Insurance Claims and Bad Faith Law Blog

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".
   
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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.

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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."

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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.

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Contamination Exclusion in First-Party Policy Held Ambiguous to 911 Damages.

    On December 21, 2006, the Federal Second Circuit Court of Appeals reversed Summary Judgment and remanded for the Federal Trial Court to take evidence on the intent of a First-Party Property Insurance provision.  Here is a link to the Second Circuit Web Site, where you can reach this case by clicking on "Decisions":  Parks Real Estate Purchasing Group, et al. v. St. Paul Fire & Marine Insurance Co., et al. (Second Circuit Case No. 05-5890, Opinion Filed December 21, 2006).  Here is a brief summary why.

    Parks Real Estate and the other Plaintiffs-Appellants in this case, filed their Complaint to recover under a First-Party Property Policy, in pertinent part, "for building damage caused by particulate matter emanating from the collapse of the World Trade Center Twin Towers".  (Slipsheet at 1.)  Their Proof of Loss notified the insurance company that the Plaintiffs "has sustained damage" to a Building, together with Business Interruption Loss, totaling some $18,400,000.00.  (Id. at 5.)

    The Plaintiff Policyholders owned an "insured Building [that] was located a few blocks from the World Trade Center."  (Id. at 4.)  On 911, the World Trade Center Twin Towers were both struck and collapsed in a terrorist attack, causing particulates from the pulverized buildings to spread across New York City, among other things.  "The particulate matter apparently penetrated the Building and settled in its mechanical and electrical systems."  (Id. at 3.)

    The subject Policy is "an 'all-risk' property insurance policy providing that [the insurance company] would '[p]rotect against risks of direct physical loss or damage except as indicated in the Exclusions", said the Second Circuit.  (Id. at 13.)  The defendant insurance company that issued the Policy filed a Motion for Summary Judgment against Coverage, arguing that the subject  Policy's "Contamination Exclusion" barred all Coverage claimed by the Plaintiffs.  This Policy's Contamination Exclusion provides that Coverage is barred for "loss or damage caused by or made worse by any kind of contamination of ... products or property covered by this insuring agreement.'"  (Id. at 5-6.)

    The Second Circuit now holds that this First-Party Property Insurance Contamination Exclusion is ambiguous, that Summary Judgment for the insurance company in this case is reversed, and, further, that all parties "should be allowed to introduce evidence" in the Federal Trial Court regarding the intent of this Contamination Exclusion.  (Id. at 18-19.)

    Parenthetically, the insurance company's Motion for Summary Judgment also presented arguments that the Policy's "Mechanical Breakdown" and "Wear and Tear" Exclusions applied.   (Id. at 6.)  The Federal District Court held however that these particular Exclusions did not apply (id. at 11), and they were not otherwise addressed by the Second Circuit.

    Best wishes to all for a Happy New Year!

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.
 

Sigma 2005 and 2006 Results From Swiss Re.

    Swiss Re has released "sigma" results for 2005 and, tentatively, for 2006 to date.  "Sigma" is the Greek codeword used by Swiss Re to identify its computer-based reports.  A link to both reports, released separately by Swiss Re, is here.   The information is revealing.  Here is some of it.

2005

    Total Insurance Policy Premiums in 2005 were $3,426,000,000.00 or 7.7 % of the World's "Gross Domestic Product".  About 56 percent of Insurance Premiums are for Life Insurance.  There is a definite link to commerce here.   Swiss Re notes further that "the growing loan market generated more mortgage-related life insurance policies."  The rest of the Premiums went to pay for what Swiss Re categorizes as "non-life" Insurance Policies.

2006

    So far in 2006, Swiss Re's computer results reveal the third-lowest "insured losses" in the last 2 decades.  The "loss events" studied by Swiss Re's computers show that this year, typhoons and earthquakes predominated among the Catastrophe list and they "hit mainly newly industrialising countries where insured losses are relatively low."  The irreplaceable loss of Life to Catastrophes appears to be proportionately higher than Property Losses to date.  The role of Insurance available to relieve worldwide Catastrophes in 2006 is not necessarily great, it appears.

    Economic losses worldwide in 2006, Swiss Re says, total $40,000,000.00 and so far $15,000,000.00 or 37.5% "were actually covered by insurance."  There is no word on how if at all, the remaining 62.5% or $25,000,000.00 of economic losses is and are addressed in the countries where this year's Catastrophes have struck.

    Remembering to give thanks for our blessings, and remembering to remember those who may not be as fortunate,  Happy Holidays to All!

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.

 

 

   

Computer Models: Facts In, Opinions Way Out.

    All Catastrophe Insurance Premiums such as for Homeowners Insurance and all kinds of Property Insurance, are based on a solid, fact-based Computer Model.  For example, Florida is the first State -- and as of now, perhaps the only State -- to develop its own CatClaims Computer Model which is used to assess Rate Hike requests.  The history of Hurricane damage, for example, is input into that Computer Model to reflect the reality on the ground since statistics about Hurricane damages began.

    This year Florida spent $2,700,000 to obtain a "computer catastrophe model" of CatClaims.  Florida officials are also continuing to use Property Insurers' computer models, which were the only source of claims predictions data available to Florida and other States until Florida developed its own CatClaims Model this year.  See my November 6, 2006 post.

    Recently, some corporate headquarters in other States have quietly submitted Premium Increase Requests in Florida using opinion-based 'models' instead.  One such 'model' originates in California and is based on the input opinions of several paid anonymous persons, for example.   See  my December 3, 2006 post here, and see Peter G. Gosselin, "Insurers Learn to Pinpoint Risks -- and Avoid Them" (Los Angeles Times, Tuesday, November 28, 2006, page A1, col. 2)(Note: Registration for this newspaper article may be required, but is stated on their Web Site to be FREE).

  However, the Florida Office of Insurance Regulation, it seems, is not accepting Premium Increase submissions based on anything but the facts.  One recent example is given by the submissions of USAA, one of many examples and not unique to USAA, a good and exemplary Company in many ways.

   USAA at first requested an increase in premiums for homes and condominiums for a statewide average of 40% in Florida.  USAA's first request was made as of August 11, 2006.

   Within a month and  a half, a Hearing was held by the Florida O.I.R. on September 26, 2006.  The evidence for the Rate Hikes requested was examined and of particular interest here, the regulators questioned the model that was used as a basis for the requests.

  On November 2, 2006 the O.I.R. rejected the 40% rate hike request.  The reasons of especial interest here include that (1) "[t]he company failed to provide sufficient supporting data for the catastrophe model used" in the submission, i.e., there were not enough facts presented that would allow people to review the facts used to support the requested increase, and (2) the 'model' used in the submission "is not currently accepted ...." November 2, 2006 Notice of Intent to Disapprove, from the Florida Office of Insurance Regulation (Mr. Ken Ritzehthaler, Actuary) to U.S.A.A. (Ms. Janet Ogle, Compliance Analyst).

    USAA then "amended its filing and lowered the overall rate requests to 16.3 percent."  USAA's Rate Increase Request of 16.3 percent was approved by the Florida Office of Insurance Regulation on Thursday, December 21, 2006.  It will take effect for Florida Homeowners and Condominium Owners insured by USAA as of February 8, 2007.   See December 21, 2006 Press Release, Florida Office of Insurance Regulation.

    Reporting on these complex issues is done by very few, and very few people report on these issues better than Ms. Kathy Bushouse, for example, and one way to read current and past reporting on these complicated issues is to link to this article:   Kathy Bushouse, "USAA Rates on Home Insurance to Rise by 16.3% Across State" (South Florida Sun-Sentinel, Friday, December 22, 2006). 

    More information needs to be made public about shifts away from reality that are requested anonymously by some people, and to a 'model' that benefits their employers.  Facts are abundant such as in Florida to justify good arguments for many kinds of CatClaim Coverage Premiums.  Let any and all Premium Hikes be submitted in the open -- and if they are not, let them continue to be amended until they are submitted based on publicly available facts.

   Until that day, Happy Holidays to All!

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.

 

Schools Face Higher Premiums, Lower Coverage ....

                                        .... And Catastrophe Claims.

    Insurance Premiums for School Districts in Florida increased in 2006 while available Coverage went way down.  A current newspaper report is published for example in an article copyrighted by the Times Publishing Company, written by David DeCamp, "Insurance Bills Hit Schools Hard" (St. Petersburg Times, State Edition, published December 21, 2006).  Link here.

    Across the State of Florida, Premiums for Property Insurance jumped over 80 percent in 2006, from $98,000,000.00 for Coverage in 2005 to $178,000,000.00 for Coverage now, says the Florida Association of District School Superintendents in their report to the public.

    In addition, total covered School District property in Florida fell by 86%, measured by value.  When Hurricane Charley struck in 2004, Florida School Districts were able to -- and did -- insure 7 times the value of property for which they can purchase Coverage now.   In 2005, the amount of covered School District Property was worth $7,400,000,000.00; now, only $1,500,000,000.00 worth of the same Property can be covered.   The current value of covered School District Property is not even 3% of all School District Property in Florida.

    These are facts, and here is one more fact to consider:  In Florida, schools are lower risks for Catastrophic Claims and Property Claims than other kinds of buildings -- so much so, that schools are the location of choice as Hurricane Shelters.  The Shelter your Family flees to in a Catastrophe may not be insurable.

    That is not all.  Since School Districts are not able to obtain Coverage, if a Catastrophe strikes they have no choice but to hope for Federal assistance to rebuild.  The costs of having no other resource are enormous.   For example, in 2004 Hurricane Charley destroyed 7 schools in Charlotte County, which were rebuilt in whole or in part with Federal Funds.  It is reported in the above newspaper article, for example, that the Chief Financial Officer of Pasco County Schools reports that each new elementary school costs $20,000,000.00.

    School Districts are already building more schools.  Many of the new buildings are portables.  Little money has been used to build permanent school buildings, for many reasons not the least of which is the relative unavailability of funds.  When the next Hurricanes strike Florida, there will be many more portable school buildings waiting in the Hurricanes' path than ever before.

    The Florida Legislature is set to meet in a Special Session beginning on January 16, 2007 to address the Florida Insurance Crisis.  The opportunity exists then to address Homeowners and Property Insurance including CatClaims issues that confront the children, teachers and administrators who will preserve and protect Florida in years yet to come.

    In the meantime, Happy Holidays to All!

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.