In most homeowners’ or lender-placed insurance policies, two very common provisions discussed extensively are: Appraisal and Mediation.  We will discuss Mediation here.

The Basics of Mediation:

Mediation is an informal and voluntary process that allows the insured to negotiate directly with the insurance company with the assistance of a mediator.  Most importantly, it is a NON-BINDING process to negotiate directly with the insurance company to quickly resolve an insurance claim and coverage dispute.

Like appraisal, mediation comes after a coverage decision is made.  Unlike appraisal however, mediation does not require the insurance company accept coverage on your claim (i.e. pay the insured at least 1 cent).  Unlike appraisal, mediation can be exercised on even denied claims (see your individual policy for more information).  Because mediation is non-binding, both parties benefit from the efficiency, low costs, and high value of reaching an agreement.

In practice, mediation is simply an in-person (or video call) negotiation at a round table.  While the insured and the insurance company’s representative sit across each other, the mediator sits at the front.  Both sides present an “opening statement” where they present their version of the facts, and argue in favor what they see as a fair settlement of the claim.  The mediator then “caucuses” each side into a separate room, and then spends time with each side (insured vs. insurance company) to learn more about their argument and position.  At the same time, the mediator acts as a messenger to negotiate between the parties. 

A good mediator will effectively “beat-up” both sides to get both parties to come to an agreement.  If the insurance company claims the property damage is below $5,000, a good mediator would use the arguments presented by the insured to convince the insurance company that the claim should settle for more.  Similarly,  a mediator will attempt to convince the insured to settle for a lower amount (than their initial expectations), to avoid the costs, risk, and uncertainty of possible litigation, and the ease of a quick settlement.

How can you get the most out of mediation?

For the policyholder-insured, mediation is most effective if the insured goes in with either a public adjuster or attorney for several reasons:

1. A public adjuster/attorney will carefully avoid disclosure of poor facts or evidence that could stack up against you if the claim does not settle.
2. A public adjuster/attorney are familiar with effective mediators, so the insured isn’t stuck with the insurance company’s first choice of mediator (who will generally be more aggressive against the insured than the insurance company).
3. A public adjuster/attorney are better positioned to argue the “merits” of the claim.  In other words, they can better explain – from experience – actual consequences of potentially drawn-out litigation should the insurance company reject their offer.  They can also discuss persuasive arguments that would sway a jury’s decision in favor of the insured.
4. A public adjuster/attorney can realistically set the expectations and the value of your claim.  That way, you’re better armed and prepared to get the best possible deal at mediation.  There’s nothing more frustrating than getting low-balled and not do anything but accept a poor offer, or walk away with no resolution without being taken seriously.  It’s like buying a car; it helps to bring your more-experienced Dad to negotiate after you pick out what you want.

Practical tips to prepare for mediation (To-Do List):

• Only agree to a mediator that has no financial stake in the outcome.
• Insist that the insurance company representative who attends must have sufficient dollar authority to pay what you are owed.
• Request copies of “all claim related documents” in your insurer’s files prior to the mediation.
• Consult with or bring an attorney/public adjuster, especially if the insurance company is bringing one.
• Keep your expectations low and be ready to walk away without settling.  Many disputes settle after the initial mediation, so you may only be laying the groundwork for a future settlement.  The insurance company will often try to settle the claim days after a “failed” mediation because they do not want to risk defending a poor case.
• Go in confident and prepared.  Role-playing may be an effective exercise for adjusting your expectations and determining where you might be willing to compromise. 
• Give the mediator a written summary of your position in advance of the mediation.  This will help the mediator with their notes and avoid wasting time trying to explain them your damages.  Be sure to include photographs, invoices for damaged property, and a short summary of explaining the basis of your claim.  Like an interview, the other side would be inclined to settle if they see you fully prepared to get paid or walk away.
• Dress well and act professional.  Little things can pay huge dividends.
• Don’t be intimidated. You paid good money for your insurance protection and you are entitled the full benefits your policy and the law provide.

As always, enjoy the process.  If you are prepared, there is a very good chance you will settle the claim, or at the least, let the insurance company see who they are going up against if you were to sue.