Insurance Claims and Bad Faith Law Blog

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Rescind the "Religious Employer" Exemption to Health Care!

    So, apparently the dozen lawsuits filed by various Vatican-led persons, in the names of Catholic institutions also led by men, challenge the regulations published under the Affordable Care Act requiring that all plans and policies offered by Employers to their Employees shall include preventive health services for women.  The ACA mandates that preventive health services for women be provided.  Specifically, the ACA mandates that preventive health services for women be included in such policies and plans, as are recommended by the Health Resources and Services Administration.  See the post here on May 24, 2012 , "The Faith of ACA:  Good Faith, Bad Faith, no Faith?".

    The HRSA has determined that preventive health services for women must include contraceptive services.  See Download Institute of Medicine July 2011 Report Brief with Recommendations Commissioned by HHS.  As required by Congress in the ACA, Federal agencies charged with implementing the ACA have required in regulations that preventive health services for women must include contraceptive services.  These are apparently the regulations challenged in the lawsuits.

    Anyone familiar with the process of how administrative agencies promulgate rules and regulations, is familiar with required "comment periods".  These are periods of time during which comments must be solicited from the public on proposed regulations, before those regulations can become final.  Accordingly, there was a proposed comment period before the challenged regulations became final.

    The self-proclaimed Catholic organizations took the opportunity to comment, as did others.  See, e.g., Download Catholic Medical Assn.09.17.10 Letter.(taking position against providing contraceptive services as a part of required women's health coverage);  Download Religious Coalition for Reproductive Choice.09.17.10 Letter. (taking position in favor of providing contraceptive services as a part of required women's health coverage).   After the comment period was over, the Federal agencies carved out an exception for "religious employers".  According to newspaper reports, the Obama Administration went further after some persons objected, who described themselves as Catholic officials; the Obama Administration expressed its willingness to require only Insurance Companies to offer contraceptive services, not to require (apparently) that all Employers offer plans and policies containing provisions for contraceptive services.  See Editorial, "For Contraceptives, a Catholic Exception?" (Los Angeles Times Online, posted Wednesday, May 30, 2012).

    The answer from these self-described officials came when they filed their lawsuits to challenge regulations that do not take effect until late in 2013 at the earliest, in 12 different Courts where one would have been enough, in an election year.

   Well, defenses aside for the moment, here is a proposed solution to the pending plaintiffs and their prey, the Obama Administration:

Rescind the "religious employer" exemption.

    The Affordable Care Act does not contain any exemption.  See "Congress Did Not Exempt Anyone From Women's Health Requirements," posted on Insurance Claims and Issues Weblog on May 23, 2012.  Arguably, there is no authority for promulgating a regulation that does contain an exemption, even an exemption for "religious employers".  See  "They Should Be Ashamed," posted on Insurance Claims and Issues Weblog on May 21, 2012.  That would squarely put the burden on these plaintiffs to prove that when they act as Employers, they should be treated differently from every other Employer offering Health Insurance to Employees in the United States.

    Let them try to prove that, if they can.

Please Read The Disclaimer.

       

When RISK MANAGERS Took Risks, Made Profits, Who Knew From Losses?

This post follows previous posts on similar subjects on Insurance Claims and Issues Web Log on May 14, 2012 and on May 15, 2012, and on Insurance Claims and Bad Faith Law Blog on May 15, 2012.

    When the Great Recession started, Wall Streeters said that they had no idea that loss could follow risk.  They attempted to make us believe flimsy excuses along the lines of "Who knew?"  Or, "It was a perfect storm," or "a black swan," something that is so far out of the realm of human experience that they just could not anticipate it.

    They were wrong.  We know now that not only did they anticipate it, they did not care so long as they made money for themselves.

    Now we read recent newspaper reports that JPMorgan Chase has lost Billions of Dollars trading in credit derivatives, particularly Credit Default Swaps, the same instruments that nearly brought down the house or, more accurately, definitely brought on the Great Recession.

    At first JPMorgan announced that its losses were $2 Billion.  Now JPMorgan is announcing that the losses are $3 Billion, with more to come.  And JPMorgan representatives are eerily echoing the false excuses of the first days of the Great Recession.  'Who knew?' 'No-one could have anticipated this loss,' and so on.

    These things were not true in late 2007.  They are not true in the Spring of 2012, either.

    The office of JPMorgan from which the announced losses are originating is a huge clue.  JPMorgan Chase turned its Risk Management office into a profit center.  Anyone who looked at the fact that profits were being generated by Risk Managers should have known, in fact almost certainly did know, that something was glaringly, terribly wrong at Diamond Jamie's place.  See Jessica Silver-Greenberg and Ben Protess, "Bank Regulators Under Scrutiny in JPMorgan Loss / Risk Was Played Down / No Overseers Assigned to Investment Unit That Lost Billions" p. A1, col. 6 (New York Times Nat'l ed., Saturday, May 26, 2012):  "But JPMorgan's office, with a portfolio of nearly $400 billion, had become a profit center that made large bets and recorded $5 billion in profit over the three years through 2011."

    Those who have eyes to see with, let them see, and ears to hear with, let them hear.  It is not truthful to claim that you could not see something that was so unusual it had to have been seen, or that you could not hear what everyone else could hear including that there was a whole lot of shakin' goin' on at JPMorgan even before Billions of Dollars in losses arrived at the door.

P.S. on so-called regulation by the Wall Street-controlled OFFICE OF THE COMPTROLLER OF THE CURRENCY, which has jurisdiction over the activities in question at JPMorgan:

"The Office of the Comptroller of the Currency has also faced scrutiny about whether it is too cozy with the banks it oversees."  Id.

Duh.  What was your first clue?

Please Read The Disclaimer.

The Faith of ACA: Good Faith, Bad Faith, no Faith?

    This post continues where two posts on Insurance Claims Issues Blog left off, the first one on Monday, May 21, 2012 and the second on Wednesday, May 23, 2012.

    Congress expressed its clear intent in the ACA statutes that "preventive health services" must be included among "essential health benefits" --and that the Secretary of Health and Human Services must fill in gaps with rules and regulations that Congress intended would be more specific than the statutory language.

"Essential health benefits" are described in general terms in Section l302(b) of the ACA [42 U.S.C. § l8022(b)]:

(b) ESSENTIAL HEALTH BENEFITS.­

(1) IN GENERAL.-Subject to paragraph (2), the Secretary shall define the essential health benefits, except that such benefits shall include at least the following general categories and the items and services covered within the categories:

(A) Ambulatory patient services.

(B) Emergency services.

(C) Hospitalization.

(D) Maternity and newborn care.

 (E) Mental health and substance use disorder services, including behavioral health treatment.

(F) Prescription drugs.

(0) Rehabilitative and habilitative services and devices.

(H) Laboratory services.

(i) Preventive and wellness services and chronic disease management.

(j) Pediatric services, including oral and vision care.

[Emphasis added.]

"Preventive health services" are special, or at least they are treated that way in the ACA and in the Regulations which it generated. Section 1001 of the Affordable Care Act adds section 2713 of the Public Health Service Act, which in turn amends Part A, Title XXVII, Public Health Service Act [42 U.S.C. § 300gg et seq.]:

SEC. 2713 [42 U.S.C. 300gg-13]. COVERAGE OF PREVENTIVE HEALTH SERVICES.

(a) IN GENERAL.-A group health plan and a health insurance issuer offering group or individual health insurance coverage shall, at a minimum provide coverage for and shall not impose any cost sharing requirements for­

(1) evidence-based items or services that have in effect a rating of 'A' or 'B' in the current recommendations of the United States Preventive Services Task Force;

(2) immunizations that have in effect a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention with respect to the individual involved; and [sic]

(3) with respect to infants, children, and adolescents, evidence-informed preventive care and screenings provided for in the comprehensive guidelines supported by the Health Resources and Services Administration. [; and]

(4) with respect to women, such additional preventive care and screenings not described in paragraph (1) as provided for in comprehensive guidelines supported by the Health Resources and Services Administration for purposes of this paragraph.

(5) [F]or the purposes of this Act, and for the purposes of any other provision of law, the current recommendations of the United States Preventive Service Task Force regarding breast cancer screening, mammography, and prevention shall be considered the most current other than those issued in or around November 2009.

[EMPHASIS ADDED.]

To be continued on Insurance Claims and Issues Weblog at www.insuranceclaimsissues.typepad.com, including the story of how the Affordable Care Act contains NO EXEMPTIONS for Employers required by the ACA to offer Plans and Policies which contain coverage for women's health, INCLUDING OFFERING COVERAGE FOR CONTRACEPTIVE SERVICES, whereas the Regulations DO.

Please Read The Disclaimer.

FORCED-PLACED INSURANCE UNDER INVESTIGATION.

 

    Until we have decided cases to report on, we will clearly be able to make do with governmental investigations of the practices involved in forced-placed insurance.  That is the insurance "which mortgage lenders take out when borrowers stop making payments on their homeowner's insurance."  Mary Williams Walsh, "New York Investigates Bank Payments to Insurers" p. B1, col. 2 (New York Times Nat'l ed., "Business Day" Section, Tuesday, May 22, 2012).

     Two forced-place insurance companies, Assurant and QBE Insurance, reportedly control "about 90 percent of the market" (in New York State).  Id.

     "The [New York] state Department of Financial Services is looking into whether the insurance firms effectively bought their dominant positions by paying kickbacks to banks disguised as commissions or other business, according to the department's superintendent, Benjamin M. Lawsky."  Id.

     The New York department is also "considering whether to require rebates for homeowners who were overcharged for the coverage."  Id.

 

Please Read The Disclaimer.

Federal Court: No Jury Trial for ERISA Fiduciary Breach Claim.

    In Ehlen Floor Covering, Inc. v. Lamb, 2012 WL 1698351 (M.D. Fla. May 14, 2012), Download Ehlen Floor Covering, Inc. v. Lamb (M.D. Fla. Case No. 2.07cv666, Order Filed May 14, 2012) PUBLIC ACCESS, a Federal Court just joined other District Courts in resolving the issue of whether there is a right to a Jury Trial on a Breach of Fiduciary Duties Claim under ERISA. 

    The District Court answered in the negative in this case.

    So far, according to the District Court, there are no applicable Circuit Court of Appeals' decisions to provide guidance on this question, and none from the U.S. Supreme Court, either.

Please Read The Disclaimer.

Cavalcade of Risk #157, the Bad Faith Part.

    I am pleased to be hosting Cavalcade of Risk Number 157, which I have broken into two parts for your linking-reading pleasure.  In this part, we begin with Risk Management Monitor's post exploring the subject of  "Who Pays For the Cost of Cyberwar?"  They have provided this enticing Summary -- There’s no doubt fraud, committed by both external and internal parties, is on the rise as methods for committing theft become more available and easier to hide due to technology. And according to a recent survey by the Association of Certified Fraud Examiners, businesses around the world lose an estimated 5% of their annual revenues to fraud, for a total loss of more than $3.5 trillion.

      Our Cavalcade of Risk of Bad Faith closes with this post from Oblivious Investor Blog about the Securities Investor Protection Corporation, entitled "SIPC:  What it Covers and Coverage Limits."  Summary: Despite the important role it plays, many investors know little about the SIPC and the protection it provides.

Enjoy linking and reading!  The next Cavalcade will come your way on May 30 and will be hosted by Nina Kallen at Insurance Coverage Law in Massachusetts, http://insurancecoveragemassachusetts.blogspot.com.

Please Read The Disclaimer.      
    

Tuesday in Tampa: JPMorgan Shareholders Deserve More Than Apologies.

"If the trades at issue were proprietary trading, as now appeqrs to be the case,  they would be banned by the Volcker Rule.  And if derivatives rules under Dodd-Frank had been in effect, these trades would almost certainly have been required to be cleared and transparently executed.  The losing nature of the trades, therefore, would have been obvious to market observers and regulators for quite some time and the losses would not have piled up opaquely." 

Prof. Michael Greenberger of the University of Maryland School of Law, quoted by Gretchen Morgenson, "Fair Game /  At JPMorgan, the Ghost of Dinner Parties Past" p. 1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, May 13, 2012).  

 

    The current leadership of JPMorgan Chase will appear before the Annual Shareholders Meeting in Tampa, Florida today, Tuesday, May 15, 2012.  They have spent lots of the shareholders' money arguably to block the shareholders' interests and advance their own interests.  They have spent millions of dollars to pay lobbying fees, first,  to obtain an exemption from the Volcker Rule against proprietary trading -- which means trading with the shareholders' own money -- in favor of redefining "hedging," and second, to delay the implementation of any rules under Dodd-Frank regulating derivatives trading.  They now contend that the announced loss of $2 Billion on their watch, with announcements of more bad news expected to come shortly, was permitted by the exemption and of course that derivatives rules are not in effect yet.

    Observers of the situation see something different.  They see proprietary trading prohibited by the Volcker Rule or, at the very least, a need for accurately defining "hedging" so as to never again allow this sort of failure, in which corporate shareholders pay for the risks taken by corporate officers who stand to gain but not to lose.

    Mr. Jamie Dimon, the current head of JPMorgan, reportedly "does not agree".  See Gretchen Morgenson, "Fair Game / At JPMorgan, the Ghost of Dinner Parties Past" p. 1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, May 13, 2012).

    We do not need Mr. Dimon's admission.

    We have the evidence, including Expert Opinion Testimony which is not in serious dispute.

    Last but not least, if the Glass-Steagall Act had not been repealed, JPMorgan's losses would never have happened.  Some even say that the depression through which we are now living would never have happened either.

Please Read The Disclaimer.

Foreclosers in Florida Follow Foreclosure "Mistakes Are Made" Business Model.

    The problems dumped on Florida's Judicial system by Foreclosure Fraud -- and on the Courts in other jurisdictions as well -- have been the subject of many posts here.  See, for example, the series on "Immunizing Foreclosure Frauds is Not an Option," posted on 09.29.11, 10.06.11, and 10.13.11.

    Solutions have been proposed to these problems.  For example, a  set of several solutions was posted here almost a year ago, on June 8, 2011, "Foreclosure Lawsuits Problems Attmept Overcoming Court:  No. 1, With Solutions."  The State of Missouri has followed one of its own solutions:  Missouri is criminally prosecuting Forgery initiated by Florida Foreclosure Facilitators, and the Missouri prosecution was posted here on February 9, 2012.

    Now another issue has arisen and is pending right now in front of the Florida Supreme Court:

    The issue is whether Florida banks should be able to escape punishment if they drop a foreclosure case because they realize they have fraudulent documents.  They are allowed to do so and then refile the case with proper documentation.

Kathleen Haughney, "Florida Justices Weigh 'Robo-Signing' Sanctions" p.A3, col. 1 (Orlando Sentinel, Wednesday, May 9, 2012).

    The Florida Supreme Court has scheduled Oral Arguments on the issue for today, Thursday, May 10, 2012.

    Reportedly, groups of bankers have filed briefs in which they take the position that they should be allowed to continue their foreclosure 'mistakes are made' business model.  See id.

    If mistakes were the only issue, then perhaps.

    But mistakes are not the only issue.  See all the posts and links, above.  No, the business model is the issue.  It is not compatible with the Justice system in Florida -- or anywhere else.

Please Read The Disclaimer.

Constructing many things on platform of Good Faith.

    Many things are constructed by the law on the equitable concept of Good Faith.  One of those constructs is Good Faith in reaching a settlement.  If a Court cannot find objective evidence of such Good Faith, the settlement in such a case is subject to begin set aside as if the settlement was never arranged.  Where Good Faith is found, on the other hand, the settlement will ordinarily survive.

    "In sum, we agree with the district court that the settling parties entered into their settlement agreement in good faith.  We therefore conclude that the district court did not abuse its discretion in approving the settlement agreement."  In re September 11 Property Damage Litigation, 650 F.3d 145, 154 (2d Cir. 2011).

Please Read The Disclaimer.

Fiduciary Law Solutions to Corporate Governance Issues Criminal Law Ignores.

   "I couldn't find a case of an executive at a major American-based, publicly traded company who was successfully prosecuted and sent to jail." 

James B. Stewart, "Common Sense / Bribes Without Jail Time" p. B1, col. 1 (New York Times Nat'l ed., "Business Day" Section, Saturday, April 28, 2012).

   "This case could turn out to be a poster child for individual liability."

Prof. Andrew Spalding, quoted by Stewart, New York Times, supra, commenting on allegations published in the New York Times that Wal-Mart executives allegedly participated in foreign corrupt practices including bribery in Mexico.  The Law Faculty Blog of the Chicago-Kent College of Law, where Prof. Spalding is an Assistant, Visiting Professor, provided a recent postwith links to other places where Prof. Spalding's various comments can be found.

   Criminal Law apparently has not been doing a very good job of policing corporate governance issues.  In particular, a common pattern reportedly emerges of companies admitting the facts of alleged corrupt foreign practices, followed by the corporation paying a fine, and ending with no individuals charged with a crime.  Stewart, New York Times, supra.

   This undoubtedly has something to do with the fact that officials at the Department of Justice and at the Securities and Exchange Commission who are charged with executing U.S. criminal laws, including the Foreign Corrupt Practices Act, have entirely avoided criminal prosecutions of corporate officers who, clearly, have the money at their disposal to contest criminal charges and force a criminal trial. 

   What is also clear is that the current system of criminal justice simply is not equipped to deal satisfactorily with -- including incapable of deterring  -- potential breaches of Fiduciary obligations.  In at least one field of corporate governance, Corporate Compensation, the field of Fiduciary Law lies open with solutions to the problems.  "Fiduciary Issue on Corporate Compensation, And How to Solve It," posted on Insurance Claims and Bad Faith Law Blog on Thursday, April 26, 2012.

   It is time to try the solutions offered by Fiduciary Law.  If it is good enough, as they say, for the claim handling practices of Insurance Companies, then it is certainly good enough for the alleged corrupt practices of corporations.

Please Read The Disclaimer. 

Fiduciary Issue on Corporate Compensation, And How to Solve It.

    Corporate board members sit on compensation committees considering the compensation of corporate officers.  The corporate officers, in turn, return the favor with lavish endorsements to their shareholders to elect and retain the most generous board members who vote for increasing their compensation.

    In one representative example, corporate officers both submitted a compensation committee member for re-election and endorsed him:  "The board has recommended shareholders re-elect Mr. X.  He has served them well since 1999 and will continue to do so."  A proxy statement they filed on behalf of the corporation -- on behalf of the shareholders? -- praised Mr. X as one who "offers deep insight into governmental affairs and the regulatory process, gained from" a record which did not list any specific encounters with reality, perhaps because there were few if any positive encounters to list.  See Andrew Ross Sorkin, "Dealbook / 'Tainted,' But Sheltered On Boards" p. B1, col. 1 (New York Times Nat'l ed., "Business Day" Section, Tuesday, April 24, 2012).

    There are many reasons that this arrangement is arguably unholy, that it is not in the best interests of the corporation or its shareholders.  My concern here is to address one of those reasons.  The board members have a Fiduciary Duty toward the shareholders of the corporation and so do the corporate officers.  The cozy relationship between board members and corporate officers is nowhere more in conflict with the interests of the shareholders than in the arena of corporate compensation.  Accordingly, here is the first step in a proposal which would eliminate that source of conflict in which the interests of board members and corporate officers are often preferred to the interests of their shareholders:

    1.  To completely eliminate the actual and apparent conflict of interest in this arena, completely eliminate the capacity of corporate officers to do anything more than nominate board members.  They should no longer have the authority to do anything more than nominate board members for election or retention (which comes at corporate expense, not at their own expense in any case).

    Then take another step:

    2.  Submit issues of compensation during the tenure of any corporate officer to a vote at an annual shareholder's meeting.  Let the shareholders determine the amount of money that a corporate officer ought to receive for her or his job performance since the last time their compensation came up for a vote.  In the case of a newly hired officer, allow the corporation's board to make a job offer of course including starting pay and benefits -- and then submit that offer, if accepted, to a vote at the next annual shareholder's meeting if the next meeting is scheduled to take place within the next 6 months, say, and if not, then no additional compensation will be considered or offered for 1 year or the next annual shareholder's meeting, whichever comes later.

    I am sure that these proposals will not be pleasant for corporate compensation committees or for corporate officers.

    If that is the only objection, I can live with that, as they say.  I would be curious to receive whatever other objections there might be, though.  I cannot imagine any valid objections but perhaps those more familiar with corporate governance and its hidden ways can enlighten all of us.

Please Read The Disclaimer.

Fiduciary Settlement?

    Lawyers retained by two Plaintiffs have reportedly settled claims for alleged Breaches of Fiduciary Duties by "the directors of Bank of America over its purchase of Merrill Lynch".  The settlement requires Court approval in a Federal class action lawsuit pending in the United States District Court for the Southern District of New York (Manhattan).  Gretchen Morgenson, "Bank of America Accord in Lawsuit is Challenged" p. B1, col. 5 (New York Times Nat'l ed., "Business Day" Section, Saturday, April 21, 2012).

    The tentative settlement has been challenged in the Federal Court by other Plaintiffs who filed their lawsuit in Delaware apparently against the same Bank of America Defendants, and also on account of BOA's purchase of Merrill Lynch.  The Delaware Plaintiffs' claims would arguably be terminated if the New York settlement is approved by the Federal Court.  Id.

    The New York Plaintiffs are reportedly willing to settle their $5 Billion Breach of Fiduciary Duties claims for $20 Million.  Id.

    The Delaware Plaintiffs' challenge to the tentative New York settlement is based on grounds that "the settlement [is] grossly inadequate and the result of collusion".  Id.

    To put it another way, the Delaware Plaintiffs apparently contend that the New York Plaintiffs are acting in Bad Faith with the New York Defendants.

    Time -- and a Federal Judge in New York -- will tell.

Please Read The Disclaimer.

British Insurers Question High Pay for Low Results.

   The Association of British Insurers (access home page here) are in the news for something extraordinary, at least extraordinary in my experience in the United States.

   The British Insurers question whether a bank CEO has earned high pay when his bank lost 16 percent of its profits last year, as reported by Mark Scott on Dealbook Blog on New York Times Online, posted April 11, 2012.

   Hear, hear.

Please Read The Disclaimer.

Rescission Defeats Bad Faith Claims, Federal Court Holds.

      A mom and dad tried to set their son up with a Crop Insurance Policy, but the attempt was not successful when the Crop Policy was rescinded by a Federal Court.  Among other evidence in the record of that case, the Federal Court pointed out that apparently the son did not invest very much in the crop which he was applying to insure before he made a claim for a big loss on it.  Actually, according to the evidence in that case, "[b]eginning with the 2006 crop year," the son "did not own any equipment at that time and had not secured any debt in the name of the nursery".   Skymont Farms v. Federal Crop Insurance Corp., 2012 WL 1193407 *1 (E.D. Tenn. April 10, 2012), Download Skymont Farms v. Federal Crop Ins. Corp. (E.D. Tenn. Case No. 4.09cv65, Memorandum and Order of Lee, U.S.M.J.) PUBLIC ACCESS.

    Lacking a Federal definition of what is a "material" misrepresentation legally sufficient to void a Federally subsidized Crop Insurance Policy, the Federal Court turned to State Insurance Law for a definition, held that the application for Crop Insurance at bar met the definition because the son just did not display a sufficient insurable interest for the Crop Insurance he was applying for, and ordered that the Crop Insurance Policy was rescinded -- without payment of the son's claim, of course.  Id. at *8 - *10.

   The son had alleged several claims against the Federal Crop Insurance Corporation which included Bad Faith Claims under Tennessee law.  Once the Federal Court reached the decision to rescind this Policy in this case, no Bad Faith Claims existed since there never was legally any Insurance Policy in existence, the Court reasoned.  See id. at *2, 14.

Please Read The Disclaimer.

Good Faith in Lender-Placed Insurance?

    Force-placed Insurance is also known as lender-placed Insurance.  The right to place Insurance is a right borrowers give up by contract.  If borrowers fail to keep Insurance in place on mortgaged property, they give lenders the right to place Insurance on the property and send the Premium bill to the borrowers.

    There are apparent problems in practice with how lenders exercise lender-placed Insurance rights.  At least in New York State, there is reported evidence of scams to direct placement of that Insurance to selected companies for higher Premiums.  Sometimes, there is evidence of kickbacks and added fees for Reinsurance to protect these Insurance Companies but not the borrowers of course, in New York State.  See Liz Rappaport and Leslie Scism, "Insurers Facing Greater Scrutiny" p. C1, col.6 (Wall Street Journal, Thursday, April 5, 2012).

    Although there is a reported ongoing investigation of underway in New York State, the exposure of Insurance Companies issuing the lender-placed Insurance is said to be particularly high in Florida in part because of the high number of Florida Foreclosures.  Id.

    If a borrower gives up a right to place Insurance on mortgaged property, it seems that at least arguably, lenders should, do or may have a corresponding Fiduciary duty of Good Faith in the exercise of that right and to Deal Fairly with the borrower who not only has given up the right exercised by the lender, but pays the bill for the Insurance product selected by the lender.

Please Read The Disclaimer.

Government's Role in Health Insurance: Two Questions Answer Legitimate Concerns.

"You can get health insurance."  Associate Justice Samuel Alito, during the recent oral arguments at the Supreme Court in the Patients Protection and Affordable Care Act ("ACA") Case.

    Maybe you can get health insurance.  Others cannot get health insurance.  Not because they do not want it.  But because they cannot get it even though they need it.

   There is a big difference.

   A Constitution-size, Insurance Coverage -size difference.

          During the course of the recent oral arguments at the Supreme Court over the constitutionality of the so-called Health-Insurance-purchasing-mandate of the ACA, a favorite, recurring topic of the Justices' questions was if the Federal Government can require people to purchase Health Insurance or be penalized with a monetary penalty if they do not, what else can the Federal Government require people to do if it can require that?  And like unto it:  What then are the boundaries of this power, what are the limits if any on it?

        This past weekend, a business owner named Donna Dubinsky gave a complete answer to these questions with a compelling two-part test:

   The government muffed its response.  To me, the answer is obvious.  There are two simple limiting conditions, both of which must be present:  (1) it must be a service or product that everybody must have at some point in their lives and (2) the market for that service or product does not function, meaning that sellers turn away buyers.  In other words, you need something, but you may not be able to buy it.

Donna Dubinsky, "What Makes Health Care Different" (Washington Post Online, published Friday, April 6, 2012).

         To phrase the two parts of this test in slightly different words, (1) people need it and (2) regardless of how much if anything they are willing to pay for it, they do not control whether they get it, someone else controls whether they get it or not.

        Clearly the factor of someone else holding control over this situation involves a power which ought to be exercised only in Good Faith.  The parties exercising such a power ought to be required to deal fairly with the people who need "it," whatever "it" is, including Health Insurance.  The reluctance of many if any Courts to impose an actionable duty of Good Faith and Fair Dealing on the Insurance application process reflects the difficulty in relying on common law or even equitable solutions to the problem.

       If statutory requirements like the ACA's requirements are not the answer, what is the answer when someone needs Health Insurance but cannot get it because of a decision made by someone else?

Please Read The Disclaimer.

 

Bad Faith Financial Services: No Comparative Negligence in Lawsuit.

    The Verdict is in:  Federal Jury awards every penny St. Petersburg put on the board in Closing.

    Many cities claim that they lost money by relying on bad advice or, in some cases, allegedly relying on no advice, from the cities' financial advisers before the Great Collapse.  One of those cities among many is the City of St. Petersburg, Florida.

    The City sued because it allegedly lost money buying Lehman Brothers bonds after Lehman's financial condition began a death march.  The Defendants in the City's Federal lawsuit is the City's financial adviser:  Wachovia Global Securities, now owned by Wells Fargo.  According to the City's claims, the Defendant did not tell St. Petersburg that Lehman's financial condition  had begun rapidly deteriorating.  

    The Defendant defended on a reported contention that the City of St. Petersburg knew or should have known that Lehman bonds were a bad investment at the time.

    Regardless of what the Defendant told the City, or did not tell the City, their client.

    All of these contentions were previously posted here on March 27, 2012, "City Sues For Alleged Bad Faith Financial Services, $16 Million Damages".  (The amount of money reflected in the title of that post comes from a newspaper article which is linked in the post.  That amount is apparently the amount lost by the City as of the time the City filed ts lawsuit.)

    Now, the Verdict is in.  A Federal Jury awarded the City of St. Petersburg every penny it asked for: $10,387,500.00.  This represents the difference between what the City paid for the Lehman bonds, and what the Lehman bonds are worth now.  See Michael Van Slicker, "City of St. Petersburg Wins $10.4 Million Verdict Against Big Bank" (Tampa Bay Times Online, Tuesday, April 3, 2012).

    Two of the Jurors who were interviewed for the linked newspaper report, revealed that they were not happy with the conduct of the City's chief financial-investment official, who reportedly went ahead with the investments despite apparent knowledge at least that Lehman was in bad straits financially.  However, according to the Jurors, the Jury in this case concentrated on the conduct of the Defendants, which reportedly impressed them even more.

    As the Jurors saw it, the City's financial advisers breached their duties to advise the City about these and other risky financial investments.  "'But the evidence showed that Wachovia didn't do its fiduciary duty.'" Id., quoting the man whom the Jury elected as its Foreman.

    The City sued its financial advisers for alleged breach of contract, breach of alleged Fiduciary Duties, and negligence.  As a matter of law, a matter perhaps unknown to financial advisers at least before this Verdict, 'comparative negligence' is not a defense to claims other than negligence when, as the Jury found in this case, financial advisers breach the duties they assume when their offer to be paid in exchange for their financial advice are accepted.  When that happens, they owe duties to their new-found clients.  In this case, a Federal Jury found one more thing:  These Defendants breached their duties to the tune of every penny their client lost as a result, which the Jury awarded.

Please Read The Disclaimer.

FILLING OUT "OFFICIAL" ONLINE NOTICE FORM NO BAR TO DISMISSAL.

   In  Ardrey v. USAA Casualty Insurance Co.,  2012 WL 831620 (M.D. Fla. March 12, 2012), Download Ardrey v. USAA Casualty Ins. Co. (M.D. Fla. Case No. 8.12cv08, Order Filed March 12, 2012) PUBLIC ACCESS, a Federal District Court considered a Motion to Dismiss a Bad Faith Claim under Florida's Bad-Faith Statute.  USAA based its Motion to Dismiss in part on an alleged failure of a USAA Uninsured Motorist Policyholder to comply with a statutory condition precedent of completing a legally sufficient Civil Remedy Notice form.

    As reported by the Court in this case, USAA argued that certain specific Bad Faith claims alleged by the Plaintiff must be dismissed for failure to comply with the statutory condition precedent:

Because none of these specific violations were identified in the CRNs, USAA argues that Plaintiff's unfair settlement practices claim based on these alleged violations must be dismissed.

Id. at *3.

     Plaintiff opposed the Motion to Dismiss in this regard on the ground that she went to the website of the Florida Office of Insurance Regulation (formerly the Florida Department of Insurance), and there she filled out a form Civil Remedy Notice or "CRN" which she printed and sent to USAA.  She contended that "she cannot be faulted for failing to list the specific statutory subsections in the CRNs, because the CRN form was provided online by the Department and she was required to select the statute that was violated from a drop-down menu.  Thus, Plaintiff contends that she did not have the option to identify the specific subsections that USAA violated.  Id.

     The Federal Judge did not address this contention directly.  However, the Federal Judge granted USAA's Motion to Dismiss in this regard, holding:

Furthermore, given the complete lack of any information in the CRN regarding the specific ways in which Plaintiff believed that USAA engaged in unfair settlement practices, the Court finds that the CRNs did not provide USAA with sufficient notice of her unfair settlement practices claim.

 Id.

     Two things come immediately to mind as a result of this decision.  First, the OIR may need to provide statutory-compliant options as a part of its online Civil Remedy Notice form.

     Second, after this case, at least, it will do Policyholders no good to rely on the OIR's online CRN form rather than on what the Florida Statute requires.

 

Please Read The Disclaimer.

Is This a Mortgage Fraud "Settlement"? Or Just a Fraud?

    Criticism of the supposed Mortgage Fraud Settlement is being reported from many points of the compass.  A chief criticism of the arrangement between the Federal and State Attorneys General, on the one side, and five huge Mortgage Servicers which are also investment Banks on the other side, is that the Gang of Five are credited in their agreement with things they would do anyway.  See Shaila Dewan and Jessica Silver-Greenberg, "Foreclosure Deal Credits Banks for Routine Efforts (New York Times Online, posted March 27, 2012).

    So how, you understandably are asking, is this a negotiated settlement?  Good question.  A lot has to do with the nature of this arrangement.  It is likely that the settlement documents are not complete.  It is a certainty that the settlement documents that do exist, were written first,  before a Complaint was written -- which as most lawyers and every Banker knows is the opposite of the way things are handled in a negotiated settlement.   See March 18, 2012 post here, "After the Settlement ... They Wrote the Complaint".

    More to come, no doubt.

    Please Read The Disclaimer.

FANNIE MAE AND FREDDIE MAC REFUSE TO WRITE DOWN PRINCIPAL ...

... AND WHY THEIR REFUSAL MAY BE IN GOOD FAITH.

 

Sometimes it takes a little learning.

          The Federal Housing Finance Agency is the current, and hand-picked, regulator for both Fannie Mae and Freddie Mac.  The acting director of FHFA says that he takes his duties seriously.  His duties are above all to safeguard the risks imposed on the Taxpayer and the money the Taxpayer will have to pay.

 

          Fannie Mae and Freddie Mac were both put into conservatorship as a result of the Mortgage Fiasco, of course.   Neither had the money to pay the bills, i.e., the Mortgages they assumed, once the bills came due.

 

          There have been calls for Fannie and Freddie to write down the principal amount of the first Mortgages which they assumed.  The publicly stated theory behind such calls is that Homeowners-Mortgagors will find it easier to pay reduced first Mortgages.

 

          This ignores a fact that the FHFA acting director cannot ignore, however.  Writing down the principal on first Mortgages held by Fannie and Freddie without a corresponding write-down of the principal on second Mortgages would increase the likelihood that the second Mortgages would remain completely in effect and would be paid, or the Homeowners would suffer the consequences of Foreclosure once the first Mortgages, now held by Fannie and Freddie, no longer exist once a reduced write-down amount is paid.

 

          There is a victim, if you will, if Fannie or Freddie write down the principal amount due on first Mortgages even as the Homeowners would be given apparent relief on the face of it:  Federal Taxpayers are the people due the principal amount which is being written down.  If the principal is in fact written down, the Taxpayers recover less whenever any Mortgage now held by Fannie or Freddie is reduced.

 

          Further, the second Mortgagors are investment Banks.  They already got their bailout, as we all know.

 

          Reducing the amount owed on first Mortgages held by Fannie Mae and Freddie Mac, without a corresponding write-down of the principal on second Mortgages held by the Banks, would mean nothing less than a second bailout of the Banks.

 

          Much of this is laid out in an easy-to-understand article by Gretchen Morgenson, "Fair Game / A Bailout by Another Name" p.1 col. 6 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, March 25, 2012).  As Ms. Morgenson wrote at the conclusion of her article:

 

So the next time you hear someone advocating vast principal reductions on Fannie and Freddie loans, remind them that it would be another stealth bank bailout, courtesy of taxpayers.  Banks' unwillingness to share the pain has been a central feature of this crisis.  It's time to put an end to this dysfunctional dynamic.

 

Please Read The Disclaimer. 

City Sues for Alleged Bad Faith Financial Services, $16 Million Damages

    The Trial began on Monday in a Florida municipality's Federal lawsuit against its financial services "bank"/financial adviser.  The City of St. Petersburg has sued Wachovia Global Securities for failing to disclose the condition of Lehman Brothers to the City even as Wachovia allegedly advised St. Petersburg to invest in Lehman bonds and Lehman was going bankrupt.

    The bank reportedly counters that the City of St. Petersburg was fully aware of Lehman's condition, which Wachovia itself of course knew.  Wachovia Financial Services has since been acquired by Wells Fargo.

    As the result of a pretrial ruling in the case, the City of St. Petersburg will be allowed to put on evidence of similar circumstances resulting in losses to other cities.  For example, the City of Sarasota reportedly lost $40 Million in a similar investment in Lehman bonds apparently at or about the same time.

    The common thread in cities' litigation against their former financial advisers is known as "securities lending".  In essence, the cities leased bonds they held, or the right to receive income from them in the future, in exchange for cash payments now.  "The risk comes when the city makes an investment that loses money, which would then have to be repaid."  Michael Van Slicker, "St. Petersburg Seeks to Recover $15.8 Million in Lost Investments in Trial Monday" (Tampa Bay Times Online, Saturday, March 24, 2012).

    Who bears the risk of nondisclosure, on the one hand, or of the equivalent of assumption of the risk, on the other hand, is at issue in such lawsuits.

Please Read The Disclaimer.

Bad Faith Attorney's Fees Awarded for Dishonoring Florida Mediation Agreement.

    In Cox v. Great American Insurance Co., --- So.3d ----, 2012 WL 933073 (Fla. 4th DCA March 21, 2012), Download Cox v. Great American Insurance Co. (Fla. 4th DCA Case No. 4D10.5155, Opinion Filed March 21, 2012) PUBLIC ACCESS, several issues were resolved concerning the imposition of Attorney's Fees as sanctions for not keeping an agreement made at a Florida Mediation.

    First, the Florida Appellate Court upheld the imposition of Attorney's Fees as sanctions in this case under Fla. R. Civ. P. 1.730(c), which expressly authorizes the assessment of Attorney's Fees in cases in which parties do not keep their Mediation agreements.  Further, the Appellate Court affirmed the Trial Court's ruling that the moving party in this case was entitled to its Attorney's Fees incurred in litigating the amount of Attorney's Fees incurred, not merely for litigating the issue of entitlement.  Id. at *1, *2.

    The Florida Appellate Court upheld the imposition of Attorney's Fees as sanctions for failure to keep an agreement made by a party at Mediation in this case, under a doctrine that Attorney's Fees can be imposed as sanctions where a Court can determine that a party has engaged in "inequitable conduct".  As described in the Appellate Court's opinion, the inequitable conduct doctrine permits the assessment of Attorney's Fees where one party has engaged in "'egregious conduct or acted in bad faith.'”  Id. at *1.

    The Appellate Court remanded the case to the Trial Court, however, for the purpose of detailing the specific instances of Bad Faith conduct that warrant the sanctions in this case.  Id.

    For those concerned with the conduct of litigation and of Insurance Claims and of Mediations -- a group which should include most or all of us -- the decisions of the Trial Court and of the Appellate Court in this Florida case show that Bad Faith conduct still reaps a special kind of attention from the Courts.  It is the kind of attention that most of us -- a group which should include all of us -- do not attract, or want to.

Please Read The Disclaimer.

Bad Faith Statute Not Defense to UIM Bad Faith Claim.

    In Moss v. GEICO Indemnity Co., 2012 WL 882575 (M.D. Fla. March 15, 2012), Download Moss v. GEICO Indemnity Co. (M.D. Fla. Case No. 5.10cv104, Order of USMJ Filed March 15, 2012) PUBLIC ACCESS, a dissatisfied Policyholder sued an Underinsured Motorist Insurance Company for alleged Bad Faith.

    The UIM carrier, GEICO, raised Florida's Bad Faith Statute, Fla. Stat. § 624.155, as a defense to the Bad Faith Claim.  Its Affirmative Defense on this ground already having been stricken once, GEICO re-alleged it in a half-dozen paragraphs as follows:

As its Second Affirmative Defense, GEICO states that the Plaintiff's claim is governed by § 624.155, Florida Statutes, and that GEICO is entitled to the following protections afforded to GEICO by that statute:

a. To the extent that Plaintiff's Civil Remedy Notice failed to comply with the requirements of Florida Statute § 624.155, Plaintiff failed to fulfill a condition precedent to the present action.



b. To the extent that the allegations set forth in Plaintiff's Amended Complaint are broader than the allegations set forth in Plaintiff's Civil Remedy Notice, Plaintiff fails to fulfill a condition precedent to the present action.



c. The provisions of Florida Statute § 624.155 regarding punitive damages apply to the present action. There is no basis for punitive damages to be sought or awarded.



d. To the extent that Plaintiff's allegations do not constitute bad faith as defined by Florida Statute § 624.155 and Florida law, Plaintiff's Amended Complaint fails to state a cause of action.

e. To the extent that Plaintiff alleges damages in her Amended Complaint that are not allowed by Florida Statute § 624.155, Plaintiff's Amended Complaint fails to state a cause of action.

 

Id. at *1, quoting GEICO's Second Affirmative Defense in this case.

    The Plaintiff-Policyholder again filed a motion to strike this Affirmative Defense as legally insufficient.  The United States Magistrate Judge agreed and granted the motion to strike.  The Court based its ruling on four grounds:

1. This was a legal argument, not an Affirmative Defense which must be based on allegations of fact under the Federal Rules of Civil Procedure.  In particular, "subparagraphs 'c' and 'e'" were stricken as "statements of law; [they are] not affirmative defenses."
2. It is "devoid of any factual allegations to support its legal conclusions."  As such, this alleged Affirmative Defense "fails to give Plaintiff notice of the grounds of the defense and is likely to lead to surprise and undue prejudice."
3. The Court noted that "each subpart" of this alleged Affirmative Defense begins with the words, "[t]o the extent."  "Absent specifics, which GEICO has not supplied, it is impossible to know whether any part of the second affirmative defense applies in this case."  [Emphasis added.]  To put it another way, it is not enough to know how many angels can dance on the head of a pin; the knowledge required is specific to the facts of this case, whether or not it applies to the facts in other cases pending or yet to be filed.
4. Finally, GEICO attempted to allege what once was called "a general denial" of the Plaintiff's compliance with a supposed condition precedent.  Under Federal Rule of Civil Procedure 9(b), however, and under most Rules of Civil Procedure extant in 2012, a denial of compliance with a condition precedent must be alleged with particularity.

Id. at *2.

    The Court nonetheless granted GEICO further leave to file and serve another Amended Affirmative Defense, but only "if, consistent with counsels' obligations" under Federal Rule of Civil Procedure 11, GEICO can allege "specific failures" by Plaintiff to comply with Fla. Stat. § 624.155, "which put at issue relevant legal and factual matters."  Id. at *3.  [Emphasis added.]

Please Read The Disclaimer.

AFTER THE SETTLEMENT ...

   ... They Wrote the Complaint.

    Settlement between five Mortgage Servicers/Banks, on the one hand, and the United States, and all but one of the Attorneys General of the States and the District of Columbia on the other hand, was announced in early February, 2012.  They settled unalleged differences over unknown things.

    Their Settlement Agreement was not made available until it was posted this past week online, at www.nationalmortgagesettlement.com.  

    The only people who could look at it in the meantime, are the ones who wrote it.  See February 26, 2012 post here:  "Is There a Mortgage Foreclosure Fraud Settlement? 

    In an unusual development, the Complaint was not written until after the settlement was announced.  Also this past week, a Complaint was posted for the first time.

    It is not dated.  A date would, well, date it.

    It does not show a Case Number, nor does it bear any Clerk's "Filed" stamp.  Presumably, it looks the same as the original filed in Court.

    Without a case number, the parties listed in the style are too generic to yield any PACER search results.  PACER is of course the online electronic docket of the Federal Courts.  I have tried PACER searches for the lawsuit, without success, yet.  I plan to continue.  If you want to try a search yourself, on PACER or otherwise, the parties' names on the Complaint are United States of America, et al. v. Bank of America Corporation, et al. 

    Here is a copy of the only Complaint made available in the interim from the www.nationalmortgagesettlement.com website:  Download Undated, Unfiled Complaint.  It is 99 pages long.  I have not finished reading it, at this time.  I plan to comment further regarding it, in a later post.

    There are as many Settlement Agreements posted on the website as there are Mortgage Servicers:  Five.  A look at the Settlement Agreement reached with the first-named "Defendant" in the Complaint, Bank of America Corporation, shows that it is a potentially intimidating 317  pages long.

    To summarize where we are to this point:  There was a settlement, after which a 99-page complaint was written, and thousands of pages of settlement documents were also written, and all of which reading material was released for public review a month after the press notices were released announcing a settlement of unknown, unidentified allegations.

    And now, a Federal Judge is going to be asked to approve it all.  Judge, correct me if I am wrong, but this smells.  Perhaps it is just the way it was cooked.

    The prevailing applicable rule of law followed by Federal Judges in reviewing actions of administrative agencies, is one of "deference".  In the 21st Century, this standard of review rule or at least the way it is being argued in recent similar cases, has frankly outlived any basis in reality it once had.  The Governments' argument is essentially that Federal Judges are duty-bound to rubber stamp whatever settlements the Governments make.

    That is the binding rule of law at this time, at least according to one Second Circuit panel.  See Edward Wyatt, "Ruling Gives Edge to U.S. in its Appeal of Citi Case" p. B1, col. 6 (New York Times Nat'l Ed., "Business Day" Section, Friday, March 16, 2012).

    Perhaps there will be one United States District Judge honest enough to say that the evidence submitted in support of the bare allegations in the "Complaint" is not enough, but prevailing law requires approval of this settlement anyway simply because an administrative agency of the Federal Government made it.

Please Read The Disclaimer. 

    

 

    

Two Heads Shaking From Louisiana: One Court's, One Party's.

    In two decisions rendered in the last two days, two Louisiana Appellate Courts issued head-shaking judgments.  Neither case involved reported allegations of Insurer Bad Faith.  Insurance practitioners will appreciate knowing about both of these decisions in any case.

    In State of Louisiana Patricia Bourque v. Essex Insurance Co., 2012 WL 832748 (La. Ct. App. 3d Cir. March 14, 2012), Download State of La. Patricia Bourque (La. Ct. App. 3d Cir. Opinions Filed 03.14.12) PUBLIC ACCESS, a Louisiana Appellate Court was fractured in its differing views.  Two judges dissented, and a third wrote a special concurrence.  The case was the fourth appearance on appeal; there were three previous Jury Trials.  In the present appeal, the Jury found against the Plaintiff.

    The dispositive issue on this appeal was whether the Plaintiff suffered an  injury as a result of an accident in the first place.  The majority held that the following Interrogatory Verdict was ambiguous, did not manifest the Jury's intent, and all in all was a nullity not to be considered even though the Plaintiff did not object to it in the case at bar:

In the case before us, for both the first and second trials, the jury only answered the first interrogatory. It read:

    Do you find, by a preponderance of the evidence, that an accident occurred  on or about August 19, 2002, injuring the plaintiff, Patricia Bourque?

YES _______ NO _______

In both trials, the jury selected “NO.”

    The deciding majority of the appellate panel in this case held that this was fundamental error, so that the Plaintiff's failure to object did not preclude appellate review.  Having reviewed the quoted Interrogatory Verdict, the majority, as noted, held in effect that it was a nullity and that it furnished no assistance in divining the Jury's intent. 

    So the Appellate panel majority issued its own Judgment in this case.

    The panel majority reviewed the record from the three previous Jury Trials, to the extent that the record had been transmitted to the Court of Appeals.  The Appellate panel majority announced their Verdict, er, Judgment upon announcing that they completed their review of the record on appeal.  Their Judgment is for the Plaintiff, which they announced as follows:

Next, given that the record was complete, we conducted a de novo review to adjudicate this matter. We found that Patricia Bourque carried her burden to prove that an accident occurred on August 19, 2002, that Donald Lack improperly installed the kitchen light fixture, and that she suffered damages as a result of that improper installation. We rendered judgment that awarded Patricia Bourque $452,689.78 in medical expenses, $250,000.00 in lost wages and future medical expenses, and $500,000.00 in pain and suffering and loss of enjoyment of life. All costs of these proceedings are assessed to Lack Construction, Inc. and Essex Insurance Company.

JURY VERDICT VACATED AND JUDGMENT RENDERED.

    In another case decided in a second Louisiana Court of Appeals, Mason v. Bankers Insurance Group, 2012 WL 833364 (La. Ct. App. 5th Cir., March 13, 2012), Download Mason v. Bankers Ins. Grp. (La. Ct. App. 5th Cir. Opinion Filed 03.13.12) PUBLIC ACCESS, a Homeowner's Insurance Company defended a Coverage case brought on account of damages and expenses caused to and by ruptured plumbing.

    First, the Defendant contended that there was no Coverage under the Homeowner's Policy in the first place, because the Policy only covers damage to a structure attached to a dwelling and a covered attached structure does not include plumbing, it said.  The Appellate Court disagreed.  Id. at *2-.

    Returning to a position presenting greater lucidity, the Defendant also argued that an Exclusion should apply to preclude all Coverage under the Homeowner's Policy in that case.  The Louisiana Appellate Court held that there were factual issues to be tried concerning the application of that Exclusion, and reversed the Trial Court's entry of a Summary Judgment of no Coverage accordingly.  Id. at *3-*4.

    As noted, neither of these decisions involved reported allegations of Insurer Bad Faith.  They are posted here because you will certainly find them interesting and you will also likely find them useful in any case.

Please Read The Disclaimer.

MOTION FOR SANCTIONS IN RESPONSE TO SANCTIONS MOTION: BOTH DENIED.

... One Federal U.S. Magistrate Judge Calmly Denies Both Motions.

         In Vanliner Insurance Co. v. ABF Freight System, Inc.,  2012 WL 750743 (M.D. Fla. March 8, 2012)(Thomas B. Smith, USMJ), Download Vanliner Ins. Co. v. ABF Freight Sys., Inc. (M.D. Fla. Case No. 5.11cv122, Order of USMJ Filed March 8, 2012) PUBLIC ACCESS, a Federal Magistrate Judge was faced with two motions for sanctions.  A truck was at the center of this dispute, at least to begin with.

        The originating motion was filed by an Insurance Company and its apparent Policyholder, "for spoliation sanctions" against ABF.  That motion was based on ABF's alleged destruction of its truck's Electronic Control Module of "ECM" data.  Id. at *1.  Supposedly, the lost data would or may have revealed some information about the crash in which the truck was involved.

        ABF and its lawyers were not amused, as they say.  ABF filed a motion for sanctions against the parties which filed the spoliation sanctions motion, alleging that the spoliation sanctions motion was "'frivolous and baseless'".  Id.

        Ruling that in the Eleventh Circuit, proof of spoliation requires proof of Bad Faith among other things, the Magistrate Judge denied the "spoliation sanctions" motion because in this case, the Court held that one of the "other things" was not proven.  The Court held that the spoliation movants "failed to demonstrate that the allegedly spoliated evidence was crucial to its case or defense, which is an essential element of the spoliation claim."  Id. at *2.

        The Magistrate Judge then calmly denied the second motion for sanctions, which, on its face, was filed because of the first motion for sanctions.  "Lastly, as the Court has given due consideration to the" spoliation sanctions motion, the Court denied the second sanctions motion without further words.  Id. at *3.

 

Please Read The Disclaimer.

FOURTEEN FOR THE EXPERTS: NEW INSURANCE CASES THAT MAKE EXPERT WITNESS LAW ....

.... Lucky Thirteenth.

    In a change-of-pace, Insurance Claims and Bad Faith Law Blog and Insurance Claims and Issues Weblog have been trading consecutive posts addressing a single common theme:  14 total Court rulings on Expert Witness Testimony and Reports in recent Insurance Cases.  For the previously developed rules of law and judicial decisions on these issues, see generally as to Liability Insurance Cases, volume 1 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 8:17 (West Publishing 3d ed. 2011; 2012 Supplement in process), and see generally as to all types of First-Party Insurance Cases, volume 2 id. § 12:18.

 

Hurricane Wilma Professional Engineer Expert Disallowed.*

*This same case was previously posted for other reasons on Insurance Claims and issues Web Log on March 7, 2012.

 

        In the case of Banta Properties, Inc. v. Arch Specialty Insurance Co.,  2011 WL 7118542 (S.D. Fla. December 23, 2011), Download Banta Props, Inc. v. Arch Specialty Ins. Co. (S.D. Fla. Case No. 10.61485, Order Granting Daubert Motion for Exclusion, Filed Dec. 23, 2011) PUBLIC ACCESS, the District Court disallowed a Plaintiff Property Management Company's proffered Expert.  The Expert in question is a Professional Engineer proffered to testify to Opinions "that Hurricane Wilma damaged windows and doors at Plaintiff's properties and as a result needed replacement."  Id. at *1.  The Defendant Insurance Company requested the Court to exclude her Expert Testimony on a number of different grounds.

        In pertinent part, the Professional Engineer Expert could not satisfactorily attribute the Plaintiffs' claimed Damages to their claimed cause, Hurricane Wilma, a crucial component of the Plaintiff's Coverage case.

       The Court "agrees that Mellinger was unable to attribute damage to Hurricane Wilma with any degree of certainty and that she used an unreliable methodology.  Therefore, the Court shall exclude her expert opinions."  Id. at *2.

        If an Expert is proffered on Damages in an Insurance Case, that Expert must ordinarily be prepared to testify to more than Opinions on the totality of Damages.  She should also be prepared and equipped to offer acceptable Opinion Testimony as to what caused those Damages, or suffer the risk of not being allowed to testify at all.

      Parenthetically, the exclusion of this Expert's Testimony does not appear to have harmed the Plaintiff''s case very much.  PACER, the online docket of the Federal Courts, reflects that the Jury returned a Verdict for the Plaintiff on January 30, 2012.  The Verdict includes the Jury's finding that $4,000,000.00 or $4 Million is the amount of the Plaintiff's covered Damages resulting from Hurricane Wilma.  On February 27, 2012, the Plaintiff filed a motion for entry of final judgment.

Part of a Series.  To be continued ....

Please Read The Disclaimer.

FOURTEEN FOR THE EXPERTS: EXPERTS IN 14 INSURANCE CASES ....

This case makes number 11.  Part of a continuing series.  The last post was on Insurance Claims and Bad Faith Law Blog on Tuesday, February 28, 2012.  For the previously developed rules of law and judicial decisions on these issues, see generally as to Liability Insurance Cases, volume 1 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 8:17 (West Publishing 3d ed. 2011; 2012 Supplement in process), and see generally as to all types of First-Party Insurance Cases, volume 2 id. § 12:18.

 

 

Totality of the Case:  Expert Can Testify Regarding Total Damages Only, Without Limitation to Any Part Thereof Which Might Actually be Covered by Insurance.

 

 

   In Sheffield Woods at Wellington Condominium Association, Inc. v. Scottsdale Insurance Co., 2011 WL 7069785 *1 (M.D. Fla. March 7, 2011), Download Sheffield Woods at Wellington Condo. Assn v. Scottsdale Ins. Co. (M.D. Fla. Case No. 8.09cv1148, Order Filed March 7, 2011) PUBLIC ACCESS, the Defendant Insurance Company argued that the Plaintiff Condominium Association "should be precluded from presenting expert testimony regarding the amount of damage to the Property," since the Plaintiff's experts could not tie the Damages down to a particular timeframe which would have fallen during the subject Policy Period.

 

The District Court disagreed with that position in this case.  The Plaintiff's Expert would not be precluded from testifying to Opinions about the total Damage incurred by the Plaintiff, even if, as the Court agreed, "that it would be difficult, if not impossible, for anyone to give a reliable opinion regarding the amount of damage to the Property that occurred in any one or more specific past years or periods".  Id.  PACER, the online docket of the Federal Courts, reveals that the parties filed a notice of settlement on March 10, 2011 and that the Court accordingly granted the parties' joint motion to dismiss with prejudice on April 4, 2011.

 

Part of a continuing series.  To be continued ....

 

Please Read The Disclaimer. 

FOURTEEN FOR THE EXPERTS: NEW INSURANCE CASES THAT MAKE EXPERT WITNESS LAW ....

.... TWO MORE.

    In a change-of-pace, Insurance Claims and Bad Faith Law Blog and Insurance Claims  and Issues Weblog will carry consecutive posts addressing a single common theme:  Court rulings on Expert Witness Testimony and Reports in recent Insurance Cases.  For the previously developed rules of law and judicial decisions on these issues, see generally as to Liability Insurance Cases, volume 1 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 8:17 (West Publishing 3d ed. 2011; 2012 Supplement in process), and see generally as to all types of First-Party Insurance Cases, volume 2 id. § 12:18.

What Are "Impermissible Legal Conclusions," Exactly, to Which No Expert Witness Shall Ever be Allowed to Testify?

          In the case of Great American Insurance Co. v. Jefferson County Commission, 776 F. Supp. 2d 1252 (N.D. Ala. 2010), Download Great Am. Ins. Co. v. Jefferson County Comm'n (N.D. Ala. Case No. 2.08cv01687, Memorandum Opinion Filed Nov. 15, 2010) PUBLIC ACCESS, a Federal Judge ruled in ways that outline answers to this question.  The Court allowed an Insurance Company's vice president to testify about a broker's responsibilities because the vice president's testimony did not "purport to define ... legal obligations."  For that announced reason, the Federal Judge overruled an objection that the vice president's testimony "amounts to expert testimony."  Id. at 1260.  [Emphasis added.]

              In Nevels v. Deerbrook Insurance Co., 2011 WL 6304066 (E.D. Ky. December 16, 2011), Download Nevels v. Deerbrook Ins. Co. (E.D. Ky. Case No. 10-83, Memorandum Opinion and Order Filed Dec. 16, 2011) PUBLIC ACCESS, an Attorney was not allowed to offer Expert Opinion Testimony to the extent it was based on legal conclusions, but the Court's ruling is somewhat obscured by its further rulings that in that particular case, the Attorney in question was not allowed to testify to Opinions based on an application of an incorrect standard of Kentucky Bad Faith Law in that Bad Faith case in Kentucky.  Id. at *3 (holding that Attorney "cannot offer an opinion on whether Deerbrook acted in bad faith because he has neither any expertise in nor a complete understanding of Kentucky bad faith law."); id. at *5 (ruling that Attorney "cannot opine on whether Deerbrook acted in bad faith because his testimony demonstrates that he does not understand Kentucky bad faith law.").

      Perhaps the clearest explication of the Court's ruling came at the beginning of the Court's Opinion in this case:  The Plaintiff retained the Attorney-Expert "as an expert in bad faith law and insurance claims handling.  Based on [the Attorney's] testimony at the Daubert hearing, he may opine on what Deerbrook Insurance Company's initial settlement offer to Nevels should have been, but he cannot take the next step and state that Deerbrook acted in bad faith.  This is because [the Attorney-Expert] does not sufficiently understand Kentucky bad faith law."  Id. at *1.

Part of a Series.  To be continued ....

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Is There a Mortgage Foreclosure Fraud Settlement?

And if there Is a Mortgage Foreclosure Fraud Settlement Agreement, why can't we see it?  If it displays Good Faith, Would It not be displayed?  You would think.

   There is no Settlement Agreement on the website set up for the Foreclosure Fraud Settlement.

    The reports of an Agreement may be premature.

    There is an Executive Summary, and something called a fact sheet.  There are no dates in them. 

    The Mortgage Foreclosure Fraud Settlement was announced 3 weeks ago, as this post is written.

    I am interested in how the reported 'settlement' affects Banks' and Mortgage Servicers' liability for past practices that allegedly committed fraud upon the Courts.  Things like submitting Affidavits as proof without personal knowledge despite the signers' oath that they had personal knowledge of what was in the Affidavits they executed.  Things like at least some Foreclosure Plaintiffs' allegations that Notes and Mortgages were lost and could not be found, although allegedly the Notes and Mortgages are in the files of the Foreclosure Plaintiffs who made such allegations.  I have been looking for any information and in researching the entire Internet on this subject, I have found one source of information.

    We owe it to one source among the many weighing in on this reported 'settlement,' who describes what if any provisions are made in it concerning the liability of Banks and Mortgage Servicers for past practices which allegedly perpetrated fraud upon the Courts.  An Assistant Attorney General in Wisconsin writes on the website of the Wisconsin Bar that in the settlement, the participating Banks/Servicers are completely released from all such claims which might be pursued by the Federal Government and the participating State Attorneys General, based on alleged fraud upon the Courts of the States and of the United States.  See Holly Pomraning, Esquire, Assistant Attorney General, Wisconsin Department of Justice, "Wisconsin Joins $25 Billion Mortgage Settlement" posted on February 13, 2012 on State Bar of Wisconsin website.

    If Attorneys General will not ensure that fraud is not committed upon the Courts, who will?

   We would likely be better off if the reported settlement was never born, as they say.  See "Mortgage Foreclosure Fraud Settlement:  This Settlement is a Fraud," posted on February 16, 2012 on Insurance Claims and Bad Faith Law Blog.

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