Personal injury insurance is a legal tool that protects against losses resulting from personal injury caused to another person. The insurance covers both bodily injuries as well as non-bodily personal injuries.
In general, insurance is a contract in which an individual receives financial reimbursement from an insurance company in case of specific predefined losses.
There is a wide variety of insurance policies, such as car insurance, homeowners insurance, life insurance, health insurance, commercial insurance, etc. Personal injury insurance is usually part of standard commercial and business insurance policies. Since all businesses are sensitive to financial losses, most companies invest significant time and effort protecting themselves against personal injuries claims. Insurance is, therefore, a requirement for all responsible companies.
When a customer suffers a personal injury on business premises, the business owner (as a policyholder) claims the insurance benefits from an insurance company after paying the damages to the injured customer. In some cases, however, an insurance company and a policyholder may not agree on the terms of their contract. The insurance company sometimes denies the claim regarding the reimbursement. It offers less than the claimant believes the damages are worth or unreasonably delays the payment without legal explanation. That is when an insurance dispute arises.
Personal injury insurance disputes are typically a matter of traditional litigation. However, alternative dispute resolution mechanisms are becoming increasingly popular.
Mediation is an alternative dispute resolution method that is the most suitable mechanism for resolving personal injury insurance disputes.
Resolving personal injury insurance disputes in litigation usually takes years due to its specific nature. A vast body of evidence, numerous pre-trial motions, complex discovery procedures, and witness testimonies lead to a lengthy and expensive process.
Besides, undue publicity is necessarily involved, which is another negative side-effect of traditional litigation.
On the other hand, in mediation, a neutral third person resolves the dispute. The process is confidential, far less expensive and usually ends in several days. The mediator is always an experienced professional equipped with specific knowledge that trial judges lack.
Due to mediation’s informality and flexibility, presenting arguments to support insurance claims is far easier in front of a neutral person with an understanding of specific economic and market nuances typical for the insurance industry.
Additionally, mediation enables the free flow of information and protects the parties against undue publicity.
In an insurance dispute, the parties choose the mediator voluntarily by signing the mediation agreement, which is often an integral part of an insurance policy.
The mediation procedure consists of a series of separate talks with each party privately (caucuses) that enable the mediator to estimate the possibility of settlement.
Following the caucuses, the mediator then holds joint sessions where all disputed issues are open for discussion between the insurer and the policyholder.
Both parties sign the agreement in case of a settlement, which is enforceable as a binding contract.
Arbitration is an alternative dispute resolution method that is more formal than mediation.
Unlike mediation, the arbitration process consists of various formal stages typical for litigation, such as opening statements, witness testimonies, expert witnesses, and closing arguments.
In an insurance dispute, the arbitrators are skillful and neutral individuals experienced in current legal and business issues.
More informal and flexible than litigation, the arbitration procedure requires less time and money than a court trial, but the costs are still slightly higher compared to mediation.
Arbitration provides the parties with confidentiality and discretion. That is a crucial trait, especially for a policyholder.
The neutrality, informality, and confidentiality of mediation and arbitration provide the parties with various benefits and enable them to get the financial reimbursement they claim while at the same time protecting their business integrity.