When an appraisal award is granted, the insured may seek to have the appraisal award vacated if the insured disagrees with the award damages calculations. Appraisal has limitations. It’s good to keep in mind that appraisal is not the only way to resolve a claim without litigation. If an insurance company is amenable, there are other alternatives, one of which is mediation.


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I appreciate all the comments to posts from readers with various perspectives on insurance coverage and the insurance claims industry. I read them all, try to respond when I can, and honestly consider the viewpoint of those writing. This morning, I came across a comment worthy of consideration by all of us regarding mediation and alternative approaches to insurance claims dispute resolution.


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