by William Cea
Preparing for mediation with a participating insurance company presents opportunities as well as challenges. Recognizing the adjuster’s perspective well in advance of the mediation is critical. Unlike individual parties that may have the ability to make decisions on the spot, insurance companies make decisions in advance. Consequently, the amount of insurance coverage may be vastly different than the “amount of money” the adjuster is authorized to offer.
The claimant and the insured party have a shared interest in making sure sufficient analysis of coverage, and claim evaluation has occurred prior to the mediation. From the claimant’s standpoint, has the insurer been provided the relevant documents, facts, and damages calculations needed to evaluate the claim? From the insured’s standpoint, you cannot expect the insurer to settle the case on your behalf without a thorough analysis.
For example, in the context of a construction defects case, there are a number of issues that the insurer must evaluate. First, for most contractor’s policies, the insurer needs to establish a date of loss to determine which policy is triggered. General liability policies are typically occurrence based, meaning that the damage or injury must have occurred during the policy period. For claims made policies, it would be the date that the claim is actually made that would trigger the policy.
Next, the insurer needs to make a coverage determination. Coverage for the claim is different than the duty to defend. Just because there is an insurer paying for the defense of a claim, it does not mean that they have determined that there is coverage for the claim itself. It is critical to recognize the distinction. As anyone who has read a policy knows, they contain a laundry list of exclusions that the claimant needs to review, and the claimant needs to understand what claims are covered in order to prepare for the mediation. (i.e. there may be coverage for property damage caused by water intrusion, but not defective workmanship).
Additionally, the insurer needs to have sufficient information to assess the extent of the damages. If the claim alleges damages to an entire building, then providing damages limited to a particular portion of the building may not be good enough. Further, has there been an analysis or expert testimony as to the scope and cost of repairs that will be necessary to provide a quantification of the claim? If the insurer does not have this information, the adjuster attending the mediation may have little or no actual authority to settle the claim. This can obviously lead to frustration for all parties involved.
Accordingly, the parties have a shared interest in making sure that the assigned adjuster is armed with all relevant information, and comes prepared to meaningfully negotiate and resolve the claim. It simply will not be good enough to make general allegations and provide superficial documentation or evidence of the claim. Counsel for both parties should pay particular attention to coverage issues in preparing for mediation. Indeed, the parties will often expect that if an adjuster is present, the insurer has authorized payment. This is a risky assumption to make. Finally, clients may be highly disappointed with the process if the first time they learn about coverage issues or a lack of documentation is the day of mediation.