Hurricane Claims & Fraud: Mediation Vs. Hiring An Attorney

Many state insurance departments have created state sponsored mediation as a way to resolve insurance claims without filing a lawsuit against your insurance company. Many of the cases involve hurricane fraud, where an insurance company has acted in bad faith by delaying or denying payments. There are pros and cons to each method, but which is better for you?

What is state sponsored mediation?

Florida's Department of Financial Services (the state's insurance department) has set up hotlines where you can call and voice your complaints or address what you perceive to be insurance fraud on the part of the insurance company, according to R. Jason Richards, a Florida attorney whose firm represents victims of hurricane fraud and bad faith insurance practices. He says that in Florida, and other states such as Mississippi, they'll provide pro bono attorneys who can assist you with your claim and state sponsored mediation. He told us:

It's a good way to get your issues resolved without having to file a lawsuit. They do that specifically for the reason of trying to avoid an influx of litigation and resolve claims through the mediation process. They've done a good bit recently especially after the hurricanes in 2004. There were so many of them here in Florida that they took some action to try to get those cases resolved without flooding the courts with lawsuits. It's not required, but it can work and is a good program for some people.

Is hiring a lawyer better?

When should someone use state-sponsored mediation versus contacting an attorney? Richards says that it depends on the type of claim and the conduct of the insurance company. He explained:

If it's just a straight undervaluation of claim case where the adjuster is giving you X amount of money, but the contractor says that it's going to cost a lot more than that, then that type of case may be more ripe for mediation. That being said, it's important to understand that when you go to mediation, you're on your own and you generally don't have an attorney there.

So, you have to understand what you're doing at the mediation. If it gets a little bit complicated or requires some expert testimony to determine a wind / flood issue, or you need to hire an adjuster to argue your side, then you may want to bring in an attorney.

However, the impartial mediator at a state sponsored mediation may help you, the policyholder, in a sense. He or she may walk you through the process and hold your hand a bit. If you can go through the state mediation process and you're comfortable with the resolution that's been offered, then it benefits you to the extent that then you don't have to pay any attorney fees out of your recovery. However, if you're unsatisfied with the amount the insurance company is offering at the mediation, then you can always contact an attorney at that point.

An unfortunate, but common, reality

Richards says that while mediation certainly can be good in some situations, he told us that it is often ripe with an unfortunate, but common, reality. He explained:

Unfortunately, what we've found is that sometimes at the state sponsored mediations, the insurance companies come into those proceedings without the intent of offering any money of significance. So it can sometimes be a waste of time for the policyholder because the insurance company didn't really plan on changing their position, so they end up having to hire an attorney anyway and they've wasted their time by going to mediation, taking off work and everything else hoping to get a resolution.