Insurance Claims and Bad Faith Law Blog

Settlement of Bad Faith Claims .....

  .... When is That Settlement Confidential and Protected,
                 And When is it Concealment and Void?

There may be an issue under Florida law, whether a settlement of Bad Faith Claims can be kept confidential by the parties as a provision of their settlement agreement, even with a Court's approval.   Under Florida Statute Section 69.081(4):

Any portion of an agreement or contract which has the purpose or effect of concealing a public hazard, any information concerning a public hazard, or any information which may be useful to members of the public in protecting themselves from injury which may result from the public hazard, is void, contrary to public policy, and may not be enforced.

    A "public hazard" under this statute includes any "person" or "procedure" "that has caused and is likely to cause injury."  Fla. Stat. § 69.081(1).    No Court shall enter an order or judgment, it is provided in this statute, "[e]xcept pursuant to this section," which order or judgment has, among other things, "the purpose or effect of concealing a public hazard" or "of concealing any information which may be useful to members of the public in protecting themselves from injury which may result from the public hazard."  Id. (3).

  Time and the Courts will tell which settlement of Bad Faith Claims is confidential and protected, and which is concealment and void.

                    Please Read The Disclaimer.

 

Jury Pools in the Wake of Katrina in Mississippi.

    Bad Faith Cases receive careful attention.  Part of the focus in every Bad Faith Case is the potential Jury Pool, or the Venire.  They are the people deciding issues of fact and who they are is clearly important.

    Before Katrina struck Mississippi, most Mississippians were like most residents of the rest of the Gulf Coast.  Few people carried Flood Insurance.  However, the focus on Insurance Coverage for Katrina Damages Claims can divert attention from the fact that many people did not have Property Insurance Coverage or  Homeowner's Insurance  either.

     They are the people who make up the Venire for Mississippi Bad Faith Cases like the recent case reported in newspaper articles and in a post here on January 15, 2007.

    Briefly, the recent case in Mississippi involved First-Party Bad Faith Claims including Punitive Damages Claims.  A Federal Judge directed a verdict for the full Policy Limits available under a Homeowner's Policy.  The case went to the Jury on the question of Punitive Damages under Mississippi law, which is fully discussed in the January 15, 2007 post.  Without repeating all of that post here, in general terms Mississippi law allows the assessment of Punitive Damages for Bad Faith Breach of Contract and it can be Bad Faith not to pay any part of Damages which are covered.

    It is reported that the Homeowner's Insurance Company in that case never made an offer.

    The Jury assessed $2,500,000.00 in Punitive Damages.

     See the detailed discussion of the situation in which these potential Jury members live today, Peter Whoriskey, "As Aid Lags, Volunteers Shoulder Rebuilding on Gulf Coast/Local Gratitude Mixes With Frustration Over Government's Failures" (Washington Post, Sunday, January 28, 2007, p. A03), and the discussion generally of Venires available for Katrina Cases across the Gulf Coast, in Insurance Claims and Issues.

                                                        Please Read The Disclaimer.

FEDERAL REMAND: MORE ABOUT ....

                        .... Less Than $75,000 Bad Faith Damages.

    This issue was addressed in a previous post on October 26, 2006.  That post addressed two recent Federal Cases, one of which was decided in the Eastern District of Pennsylvania, Howard v. Allstate Insurance Co.  In the Howard case, the Federal Judge grants remand back to State Court whence the lawsuit came.  The reasons include that the Complaint filed by the Plaintiff, Mr. Timothy Howard, seeks Damages "not in excess of $50,000" although the Complaint includes a prayer for Punitive Damages too.  Further, under Federal Third Circuit Court of Appeals' precedent, remand has to be granted whenever it appears "'to a legal certainty'" that the Plaintiff is not entitled to recover the Federal Diversity Jurisdiction Amount of $75,000.

 Within the same Federal Third Circuit, but in the Middle District of Pennsylvania, the Plaintiff's Motion to Remand was Denied in the even more recent Federal Case of Download Carnathan_v. Ohio National Life Insurance Co. and Jefferson National Life Insurance Co. (M.D. Pa., Case No. 1.06-CV-999, Opinion Filed October 18, 2006).pdf.  Mr. Paul Carnathan filed that lawsuit seeking a Declaratory Judgment that would interpret and reinstate his disability income insurance policy.  The policy, if reinstated, would provide Mr. Carnathan "'a monthly benefit of $2500 a month [sic] for life if plaintiff becomes disabled.'"  The Complaint filed by Mr. Carnathan did not seek payment of the disability benefits nor did Mr. Carnathan's Complaint allege that he is presently disabled which he is not, although the Complaint includes a prayer for Punitive Damages.

    "It is clear that the amount in controversy has been met," wrote the District Judge in Mr. Carnathan's unwillingly Federal Case (Mr. Carnathan, at least, is unwilling to have his case decided there).  The Complaint and the case will stay in Federal Court under this ruling.

    Since Mr. Carnathan sought Declaratory Judgment, the demand for relief in his Complaint did not provide a sum of money against which to measure the required Jurisdictional Amount for Federal Diversity.  The Federal District Court looked therefore to Third Circuit precedent that "[w]here the validity of an insurance contract is at issue," such as in this Declaratory Judgment action, the amount in controversy can be figured out by taking into account "'the full value of the contract,'" including payments that "'may possibly'" be payable to the Policyholder.  No "legal certainty" standard here, which would have required remand if met.  No, to the contrary, as noted the standard applied here on these facts and allegations is "'may possibly'" meet the jurisdictional amount:  "If a possible award under the insurance policy could exceed the jurisdictional amount, the amount in controversy requirement is met."

    After that analysis, the Federal District Court had no problem calculating that if Mr. Carnathan possibly received disability benefits under this policy, then his disability benefits could meet the jurisdictional amount in 30 months.  Again, it bears repeating that a major lesson here seems to be that the facts and allegations are crucial to determining the outcome of remand motions in Federal Court, just as the facts and allegations also can often determine the outcome of the entire Bad Faith case in any Court including Federal Court.  Another issue  arises from even a quick comparison of the Howard v. Allstate decision in Pennsylvania's Eastern District, and this even more recent Carnathan v. Ohio National Life decision in Pennsylvania's Middle District.  It looks like the Federal Third Circuit Court of Appeals has some reconciliation tasks ahead of it on legal standards applicable to a Motion for Remand.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

FEDERAL REMAND: Less Than $75,000 Bad Faith Damages.

    Some Federal Court decisions issued only days apart, show the differences in facts and maybe in the law necessary to convince a Federal Judge to remand a Bad Faith case.  When any civil case is filed in State Court, it can sometimes be "removed" to Federal Court.  Insurance Companies, which are usually Defendants anyway, will often try to remove a case to Federal Court, in which the Insurance Company has been sued for Bad Faith Damages.

    The legal basis for removal is often Federal "diversity jurisdiction".  This is short-hand for jurisdiction that Federal District Courts have over civil actions between citizens of different States where the matter in controversy is over the value of $75,000.00, not including interest and costs.  The Plaintiff who filed a case in State Court, usually an injured claimant or policyholder, can ask the Federal Judge to "remand" back to State Court including because the controversy does not have a value exceeding $75,000.00.

    That is what happened in two recently decided Federal Court cases.  In one, a motion to remand was granted.  Mr. Timothy Howard filed a State Court Complaint against Allstate Insurance Company including a claim for statutory Bad Faith under Pennsylvania law.  The Complaint alleged claims for Punitive Damages and for Attorney's Fees.  However, the Complaint alleged that the Plaintiff, Mr. Howard, was seeking Damages "'not in excess of $50,000'".  Further, the "civil cover sheet" filed at the time the Complaint was filed lists damages "as $50,000 or less."  Finally, "the case was designated for compulsory arbitration" and under the Pennsylvania  Bad Faith Statute an arbitration award is capped at $50,000.  With these matters in the fact record, the Federal Court had no problem granting the motion to remand in Download Howard_v. Allstate Insurance Co. (E.D. Pa. Case No. 06-04017 Opinion Filed September 28, 2006).pdf.

    Parenthetically, this District Court is governed by the Federal Third Circuit Court of Appeals in which part of the legal standard to determine the $75,000 issue is that remand must occur whenever "'it appears to a legal certainty that the plaintiff [is not] entitled to recover the minimum amount''.  This legal standard is easily met in this case.  The above allegations would likely have caused remand, however, even under a  simpler legal standard such as "preponderance of the evidence," which this District Court says it would apply under Third Circuit precedent "[i]f facts are in dispute ...."  Again, the allegations in the record determine the outcome in this case, except that the alleged claims for Punitive Damages and Attorney's Fees were not enough to increase the likely value of the Claims here.

    In the second Federal Court case, the likely value of claims alleged for recovery of Punitive Damages and Attorney's Fees do help determine that the matter in controversy has a value which exceeds $75,000.  In this case, Mr. Robert Etchison filed a State Court Complaint against Westfield Insurance Company which included allegations that Westfield violated the West Virginia Unfair Trade Practices Act or "UTPA".    Here, the governing Federal appellate court is the Fourth Circuit, where the amount in controversy is determined by figuring out the judgment that the Plaintiff would receive if the Plaintiff prevailed on the merits of his entire case at the time it was removed.

    There, Mr. Etchison claimed Punitive Damages.  The Federal District Judge noted that the Supreme Court of the United States has permitted certain Punitive Damages amounts.  Mr. Etchison also claimed Attorney's Fees under UTPA.  The West Virginia Statute allows "increased expenses such as attorney's fees."  Mr. Etchison's Attorney's Fees, added to other Damages, "will more likely than not exceed the minimum in controversy requirement."  Further, Mr. Etchison at one time demanded $3,000,000.00 to settle his Claims, although by the time of remand his settlement demand was lowered to $70,000.00.  The Federal Judge denied Mr. Etchison's motion to remand on these facts and allegations in the record in Download Etchison_v. Westfield Insurance Co. (N.D.W. Va. Case Nos. 5.05CV99, 5.05CV132 Opinion Filed September 26, 2006).pdf.

    Three days later, the same Federal District Judge granted Westfield's Motion for Summary Judgment.  Download Etchison_v. Westfield Insurance Co. (N.D.W. Va. Case Nos. 5.05CV99, 5.05CV132 Opinion Filed September 29, 2006).pdf.

    One major lesson here seems to be that the facts and allegations are crucial to determining the outcome of remand motions in Federal Court, just as the facts and allegations also can often determine the outcome of the entire Bad Faith Case in any Court including Federal Court.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.    

"No" to Penalties For Overdue Payments.

   

    A penalties statute "must be strictly construed", as discussed in Saturday's and yesterday's posts.  Under that rule, a penalties statute imposing duties on an "insurer" does not apply to Nestle USA, Inc.  The case is  Bazile v. Nestle USA, Inc., ___ So. 2d ___, 2006 WL 2773806 (La. Ct. App., 3d Cir., Case No. 06-223, Opinion Filed Sept. 27, 2006)(subscription required), or use Louisiana Third Circuit Court of Appeals public site access.

 

    Nestle is a candy bar manufacturer.  The concurring opinion in Bazile also informs us that Nestle is self-insured.  If alleged bad acts are needed for Bad Faith, the allegations against Nestle in that case seemed to supply them:  Nestle was accused of manufacturing a candy bar that had worms in it.

    Regardless, all judges in this case agree that Nestle is not an "insurer" under the Louisiana Good Faith Duty Statute, La. Rev. Stat. 22:1220.   This is true even though Nestle failed to pay a settlement within 30 days after the agreement is reduced to writing, which the Louisiana statute penalizes.

    But the Louisiana statute only penalizes an "insurer" which violates certain Good Faith duties imposed by the statute.  One Good Faith duty involves paying a settlement within a time certain after there is a written settlement agreement, and that time certain is, as noted, 30 days.  As the Chief Judge wrote in an opinion which the other judges all joined:  "No insurance companies were involved in the suit."  Therefore the Louisana Good Faith Duty Statute does not apply to a case of Nestle.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

"Overdue" Liability Insurance Attracts Interest

       Standard "Overdue" Statute Empowers Third Parties to Collect Interest.

 Today's post picks up where yesterday's post left off:  In the ordinary Third Party situation, Bad Faith remedies are available to shift the excess liability to pay the injured claimant.  Bad Faith remedies exist to shift that liability from the insured-policyholder to the liability insurance company after there is an amount in "excess" of the liability policy limits in a judgment, or in a settlement, at the end of the underlying case.  There was nothing "overdue" there.  Now, there is.

    There is now a duty under the standard "overdue" insurance claim statute which the liability carrier of the defendant, the policyholder, owes directly to the injured claimant who has brought a claim or filed a lawsuit against the insured-policyholder.   It is a duty to pay interest from the moment that the injured person's claim against the insured-policyholder can be determined to be "overdue".  These are the views resulting from decision in the Kontowicz 2006 Case (Wisconsin Supreme Court site).

  In future cases in Wisconsin and in jurisdictions following the Wisconsin lead, liability insurance companies after this new Kontowicz case may pay a form of damages which never before existed, if they do not fulfill a duty they never had before:  Damages for statutory interest when they do not pay claims made or lawsuits filed against their policyholders and other insureds.

 In Kontowicz, interest under the Wisconsin statute was recovered beginning from an "overdue" date long before the injured claimant recovered any judgment against or settlement with the insured-policyholder.  The obligation to pay interest  is clearly a new duty.  It is a duty which must be fulfilled  toward injured claimants by  the liability insurers of the defendants sued  by the injured claimants where, and only where, the defendants purchased  liability insurance.  The defendants themselves do not owe this duty, whether or not the defendants purchase liability insurance.

    Interest-on-overdue-insurance-claim statutes, like the one involved in the Wisconsin case, make only insurance companies liable for "overdue" payments. Without saying "why not," the Wisconsin Supreme Court majority in the new Kontowicz case noted that the statutory liability on insurance companies is not the same thing as Bad Faith and, the majority also noted, again without saying "why not," the statute does not impose a penalty.

    If you know of statutes and cases in which liability insurance companies are required to pay interest on overdue claims to injured claimants, I would like to hear about them.  If this be an emerging view, it is important for policyholders, injured claimants, and their lawyers to know.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

Interest on "overdue insurance claims payments" extended to liability insurance in Wisconsin.

    Interest can be recovered for money unpaid, such as a bank loan.  There, interest compensates for the loss of use of money.

    Interest can also be recovered when the law provides that money should have been paid, but was not paid.  This is a penalty.  It is usually imposed under a statute, which is strictly construed.

    In either case, as compensation or as a penalty, interest is payable because the money due to you is treated as "overdue".  Recently, the Wisconsin Supreme Court construed a statute allowing interest on "overdue" insurance claims, Wis. Stat. § 628.46.  For the first time, in Kontowicz v. American Standard Insurance Co., 290 Wis. 2d 302, 714 N.W.2d 105, 2006 WI 48 (2006)(subscription required to access Northwestern Second), access public site at Kontowicz Wisconsin Supreme Court site, the Wisconsin high court applied this Wisconsin interest-on-overdue-insurance-claim statute to liablity or "Third Party" claims.  In Third Party Bad Faith cases, to put this holding in context, there is almost always a judgment or a settlement at the end of the underlying case which exceeds the liability policy limit.  The later Third Party Bad Faith case ordinarily is filed to shift the excess liability (where the insurance contract provides coverage for the policy limits) to pay the injured claimant, from the shoulders of the insured-policyholder to the liability insurance company because the excess would not have happened but for the Third Party Bad Faith by the insurance company, in basic terms.  There is nothing "overdue" there.

    Now, in Wisconsin, there is. 

    That is a very important departure from pre-existing law.  I will have more to say in future posts about the many other important issues this new case represents.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.