I can hardly believe what I read in http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/8091653/Insurance-advocacy-service-pruned where Gerry Brownlee asserts that the planned mediation service is now going to be scaled back because he claims that insurance settlements are taking place more quickly. When was the last time Gerry Brownlee sat in a room full of Cantabrians and listened to their concerns about their insurance problems. A mediation service is a critical part of re-establishing communities in wake of massive numbers of claims. The private insurance industry has no incentive in speedily settling the many thousands of claims Cantabrians have.
Use of mediation in insurance disputes is commonly used around the world as a method of settling disputes. It was regularly used in the U.S. after Hurricanes Katrina, Ike, Northridge and no doubt will be used again once the dust has settled in the wake of Hurricane Sandy. In fact it has been so widely employed in the U.S. it is now a permanent fixture as a method of insurance dispute resolution. See my post on TheConsequences of Hurricane Sandy for the Insurance industry and Policyholders…. detailing the numbers of law suits that arose after some of these natural disasters.
In Australia mediation is also successfully used in Work place disputes. Complaints to the Fair Work Ombudsman in Australia soared last year with the Ombudsman’s annual report published yesterday revealing 26,366 complaints, up from 21,890 in the previous year. Of these complaints, 28,412 were finalised through mediation and only 51 of those complaints actually proceeded to court. (See http://www.smartcompany.com.au/industrial-relations/052622-report-reveals-big-spike-in-complaints-to-the-fair-work-ombudsman.html?goback=%2Egde_935617_member_180526365).
In times of natural disaster, the U.S. mediation rules require the mediator to satisfy certain state criteria, including:
- Required levels of experience and education;
- Insurers to pay all costs associated with the mediation. Private insurers are required under the regulations to participate. Having mediation at no cost to homeowners is a vital part of the programs and gives homeowners the incentive to mediate before litigating. In the event that the insured does not like the decision they are still able to employ the services of a lawyer and decide to litigate.
- All cases are handled without counsel on either side, but legal representatives from the attorney general’s office are on hand to respond to legal and procedural questions.
- There are specified minimum amounts that can be mediated, ranging in the various states from USD 500 in most programs to as much as USD 2000 in California. There is no maximum stipulated with settlements being in the range of typical house values.
- The insurer is required to advise the insured of the mediation alternative as soon as it becomes aware that a dispute exists. In the Mississippi program it was required that notice be sent within ten days, while most programs required a five-day period.
- In the Louisiana program a minimum starting point in claims was required and an acknowledged database of construction and remodelling costs was employed for this purpose.
- All programs provided for strict confidentiality.
- Issues that were considered appropriate for mediation included: scope of loss; mandated building code upgrades; dwelling versus other structures; pre-existing damage versus proximate cause; additional living expense; asbestos abatement; earthquake versus aftershock; hidden damages; and proof of loss and other personal property issues.
- Issues which were considered inappropriate for mediation included coverage issues (e.g., the absence of earthquake coverage, and other underwriting issues involving underinsurance, failure to insure, cancellation, nonrenewal and rating issues); legal interpretations of policy provisions and terms; the statute of limitations and contractual limitations on filing periods; claims in excess of policy limits in the absence of Full Replacement Coverage; allegations of bad faith (a concept we do not have in New Zealand but one which we should have as opposed to ‘good faith’ which is established in law in New Zealand. It would not be hard to show many examples of bad faith in New Zealand), and other demands for extra contractual payments, including under-insurance.
- The insurance representative was required to appear with a blank check in hand. If not immediate, payment would have to be made within just a few days.
- Issues relating to the power-imbalance problem between the insurer and insured are addressed in some of these programs by the inclusion of a government staff attorney/lawyer in the mediation process. You can be sure that there is an effect on the mediation when a government watchdog is sitting in the room.
- These programmes have also been extended to commercial claims!
Once again this begs the question as to why the New Zealand Government has not yet begun to find solutions to the deadlock with the insurance industry after the Canterbury earthquakes? The Christchurch City Council this year voted unanimously to ask Canterbury Earthquake Recovery Minister Gerry Brownlee to urgently set up an insurance tribunal and advocacy service based in Christchurch. On July 12, 2012 Canterbury Earthquake Recovery Minister Gerry Brownlee told a parliamentary committee that he knew people were having difficulties ‘unlocking’ their insurance payments. ”We will certainly take a look at what they were suggesting and then look at all the implications,” he said. So what are these ‘implications’?
Brownlee stated that the Government needed to ensure anything set up did not mean taxpayers would assume more liabilities. That’s a pretty weak line of reasoning. Justice is in the province of the tax payer. It seems likely that few taxpayers would object to having a means of resolution in their favour established. Corporates doing what they like is objectionable to everybody. The single biggest barrier to success is securing a commitment to mediate from the parties to a dispute and one can only assume the insurers have refused to play ball.
In a recent article published on Stuff.co.nz, entitled “Insurance Advocacy Service for Christchurch Residents” it has been suggested that an insurance advocacy service may begin operation soon. However it will be driven by the private insurance industry and hence valueless.
How is this to assist residents who are dealing with delay tactics and the massive power imbalance between consumers and the insurance industry? It is suggested that the service is likely to deal with ”clusters” of issues rather than on a case-by-case basis.
As a ‘green zoner’, without any particular issues relating to my land and still waiting settlement – now in year three post earthquake damage – I find it highly unlikely that tackling these issues in ‘clusters’ will achieve anything other than sweeping propositions which benefit the insurance industry and the Government at the expense of the affected population and in corporate favour. Individual home owners are unlikely to see any faster resolution of their claims. This methodology seems very occluded in comparison with the U.S. system which deals with individual problems on a case by case basis.
What other explanation could there be for the Government to continue to allow tens of thousands of people to wallow in limbo while their insurers make profits on EQC payments and bloat ‘floats’?
Why has our Government not implemented a service which will protect policyholders on an individual basis? What are they waiting for?
There is absolutely no reason why a mediation service of the type mentioned above, could not be set-up in Christchurch without further delay?
Do you think it is a deliberate strategy?
Please read the comments by Cantabrians attached to these articles.
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