New York State introduced a program Monday for homeowners battered by superstorm Sandy to challenge insurance companies, providing mediators to determine whether settlements were fair and if claims were improperly denied.
The mediation program, modeled after efforts in Florida and Louisiana, could help thousands of Long Islanders rebut their homeowners' insurance companies without having to shoulder the expense of filing lawsuits.
"Mediation offers a speedy, low-cost resolution of insurance claims for homeowners who are unable to reach agreement with their homeowners' insurance companies," Gov. Andrew M. Cuomo said in a statement.
The program, run by the state Department of Finance, applies only to disputes over homeowners' insurance claims, which primarily cover damages from wind and fire. It is not for auto claims. Nor does it apply to flood settlements, which are handled by the federal government.
While flooding caused the worst havoc in the Oct. 29 storm, insurers are expecting to pay out $1.7 billion to settle 287,000 homeowners' claims in New York State, mostly from wind damage. All but roughly 5 percent have been resolved.
To settle the lingering disputes, the state has enlisted the American Arbitration Association, which helps resolve contract negotiations and other impasses.
Insurance companies are required to pay for the mediations. Homeowners are not bound to accept the rulings. "There is no forcing anyone to settle in any way," said Sandra Partridge, a vice president for American Arbitration Association.
Florida pioneered the use of insurance mediators after Hurricane Andrew in 1992, establishing a program that settled 92 percent of the 2,400 claims it handled. A similar effort in Louisiana after Hurricane Katrina settled 74 percent of its 15,000 cases, officials said.
Insurance companies often welcome the programs because they help avoid costly litigation, industry experts said. Consumer advocates, however, say the efforts favor insurers, who have vast experience arguing before mediators.
"If I had a really big claim, I wouldn't touch this with a 10-foot pole," said J. Robert Hunter of the Consumer Federation of America. "Or at least I'd talk to an attorney first."
HOW PROGRAM WILL WORK
1. Insurers must notify homeowners of the state’s new mediation program if any part of a claim is denied
2. If a policyholder asks for mediation, the insurer must alert the American Arbitration Association
3. Mediations can be conducted in person or via phone or video conference
4. Homeowners do not need to accept the findings