New ways of resolving insurance disputes – a 10 point plan

A business goes into the insurance market looking to limit risk across its activities. With the help of a broker, it finds an insurer, or possibly insurers, to provide cover for these risks. This is not usually a short term need, insurance policies need to be renewed annually and both insured and insurer will look for a long term relationship, subject to an agreement on the annual premium.   The classic example of a long term commercial relationship.

I’ve often questioned why, during my 30-year career in insurance, do so many coverage disputes blight these long term relationships and, when they do arise, why are they often so difficult and expensive to resolve, often leading to the collapse of the business relationship?

The pandemic has only accentuated this problem, producing a plethora of disputes around the response of insurance policies to the business losses and disruption caused by Covid. My sense is that insurers, for understandable reasons, are more inclined to take points on policy wordings that they believe were not designed to respond to this kind of national emergency.

Even if the insurer accepts that a loss is covered by the policy, the assessment of loss is made much more difficult by the dramatic and unexpected falls in business activity throughout the economy.

How then, can the parties, their lawyers and us as mediators help to improve this situation? Here is my 10 point plan:

1. We should talk to insurers, brokers and lawyers about the design of dispute resolution processes that can nip these disputes in the bud and restore those long term relationships to good health. Multi-tiered clauses - such as the IPOS one - should be written into policy wordings or at least considered at the outset of a dispute.

2. We should help to establish a panel of experts who could issue non-binding guidance on contentious issues which have a broad application in the market.

3. We should help clients prepare for mediation to ensure the best prospect of success. Where, for example, the quantum of a claim is likely to be a serious block to settlement, we may need help from an independent loss adjuster or accountant at the mediation.

4. Where there are genuine policy interpretation issues that affect multiple policies, serious consideration should be given to an expert determination or early neutral evaluation to guide or possibly bind the parties on the issues at play

5. We should exploit familiarity with new technologies which have come to the fore in the pandemic to allow for remote or hybrid mediation and/or for sessions with experts who might join by video at the right stage of the process.

6. Encourage the establishment of protocols for early mediation or facilitated settlement discussions involving an early exchange of key documents and staged sessions with the mediator to review key issues and narrow differences before the final negotiations on the settlement number.

7. Involve the insurance broker who placed the business in almost every dispute. They can have an invaluable role, given their knowledge of the insurance placing and their relationship with both insured and insurer

8. Be aware of the impact of litigation funding and ATE insurance on the dynamics of any disputed claim. The funders need to be at the table or at least behind the scenes in any resolution process.

9. Understand the role of reinsurance in the insurer’s ability to settle and the parameters for settlement.

10. Finally, recognise that however many insurance disputes you have been involved in, the insurer’s claims manager will have handled many more!