The North Carolina Insurance Commissioner has activated the North Carolina Department of Insurance’s Disaster Mediation Program for first party claims in the wake of Hurricane Florence. The Program only becomes available if 1) a state of disaster has been proclaimed (by the Governor or the President) for all or part of North Carolina, within 60 days following the event, and 2) the Commissioner of Insurance subsequently orders Program activation. On September 14, 2018, the President of the United States issued a declaration of disaster for twenty-eight counties in North Carolina. The counties include: Beaufort, Bladen, Brunswick, Carteret, Columbus, Craven, Cumberland, Duplin, Greene, Harnett, Hoke, Hyde, Johnston, Jones, Lee, Lenoir, Moore, New Hanover, Onslow, Pamlico, Pender, Pitt, Richmond, Robeson, Sampson, Scotland, Wayne and Wilson counties. On September 27, 2018, the Commissioner of Insurance issued an order activating the Program. North Carolina has contracted with the American Arbitration Association to act as the Program Administrator.
The Disaster Mediation Program is codified in North Carolina General Statutes § 58-44-70 thru § 58-44-120. It was designed to create a non-adversarial mediation program to facilitate the effective, fair, and timely resolution of insurance claims arising out of damage to residential property as the result of a disaster. N.C. Gen. Stat. Ann. § 58-44-70(a). The Program does not apply to commercial insurance, motor vehicle insurance, or to liability coverage contained in property insurance policies. N.C. Gen. Stat. Ann. § 58-44-70(b). Under the Program, insurers must notify insureds who have claimed damage to their residential properties as a result of a disaster of their right to mediate disputed claims. § 58-44-80(a). This applies to all disputed claims, including ones where payment has been made. Id.
By definition, a “disputed claim” is:
Any matter on which there is a dispute as to the cause of loss or amount of loss, for which the insurer has denied payment, in part or whole, with respect to claims arising from a disaster. Unless the parties agree to mediate a disputed claim involving a lesser amount, a “disputed claim” involves the insured requesting one thousand five hundred dollars ($1,500) or more to settle the dispute, or the difference between the positions of the parties is one thousand five hundred dollars ($1,500) or more. “Disputed claim” does not include a dispute with respect to which the insurer has reported allegations of fraud, based on a referral to the insurer's special investigative unit, to the Commissioner. A disputed claim does not include one in which there has been a denial of coverage for the loss because of exclusions in the policy, terms in the policy, conditions in the policy, or nonexistence of the policy at the time of the loss.
§ 58-44-75(3).
An insurer must mail the notice of the right to mediate to an insured within five days after the time the insured or the Administrator notifies the insurer of a dispute regarding the insured's claim. § 58-44-80(b). The following conditions apply to the notice requirement:
(1) If the insurer has not been notified of a disputed claim before the time an insurer notifies the insured that a claim has been denied in whole or in part, the insurer shall mail a notice of the right to mediate to the insured in the same mailing as the notice of denial.
(2) The insurer is not required to send a notice of the right to mediate if a claim is denied because the amount of the claim is less than the insured's deductible.
(3) The mailing that contains the notice of the right to mediate shall include any consumer brochure on mediation developed by the Commissioner.
(4) Notification shall be in writing and shall be legible, conspicuous, and printed in at least 12-point type.
(5) The first paragraph of the notice shall contain the following statement: “The General Assembly of North Carolina has enacted a law to facilitate fair and timely handling of residential property insurance claims arising out of disasters. The law gives you the right to attend a mediation conference with your insurer in order to settle any dispute you have with your insurer about your claim. An independent mediator, who has no connection with your insurer, will be in charge of the mediation conference.”
§ 58-44-80(b)(1-5).
The notice must also:
(1) Include detailed instructions on how the insured is to request mediation, including name, address, and phone and fax numbers for requesting mediation through the Administrator.(2) Include the insurer's address and phone number for requesting additional information.(3) State that the Administrator will select the mediator.
§ 58-44-80(c)(1-3).
The Commissioner of Insurance’s September 27, 2018 order contained a “Right to Mediate” template.
An insured must request mediation within 60 days after the denial of the claim. However, the failure to request mediation within this time period will only bar the right to demand mediation. N.C. Gen. Stat. Ann. § 58-44-85(a). The failure to demand mediation will not prejudice any other legal right or remedy the insured had or prohibit the insurer from voluntarily accepting the request for mediation. Id. If the insurer receives notice of a request to mediate, it must electronically transmit the request to the Administrator. N.C. Gen. Stat. Ann. § 58-44-85(b). The fees of the mediator and Administrator are to be paid by the insurer. N.C. Gen. Stat. Ann. § 58-44-90(a). In order to be approved, a mediator must be certified by the Dispute Resolution Commission under G.S. 7A-38.2. N.C. Gen. Stat. Ann. § 58-44-95(b).
Once the mediation is scheduled, the representative of the insurer attending the mediation must:
(1) Bring, in paper or electronic medium, a copy of the policy and the entire claims file to the conference.(2) Know the facts and circumstances of the claim and be knowledgeable of the provisions of the policy.
N.C. Gen. Stat. Ann. § 58-44-100(e). If the insurer representative lacks the authority to settle within the limits of the policy, the insurer will be deemed to have failed to appear at the mediation. N.C. Gen. Stat. Ann. § 58-44-100(f). All statements made and documents produced at a mediation conference shall be deemed settlement negotiations in anticipation of litigation and afforded the protections of G.S. 7A-38.1(j), (l), and (m) governing mediated settlement conferences in Superior Court civil actions. N.C. Gen. Stat. Ann. § 58-44-100(h). Either party may move to disqualify the mediator for good cause. N.C. Gen. Stat. Ann. § 58-44-100(i).
The mediation is non-binding unless agreed to by the parties in writing. N.C. Gen. Stat. Ann. § 58-44-105(b). If the parties reach a settlement agreement at the mediation, the insurer has three days to disburse the settlement proceeds in accordance with the settlement agreement. N.C. Gen. Stat. Ann. § 58-44-105(c). The insured has three business days after receipt of the settlement funds within which to notify the Commissioner and the insurer of the decision to rescind the settlement agreement, as long as the insured has not received the settlement funds by electronic means or has not cashed or deposited any check or draft disbursed to the insured in payment of the settlement funds. Id. If a settlement agreement is reached and is not rescinded, it shall act as a release of all specific claims that were presented in the conference. Any subsequent claim under the policy shall be presented as a separate claim. N.C. Gen. Stat. Ann. § 58-44-105(d).
If the insured chooses not to participate in the Program or the mediation is unsuccessful, the insured may still invoke appraisal, seek other forms of alternative dispute resolution or file suit. N.C. Gen. Stat. Ann. § 58-44-110. If an insured rescinds a settlement agreement, the Insurance Commissioner may review the settlement agreement and if it is determined the agreement was fair to both parties and insured, within 5 days of receiving notice form the Commissioner, may withdraw the rescission. N.C. Gen. Stat. Ann. § 58-44-115. The Commissioner’s review and findings may not be admitted in any subsequent proceedings. Id.
Posted by Jonathan MacBride
