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The negotiation process can take many forms. Generally, insurance companies prefer to negotiate in a confidential setting, behind a closed door, through mediation, non-binding, or binding arbitration or “informally” through attorneys. There are pros and cons to each approach which I will explain below.


Mediation can be court-ordered, or prior to suit, mediation can present itself informally or through a request by either party to state mediation. State mediations are usually fruitless. The mediators do not have to be attorneys and do not need to have any experience in the subject matter of property insurance. As a result, in my experience, these mediations are not conducive to constructive, substantive discussions or results.

However, private mediation through a mediator who is a property insurance attorney or knowledgeable mediator, is a positive exercise in my experience. Mediation with a third party who understands the issues of causation, coverage, as well as the defenses to those positions, can elicit constructive conversations which may allow each side to better understand the strengths and weaknesses of the case. Insurance companies are mandated to present a representative at the mediation with the authority to fully resolve the case, which rarely occurs in practice, but the representative will have some level of authority to offer at the mediation in most cases. A successful mediator is focused on resolving the case that very day, through a variety of tactics. Usually, a mediation will begin with opening statements made by both sides in an open forum with both sides present. These days, mediations can be done via Zoom in many cases as well with virtual rooms. Following the opening statements, the parties will each sojourn to their individual rooms to await further negotiations. The mediator will discuss the claim with one of the parties in its individual room and request a starting offer. This offer is then taken to the opposing party with the explanation of the offer. The opposing party will then offer its defenses for its own position and make a counteroffer, which the mediator then takes to the other room. This process will continue until the sides agree on a number to resolve the case, or in many cases, the mediation will either be extended or impasse. When a mediation is extended, the mediator will have brought the amount in dispute much closer than where it was when both parties began the mediation, and the mediator has some belief that the claim could resolve if the parties have a week or two to consider the new numbers. Should a mediation impasse, this is a result of the parties being too far apart that the mediation is unlikely to result in the settlement of the case. No matter the outcome, mediation is a good way for all parties to the dispute to hear the reasons for the opposing party’s position.


Arbitration is similar in many ways to mediation, except that it is a more formalized procedure, which will generally include a judge or magistrate, should include attorneys on both sides in all cases, and will involve the presentment of evidence. The arbitration rules will govern the conduct of the parties and the process will result in a written arbitration “award”. The award can be binding or non-binding depending on the terms of the arbitration clause in your policy, if any, or by agreement between the parties. If the arbitration is non-binding, the award is sealed as confidential if not agreed upon by both parties and does not have any impact on the ultimate settlement or resolution of the case. However, insurance companies often use non-binding arbitration as a method of forecasting a potential result should the case continue to trial and may consider increasing their offer to the policyholder should the arbitration award be in the policyholder’s favor. As a result, arbitration can be an effective tool in overcoming disagreements between the parties prior to trial. In many jurisdictions, non-binding arbitration is ordered by the court prior to trial of the case. If the arbitration is “binding”, the award made by the arbitrator is final. Binding arbitration is mandated in certain insurance policies and policyholders should ensure they have their policy reviewed by an attorney or insurance professional to determine if arbitration is mandatory and binding for their respective claims.