Claims and Bad Faith Law Blog

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RULES FOR A "NO-SHOW" TRIAL.

This is a special edition of Claims and Bad Faith Law. This article is about bad faith without a system of justice.

The U.S. Constitution requires a "Trial" once the president is impeached. The Constitution does not say how to conduct that Trial.

The leaders in charge of the U.S. Senate have stepped into the vacuum and supplied rules. They use the word "Trial," and it will not be like a "show trial" under Stalin. It will be a "no-show trial" under McConnell.

The leaders proposed their Trial rules at 6:00 on the evening of a national holiday before the "Trial" would begin the next day. They have known for weeks that they would have to define rules for the Trial. The leaders have talked about using the Clinton Impeachment Rules as a model. If they had wanted, they could have done a Global Find and Replace "Clinton." With that, you're pretty much done, so it's on to the Trial from there.

That is not what the leaders did, though. Their proposed marathon rules allow opening statements to begin today, Tuesday, January 21, 2020 and to wrap up the opening statements long before the week is over. They require opening statements to be delivered in marathon sessions of 12 hours a side over 2 days. In redefining a Trial to mean a no-show Trial, they have also redefined what a "day" means.

The Senate will stay in session each day until the next day to complete that day, so a "day" means that they will complete the opening statements within 12 consecutive hours even if they begin at say 1:00 PM and they end after Midnight and go into the following calendar day.

Their proposed rules do not call for anything but opening statements. They do not commit to considering evidence. They require a separate vote to consider even the evidence from the House impeachment proceedings, i.e., to consider the reasons that we are even in the Senate for a constitutionally required Trial.

That takes care of the old evidence. The proposed rules do not provide for any new evidence at all.

The proposed rules do not even address consideration of new witness testimony or documentary evidence. Under these rules, U.S. Senators would not have to listen to any testimony or read any documents.

The leaders propose that their no-show Trial will not show up to be seen or heard by the American people, either. The press in particular will be required to do their reporting from a pen away from whatever is going on in the Senate. Have you ever attended a political rally and seen the press in pens? It will be like that.

Television coverage if any will be like C-Span is now. The camera will be rigid and focused on the speaker. It will not show what else is going on in the chamber. (The Senate Chamber is mostly empty during proceedings now, and the C-Span cameras are certainly not allowed to show that, for example.) The single television camera that the leaders allow will be focused on what the powerful want you to see of their power.

The leaders have called for a fast acquittal. They want to wrap up the whole thing before the State of the Union, which is scheduled for February 4th. Parenthetically, can they arrange things such that the no-show Trial actually wraps everything up that day so that the leaders can declare an "exoneration" that night?

These arrangements look like reverse engineering. Someone perhaps started with the idea of a no-show Trial and worked backwards from there on how to achieve it. Again, these rules are proposed for the opposite of a show trial under Stalin. They propose instead a no-show Trial.

I had thought about writing this article that way. That is, I would break down the no-show Trial, deconstruct it. But I recognized that you are capable of delivering your own verdict, of reaching your own judgment, once you are presented with the evidence.

Unlike the person or persons who wrote these proposed rules for a no-show Trial.

Mitch, today is the day in January that you lost your majority in November.

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NO. actually, THEY are TAKING YOUR HEALTHCARE COVERAGE AWAY: III.

To summarize, there have been three judges in these lower federal Fifth Circuit cases who have held the ACA's individual mandate unconstitutional now. All three are members of the Federalist Society. In each case, the votes of all three accurately reflect the opinions of the Federalist Society.

One additional judge dissented. She is not a member of the Federalist Society and her opinion does not look like the opinions of the Federalist Society. The dissenting judge is Judge Carolyn Dineen King on the Fifth Circuit panel.  Judge King pointed out the undeniable fact that the true legislative history of the ACA shows that Congress never amended or repealed the individual mandate provision. Congress did one thing only; it reduced the tax penalty for failure to comply with the mandate to zero dollars. Command without coercion is not unconstitutional in the eyes of the dissenting judge.

The effects of the lower federal Fifth Circuit rulings perhaps do not change the outcomes of their persuasive capacities if any. Regardless, the collective effects of these lower court decisions are a catastrophe causing uncertainty in healthcare and in every other area affected by the Affordable Care Act. The other areas affected by the ACA include financial, regulatory, and commercial planning. The introduction of uncertainty in these areas is a fact, not a contest.

State and local government agencies rely on billions of dollars in aid under the ACA each time they set their budgets. Government budget planning can take months and even years. Insurance companies too plan for years in advance based on the ACA. Carriers must decide far in advance of implementing their decisions of how and whether to ask for any changes in regulated health insurance premiums and health insurance markets.

The pending catastrophe also includes consumer and individual life-changing decisions such as whether to move, to change a job, to start a family, or to care for an aged parent. Without being able to rely on healthcare required by the ACA, individuals as well as businesses, and state and federal government agencies, face uncertainty whether their reliance on the ACA has been misplaced and the uncertainty of what if anything will replace the availability of healthcare insurance under the ACA.

In short, after the lower court decisions in the federal Fifth Circuit, all healthcare decisions will have to be made without knowing whether the ACA will ultimately be held valid by judges, or not.  As Judge King put it in her dissenting opinion in the Fifth Circuit:  "It is unlikely that Congress would want a statute on which millions of people rely for their healthcare and livelihoods to disappear overnight with the wave of a judicial wand." Put another way, "it is difficult to imagine that this is a matter Congress intended to turn over to the judiciary."

And now it's on to the U.S. Supreme Court once again, and let's see if they have the votes there to "repeal, defund, delay, or otherwise amend the ACA."

Continued from Claims and Issues Blog on January 15, 2020 and Claims and Bad Faith Law Blog, here, on January 16, 2020. Adapted by the author from his new Chapter 18E forthcoming in the Spring of 2020 in the book, CATASTROPHE CLAIMS: INSURANCE COVERAGE FOR NATURAL AND MAN-MADE DISASTERS (Thomson Reuters). Please Read The Disclaimer. ©2020 Dennis J. Wall. All Rights Reserved.

 

 

 

 

 

 

NO, actually, THEY are TAKING YOUR HEALTHCARE COVERAGE AWAY: II.

In 2017 Congress passed what it called the Tax Cuts and Jobs Act. One section of it affected the ACA's individual mandate. It did not repeal it, but it levelled the tax involved to zero dollars. The 2017 law ("TCJA") touched upon many statutes.  With respect to the Affordable Care Act in particular, the TCJA amended the individual mandate by resetting to zero the amount to be paid to the I.R.S. if a person failed to obtain their own statutory minimum level of health insurance coverage.

    Even as the 2017 law reset to zero the amount of the tax imposed for failure to comply with the individual mandate, Congress still did not have the votes to change or repeal the Affordable Care Act. Having no other choice, Congress left each and every other provision of the ACA intact and unchanged.  Congress did not even have the votes to change the individual mandate other than the naturally popular vote, by itself, to reset the penalty to zero dollars.

    Two months after the TCJA reduced the penalty behind the individual mandate of the ACA to zero dollars, two individuals and a group of states filed a lawsuit in a district court in Texas.  The objective of the lawsuit was once again to declare the ACA unconstitutional.  This would be the second time that the attack on the Affordable Care Act would reach the U.S. Supreme Court.

    This time, the plaintiffs argued in the trial court that a majority of Justices had held in the first case in which the constitutionality of the ACA was attacked in court, in the National Federation of Independent Businesses case, that the individual mandate penalty was a tax.  They continued their argument that since the 2017 law reduced the collectible tax under the 2010 law to no money, that meant that not only the individual mandate but also the entire Affordable Care Act must be unconstitutional.

     The plaintiffs in Texas were undeterred by the ACA's legislative history, including the failure of repeated attempts to persuade Congress to repeal the individual mandate and even the ACA itself. The federal district judge in Texas agreed. "The Individual Mandate no longer triggers a tax, so the saving construction crafted in NFIB no longer applies," he wrote.

    In his rulings in this case the district judge ruled not by persuasion but by power. The district judge demonstrated the power of unrestrained judicial activism in triple holdings: first, that the plaintiffs have standing to sue for a declaration that the ACA is unconstitutional; second, that the individual mandate is now unconstitutional because its enforcement penalty collects zero dollars in tax, and third and finally, that not a single one of the hundreds of other provisions of the ACA can be severed from the individual mandate meaning that each and every one of those provisions, too, is unconstitutional.

     The district judge not only refused to consider the evidence, but he actually recoiled from the Intervenor Defendants' reliance on evidence of the positive effects of the ACA and of Congress's previous refusal to invalidate the entire ACA itself. Texas v. United States, 352 F. Supp. 3d 665, 685-89 (N.D. Tex. 2018), aff'd in part, rev'd in part, 945 F.3d 355 (5th Cir. 2019), petition for cert. docketed, No. 19-840 (U.S. Jan. 3, 2020) & petition for cert. docketed, No. 19-841 (U.S. Jan. 4, 2020).

    On appeal from the district court's rulings, two judges on a panel in the Fifth Circuit Court of Appeals affirmed the district court in part.  The two judges agreed with the district judge that all the plaintiffs have standing to ask federal courts to declare the ACA unconstitutional, and that the individual mandate is unconstitutional because it would now impose a penalty of zero dollars for noncompliance.

    However, the two judges reversed the district judge's ruling that all the other provisions of the Affordable Care Act must be unconstitutional, too.  The two judges voted to remand the case on the issue of severability of the remaining ACA provisions, sending the case back to the same district judge who had already ruled that the remaining ACA provisions cannot be severed and so they too are unconstitutional.

    And now it's on to the U.S. Supreme Court once again, and let's see if they have the votes there to "repeal, defund, delay, or otherwise amend the ACA."

Continued from Claims and Issues Blog and to be continued next on Claims and Bad Faith Law Blog. Adapted by the author from his new Chapter 18E forthcoming in the Spring of 2020 in the book, CATASTROPHE CLAIMS: INSURANCE COVERAGE FOR NATURAL AND MAN-MADE DISASTERS (Thomson Reuters). Please Read The Disclaimer. ©2020 Dennis J. Wall. All Rights Reserved.

SECRECY IS DECIDED BY GOOD CAUSE, COMPELLING REASONS, NOT AGREEMENTS.

Just because lawyers and their clients have agreed to keep things a secret does not mean that the Courts must keep those things secret now, let alone for all time.  "Specifically, parties often disregard the precedent that holds, the fact that the Court has entered a stipulated protective order and that a party has designated a document as confidential pursuant to that protective order does not, standing alone, establish sufficient grounds to seal a filed document."  MetroPCS v. AZZ Connection, LLC, No. 2:15-cv-01412-JAD-DJA, 2020 WL 127550, at *5 (D. Nev. January 10, 2020) (Albregts, USMJ).

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PAYMENT OF APPRAISAL AWARD NO DEFENSE TO BAD FAITH CLAIM.

Damages under the Florida Bad Faith Statute have been held to be separate and distinct from damages settled in Mediation after an Appraisal.  The holding came in a case with some unique features which may blur the broad outlines of this message, but upon closer review this message becomes clear:  Paying an appraisal award is not a defense to liability for alleged bad faith conduct.

  See Almeria Park Condo. Ass'n v. Empire Indem. Ins. Co., No. 19-21834-CIV-ALTONAGA/Goodman, 2019 WL 7344827, at *4 (S.D. Fla. Oct. 23, 2019):

As the underlying Breach of Contract action is distinct from this bad faith action, Defendant’s payment of the appraisal award does not preclude liability for the alleged bad faith conduct, and Defendant is not entitled to summary judgment on this issue.

Image provided by Dennis J. Wall. ©Dennis J. Wall.

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UIM COVERAGE, BAD FAITH DAMAGES, LOST INCOME AND CONSORTIUM.

Damages in an insurance bad faith action can be different from damages under Underinsured Motorist Coverage.

In Palmer v. Owners Ins. Co., No. 18-cv-01953-JLK, 2019 WL 7370372, at *3  (D. Colo. Nov. 6, 2019), the plaintiffs-policyholders of UIM Coverage, claimed damages in their bad faith suit that were in addition to damages available for breach of the UIM Coverage in their policy:

    Ultimately, the Palmers brought suit against Owners for breach of contract and both statutory and common law bad faith breach of an insurance contract. Their damages include Mr. Palmer’s past medical bills, his future medical bills, past and future income loss, Mrs. Palmer’s loss of consortium, and any other non-economic and physical impairment damages they can prove at trial. Owners attacks the Palmers’ allegations regarding Mr. Palmer’s lost future income and Mrs. Palmer’s loss of consortium.

The Court held that the policyholders could recover damages both for lost future income and for Mrs. Palmer's loss of consortium under their bad faith claims, and the Court accordingly denied the carrier's motion for summary judgment.

Image courtesy of the Florida Department of Agriculture and Consumer Services.

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ANOTHER EMBARRASSING 2-TO-1 FIFTH CIRCUIT RULING.

HAPPY NEW YEAR FROM THE FIFTH CIRCUIT COURT OF APPEALS!

In another case, a separate panel of the Fifth Circuit again issued a 2-to-1 ruling on the law.  The panel decision is In re Willis (Tower Loan of Mississippi, L.L.C. v. Willis), 944 F.3d 577 (5th Cir. 2019).

The two judges relied on an outlier dissent in an appeal from outside of the Fifth Circuit, and applied the law of commercial transactions to a consumer transaction.  They held that competing arbitration provisions were both valid and enforceable, one in a consumer loan and the other in an insurance policy.  Had consumer law been applied to this consumer transaction rather than commercial law, the court would have had to decide whether there was a meeting of the minds, as the lower court did applying governing State law principles.  By applying the law applicable to commercial transactions, the majority enforced both arbitration provisions.

The two-to-one decisions that are regularly issued by the current Fifth Circuit Court of Appeals are embarrassing.

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THE INEXPLICABLE FIFTH CIRCUIT ACA DECISION EXPLAINED AT LAST.

The two judges in the majority did not affirm the entire ruling all at once.  They did not want the Supreme Court to decide the appeal during the 2020 election.  See Sun Sentinel Editorial, Obamacare Ruling Deserves to Take Center Stage in Presidential Election, ORLANDO SENTINEL, Sat., Dec. 28, 2019, p. A10 (the Orlando Sentinel may charge you for online access).

The people in power who are against health care are a minority, including the 17 States that brought this case in a Texas court.  They want to stay in power and they are happy to rely on judicial activism for that, just not yet so that they do not get blamed.

Talk about the tail wagging the dog. To the point of this particular decision, they will be happy to have the court delete health care entirely.  Again, just not yet.  "Make no mistake:  [They] want the court to trash Obamacare, but not in time for the voters to hold it against them in November.  And no matter the potentially drastic, even deadly, consequences for everyone who depends on its coverage.  That's nearly everyone in America ...." Sun Sentinel Editorial, Obamacare Ruling Deserves to Take Center Stage in Presidential Election, ORLANDO SENTINEL, Sat., Dec. 28, 2019, p. A10 (again, online access may be charged by the Orlando Sentinel).

Now we can understand the Fifth Circuit panel's 2-to-1 decision to affirm one ruling and remand the case back for more of the same.  The two judges are playing politics, simple as that really.  Sometimes the answers that are right in front of our eyes are the hardest to see.

Best wishes, and hopes and prayers, for less judicial activism and better decisions by courts in 2020.  Happy New Year!

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MOTION TO CERTIFY QUESTION DENIED: FILED RATE DOCTRINE IS FILE -30-.

MERRY CHRISTMAS AND HAPPY HANUKKAH!

In Castillo v. Johnson, No. CV-17-04688-PHX-DLR, 2019 WL 6827472 (D. Ariz. Dec. 13, 2019), the defendants asked for a do-over but they would probably word things differently next time.

On the surface, the defendants filed a motion to certify the Filed Rate Doctrine to the Arizona Supreme Court.  In the motion, however, they actually asked the District Judge to reconsider his previous rulings rejecting both the Filed Rate Doctrine and the defendants' previous motion to certify the question.  The District Judge's ruling on the motion to reconsider is worth noting for two reasons.

The first of these two noteworthy rulings is of interest to all lawyers, at least to those who litigate and consider whether to ask a court to reconsider previous rulings.  In particular, in his first ruling the District Judge pointed out the failures he saw in the motion to reconsider the judge's previous refusal to certify the defendants' question:  "Defendants have made no showing ...

1. that the Court's determination was manifestly erroneous,
2. have presented no new facts, and
3. have produced no new legal authority that could not have been brought to its attention earlier with reasonable diligence to justify its request.

The Court stands by its prior determination."

Castillo, 2019 WL 6827472, at *1 (numbering added to what is otherwise a verbatim quotation from the Judge's opinion).

On the substance of the motion, the District Judge pointed out again, as he had earlier in the case, that the Arizona State Commission with jurisdiction over the defendants' rate requests already concluded that it would not apply a Filed Rate Doctrine to immunize bribery.  The plaintiffs were suing to challenge bribery and not to challenge rates, the judge said:  "Rather, Plaintiffs are challenging the Bribery Defendants' conduct in inducing the setting of a higher rate base."  Castillo, 2019 WL 6827472, at *2 (italics by the District Court).

The Defendants' insistence on characterizing the plaintiffs' claims in the case as actually challenging their filed rates, rather than challenging their conduct, showed up in how they phrased their proposed question which would have dealt with whether their rates had been "set too high," even if there was bribery.  This is simply not how the judge in charge of the case saw the question.  He wrote that even if the Court had been inclined to the view of certifying a Filed Rate Doctrine question to the Arizona Supreme Court, "it would not certify Defendants' proposed question." Castillo, 2019 WL 6827472, at *2 n.3.

The lesson here is that it is often better to "quit while you're ahead" in litigation just like it is often the best course to take in the rest of life.

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AFFORDABLE CARE ACT AND "JUDICIAL OVERREACH": GUNNED DOWN IN TEXAS.

On December 18, 2019 two judges of the Fifth Circuit Court of Appeals decided two things.  First, they affirmed a lower court's announced decision to gut the Affordable Care Act's requirement to purchase health insurance, the so-called "individual mandate."  Second, the two judges agreed to remand the case to the same judge to decide, as he already has, that the entire ACA should be gutted too.

In a stinging dissent, "textbook judicial overreach" was highlighted as the basis not only of the decision of two judges of a Fifth Circuit panel, but the entire basis of the underlying decision to gut the Affordable Care Act on December 18, 2019:

    Limits on judicial power demand special respect in a case like this. For one thing, careless judicial interference has the potential to be especially pernicious when it involves a complex statute like the ACA, which carries such significant implications for the welfare of the economy and the American populace at large. For another, the legitimacy of the judicial branch as a countermajoritarian institution in an otherwise democratic system depends on its ability to operate with restraint—and especially so in a high-profile case such as the one at bar. The district court's opinion is textbook judicial overreach. The majority perpetuates that overreach and, in remanding, ensures that no end for this litigation is in sight.

Texas v. United States, ___ F.3d ___, No. 19-10011, 2019 WL 6888446, at *44 (5th Cir. December 18, 2019).

And so it continues.  How much longer can this go on?

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JURY INSTRUCTION FOR UNIFORM UNFAIR AND DECEPTIVE INSURANCE PRACTICES ACT.

In Cooper v. Federated Nat'l Ins. Co., No. 5D18-2585, 2019 WL 6794250 (Fla. 5th DCA December 13, 2019) (stated Not Final Until Officially Released for Publication in Permanent Law Reports), a Florida intermediate appellate court issued a ruling that so far as I know, is unique.  The panel unanimously approved a jury instruction for one of the Uniform Unfair and Deceptive Insurance Practices Act provisions that has been adopted in Florida but that has not received such attention in the national case law before now.

    The Florida appellate panel approved the following jury instruction based on the evidence in the case.  In particular, the evidence they cited concerned alleged statutory violations "through acts such as failing to adopt and implement standards for the proper investigation of claims, misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue, and denying claims without conducting reasonable investigations based upon available information."  Cooper, 2019 WL 6794250, at *1.  These are alleged violations of Florida's version of the Uniform Act, codified in Fla. Stat. § 626.9541(1)(i)3a, b, and d [brought forward to 2019 unchanged in pertinent part].  (The court later included 3c in its ruling in this case.)

     The court's unique ruling and its solid analysis bear quoting at length here:

    At trial, both sides presented conflicting evidence and experts as to the appropriateness of FedNat’s handling of the claim. The Coopers submitted a proposed jury instruction related to the alleged violation of section 626.9541(1)(i)3., which provided, in relevant part:

Bad faith on the part of an insurance company also includes violating Fla. Stat. § 626.9541 by committing any of the following acts:

Failing to adopt and implement standards for the proper investigation of the claim; misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue; failing to acknowledge and act promptly upon communications with respect to the claim; denying the claim without conducting reasonable investigations based upon available information; failing to promptly provide a reasonable explanation in writing to the insured of the basis in the insurance policy, in relation to the facts or applicable law, for denial of a claim or for the offer of a compromise settlement; failing to promptly notify the insured of any additional information necessary for the processing of a claim; failing to clearly explain the nature of the requested information and the reasons why such information is necessary.

    That proposed instruction tracked the language of section 626.9541(1)(i) 3. The trial court denied the Coopers’ request. Instead, it gave the standard jury instruction for bad faith:

Bad faith on the part of an insurance company is failing to settle a claim when under all the circumstances it could and should have done so had it acted fairly and honestly toward its insured and with due regard for their interests.

Fla. Std. Jury Instr. (Civ.) 404.4. It also instructed the jury that it may consider evidence of negligence but that mere negligence does not constitute bad faith.

    A note to the bad faith standard jury instruction provides that the instruction is not exhaustive on the subject of an insurer’s failure to settle a claim. See Fla. Std. Jury. Instr. (Civ.) 404.4 n.2.  Although the trial court’s instruction was a correct statement of the law, it failed to encompass the pleadings and proof elicited at trial; the Coopers presented evidence that FedNat violated section 626.9541(1)(i)3.a., b., c., and d.

Cooper, 2019 WL 6794250, at *2.

    Although the parties were allowed to argue the evidence, the arguments of attorneys were no substitute for a jury instruction under settled Florida law.  The court's unique ruling was therefore straight-forward here:  " Accordingly, we reverse for a new trial; however, we limit the Coopers’ claims to section 626.9541(1)(i)3.a., b., c., and d., and section 624.155(b) [also brought forward to 2019 unchanged in pertinent part], as the Coopers’ evidence at trial supported only these claims."  Cooper, 2019 WL 6794250, at *3.

    If this unique ruling stands, it will be solid precedent for similar jury instructions in similar cases across the nation when the record contains evidence of the alleged violations of the Uniform and Deceptive Insurance Practices Act as enacted in the given jurisdiction.

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The Racketeer Influenced and Corrupt Organizations Act. No, Not Him.

Recently it was held that RICO, the Racketeer Influenced and Corrupt Organizations Act, was not available against an insurance company.

In that case, Sbrocco v. Hartford Ins. Co., No. 2:19-cv-59-FtM-99NPM, 2019 WL 3802458 (M.D. Fla. August 13, 2019), the plaintiff sued a worker's compensation carrier which denied the worker's claim for benefits.  Specifically, the worker alleged that "mental/emotional health benefits [were] rightfully due under his Florida worker's compensation claim[.]" Sbrocco, 2019 WL 3802458, at *3.

The federal judge sitting in the Eleventh Circuit followed precedent from another Circuit and concluded that RICO does not reach cases where the plaintiff alleges that a claim to benefits under a worker's compensation insurance policy "was mishandled and wrongfully denied."  In this specific case, the federal judge looked at the plaintiff's claim as the legal equivalent of a claim for the impermissible recovery of personal injuries under RICO. Sbrocco, 2019 WL 3802458, at *3.

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"REVERSE PREEMPTION" OF RICO IN all INSURANCE CASES?

It was held in an insurance case earlier this year that RICO was "reverse preempted" by the McCarran-Ferguson Act. This decision meant that the insurance issues could not be litigated in that action because they were matters relegated to the States to address with regard to insurance.

The decision was immediately appealed. It is still on appeal as of this writing. Ogles v. Security Benefit Life Ins. Co., 401 F. Supp. 3d 1210 (D. Kansas July 12, 2019), appeal docketed, No. 19-3154 (10th Cir. July 29, 2019).

Stay tuned.

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"THOSE WHO HAVE EARS TO HEAR, LET THEM HEAR."

In answer to two certified questions, the Supreme Court of Washington has unanimously given us enough material to fill books. This will be the second of two posted articles addressing these answers. The first article was posted here on Tuesday, December 3, 2019.

    In Peoples v. Utd. Serv's Auto. Ass'n, ___ Wash. 2d ___, ___ P.3d ___, No. 96931-1, 2019 WL 6336407 (Wash. Nov. 27, 2019), the Supreme Court of Washington was confronted with two questions. Both were certified by a U.S. District Court for answers under Washington State law.

    The two questions arose out of the claims of two of the plaintiffs in the District Court, one Krista Peoples and one Joel Stedman. Both of them were physically injured in a motor vehicle accident. Both claimed Personal Injury Protection or PIP benefits to pay for the bills of their medical providers. Both of them were denied PIP benefits.

    Besides this common core of facts, their claims presented the same broad question of whether the plaintiffs were injured in their business or property so that they could claim standing to sue under Washington State's Consumer Protection Act.

    That is where the questions posed by their separate claims diverged.  The first question, the one posed by the claims of Krista Peoples' class, were discussed here on Tuesday, December 3, 2019.

    Joel Stedman presented the second question.  He alleged that his insurance carrier, Progressive, impermissibly interjected a condition into the statutorily required availability of Personal Injury Protection (PIP) benefits.  This issue has reverberations beyond the boundaries of the State of Washington.

    In Washington State, as in most States, PIP benefits are required to be provided in policies like Stedman's.  The condition challenged in Stedman's action was Progressive's termination of required benefits whenever a claimant reached "Maximum Medical Improvement," or MMI, which it determined.  MMI is not a limitation authorized by the PIP Statute on the receipt or payment of PIP benefits.

    In Stedman's case, filed as a class action, Stedman alleged "that by terminating benefits on the basis of 'Maximum Medical Improvement,' Progressive routinely fails to pay all reasonable medical expenses for treating an insured’s injuries arising from a covered event, in violation of" Washington State Statutes.  Peoples, 2019 WL 6336407, at *1, ¶ 4.

    The Federal judge certified the question whether Progressive's reliance on MMI to terminate PIP benefits satisfied the Consumer Protection Act requirement of an injury to business or property, where an insured like Mr. Stedman was physically injured in a motor vehicle accident and whose PIP benefits were terminated.

    The Washington Supreme Court's short answer is "yes," such claims satisfy the requirement of an injury to business or property.  The Court's reasoning was applied both to the Joel Stedman class claims and to the Krista Peoples class claims discussed in this space on Tuesday, December 3, 2019:

[T]he plaintiffs here do not allege the defendants caused their personal injuries. Their CPA suits do not seek to vindicate their right to be free of bodily harm but, rather, their property interest in the benefits they bargained for in their insurance contracts. When parties enter an insurance contract, the insured obtains a legal right to benefits upon the happening of a particular event. [Citation omitted.]  An insurance contract also gives rise to a quasi-fiduciary relationship between the parties, which requires them to deal in good faith. [Citation omitted.]  An insured, therefore, has a legally protected property interest in benefits due under the contract and a related right to insurance dealings free from bad faith. Claims mishandling and wrongful denial of benefits invade this property interest, regardless of the type of event that triggers coverage.

Peoples, 2019 WL 6336407, at *4, ¶ 12.

    After placing its reasoning in a place where causation of the alleged Consumer Protection Act damages is not a part of the equation at hand, i.e., "regardless of the type of event that triggers coverage," the Court turned its attention to the question of recoverable damages for the alleged injury in fact.

    Stedman and his class sought "to recover excess premiums paid for the PIP coverage," together with "the costs of investigating the unfair acts, and/or the time lost complying with the insurer's unauthorized demands[.]"  Peoples, 2019 WL 6336407, at *2, ¶ 5.  The Washington Supreme Court unanimously spent very little time on the issue of damages recoverable by the Stedman class.

    To begin with, the Supreme Court declined to reach "the portion of the question that asks about excess premiums."  The Court devoted a footnote to Peoples' -- not Stedman's -- use of the phrase as "an alternative way of characterizing unpaid benefits."  Accordingly, in the Court's view, "it is unnecessary to address Peoples' alternative theory about 'excess premiums.'"  Peoples, 2019 WL 6336407, at *4, n.2.  What was good for the Peoples was good for Stedman, too, as the Court declined to address the issue of recovery of any "excess premiums" for unpaid PIP coverage.

    With respect to Stedman's remaining alleged damages, "the costs of investigating the unfair acts" and "the time lost complying with the insurer's unauthorized demands," the Supreme Court answered succinctly that "when a CPA claim is predicated on an insurer’s mishandling of a PIP claim, ordinary CPA principles govern whether investigation costs or time lost are injuries to business or property."   Peoples, 2019 WL 6336407, at *4, ¶ 14.  In answering the questions certified by the Federal court, the Washington State Supreme Court felt no compulsion to hold further whether the actual damages alleged by the Stedman class would if proven be recoverable under the Consumer Protection Act, but it did offer guidance from Washington State case law.

    The Court pointed to its own precedents to note that "we have we have continued to recognize that expenses incurred to investigate a deceptive act or practice are cognizable injuries and damages under the CPA."  Peoples, 2019 WL 6336407, at *4, ¶ 14.

    The Court then turned to precedent from the Washington lower courts concerning the allegation of lost time as a recoverable item of damage under the CPA.  "The Court of Appeals has also held that taking time away from business to respond to unfair practices may satisfy the injury requirement." Peoples, 2019 WL 6336407, at *4, ¶ 14.

    The Court was satisfied that this was all the guidance that litigants would need in cases like the present one:  "The principles articulated in these cases apply when a CPA claim is predicated on an insurer’s mishandling of a PIP claim." Peoples, 2019 WL 6336407, at *4, ¶ 14.

    To summarize what was summarized before, the key issue in the Peoples case was standing to sue.  The key to resolving the standing issue, in turn, was that the alleged 'injury to business or property' in both the Peoples' claims and the Stedman claims was "the deprivation of contracted-for insurance benefits." That was their injury. That conferred their standing to sue.

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"THOSE WHO HAVE EYES TO SEE, LET THEM SEE."

In answer to two certified questions, the Supreme Court of Washington has unanimously given us enough material to fill books.  This will be the first of two posted articles addressing these answers.  The second article will be posted here later.

    In Peoples v. Utd. Serv's Auto. Ass'n, ___ Wash. 2d ___, ___ P.3d ___, No. 96931-1, 2019 WL 6336407 (Wash. Nov. 27, 2019), the Supreme Court of Washington was confronted with two questions.  Both were certified by a U.S. District Court for answers under Washington State law.

    The two questions arose out of the claims of two of the plaintiffs in the District Court, one Krista Peoples and one Joel Stedman.  Both of them were physically injured in a motor vehicle accident.   Both claimed Personal Injury Protection or PIP benefits to pay for the bills of their medical providers.  Both of them were denied PIP benefits.

    Besides this common core of facts, their claims presented the same broad question of whether the plaintiffs were injured in their business or property so that they could claim standing to sue under Washington State's Consumer Protection Act.

    That is where the questions posed by their separate claims diverged.

    Krista Peoples presented the first question.  She alleged that USAA routinely denied PIP claims based on a "practice of algorithmic review[.]"  Peoples, 2019 WL 6336407, at *1, ¶ 3:

    Specifically, Peoples alleges that USAA refuses, without any individualized assessment, to pay medical provider bills whenever a computerized review process determines that the bill exceeds a predetermined limit. According to Peoples, USAA’s failure to investigate or make an individualized determination regarding the reasonableness or necessity of a provider’s charges before denying payment[.]

Peoples's claim was alleged as a class action.  But that was not important to the outcome of her question.  She and the class prayed for "actual damages, including unpaid medical bills and expenses incurred to investigate USAA's wrongful conduct." Peoples, 2019 WL 6336407, at *1, ¶ 3.

    But Peoples and the class emphatically did not sue for their personal injuries incurred in the accident.  Nor did they sue simply because the benefits for which they contracted related to payment of treatment for their personal injuries.

    Rather, they sued because they were deprived of contract benefits, the benefits of statutorily required PIP coverage.  That was their alleged injury to property or business, and that is what conferred standing upon them to sue under the Washington State Consumer Protection Act.

    Stripped to its simplest elements, their question was whether "the wrongful denial of PIP benefits is an injury to 'business or property' under" the CPA.  It bears repeating that "they seek to hold their insurance companies liable for benefits owed under contract. We conclude that the deprivation of contracted-for insurance benefits is an injury to 'business or property'” and that the type of contracted-for insurance benefits does not matter.  Peoples, 2019 WL 6336407, at *3, ¶ 9.

    Beyond contracted-for insurance benefits, the Court answered that policyholders also have "a related right to insurance dealings free from bad faith," that this "protected property interest" is invaded by "[c]laims handling and wrongful denial of benefits, ... regardless of the type of event that triggers coverage." Peoples, 2019 WL 6336407, at *4, ¶ 12.

    In other words, the "algorithmic review" challenged by Krista Peoples and her class may have been the alleged cause of contract benefits being denied here, but it was the wrongful denial of benefits that was important to the outcome.  What was important to the Supreme Court in this decision was the result and not the cause. 

    For all these reasons, the Washington Supreme Court's answer to the Krista Peoples's certified question was in the affirmative:

Therefore, to the extent proved, the plaintiffs may recover actual damages, including out-of-pocket medical expenses that should have been covered, and can seek injunctive relief to compel the payment of benefits to medical providers.

Peoples, 2019 WL 6336407, at *4, ¶ 13.

    To summarize, the key to alleged 'injury to business or property' in the Peoples' class claims was "the deprivation of contracted-for insurance benefits."  That was their injury.  That conferred their standing to sue.

In the next article arising from the Peoples case, the second certified question will be addressed along with the question of whether "injuries to business or property" can ever include "investigative costs or time lost."

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THE McGAHN DECISION: WHAT THE JUDGE ACTUALLY RULED.

    Stated simply, the primary takeaway from the past 250 years of recorded American history is that Presidents are not kings. See The Federalist No. 51 (James Madison); The Federalist No. 69 (Alexander Hamilton); 1 Alexis de Tocqueville, Democracy in America 115–18 (Harvey C. Mansfield & Delba Winthrop eds. & trans., Univ. of Chicago Press 2000) (1835). This means that they do not have subjects, bound by loyalty or blood, whose destiny they are entitled to control. Rather, in this land of liberty, it is indisputable that current and former employees of the White House work for the People of the United States, and that they take an oath to protect and defend the Constitution of the United States.

COMMITTEE ON THE JUDICIARY, UNITED STATES HOUSE OF REPRESENTATIVES, Plaintiff, v. DONALD F. MCGAHN II, Defendant, ___ F. Supp. 3d ___, 2019 WL 6312011, at *44 (DCDC Nov. 25, 2019).

    To make the point as plain as possible, it is clear to this Court for the reasons explained above that, with respect to senior-level presidential aides, absolute immunity from compelled congressional process simply does not exist. Indeed, absolute testimonial immunity for senior-level White House aides appears to be a fiction that has been fastidiously maintained over time through the force of sheer repetition in OLC opinions, and through accommodations that have permitted its proponents to avoid having the proposition tested in the crucible of litigation.

McGahn, 2019 WL 6312011, at *45.

    Thus, for the myriad reasons laid out above as well as those that are articulated plainly in the prior precedents of the Supreme Court, the D.C. Circuit, and the U.S. District Court for the District of Columbia, this Court holds that individuals who have been subpoenaed for testimony by an authorized committee of Congress must appear for testimony in response to that subpoena—i.e., they cannot ignore or defy congressional compulsory process, by order of the President or otherwise. Notably, however, in the context of that appearance, such individuals are free to assert any legally applicable privilege in response to the questions asked of them, where appropriate.

McGahn, 2019 WL 6312011, at *45.

So, this is the law.  It has been the law.  It continues to be the law.

Until this case reaches the Supreme Court.  But until then, and at least for now, this continues to be the law.

And this is what the judge actually ruled.  Check out the newspaper accounts and see what the reporters got right.  See, e.g., David G. Savage, In Major Win for Congress, Judge Rules Trump Aides Must Testify, LOS ANGELES TIMES ONLINE (posted Nov. 25, 2019); Spencer S. Hsu and Ann E. Marimow, Former White House Counsel Donald McGahn Must Comply With House Subpoena, Judge Rules, WASHINGTON POST ONLINE (posted Nov. 26, 2019).

HAVE A JOYFUL AND HAPPY THANKSGIVING!  In the midst of it all, there is a lot to give thanks for!

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SOMETHINGS FISHY, DECIDED IN THE SOUTHERN DISTRICT OF FLORIDA.

In the case of Somethings Fishy Enter's, Inc. v. Atlantic Cas. Ins. Co., Case No. 18-23990-CIV-GOODMAN {CONSENT CASE], ___ F. Supp. 3d ___, 2019 WL 5866823 (S.D. Fla. Nov. 8, 2019) (Goodman, USMJ), a business insured made claims for Hurricane Irma damages under its commercial property insurance coverage and under its loss of business income coverage under a single policy with Atlantic Casualty.

The policy had a Windstorm Exclusion.  An independent adjuster hired by Atlantic Casualty "determined that all of the damage at the Property was the result of winds from Hurricane Irma and flooding."  Somethings Fishy, 2019 WL 5866823, at *1.  Atlantic Casualty denied all coverage on the basis of the IA's inspection and evaluation.

The Court determined two things at least.  The first thing the Court determined is that if the claimed damage was caused by Hurricane Irma, then the damage was not caused by a Covered Cause.  The policy expressly provided that coverage was provided for direct physical loss unless the claimed loss is excluded or limited.   Somethings Fishy, 2019 WL 5866823, at *4.  

Second, the policy's Windstorm Exclusion applied to exclude the claimed loss from Hurricane Irma.   Simply put, the Windstorm Exclusion barred coverage for loss or damage "'[c]aused directly or indirectly by Windstorm or Hail, regardless'" of any other concurring cause of loss. The policy's Windstorm Exclusion also provided that "hurricane loss is 'therefore not a Covered Cause of Loss.'" Somethings Fishy, 2019 WL 5866823, at *4 (emphasis in original material quoted by the Court).

The Court accordingly granted Atlantic Casualty's motion for a summary judgment of no coverage.  Although the Court did not delve into any other policy exclusions in its opinion, the Court still found space to declare them after the Court said that it did not have to declare them:

The Court need not consider if any additional exclusions apply under the Policy because the Windstorm Exclusion bars coverage as a whole. However, the Court finds that the following exclusions also apply: the Utility Services Exclusion, which bars any loss resulting from a power outage; the Water Exclusion, which bars coverage for loss caused by flooding; and the Limitation for loss of animals unless caused by a specified cause of loss (which does not include power outage or hurricane).

Somethings Fishy, 2019 WL 5866823, at *5.

Magistrate Jonathan Goodman decided this case.  A little "inside baseball":  He is almost a U.S. District Judge already.  The lawyers who practice regularly in the Southern District of Florida hold him in high regard, and for the most part they enjoy his cultural references to the lyrics of pop songs and such.  Keep an eye out for his continuing rise.

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'INDEPENDENTLY REPLACING SHINGLES DID NOT MEAN CARRIER SHOULD PAY.'

In Villas at Winding Ridge v. State Farm Fire & Cas. Co., No. 19-1731, 2019 WL 5853547 (7th Cir. Nov. 8, 2019) (case involved Indiana substantive law), a condominium association in Indiana sued for breach of contract and bad faith after an appraisal awarded 20% of the cost of hail damages on 13 buildings out of 33 at issue, and Winding Ridge's property carrier under a "Residential Community Association Policy," State Farm, paid that amount.

While the condominium's bad faith lawsuit was pending, it went ahead and paid $1.5 Million to have the roofs of all 33 buildings at issue repaired.  One of the condominium's arguments was that State Farm was in bad faith for not paying that amount. 

Not this time. "The fact that Winding Ridge independently replaced the shingles on all 33 buildings for $1.5 million while its claim was pending does not obligate State Farm under the policy or mean State Farm breached the policy."  Villas at Winding Ridge, 2019 WL 5853547, at *5.

Parenthetically, Winding Ridge also contended in this litigation that State Farm's appraisal provision was void for ambiguity, i.e., that State Farm's appraisal provision was ambiguous and unenforceable.  Winding Ridge was the one that demanded the appraisal in the first place, it will be recalled.  You might say that they were for it until after the appraisal award was rendered, when they apparently turned against it.  The Court held in this case that State Farm's appraisal provision was unambiguous and enforceable.

"Be sure you're right, then go ahead."  Baby boomers will recall with fondness, perhaps, that that was the motto of Davey Crockett.  Even after all these years, it is still a good motto to follow.

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COMPLETE MATERIAL DISCOVERY, THEN MAYBE NO GENUINE MATERIAL FACT ISSUES.

The Court in  Grey Oaks Country Club, Inc. v. Zurich Am. Ins. Co., No.:  2:18-cv-639-FtM-99NPM, 2019 WL 5802513 (M.D. Fla. Nov. 7, 2019) held that where discovery still remains on issues relevant to a pending motion for summary judgment, the motion for summary judgment would be denied as premature.  Grey Oaks Country Club, 2019 WL 5802513, at *4 ("The Court finds that the entry of summary judgment on damages is premature when the parties have not yet completed discovery that could have a bearing on the issue.")

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INJURY IN FACT AND INSURANCE BAD FAITH STATUTES.

       Cases and Constitutional interpretation have the potential to abolish statutory claims for insurance bad faith:

    In 2016, the Roberts Court grafted a requirement onto the U.S. Constitution which is not found in it—standing—but which is instead found in the Court's cases. Cases decided in lower courts since the Roberts Court raised standing to a constitutional prerogative are divided over whether Congress and State Legislatures can provide standing by providing remedies for statutory violations.

    In Spokeo, Inc. v. Robins,1 the Court raised the judge-made doctrine of standing to constitutional status. “Standing to sue,” the Court recognized, “is a doctrine rooted in the traditional understanding of a case or controversy. The doctrine developed in our case law,” said the Court in Spokeo, Inc. v. Robins.2

    One of the elements of standing is “injury in fact,” which the Spokeo Court raised to “a constitutional requirement” which bars legislatures from conferring standing on people and organizations in most cases. To establish injury in fact, a person invoking a statutory remedy now must meet a newly-found constitutional requirement that she or he had a legally protected interest that is concrete and individualized to her or him, and that the harm is “actual” or “imminent,” not “conjectural” or “hypothetical.”3

 ***

If the idea of “injury in fact” has been elevated surreptitiously from standing to the U.S. Constitution, it can certainly have an effect on claims based on State statutes providing remedies to ‘private attorneys general’ that the States rely on to enforce the laws. Time will tell whether State Unfair Claim Handling Practices Acts and Penalties Statutes governing the business of insurance will feel the effects and, if so, how.

 

Footnotes
1
Spokeo, Inc. v. Robins, U.S. , 136 S. Ct. 1540 (2016).
2
Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016).
3
Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547-48 (2016).

The issues are fleshed out and the case law interpreting Spokeo are all addressed in Volume 1 of LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:28.50 by Dennis J. Wall (THOMSON REUTERS WEST 3d ed. & 2019 Supplement).

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©2019 Donna Bruno and Dennis J. Wall.  Use of this Photo Courtesy of the Artist Donna Bruno.

EXPERT'S FAILURE TO "REFINE OPINIONS" TO LOCAL LAW EXCLUDES THEM.

In Hamilton v. Bayer Healthcare Pharm. Inc., No. CIV-18-1240-C, 2019 WL 5295201 (W.D. Okla. Oct. 18, 2019), nationally renowned insurance expert Allen Windt was not permitted to testify to opinions on Oklahoma insurance bad faith because his opinions were not tailored to the rulings of Oklahoma law.  The Court in this case granted the non-retaining party's motion to exclude his testimony because as a result, his testimony was not reliable.  Hamilton, 2019 WL 5295201, at *1.  This ruling came despite Mr. Windt's book on insurance which included Oklahoma law cases:

Mr. Windt relies on a book he authored as the legal basis for his opinions. To be sure, that book references Oklahoma law. However, it also references the law of other states and that law often conflicts with Oklahoma law. Mr. Windt makes no effort to refine his opinions so that they are based solely on the law applicable to this matter. Accordingly, Mr. Windt will not be permitted to offer expert testimony at trial.

Hamilton, 2019 WL 5295201, at *1.

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TRICK OR TREAT! ATTORNEY'S FEES FOR THE REST OF US.

The Uniform Mortgage Instruments written and distributed by Fannie Mae and Freddie Mac for almost all homes with a mortgage in the United States have provisions for attorney's fees for the mortgage lenders. These provisions are written for two purposes or at least with two results in mind. The first is to protect banks and mortgage companies from incurring attorney's fees in actions on the mortgage loans they make. The second is to make homeowners pay in actions on the mortgage loans they take.

Some States have tried to reach a better balance. Some State efforts apply generally to contracts which authorize attorney's fees for a large corporate party. They authorize attorney's fees for the other contracting parties as well whenever one party has written its contract to authorize it to collect attorney's fees when someone sues on that contract.

Parenthetically, in many or most such cases, it is the large corporate party that wrote the contract.

For example, Florida Statute Section 57.105(7) on its face applies to "contracts" which authorize attorney's fees for only one party to the contract:

(7) If a contract contains a provision allowing attorney’s fees to a party when he or she is required to take any action to enforce the contract, the court may also allow reasonable attorney’s fees to the other party when that party prevails in any action, whether as plaintiff or defendant, with respect to the contract. This subsection applies to any contract entered into on or after October 1, 1988.

Fla. Stat. § 57.105(7), brought forward without change to 2019.

In the case of Madl v. Wells Fargo Bank, N.A., 244 So. 3d 1134 (Fla. 5th DCA 2017) & on rehearing (Fla. 5th DCA 2018) (Edwards, J.), there was a mortgage contract. That was not disputed. There was a dispute, of course, but it was about standing to bring the suit to enforce that contract.

In a unanimous opinion in this case written by Judge James Edwards, Florida's Fifth District Court of Appeal applied the language of Section 57.105(7). "Section 57.105(7) transforms a unilateral right into a reciprocal right so that all parties to the contract are entitled to recover attorney’s fees upon prevailing." Madl, 244 So. 3d at 1138. The appellate panel awarded appellate attorney's fees to the homeowners who prevailed in this action to enforce the mortgage contract against them.

As the Fifth District itself pointed out, Madl, 244 So. 3d at 1139, there is authority from the Fourth District which appears to stand to the contrary.
It is not necessarily free from doubt whether the Fourth District in a proper case would deny outright the availability of Section 57.105(7) in mortgage cases. However, it can be said that the Fourth District cases seem to involve disputes about whether the parties before the court were all parties to the contract, or even whether the contracts at issue were proven to exist in the first place. In Madl, there was no dispute but that the appellants and the appellees were parties to the mortgage contract that existed in that case.

So, on this Halloween day, trick or treat! Thanks to Florida law (with the possible exception of the Fourth District), attorney's fees for the rest of us and not just for the ones who write the contracts.

On the attorney's fees provision in the Uniform Mortgage Instruments of Fannie Mae and Freddie Mac, and particularly on its lack of reciprocity absent another Statute, see DENNIS J. WALL, LENDER FORCE-PLACED INSURANCE PRACTICES § 4.4, Attorneys and Lender Force-Placed Insurance Practices (2015 American Bar Association Publishing). 

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PREMATURE FLORIDA STATUTORY BAD FAITH CLAIM? THIS TIME DISMISS, NOT ABATE.

The general rule in the Middle District of Florida, with some exceptions, has been that if a Florida statutory bad faith claim under Fla. Stat. § 624.155 is premature, the defendant's remedy is to have it abated rather than dismissed.

In Pranger v. Garrison Prop. & Cas. Ins. Co., No: 6:19-cv-1099-Orl-40EJK, 2019 WL 5448284 (M.D. Fla. Aug. 6, 2019), the Court addressed what it labeled a premature statutory bad faith claim in an Underinsured Motorist Case.  The District Judge in this Middle District of Florida case dismissed it and expressly declined to abate it.

Ruling as though this were the inevitable result and ignoring the clear Middle District of Florida precedent, the District Judge cited a pair of cases that ruled in favor of the exception of dismissal rather than abatement of a premature Florida statutory bad faith claim, and declined in the Court's "discretion" to abate it in this case:

    Defendant argues that Count II, which alleges a claim for bad faith pursuant to § 624.155 of the Florida Statutes, should be dismissed as premature. Plaintiff agrees that the claim is premature but argues that abatement, rather than dismissal, is proper. “[I]t is this Court’s position that until a bad-faith claim has a factual basis to support it—i.e., the plaintiff’s claim for [underinsured motorist] benefits has been resolved in the plaintiff’s favor—such claim is prematurely brought.”

Pranger, 2019 WL 5448284, at *1.  Sometimes exceptions swallow the rules, if we let them.

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RECOVERING POLICY LIMITS WITHOUT COVERAGE.

There are many things to say about the rulings in the Szafarowicz case.  Commerce Ins. Co. v. Szafarowicz, 131 N.E.3d 782 (Mass. October 1, 2019).  A special feature of the case was discussed in an article posted here on October 22, 2019, and the background of the case has been discussed with unique insight into Insurance Coverage Law in Massachusetts by Nina Kallen, Esquire in her blog of that name, most recently on October 23, 2019.

I have struggled with ways to organize my own remaining thoughts about the reported decision in this case.   Here is how I settled, for now, on organizing some of them.

1.  Recovery under a stipulated settlement or "Consent Judgment" in this case was limited to policy limits because that's what the insureds and the claimant agreed.

The insureds and the deceased claimant's estate stipulated to settlement of the estate's Wrongful Death Action against the insureds.  Although it appears not to be relevant to the stipulation, the fact that the settlement happened at all has everything to do with a couple of further facts by way of background here.  The insureds were being defended by Commerce at the time under a reservation of rights to deny all coverage.  Commerce also separately pursued a Declaratory Judgment Action before the underlying settlement was stipulated.  (Commerce objected to the settlement.)

As a part of their stipulated settlement, the insureds and the estate in the Wrongful Death Action stipulated that the estate's recovery if any would be limited to the insureds' Commerce policy limits and that they, the defendants-insureds, would not face any other risk of damages other than the Commerce policy limits.  Szafarowicz, 131 N.E.3d at 789.  Not only did the estate stipulate to limiting recovery to policy limits.  "The estate agreed that it would not seek to collect or enforce any judgment against the [insureds] beyond the amount payable under their insurance policy[.]" Szafarowicz, 131 N.E.3d at 789.  

That is why the estate's potential recovery against Commerce was limited to the policy limits by the Supreme Judicial Court of Massachusetts:  Anything else they could say would be dicta in the face of these facts.  The facts of this case determined the outcome.

2.    Recovery of policy limits was possible in this case even though there is no insurance coverage.

The Massachusetts Supreme Judicial Court allowed injured claimants, broadly speaking, to recover from defendants' liability insurance carriers so long as certain conditions were met.  Those conditions are discussed below.

However, in the Szafarowicz case, by the time the Supreme Judicial Court ruled there had already been a judicial determination that Commerce had no coverage under the "optional" bodily injury liability coverage under its policy. Szafarowicz, 131 N.E.3d at 790-91.

To recover policy limits, which the Szafarowicz Court said it would allow theoretically, means that the injured claimant would recover under the policy.  Yet in this case, there was already a determination that there was no coverage under the policy.  Still the Massachusetts HIgh Court remanded for a determination in the lower courts under its theoretical framework for recovery of Consent Judgments, as discussed below.

That framework simply does not include proving insurance coverage for the loss.  If it did, the Szafarowicz Court would not have remanded for a determination of anything in this case, where to say again there was already a judicial determination of no insurance coverage for the loss.

3.    "How many angels can dance on the head of a pin?"  Theoretically.  The elements of recovery under a Consent Judgment in Massachusetts today.

Well, there was still the matter of whether Commerce would be liable for post-judgment interest on any part of the underlying Consent Judgment.  So, the Massachusetts Supreme Judicial Court said that it was fashioning a rule to address that situation.  But that is not what they actually did.

In Szafarowicz, the Court fashioned a rule for recovery under Consent Judgments generally:

    Balancing these risks and benefits, we conclude that an insurer who defends a claim under a reservation of rights is bound by the amount of a judgment arising from a prejudgment settlement/assignment agreement where (1) the insurer is given notice of the settlement/assignment agreement and an opportunity to be heard by the court before judgment enters; (2) the insurer contests the judgment; and (3) the insured, after hearing, meets his or her burden of showing that the settlement is reasonable in amount.

Szafarowicz, 131 N.E.3d at 797.

The Court said, theoretically, that "the probability of a finding that the plaintiff's injuries were caused by an accident rather than intentional conduct ... may also be considered in determining the amount of a reasonable settlement." Szafarowicz, 131 N.E.3d at 798.

They said this despite the fact that, in this case, they previously said that on remand Commerce will not be bound here "to pay the damages determined at the assessment hearing, because it obtained a declaratory judgment that it was not obligated to pay these damages." Szafarowicz, 131 N.E.3d at 796.

In the final analysis, the Szafarowicz Court was against exposing carriers to recovery beyond policy limits even when Consent Judgments are successfully enforced against the carriers, at least in a case like this where the insureds and the injured claimant stipulated to that result.  Except that liability carriers can be exposed to paying Consent Judgments even when they have no coverage under their policies for the loss at issue unless they previously obtained a judicial declaration of no coverage for the loss at issue, as in this unique case.

Whew.  Complicated, isn't it?  Maybe it became more complicated in Szafarowicz than it had to be.  Who am I to judge?

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COURAGE, INSURANCE COVERAGE, AND STIPULATED SETTLEMENTS IN MASSACHUSETTS.

The Supreme Judicial Court of Massachusetts has rendered a decision that has many features, all of them interesting and some of them moving.

The complicated background of the decision in this case is thoroughly explored by Nina E. Kallen, Esquire in her blog article posted in Insurance Coverage Law in Massachusetts on Wednesday, October 16, 2019. I will also write another article this week about some of the other rulings in this important decision that I do not address here today.

In my judgment, one of the more important features of this decision is not readily apparent, however. I am going to ask Ms. Kallen for her comments on it by sending her a copy of this article with an email today. If we miss anything unique to this decision and Massachusetts law here, she is the right person to ask.

The decision came on October 1, 2019 in the case of Commerce Ins. Co. v. Szafarowicz, 131 N.E.3d 782 (Mass. 2019). It involves a couple of stipulated settlement agreements in a Wrongful Death Action. Commerce was defending its insured under a reservation of rights at the time, and Commerce was simultaneously pursuing a separate Declaratory Judgment Action of no coverage. Massachusetts, like most jurisdictions, permits the filing of a DJA while defending an insured under a reservation of rights to deny all coverage.

The insureds stipulated to settlement in the Wrongful Death Action before there was a determination in the Declaratory Judgment Action. The judge in the Wrongful Death Action (we are not told her or his name in the opinion) "ordered that judgment enter in favor of the [deceased claimant's] estate" far in excess of the policy limits. The policy limits were at most $500,000.00 and the original judgment was entered in the Wrongful Death Action in the amount of $5,617,510.00 (later increased to $7,669,254.41). Commerce, 131 N.E.3d at 789.
We do not know the date of the stipulated settlements because the Massachusetts Court does not tell us, but we know that "the judge ordered that judgment enter in favor of the estate" on December 28, 2016. Commerce, 131 N.E.3d at 789.

"[A]nother Superior Court judge resolved the declaratory judgment action" on February 21, 2019. The Declaratory Judgment judge (again, we are not told her or his name, only that this was a different judge from the Wrongful Death judge) held that there was no coverage for the policy's "optional bodily injury coverage of its automobile policy" because, the DJA judge found, the injuries in question "'did not arise out of an accident under the policy.'" Commerce, 131 N.E.3d at 790-91. Accordingly, said the Supreme Judicial Court in Commerce, "Commerce has no obligation to pay any amount of the $7.7 million judgment in the wrongful death action beyond the $20,000 it already paid under its compulsory bodily injury coverage." Commerce, 131 N.E.3d at 791 (emphasis by the Court).

So, to recap what happened on the facts here, the insureds stipulated to a settlement with the claimant's estate in the Wrongful Death Action for what became a judgment of $7.7 Million. That was years before the Declaratory Judgment was concluded. This means, of course, that everyone involved including Commerce, Commerce's lawyers, and the DJA judge knew that the estate was pursuing a damages determination of some 15 times what might be called the "full" policy limits of $20,000 for compulsory bodily injury coverage and $480,000 for optional bodily injury coverage.

To say again, because it bears repetition here, at the time that the DJA judge ruled in the liability insurance company's favor the insureds had already stipulated to damages far exceeding the potential policy limits. (The insureds also stipulated that their driver's negligence caused the accident which resulted in the claimant's death, a stipulation which would have triggered insurance coverage if that particular stipulation was determinative, which clearly it was not).

Nevertheless, Commerce persisted. That is clearly one way to put it. On a human level, of course the deceased claimant's loved ones are the first to command our empathy. Yet on a human level we cannot overlook the behavior of Commerce and its lawyers who for many years must have confronted the risk of losing many times, and for a lot of money, before they obtained a final Declaratory Judgment of no coverage.

That is likely to be the overlooked story of this case that I want to feature in this article today. Right or wrong, the people at the insurance company involved in this case and the lawyers who represented the insurance company in the DJA deserve to have their courage recognized, too.

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THE DISPARATE IMPACT OF INSURANCE COMPANIES ON THE HUD REGULATION.

I left the following Comments among others today on www.regulations.gov. You can too! Leave your own Comments, whatever they may be, on that website with the Docket Info and RIN below. Be heard!

Friday, October 18, 2019

TO: The Department of Housing and Urban Development
via https://www.regulations.gov/.
Re: Your proposed revisions to the Disparate Impact Rule.
Docket No.: FR-6111-P-02.
RIN: 2529-AA98.
Your proposed § 100.500(e) is arbitrary and capricious. Moreover it is a misguided attempt to "reverse preempt" current § 100.70(d)(4).

1. Your new paragraph (e) is arbitrary and capricious.

Your proposed new § 100.500(e) is arbitrary and capricious. You propose to proceed by case-by-case adjudication involving disparate-impact theories of liability concerning insurance, rather than rule-making. You have not provided a reasoned explanation for preferring case-by-case adjudication over rule-making which, after all, is the reason that HUD exists, i.e., to make rules. Under established law, as you know from a decision that you cite in your proposal, "[a]lthough HUD had discretion to decide whether to proceed by case-by-case adjudication or rule-making, it needs to provide a reasoned explanation for preferring case-by-case adjudication over rule-making. HUD's failure to do so was arbitrary and capricious." Prop. Cas. Ins. Ass'n of Am. v. Donovan, 66 F. Supp. 3d 1018, (N.D. Ill. 2014).
This holding was reached during judicial consideration of a previous version of this same regulation. So it is again regarding your current version: Your proposed, revised regulation is arbitrary and capricious with respect to the business of insurance as you have addressed it here, including by your proposed paragraph (e) and your proposed new section 100.500.

 

2. Your new paragraph (e) contravenes the Fair Housing Act's own statutory provisions, which supersede any conflicting proposed regulations of an administrative agency, as here. Further, it is an invalid and void attempt to "reverse preempt" insurance companies from disparate-impact liability for discrimination under the Fair Housing Act, and for these reasons it is unauthorized and unreasonable, as well as arbitrary and capricious.

The HUD Disparate Impact regulation already addresses the denial of "property or hazard insurance" in § 100.70(d)(4):

(d) Prohibited activities relating to dwellings under
                        paragraph (b) of this section include, but are not limited to:
* * *

(4) Refusing to provide municipal services or property or hazard insurance for dwellings or providing such services or insurance differently because of race, color, religion, sex, handicap, familial status, or national origin.

Because of § 100.70(d)(4), "denying 'property or hazard insurance' violates the FHA." Nat'l Fair Hous. Alliance v. Travelers Indem. Co., 261 F. Supp. 3d 20, 30 (D.D.C. 2017).

Your proposed addition of § 100.500(e) would risk immunizing insurance providers who otherwise violate the provisions of section 100.70(d)(4), quoted in full above:

(e) Business of insurance laws.
Nothing in this section is intended to invalidate, impair, or supersede any law enacted by any state for the purpose of regulating the business of insurance.

84 F.R. at 42863.

    The Fair Housing Act already contains a provision governing the effect on State laws including that the FHA shall not be construed to invalidate or limit any such conflicting law, with an exception that you do not recognize in your proposal. Under the FHA, Congress would invalidate any State or local law "that purports to require or permit any action that would be a discriminatory housing practice [under the FHA] shall to that extent be invalid." 42 U.S.C.A. § 3615. Your proposal is unreasonable in that it adds nothing to the law as it currently exists, in other words, there is simply no reason for your proposal. Further, your proposal conflicts with the Statute enacted by Congress on the same subject and your proposal is void as a result.

    The McCarran-Ferguson Act, for its part, famously leaves the regulation of insurance to the States. The Congressional deference to the States in this regard is so strong that the McCarran-Ferguson Act includes a "reverse preemption" provision by which conflicting federal laws are deemed preempted by State insurance laws in appropriate circumstances. See 15 U.S.C.A. § 1012. It has been said that "the key issue in analyzing whether the McCarran-Ferguson Act reverse-preempts this application of the FHA is the specific details of the state insurance law that supposedly contradicts the FHA." Nat'l Fair Hous. Alliance v. Travelers Indem. Co., 261 F. Supp. 3d 20, 34 n.4 (D.D.C. 2017) (italics in original; emphasis by the court). Here as well you have not identified any specific details of any state insurance law that supposedly contradicts the FHA. Your attempt at reverse preemption with the addition of new § 100.500(e) is as a result both invalid and void.

    Thank you for your consideration of these Comments. 

Sincerely Yours,
Dennis J. Wall

Download IMMUNIZING INSURANCE COMPANIES FROM HOUSING DISCRIMINATION.COMMENTS TO PROPOSED DISPARATE IMPACT RULE REVISIONS BY HUD. 3. 10.18.19.

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RESISTING UNAUTHORIZED BURDENS AND SPURIOUS DEFENSES.

I left the following Comments among others today on www.regulations.gov. You can too! Leave your own Comments, whatever they may be, on that website with the Docket Info and RIN below. Be heard!

Thursday, October 17, 2019

TO: The Department of Housing and Urban Development
via https://www.regulations.gov/.
Re: Your proposed revisions to the Disparate Impact Rule.
Docket No.: FR-6111-P-02.
RIN: 2529-AA98.
Your proposed revisions to the current Disparate Impact Rule are found at 84 F.R. 42854 -42863, with your Summary and your Supplementary Information.

The Comments below continue several comments on your proposed revisions.

Your proposed § 100.500(d) mis-states FHA law and would impose new, additional requirements not found either in the Fair Housing Act or in FHA law. You simply do not have the authority to rewrite any statutes nor any judicial decisions including ones that you do not like.

1. Your new paragraph (d)(1) incorrectly imposes burdens on persons pursuing discrimination claims on a disparate impact theory that the FHA and that FHA case law do not impose. It is not your place to impose them where Congress and the courts have refused to do so.

(i) The "elements in paragraphs (b)(2) through (5) of this section" as you call them are not proper elements of proof in the context of such claims.

Please see our earlier Comments concerning your new paragraphs (b)(2) through (5) of this section in particular, which are expressly incorporated herein by reference. A pdf copy will be appended to these Comments for this purpose and for your ease of reference.

(ii) This subparagraph (ii) in your new paragraph (d)(1) is an attempt on your part to introduce entirely new legal requirements in FHA law. You would effectively provide that even if an FHA plaintiff has proven the availability of less restrictive means for the defendant to pursue its policy objectives, then still the plaintiff must also prove yet another thing. You would require the FHA plaintiff at that point in a disparate impact discrimination liability case to also prove that the alternative means would not "impos[e] materially greater costs on, or creat[e] other material burdens for, the defendant." This requirement in your new subparagraph (ii) has no justification and no reason for existence.

By proposing your new requirements in subparagraph (ii), you would heap up burdens on FHA disparate treatment discrimination plaintiffs that never previously existed. This you may not do. You completely lack the authority to do so.

 

2. Your new paragraph (d)(2) incorrectly allows defenses to be raised by defendants in FHA discrimination claims that are based on a disparate impact theory, that the FHA and that FHA case law do not recognize.

(i) and (ii). What has been said above applies to these subparagraphs as well. The above Comments, and the Comments that were left previously to your § 100.500(b) (please see attached pdf, for example), are expressly incorporated herein by reference.

(iii). It bears repeating that your introduction of an unrecognized issue that a defendant in such an FHA discrimination case can escape liability by evidence that less restrictive alternatives to the defendant's discriminatory policies "would materially impose greater costs" or would "creat[e] other material burdens for the defendant," do not exist in the statutory language chosen by Congress or in the judicial opinions written by judges in the FHA case law. You do not have the authority to rewrite any of them.

Moreover, your statutory charge is to implement the FHA concerning the effects of discrimination.
Your duties are described in the Fair Housing Act. The Congressional statement of purpose is to facilitate relief from discrimination in the national housing market. Your duties do not include shielding defendants from "materially greater costs" or "other material burdens" as a consequence of their proven discrimination.

Thank you for your consideration of these Comments. As was noted from the beginning, more Comments will follow.
Sincerely Yours,
Dennis J. Wall

Download RESISTING UNAUTHORIZED BURDENS AND SPURIOUS DEFENSES.COMMENTS TO PROPOSED DISPARATE IMPACT RULE REVISIONS BY HUD. 2. 10.17.19.

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FIGHTING DISAPPEARING DISPARATE IMPACT DISCRIMINATION IN HOUSING.

I left the following Comments among others today on www.regulations.gov.  You can too!  Leave your own Comments, whatever they may be, on that website with the Docket Info and RIN below.  Be heard!

Thursday, October 17, 2019

TO: The Department of Housing and Urban Development
via https://www.regulations.gov/.
Re: Your proposed revisions to the Disparate Impact Rule.
Docket No.: FR-6111-P-02.
RIN: 2529-AA98.
Your proposed revisions to the current Disparate Impact Rule are found at 84 F.R. 42854 -42863, with your Summary and your Supplementary Information.
These are the first of several comments on your proposed revisions.
Your proposed new § 100.500(b) is unreasonable and invalid. You propose to revise existing law on when a plaintiff alleging discrimination under the Fair Housing Act has made a prima facie case under a theory of discrimination by disparate impact. Your proposed revision is not based on facts and it is not based on the law established under the Fair Housing Act you say that you are implementing. You do not have the authority to make new law especially when it is contrary to existing statutes and FHA case law. The entire proposed new section 100.500(b) is found in 84 F.R. at 42862.
The current HUD regulation, § 100.500 as it has existed from long before your proposed revision of it, has been justly described as "similar to the framework the Supreme Court ultimately adopted in Inclusive Communities, and indeed, some courts believe the Supreme Court implicitly adopted the HUD framework altogether." Reyes v. Waples Mobile Home Park Ltd. P'ship, 903 F.3d 415, 424 n.4 (4th Cir. 2018), cert. denied, ___ U.S. ___, 139 S. Ct. 2026 (2019). You of course claim in your proposal not only to have followed the Inclusive Communities decision but to credit that decision as the genesis of your proposal. Without deciding whether the Court followed the HUD regulation, the following Comments will address your proposed revision of the regulation.
(1) Your proposed § 100.500(b)(1) is contrary to the law established under the Fair Housing Act. Further, you have not shown any reason to undo and restate rules and regulations that were enacted by HUD when HUD had access to the relevant law that you rely on in your proposed revisions. This is not an attempt on your part to align the HUD regulation on Disparate Treatment with subsequent case law. as you say. Rather, this is an attempt on your part to re-align and rewrite HUD's previous regulation on Disparate Treatment because you do not approve of it.
You do a couple of things throughout your proposed revisions that are worth noting at the beginning here. You rely throughout your proposal on the 2015 decision by the U.S. Supreme Court in the case of Texas Dep't of Housing & Community Affairs v. Inclusive Communities Project, Inc., 135 S. Ct. 2507 (2015). The requirements you propose under paragraph (b)(1) of your rewritten section 100.500 are not imposed by the Inclusive Communities decision, but are instead contrary to it. This will be discussed below as well.
Another thing that you do throughout your proposal is take words and phrases from judicial opinions and propose them as new law here. Picking out words and phrases does not equal the law. It does not represent the law any more than reading case headnotes does. Certainly your proposed paragraph (b)(1) does not represent FHA law, but rather is contrary to established law. In this regard, it should not have to be pointed out, but I will point it out for the record here, that HUD simply lacks the authority to invent the law let alone to disregard it. Further, any attempts by HUD to do so are unreasonable and invalid due to its lack of authority alone if for no other reason.
Your proposed revision is strikingly reminiscent of a recent federal appellate court's description of a lower court's erroneous view of causation in disparate impact claims brought under the Fair Housing Act. Like that district court, your view would erroneously "seem to require an intent to disparately impact a protected class in order to show robust causality, thereby collapsing the disparate-impact analysis into the disparate-treatment analysis. [Citation omitted.] This goes far beyond the 'robust causality' requirement the Supreme Court described." Reyes v. Waples Mobile Home Park Ltd. P'ship, 903 F.3d 415, 430 (4th Cir. 2018), cert. denied, ___ U.S. ___, 139 S. Ct. 2026 (2019) (italics in original; emphasis by the Fourth Circuit Court of Appeals). Or to put the same thing another way, "determining whether a plaintiff made a prima facie case of disparate-impact liability requires courts [and HUD] to look at whether a protected class is disproportionately affected by a challenged policy.... The extra step of determining whether such a practice that has a disparate impact on a protected class is justified is properly contained" within the defendant's burden of persuasion. See Reyes, 903 F.3d at 424, 430 (italics in original; emphasis by the Fourth Circuit Court of Appeals).

(2) Your proposed paragraph (b)(2) of your proposal to revise section 100.500 does not represent the law which has developed under the Fair Housing Act. Moreover, it would introduce ambiguity which would tend toward the denial of otherwise valid claims under the Act.
Your proposed paragraph (b)(2) is another time when you clearly cherry-picked language from the case law, this time seemingly from the Inclusive Communities decision itself. Yet while the majority opinion used the phrase "robust causal link" one time, Inclusive Communities, 135 S. Ct. at 2523, the Court's one-off use of that phrase was not an effort by the Court to re-define the law of proximate cause, as your proposed revision would do if it is implemented. Rather, the Court used that phrase as a shorthand way to describe the requirement that an FHA plaintiff relying on a theory of disparate impact to show discrimination must allege and prove causation. The Court did not attempt to define "robust causal link" in any way other than using it as a shorthand reference for the requirement in this context to prove causation.

(3) Your new, proposed § 100.500(b)(3) is again made unreasonable by your using an ambiguous, undefined phrase to require FHA plaintiffs to allege and prove "an adverse effect" if those plaintiffs are going to make a prima facie case of FHA violations under a disparate impact theory. This again is also contrary to law under the Fair Housing Act.
FHA law does not require proof of undefined "adverse effects." Other law may require and speak to such proofs, but not this one. The law under the Age Discrimination in Employment Act of 1967 or ADEA, for example, apparently does require proof that employment decisions "adversely affect" a person's employment status, but FHA law does not contain this requirement. You lack the authority to rewrite the statute you say that you are implementing. Only Congress has such authority; you do not.
You seem to want to introduce previously undefined concepts not addressed in the Fair Housing Act or in FHA case law, or in previous HUD rules and regulations. The use of undefined, previously unknown words and phrases in your proposed regulation greatly increases the risk of adverse decisions to FHA claimants, whether the increased risk is inadvertent or not.

(4) Your proposed new paragraph (b)(4) in your proposal to revise section 100.500 would impose a new requirement contrary to established law, and not found in the Fair Housing Act you say you are implementing, that a prima facie case of discrimination under a theory of disparate impact requires proof that the alleged disparity is "significant." To say again, that requirement is new. It is not imposed by the statute and it is contrary to settled law.
What the federal courts have required of disparate impact claims under the FHA is that the plaintiff show that the challenged practice have "a significantly disparate impact." This is not the same as your proposal to require proof of a "significant" disparity.
In addition, what you mean by "significant" is not clear from your proposed revisions. Once again, your proposals would introduce uncertainty and the attendant risk along with that uncertainty of legitimate claims being denied for no good reason.

(5) Your final new proposal to revise section 100.500 is to add a paragraph (b)(5) that would require something you call a "direct link" between impact and injury. Again, this new proposed requirement is not found in the Fair Housing Act and it is not found in the law surrounding the FHA. Rather, this new requirement you propose is another example of twisting words and phrases, like headnotes, in an attempt to re-write statutes and case law more to your liking. This is beyond your authority to do.
What has already been said above applies with equal force here as well: When courts have spoken of "direct" causal links, they were not trying to re-define the law of proximate cause, as your proposed revision would almost certainly do if it is implemented. Rather, the courts have sometimes used that phrase as a shorthand way to describe the requirement that an FHA plaintiff relying on a theory of disparate impact must show discrimination by alleging and proving causation as a part of her prima facie case.

Thank you for your consideration of these Comments. As was noted from the beginning, more Comments will follow.
Sincerely Yours,
Dennis J. Wall

Download FIGHTING DISAPPEARANCE OF ACTIONABLE DISPARATE IMPACT DISCRIMINATION. COMMENTS 1 TO HUD. 10.17.19.

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NO PENNSYLVANIA CGL DUTY TO DEFEND: NO "OCCURRENCE," NO "ACCIDENT."

The Third Circuit recently applied Pennsylvania law to hold that there is no duty to defend under a Commercial General Liability Policy where there is no "accident" and so there is no "occurrence."  Sapa Extrusions, Inc. f/k/a Alcoa Extrusions, Inc. v. Liberty Mut. Ins. Co., 939 F.3d 243 (3d Cir. 2019).

But the ruling involves much more than that truism.

The Third Circuit held, first, that the trial court was wrong to determine the question of whether there is a duty to defend by looking to the headings or titles used in the complaint to describe different counts alleged.  To the contrary, the duty to defend is determined under Pennsylvania law, as it is in most jurisdictions, by looking to the allegations of fact in the complaint and comparing those allegations to the CGL policy at bar.  This is the so-called "four corners rule."  Sapa Extrusions, Inc., 939 F.3d at heading III.A of the appellate court's opinlon (page numbers not available from Westlaw at the time this article is written).

Then and only then will courts applying Pennsylvania law determine whether there is a duty to defend.  In this case, the question of a defense arose under a CGL policy, as has been noted.  The specific claims against the insured in the complaint at issue there involved aluminum parts of windows and frames that allegedly corroded.  Tired of oxidized window and door frames, homeowners sued the insured.  See Sapa Extrusions, Inc., 939 F.3d at heading I.A of the appellate court's opinlon (page numbers not available from Westlaw at the time this article is written).  The issue then was whether there is a duty to defend that insured in those cases under the CGL policies at issue there.

The Third Circuit held that there is no duty to defend the insured in that case because the nature of the alleged defects could not be an "accident neither expected nor intended by the insured" there.  Where there was no "accident," there could be no covered "occurrence" under the CGL polices at issue.  Where there was no covered "occurrence," there is no duty to defend.  Sapa Extrusions, Inc., 939 F.3d at heading IV.C.1 of the appellate court's opinlon (page numbers not available from Westlaw at the time this article is written).

On all these issues, the Sapa decision is squarely in the mainstream of insurance coverage determinations.

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COMMENTS TO HUD PROPOSAL TO ELIMINATE DISPARATE IMPACT PROOF DUE FRIDAY 10.18.19.

Comments to the Department of Housing and Urban Development's proposal to eliminate proof of discrimination by proving disparate impact are due Friday, October 18, 2019.

The HUD proposal would effectively reduce all proof of discrimination to direct proof of intent, such as an admission by the perpetrators that they are guilty.

The proposed HUD rule would run contrary to a Supreme Court decision that is four years old.

Go to https://www.regulations.gov to leave your Comments, whatever your Comments may be.

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