Last week, Connecticut’s Governor signed into law Public Act 13-148, titled “An Act Establishing A Mediation Program For Certain Insurance Policy Claims and Concerning Requirements for Persons Performing Repairs, Remediation or Mitigation Pursuant to a Loss” (“PA 13-148” or “Act”).
PA 13-148, which will become effective on October 1, 2013, allows Connecticut’s Insurance Department to establish a mandatory mediation program for “catastrophic event[s] for which the Governor has declared a state of emergency.” The Act only applies to certain types of insurance policies, which include homeowners’ policies, tenants’ policies, personal automobile policies, condominium association master policies as defined by Conn. Gen. Stat. § 47-83, and unit owners’ association property insurance policies as defined by Conn. Gen. Stat. § 47-255. The insurance dispute must be over the actual cash value or amount of loss, and the difference between the parties’ positions must be more than $5,000 exclusive of applicable deductible, except that the parties can agree to mediate a smaller dispute.
Exceptions: When Mediation Would Not Be Required
There are notable exceptions to the Insurance Department’s authority to institute a mandatory mediation program:
- PA 13-148 does not appear to apply to “commercial risk insurance” as defined by Conn. Gen. Stat. §§ 38a-663 -38a-696;
- PA 13-148 is not applicable to claims “for which coverage is in dispute;”
- the Act applies to “[a]ny company licensed to write the lines of insurance” specified, so it appears that surplus lines carriers are not subject to the Act;
- the Act specifically states it is not applicable to a flood insurance policy issued by the National Flood Insurance Program; and
- the Act specifically states it is not applicable to claims where “coverage has been exhausted”
Requirements For Mediation Program
The Act specifies numerous requirements for the Insurance Department to follow in implementing the mediation program, some of which are noted as follows:
- the Insurance Commissioner must designate an entity to carry out the mediations
- the insurer must pay the mediation fee no later than 10 business days after the insurer receives the invoice for the mediation
- the entity designated by the Insurance Commissioner must implement procedures requiring that
- the parties agree in writing that all statements made during mediation are confidential and will not be admitted into evidence in any civil action (except in regards to an investigation of insurance fraud)
- any agreement reached in mediation must be written on a form approved by the Insurance Commissioner
- the agreement must allow the insured to rescind within five business days after the agreement has been reached, provided the settlement check has not been cashed
- the mediator may terminate the mediation if one of the parties is not participating in good faith
- the mediation company may schedule additional mediation sessions if it believes the sessions may result in settlement
- the mediation company may require the insurer to send a different representative to a rescheduled mediation session if the first representative has not participated in good faith
The Act does not specify notice requirements, but allows the Commissioner to adopt regulations that would specify the manner in which the insurer is required to notify the insured of the mediation program.
The Act also addresses notice and contractual requirements for persons performing repairs to property for all personal risk and commercial risk policies, and renders contracts void if the contract fails to include certain provisions.