Mediation Vs. Litigation in Insurance Bad Faith Cases
It may not come as a surprise to you that an insurance company can sometimes act in bad faith. Essentially, that means the company deploys tactics that get them out of paying a claim. The longer they can keep that money in their accounts, the better it is for their bottom line.
Those bad faith actions, such as response delays or making a fast, lowball offer without an investigation, could be an attempt to exhaust a policyholder in the hopes they accept and move on. A better approach is to present a justifiable bad faith claim and seek compensation for that claim and your original damage claim.
You shouldn’t have to put up with bad faith actions.
In order to prevail, you’ll need to enlist the services of a skilled Reno insurance bad faith attorney. After reviewing your case, the attorney will present two paths: mediation or litigation. It is important that you understand the pros and cons of each before you decide the best course of action for your situation.
Understanding Mediation in Nevada Insurance Bad Faith Claims
Mediation is a voluntary, confidential approach to resolving a dispute. It involves an objective third party, the mediator, who will listen to the issues presented by a plaintiff and defendant. They will also review any relevant evidence.
At the end of the mediation, they will make recommendations for a resolution.
Those recommendations don’t have to be accepted by either party, but if they are accepted, it can mean they can be presented before a judge who will approve them and consider the matter closed.
Here are the pros and cons of mediation to consider:
Pros
- Lower costs
- Faster resolution
- Confidential proceedings
- Voluntary settlement control
Cons
- Requires good faith effort from both sides
- Resistance to the process can be a waste of time and money
Mediation works best when both parties enter into the proceedings with an open mind and are willing to compromise. Both sides should embrace the concept of a quicker and less adversarial resolution process.
The Strategic Advantages of Choosing Litigation for Your Case
If you opt for litigation, you will file a civil complaint. That automatically triggers a court response that assigns a judge and schedules a preliminary hearing. It will also mean serving notice to the person you’re suing, and that makes them the official defendant.
Depending on the nature of the case, it will be resolved by a judge’s ruling or a jury’s verdict.
Here are the pros and cons of litigation to consider.
Pros
- Sets legal precedent
- Holds insurers to a formal accountability
- Can result in more serious punitive damages
Cons
- Higher costs
- Public proceedings
- Extends the timeline to reach a judgment
Litigation is a better option when the case involves an obvious case of bad faith or when negotiations reach an impasse.
When Mediation Is the Right Choice for Policyholders
Are insurance bad faith claims handled out of court? Yes, they are if you choose mediation.
Mediation is the right choice if you’re looking for a faster, less expensive alternative to a court trial. There might be a situation where you file a civil lawsuit against an insurance company, and the judge either orders or strongly suggests that you engage in mediation.
Often, during a bad faith claim, the insurance company is going to deny any wrongdoing because doing so can expose them to additional damages.
You might be able to engage in negotiations, but if the legal teams reach an impasse, an objective third-party mediator can bridge the gap.
It is also important to note that unless you sign an agreement for binding arbitration, the outcome of the mediation does not have to be accepted or followed. It is also important to note that the moment you step into a courtroom, everything that transpires becomes a matter of the public record.
With mediation, you can resolve your issues without the public being aware of the details.
When Litigation Is Necessary to Hold Insurers Accountable
Making a claim of bad faith against an insurance company is very serious. It can have a direct impact on their brand. However, if it can be proven that they acted in bad faith by denying, delaying, or underpaying a claim, the only viable option for compensation may be to file a civil complaint.
On the same day that you file your lawsuit, the insurance company will be served notice. They have to respond to that notice. From that moment forward, the case will be adjudicated in a court of law unless a settlement can be reached.
Often, insurance companies want to avoid a protracted court case that can tarnish their reputation. That can be the perfect motivator to reach a positive outcome.
FAQ Section
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Is mediation legally binding in an insurance bad faith case?
Mediation itself is not binding; the mediator cannot force either party to agree to a settlement. However, if both the policyholder and the insurance company sign a written settlement agreement at the end of the session, that contract becomes legally binding and enforceable in court.
Can I still sue my insurance company if mediation fails?
Yes, if you do not reach an agreement during mediation, you retain the right to proceed with a lawsuit. Because mediation is confidential, nothing said during the negotiations can be used against you as evidence if the case eventually goes to trial.
Why would an insurance company prefer mediation over litigation?
Insurers often prefer mediation because it is private and limits their exposure to high-dollar punitive damage awards and public scrutiny. It also allows them to resolve the claim more cheaply by avoiding the massive legal fees associated with a protracted trial.
How Your Attorney Evaluates the Best Path Forward
Choosing between mediation and litigation is not a “flip of a coin” type of scenario.
The decision should be based on a calculated legal strategy that is built on strong evidence and careful timing. An experienced Reno insurance bad faith attorney can help you make an informed decision about the best option.
The Law Office of Matthew L. Sharp is extremely familiar with all the tactics deployed by an insurance company to slow-roll the payment process. None of those should be accepted.
If we agree to work together, we will carefully examine all your documentation to look for evidence that clearly establishes bad faith practices. That evidence needs to support Nevada law. It is also important to note that we won’t move forward with a case if we’re not confident of a positive outcome.
If you’re running into roadblocks with an insurance company or aren’t confident that you’re filing the claim with the right documentation, we can help.
Call to set up a free case review today. We’ll provide you with answers to your questions and options for moving forward.
