Insurance Claims and Bad Faith Law Blog

UPDATE: California Arbitrator Awards Attorney's Fees Too.

    A previous post in this space addressed an Arbitration Award in a California Arbitration.  The Arbitration of the Insurance issues apparently including Good Faith and Fair Dealing or not, was demanded by the Health Insurance Company, Health Net Inc.  The agreed Arbitrator is a retired California Judge.  The California Arbitration resulted in an Award of over $9.4 Million, $8.4 Million of which was a Punitive Damages assessment against Health Net.  See the post here, on February 23, 2008.

    On February 28, 2008, a follow up newspaper report published in the Los Angeles Times Online seems to call into question what remedies or options, if any, Health Net and its Attorneys may have to appeal or even question the Arbitration Award:  Lisa Girion, "Penalty Cuts Insurer Profit/Health Net Lowers Its Earnings After a Judge Awards $9.4 Million to a Cancer Patient Whose Policy Was Canceled" (Los Angeles Times Online, Thursday, Feb. 28, 2008).

    As the linked newspaper report's headline reflects, Health Net is filing documents with the Securities and Exchange Commission reflecting that the Arbitration Award has lowered its reportable net income for 4Q 2007, from $123.4 Million to $116.9 Million.

    The newspaper also reports that the California Arbitrator has awarded the Policyholder her Attorney's Fees, in an amount to be determined.

Please Read The Disclaimer.

 

California Arbitrator Assesses $8.4 Million in Punitive Damages Against Health Insurer.

    The Health Insurance Company in question is Health Net Inc.  The entire Arbitration Award is reportedly over $9 Million.  $8.4 Million of the award is an assessment for Punitive Damages.  The Health Insurer insisted on resolving the dispute only by Arbitration.   Here is a brief but totally accurate outline of the case.

    The Health Insurance Company canceled a Policyholder while she was receiving expensive chemotherapy treatments.  The evidence reflected that the expense of chemotherapy was the motivation for cancellation.

    Documents generated by Health Net itself were made available to the Arbitrator.  The documents showed that Health Net paid bonuses to employees who met "a cancellation quota and for the amount of money saved."

    This practice did not sit well with the Arbitrator, a retired California State Court Judge, who wrote:  "'It's difficult to imagine a policy more reprehensible than tying bonuses to encourage the rescission of health insurance that keeps the public well and alive.'"  Quoted in "Health Net Ordered to Pay $9 Million After Canceling Cancer Patient's Policy/The Punitive Damage Award is the First of its Kind and has Prompted the Giant Medical Insurer to Scrap Practices That Have Recently Come Under Fire" by Lisa Girion (Los Angeles Times Online, Saturday, February 23, 2008).

    The purpose of Punitive Damages assessments may be furthered by this award, for in the same newspaper article it is reported that other Health Insurers are about to change their own practices in this regard.

Please Read The Disclaimer.

Expert Witnesses-Lawyers Testify On Insurance Issues.

In last month's Seminar at the Orange County Bar Association in Orlando, Florida, "Survey of Insurance Issues EVERYONE Should Know," one of my topics was an Overview and Recent Cases.  Two recent cases in particular, one Federal and one State, decided issues concerning the admissibility of Expert Testimony from Lawyers on Insurance topics and both were cases involving claims of Good Faith - Bad Faith.

 IN THIS NEW FEDERAL CASE, THE LAWYER-EXPERT WAS PROFERRED ON THE ISSUE OF LIABILITY POLICY LIMITS THAT WERE REDUCED AS ATTORNEY'S FEES AND COSTS WERE INCURRRED:  In Pueblo Country Club v. AXA Corporate Solutions Insurance Co., 2007 WL 951790 *5 (D. Colo. March 28, 2007), the Federal Court held that a jury is "entitled" to hear the testimony of a lawyer-Expert Witness presented by the policyholder that the insurance company defendant knew "that attorneys' fees and costs were reducing the available policy limits," even though the policyholder allegedly was exposed to a judgment in excess of the same policy limits which were being reduced by the insurance company's instructions to defense counsel that resulted in incurring the fees and costs.

STATES ALSO ALLOW EXPERT WITNESSES-LAWYERS TO TESTIFY ON INSURANCE ISSUES

Similarly, in Johnson v. Tennessee Farmers Mutual Insurance Co., 205 S.W.3d 365, 371-72 (Tenn.  2006), an Attorney-Expert testified to opinions that the  insurance company "failed to adequately evaluate the case, that it should have settled the case, and that its failure to do so was in bad faith."

                                                                        Please Read The Disclaimer.

Katrina CatClaims Revisited: State Farm Settles, Is Sued Again.

    It appears that State Farm may have been sued again for Bad Faith as a result of Hurricane Katrina Catastrophe Claims -- indirectly, this time.

    There was once a settlement agreement, among many policyholders and State Farm, in Mississippi.  The proposed settlement agreement was subject to Federal Court approval.  The Federal Judge was confronted with more questions than answers when he was presented with the proposed settlement for his approval.  The Federal Judge refused to approve it, at least until the many questions were answered.

     State Farm then reportedly reached a settlement agreement of many of the same claims with the Mississippi Insurance Commissioner's Office.  This lengthy previous history was summarized in "Update to the Update:  New Settlement in Mississippi," posted on March 20, 2007 on "Insurance Claims And Issues".   

    It is now reported that the State of Mississippi, through the Mississippi Attorney General, filed a new Complaint on Monday, June 11, 2007 in Mississippi State Court.  The new Complaint contains allegations, it is reported, that State Farm breached the (first) settlement agreement and thus breached a contract.  The new Complaint contains demands for compensatory and punitive damages.  More will be posted as the Complaint becomes available.  As of the night of June 11, 2007, there was a momentary silence on the subject on the web sites of both the Mississippi Attorney General and the Mississippi Insurance Commissioner.

     Here is a link to State Farm's Press Release of June 11, 2007,which State Farm entitled "Mississippi Attorney General's Lawsuit Threatens to Disrupt Hurricane Katrina Settlement Process with MIssissippi Insurance Department". 

     Here is a link to the whole available story on "Insurance Claims And Issues".
   
                                                Please Read The Disclaimer.

Postscript to Secrecy.

 A postscript to the concerns about Secrecy in Settlements, which can  particularly be a concern in Bad Faith Cases in many jurisdictions, is found at Insurance Claims and Issues.   In addition to the previous posts found here concerning "Settlement of Bad Faith Claims .... When is That Settlement Confidential and Protected, And When is it Concealment and Void? " on May 23, 2007, and a second post here, addressing potential issues raised by the "World Trade Center Insurance Claims Settlement:  Confidentiality vs. Concealment Revisited" on May 24, 2007, now see also a column, "America's Secret Obsession", published in the Washington Post on Sunday, June 10, 2007 and examined in the postscript on Insurance Claims and Issues.

                                      Please Read The Disclaimer.

 

World Trade Center Insurance Claims Settlement: Confidentiality vs. Concealment Revisited.

    A post in this space on May 23, 2007 addressed the issue of Confidentiality vs. Concealment in or of Settlements of Bad Faith Claims under Florida law.  It is reported on May 24, 2007 that confidentiality provisions are found in a global settlement of unspecified World Trade Center Insurance Claims resulting from 911:  Charles V. Bagli, "Insurers Agree to Pay Billions at Ground Zero," New York Times Online, May 24, 2007.  It is unclear whether these confidentiality provisions apply to things other than the amount each insurance company participating in the settlement will pay.  It is unknown at this time whether the settlement agreement purports to address Insurance Coverage Claims, or whether it includes any alleged or potential Bad Faith Claims.

     It is also unclear whether discovery could be compelled in a Florida Court, on the ground that Florida law voids as concealment the attempted confidentiality of these settlement agreement provisions contained in a  settlement agreement reached in another State such as New York, in this case.   Further, what New York law may have to say about "confidentiality" vs. "concealment," if anything, is unknown to this writer.  To state the issue is the first step to be prepared for the issue.

                                                 Please Read The Disclaimer.

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.

 

Removal Yes, But it Sticks Only ...

                                ...  When It Is Proof Positive!

     The Defendant that claims fraudulent joinder of other local Defendants faces the burden of putting on proof.  There must not only be allegations and assertions of fraudulent joinder, but there must also be proof that the Plaintiff sued (joined) those local Defendants fraudulently.

     This means that there must be proof that the Plaintiffs in a Hurricane Katrina CatClaim Case, for example, sued local adjusters for Bad Faith under Louisiana law, but that the only possible outcome could not result in the Plaintiffs recovering Damages against the local Defendants who were sued only for the purpose of defeating the diversity-of-citizenship jurisdiction of the Federal Courts.

     Putting on no proof falls short of meeting this burden, said the Federal Judge granting Plaintiffs' Motion to Remand back to State Court in Thomas Matherne, Sr. & Anastasia Matherne v. Allstate Insurance Co. (E.D. La. Case No. 06-8120, Opinion Filed January 3, 2007).
                                  Please read the Disclaimer.

Partial Payment of Claims ... UPDATED!

     This post updates the post here on January 12, 2007 regarding:

Punitive Damages, Katrina and the Insurance Contract:  Lessons Revisited and a Tale Told in Pieces or in Parts.

   

     On January 31, 2007 Federal Judge L.T. Senter, Jr. entered an Order reducing the Punitive Damages Assessment in the Broussard case.  The Federal Judge reduced the Punitive Damages assessment in that case to 40% of what the Jury assessed, reducing the assessment from $2,500,000.00 to $1,000,000.00.  Here is a link to the Order:  Norman J. Broussard & Genevieve Broussard v. State Farm Fire & Cas. Co. (S.D. Miss. Case No. 1.06CV6, Order entered January 31, 2007) .  For another report on this same decision, go to the February 1, 2007 post on Insurance Claims And Issues.     

     The Federal Court's ruling on January 31, 2007 adds to the facts coming in about the bases for this lawsuit, about the Bad Faith allegations in it, and about the reasons behind the Jury's finding of entitlement to Punitive Damages under Mississippi law.

     The Homeowner's Policy involved in the Broussard case was "an 'all perils' policy in the case of the dwelling and a 'named peril' policy as to contents, i.e., windstorm."

     Second, the initial investigation by the Homeowner's Insurance Company showed clearly that the Policyholders' home "was reduced to a slab by Hurricane Katrina" and that the damage was caused more by flood than by wind, the Federal Judge wrote.

     The Insurance Company "did not obtain any expert opinion on this particular loss."

     Rather than obtaining any expert opinion, as the Federal Court noted, the Insurance Company instead established a procedure for homes reduced to nothing remaining except the slab, a procedure which it applied in the Broussard case.  The subject procedure was to use "the debris line" and declare that in the instance of only a slab remaining, all damage would be presumed to be caused by FLOOD which was NOT a covered loss, thereby leaving it to the Policyholders to bear the burden of proving damages caused by a covered loss such as WIND.

     Although not repeated at any length in the January 31, 2007 Order, the Federal Court had PREVIOUSLY RULED in that same case that the burden of proof was INSTEAD on the Insurance Company to prove at Trial in Court that all or part of the damages claimed by the Policyholders were EXCLUDED.

     The Homeowner's Insurance Company "relied on its flood exclusion to totally deny the claim."

     The Federal Judge held that there was clear and convincing evidence in the Broussard case supporting a finding by the Jury of entitlement to Punitive Damages.  There was in other words clear and convincing evidence, the Federal Judge wrote, "that Defendant acted in such a grossly negligent way as to evince willful, wanton, or reckless disregard for the rights of the Plaintiffs."

     That ruling affirmed the issue of Mr. and Mrs. Broussards' entitlement to Punitive Damages under the facts of this case.  As to the amount of Punitive Damages, to $1,000,000.00, the Mississippi Federal Court reduced them as noted, doing so both under Mississippi State law and under "due process considerations under the United States Constitution."

                                Please read the Disclaimer.

      

No Expert Invites Bad Faith Claim, You Make The Call.

     In a Hurricane Katrina - related First-Party Bad Faith Case, a Federal Judge recently directed a verdict on Insurance Coverage and awarded the full Policy Limits as Compensatory Damages.  The case is Norman J. Broussard and Genevieve Broussard v. State Farm Fire and Casualty Company (S.D. Miss. Civil Action No. 1.06CV6).   The Federal Court then let a Jury decide the issues of entitlement to Punitive Damages and amount of Punitive Damages.  The Jury assessed $2,500,000.00 in Punitive Damages.  More facts of this case, reported and coaxed from the available reporting and the Court file online, were discussed at length in a post here on January 15, 2007.

     As of January 31, 2007, the Federal Judge reported more facts in an Order entered that day.  In it, the Federal Court reduced the Punitive Damages assessment to $1,000,000.00, or 40% of what the Jury assessed.  Here is a link to the January 31, 2007 Order:  Norman J. Broussard & Genevieve Broussard v. State Farm Fire & Cas. Co. (S.D. Miss. Civil Action No. 1.06CV6, Order entered January 31, 2007).

    In denying all Coverage and before the Bad Faith Claim against it, the Insurance Company's investigation concluded that Mr. and Mrs. Broussard's "home (which was reduced to a slab by Hurricane Katrina) 'was more damaged by flood than wind.'"  (Page 2 of Order.)  In other words, wind caused some of the damage, but not all.  Yet, as the Federal Court pointed out, the Insurance Company denied all Coverage and among other things:

The Defendant did not obtain any expert evaluation on this particular loss.  Defendant used the debris line as its sole investigative guide in spite of the probability (as assessed initially) that some damage occurred from a cause other than flood.

Id.  [Emphasis added.]  The lesson is easy to state, but perhaps it is not so easy to learn.  Even if the result is not going to be different, the chances of defeating a Bad Faith Claim are greatly increased if the Coverage determination is supported by independent testimony of an Expert in the first place.
 

                Please read the Disclaimer.