JAMS ADR Blog by Chris Poole
Mediation of insurance coverage disputes prior to the filing of a lawsuit is becoming more common. In part, this trend is the result of ADR provisions in insurance policies that require that the policyholder and insurer mediate coverage disputes prior to engaging in litigation. Some of these provisions provide that the mediation shall continue until the mediator declares an impasse. Others have a cooling-off period after the mediation that preclude either party from filing suit for a period of time (90 days) from the date of a failed mediation.
While early mediation and resolution of disputes is a laudable goal, saving the parties the time and expense of protracted litigation, the question is whether early mediation can result in a resolution of the dispute. There are a number of things that the parties can and should do prior to the mediation to enhance the possibility of success, which include the following:
One more issue that needs to be considered in connection with the early mediation of insurance coverage disputes arising in the third-party liability insurance context is whether the insurance coverage issues can be resolved without the resolution of the underlying lawsuit against the policyholder. If the early mediation addresses the duty to defend the underlying suit, then there is no reason to delay in mediating the issue. However, if the intent of the insurance mediation is to resolve indemnity for loss arising out of the underlying litigation, then it is highly unlikely that the parties will be in a position to resolve the coverage issues without knowing the extent of that loss. Under these circumstances, I strongly suggest that the mediation of both the coverage issues and the underlying case occur simultaneously. The coverage issue may be a tool in the resolution of the underlying case and the cost of the third-party settlement will have a significant effect on the resolution of the coverage dispute.
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