Claims and Bad Faith Law Blog

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    **Florida Insurance Bad Faith Expert - Author's Note:  If you have reached this blog through a list that carries advertising, your computer may or may not be put at risk either through the list or through the advertising.  I do not accept or authorize any commercial advertising of any kind on any list or post.  Placing commercial advertisements with or near any of my web log posts is prohibited.  Further, I do not recommend any products or services advertised with or near any of my posts or any list of my posts.** 

   

 

COVID, IN SICKNESS, IN DEATH ... AND IN BAD FAITH?

At least some health insurance companies began charging their policyholders the full amount of their deductibles, copays, and coinsurance.   Other carriers are joining them, even as a pandemic continues to ravage their policyholders with illness and, in some cases, death.

          When the pandemic began a year ago, these same health insurance carriers voluntarily waived all deductibles, copays, and other costs because people who fell ill with Covid-19 had enough to deal with, what with hospitalizations, doctor visits, medications, and other treatments.  Then, it was good public relations for these carriers to waive what they call "cost sharing."

"Cost sharing."  What a polite way of saying "You caught Covid, now pay for it."  What was put into place with great fanfare is now done in silence.  Most if not all of these health insurance carriers are secretly ending their voluntary waivers of cost sharing, and many have already done so.  What was good public relations in the sunshine, is taken back in the dark.

          Except for Covid tests and vaccinations.  They should still be free to people, because the federal government requires that these costs be free.

          Some people think it's wrong to make a profit off of other people's misery.  The insurance companies' profits are going through the roof since the pandemic began.  They can afford to pay for Covid treatments; Covid patients, not so much.

          Still think insurance is boring?  Get Covid?  Pay for the full treatment on top of being hospitalized and treated for Covid?   People can EMail, write and telephone their own state's Insurance Commissioners.  Let them know that you know what's going on in the dark, and let them know if you don't like it. 

          Let them and your federal Representatives and Senators know, too, if you want the federal government to require the costs of treatment to be paid by you or by your insurer, or if you want the costs of treatment for Covid to be treated (pun intended) like the costs of testing for Covid.

Image of Insurance Policy for Warwick, a Slave, courtesy of New York Public Library Rare Photograph Collection.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved. 

The Second Part: LENDER FORCE-PLACED INSURANCE PRACTICES: UNFAIR TRADE PRACTICES.

This is the second of two parts.  The first part of this article was published on Wednesday, April 28, 2021, LENDER FORCE-PLACED INSURANCE PRACTICES:  RESPA AND UNFAIR TRADE PRACTICES.

In a decision that was just published on Westlaw, a federal judge in the U.S. District Court for the District of South Carolina decided that Mary Beth Jeffords plausibly stated both a state unfair trade practice claim, and a federal RESPA or Real Estate Settlement Procedures Act claim.  Ms. Jeffords's claims arose over the forced placement of insurance.  The federal judge's decision in her case is now published in Jeffords v. U.S. Bank National Association.[1]

          Ms. Jeffords sued U.S. Bank "as servicer of her federally-related mortgage loan[.]"[2]  She alleged that U.S. Bank "failed to pay her insurance premium from her escrow account as it became due," that her insurance policy lapsed as a result, that U.S. Bank force-placed insurance on the property, that she was charged the premium for the force-placed insurance, that she also had to obtain a replacement policy for the one that had lapsed (for which she obviously had to pay another premium), and that she incurred a loss from water damage that the replacement policy did not cover.[3]

---------------------------------------------------------------------------------------------------           

         As to the SCUTPA claim, U.S. Bank's line of attack was to argue for dismissal on the ground that Jeffords failed to allege an injury to the public interest as distinct from a merely private dispute, which is a requirement of the SCUTPA cause of action.[1]  The Court again disagreed with U.S. Bank and denied the bank's motion to dismiss the SCUTPA claim:

Plaintiff alleges that she met this low bar by alleging that “Defendant has an established and documented pattern of repetition (including previously unfairly assessing force place[sic] insurance against 139,000 members of the public).” Am. Compl. at ¶ 58.  The court agrees with Plaintiff.[2]

The Court denied the bank's motion to dismiss on this ground, and on one other:

And second, Plaintiff alleges that “Defendant profits ... for assessing forced place[sic] premiums” and “has an established and documented pattern of repetition” of this process. [Am. Compl.] at ¶ 58. Taken together, these allegations are more than mere conclusory allegations that this court customarily finds insufficient to support the third [or public interest] element of a SCUTPA claim.^{3] 

To put it in the affirmative, these allegations are legally sufficient to support an unfair trade practice claim, in the eyes of this federal judge in South Carolina.

Force-placed insurance cases including the Jeffords case are discussed in 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith §§ 9:33 - 9:35 (West 3d ed., 2021 Supplements in process), and in Dennis J. Wall, Lender Force-Placed Insurance Practices, published by American Bar Association Publishing.  A frequently refreshed selection of Chapters and Sections from these and other books is freely accessible at www.dennisjwall.com.

 

(Photo of Litigation and Prevention of Insurer Bad Faith volumes courtesy of Thomson Reuters West Publishing.  Photo of Lender Force-Placed Insurance Practices book ©Donna M. Bruno and Dennis J. Wall.)

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

[1] Jeffords, 2020 WL 9348167, at *2 n.3.

[2] Jeffords, 2020 WL 9348167, at *2.

[3] Jeffords, 2020 WL 9348167, at *2.

LENDER FORCE-PLACED INSURANCE PRACTICES: RESPA AND UNFAIR TRADE PRACTICES.

 

In a decision that was just published on Westlaw, a federal judge in the U.S. District Court for the District of South Carolina decided that Mary Beth Jeffords plausibly stated both a state unfair trade practice claim, and a federal RESPA or Real Estate Settlement Procedures Act claim.  Ms. Jeffords's claims arose over the forced placement of insurance.  The federal judge's decision in her case is now published in Jeffords v. U.S. Bank National Association.[1]

          Ms. Jeffords sued U.S. Bank "as servicer of her federally-related mortgage loan[.]"[2]  She alleged that U.S. Bank "failed to pay her insurance premium from her escrow account as it became due," that her insurance policy lapsed as a result, that U.S. Bank force-placed insurance on the property, that she was charged the premium for the force-placed insurance, that she also had to obtain a replacement policy for the one that had lapsed (for which she obviously had to pay another premium), and that she incurred a loss from water damage that the replacement policy did not cover.[3]

          Her amended complaint survived the bank's motion to dismiss her RESPA claim, which the bank seems to have filed on one ground:  that Ms. Jeffords "failed to allege any damages tied to U.S. Bank's actions[.]"  The District Judge disagreed:  "The court finds that Plaintiff adequately pleaded damages sufficient to survive dismissal."[4]

          More specifically, the Court listed some six allegations or groups of allegations of damages, "at least some" of which which the Court in this case held "alleged a plausible connection [with] U.S. Bank's alleged failure to pay the insurance premium when due":

1. lost insurance benefits which her prior insurance policy would have provided, "'including but not limited to the cost of repairs less her deductible';"
2. delay damages from the time it took to effectuate repairs;
3. an apparently higher premium for the replacement policy than she paid for her original policy;
4. the bank's charge for force-placing insurance;
5. "'miscellaneous costs including postage expenses and lost time';" and
6. emotional distress damages apparently including but not limited to "'worry, anxiety, frustration and lost time.'"[5]

As noted, the allegation of these damages alleged "a plausible connection between U.S. Bank's alleged failure to pay the insurance premium when due and at least some of the above-listed actual damages alleged by Plaintiff in her pleading.  U.S. Bank's motion to dismiss the RESPA claim is denied."[6]

To be continued ....  Force-placed insurance cases including the Jeffords case are discussed in 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith §§ 9:33 - 9:35 (West 3d ed., 2021 Supplements in process), and in Dennis J. Wall, Lender Force-Placed Insurance Practices, published by American Bar Association Publishing.  A frequently refreshed selection of Chapters and Sections from these and other books is freely accessible at www.dennisjwall.com.

To be continued ....  Force-placed insurance cases including the Jeffords case are discussed in 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith §§ 9:33 - 9:35 (West 3d ed., 2021 Supplements in process), and in Dennis J. Wall, Lender Force-Placed Insurance Practices, published by American Bar Association Publishing.  A frequently refreshed selection of Chapters and Sections from these and other books is freely accessible at www.dennisjwall.com.

 

(Photo of Litigation and Prevention of Insurer Bad Faith volumes courtesy of Thomson Reuters West Publishing.  Photo of Lender Force-Placed Insurance Practices book ©Donna M. Bruno and Dennis J. Wall.)

 

[1] Jeffords v. U.S. Bank Nat'l Ass'n, No. 3:20-cv-00393-SAL, 2020 WL 9348167 (D.S.C. Oct. 13, 2020).

[2] Jeffords, 2020 WL 9348167, at *1.

[3] Jeffords, 2020 WL 9348167, at *1.

[4] Jeffords, 2020 WL 9348167, at *2.

[5] Jeffords, 2020 WL 9348167, at *2.

[6] Jeffords, 2020 WL 9348167, at *2.

CLAIM FILE DISCOVERY AND THE WORK PRODUCT DOCTRINE

.

The Iowa Supreme Court summarized the law in this area in the context of a first-party bad faith case, Villareal v. United Fire & Cas. Co., 873 N.W.2d 714, 727 (Iowa 2016):

This means that claim files are not covered by the work product doctrine except insofar as they contain documents that would not have been prepared but for anticipated litigation. See Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 12:5 (3rd ed. 2011) (“Where the insured's complaint states a cause of action for first-party bad faith, the claims adjuster's files can generally be discovered. Work product objections will lie in particular cases.”).

          Unlike third-party bad faith cases, a first-party bad faith case does not provide any assistance by the nature of the bad faith claim either that the discovering party cannot obtain the substantial equivalent by other means, or that the discovering party cannot do without the requested materials in the preparation of its case without undue hardship.

As the Iowa Supreme Court noted, Discovery of Claim Files in first-party cases is discussed in 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 12:5 (West 3d ed. 2011; 2021 Supplements in process).  Discovery of Claim Files in third-party bad faith cases is discussed in 1 id., § 8:5.  Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

INDIANA SUPREME COURT HOLDS COMPUTER HACKING RANSOM COVERED BY INSURANCE.

Recently, the Indiana Supreme Court was called upon to interpret the phrase, "resulting directly from the use of a computer," in an insurance policy providing Commercial Crime Coverage with a Computer Fraud provision.  The policyholder, G&G Oil, paid ransom demanded by a computer hacker in that case.  G&G's claim was denied by its insurance carrier, Continental Western.

          The Supreme Court held that the ransom payment was a covered loss:

    Analyzing G&G Oil's actions in this case, its transfer of Bitcoin was nearly the immediate result—without significant deviation—from the use of a computer. Though certainly G&G Oil's transfer was voluntary, it was made only after consulting with the FBI and other computer tech services. The designated evidence indicates G&G Oil's operations were shut down, and without access to its computer files, it is reasonable to assume G&G Oil would have incurred even greater loss to its business and profitability. These payments were “voluntary” only in the sense G&G Oil consciously made the payment. To us, however, the payment more closely resembled one made under duress. Under those circumstances, the “voluntary” payment was not so remote that it broke the causal chain. Therefore, we find that G&G Oil's losses “resulted directly from the use of a computer.”

G&G Oil Co. of Ind. Inc. v. Continental W. Ins. Co., 165 N.E.3d 82 (Ind. 2021) (quotation follows Headnote 16 in the Westlaw version; pinpoint page numbers not available at this time.)

          The Indiana Supreme Court decided this issue after the trial court entered summary judgment for the insurance company and the intermediate appellate court affirmed.  The  Supreme Court reversed and remanded with instructions that neither the policyholder nor the insurance company was entitled to summary judgment on the record before it.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

THE REAL SECRET ABOUT NONDISCLOSURE AGREEMENTS.

Trying to Control the Means of Communication, books, articles, cases. computers, and cd's.  (Dennis J. Wall)

The real secret about Nondisclosure Agreements is that they don't actually keep all their secrets.  See Ifeoma Ozoma, A Nondisclosure Agreement Didn't Silence Me, New York Times, Wed., April 14, 2021, at A27, https://www.nytimes.com/2021/04/13/opinion/nda-work-discrimination.html?searchResultPosition=1.

Please read the disclaimer.  ©2021 by Dennis J. Wall.  All rights reserved.

P.S. TO "BIG LAW JOINS FIGHT TO PROTECT VOTING RIGHTS": HOW EXACTLY?

P.S.

The NYT online headline and subhead give a more accurate introduction to the story.  Kudos to the online editor who wrote the online headline and subhead; she almost makes up for the print editor in this case (almost): 

Defying Republicans, Big Companies Keep the Focus on Voting Rights / A coalition of law firms has joined business leaders in wanting to use their clout to oppose state legislation that would make it harder to vote.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

"BIG LAW JOINS FIGHT TO PROTECT VOTING RIGHTS": HOW, EXACTLY?

 

Georgia Recount, November, 2020 (John Amis / Atlanta Journal-Constitution)

It may be a story with substance to it yet:  Big Law Joins Fight to Protect Voting Rights, by David Gelles and Andrew Ross Sorkin, The New York Times, Tuesday, April 13, 2021, at B1.  As published, however, this NYT story was a bust.  This particular reporting did not fulfill the headline that someone besides the reporters wrote for it.  (Reporters rarely write the headlines for their own stories.  However, they almost always know what the headline is going to be on their story.) 

          I would like to say at the beginning that this is no criticism of the people whose bylines are on this story.  They are two of the more respected journalists at The New York Times.  They have earned that respect.  However, everyone has a bad day and this was just one of theirs.    If you want to be impressed with the knowledge that no-one is perfect, you can ask anyone who is a parent.

         The NYT reporters on this story did not feel the need to beef up their reporting to match the headline.  They mentioned once or twice that law firms have "formed a coalition" to challenge voter suppression laws, but that was all.  No details, no specifics, no facts.  Perhaps there was really nothing yet to report when this story was reported in the NYT.

         News stories are breaking slowly on other outlets.  For example, NBC News reports that 65 law firms are signing a letter to tell government officials to respect voting rights.  A much smaller number of law firms, apparently something on the order of 16 law firms, are 'committing' in some way to defend voting rights.  The NBC News story is here: https://www.nbcnews.com/politics/elections/top-private-law-firms-plan-swat-teams-fight-voting-laws-n1263891.

          I confess to a healthy skepticism of how far this story goes.  Let me explain.

          My skepticism comes from experience.  I have known lawyers for all of my professional life.  I am a lawyer.  It is hard to imagine lawyers working together on the same side amicably, suppressing their individual egos for the greater good, unless they are all paid by the same person or corporation.  But I have constantly been surprised in my life, and I am open to surprise now -- in fact, in this case, I am hoping for it.  These could be the people we have been waiting for, as the saying goes, and in the end they could be the ones who end up doing things that need to be done.

          So far, there's lots of noise frankly, and little action.  It's probably too soon to see the end of this or where it may go.  Time will tell ....

          But let's please get some facts in the meantime.  Or to borrow a phrase, this is a tale full of sound and fury, signifying nothing.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

"TOO SMART BY HALF": THE TRUE STORY OF FORBIDDEN CONVERSATIONS.

Judge's Gavel.  (Sun Sentinel)

We have been looking lately at four cases of Stipulated Protective Orders, each one decided on the same day two weeks ago as these words are written.

          The lesson to be learned here is that these four SPOs are not simply typical of each other; they are typical of SPOs in thousands of cases in all types of litigation in the 21st Century.

          One of the more chilling provisions that lawyers have written into their SPOs concerns what they call "SCOPE."  This is the provision in which they say how far they intend their order to reach.  In that paragraph, the lawyers have all agreed that the Protective Order they are proposing will cover any "conversations" that they may have "that reveal Protected Material."

         In some cases, such as Premier Valley Bank in the Eastern District of California, the lawyers have agreed that "Protected Material" is what they say it is; when they have written "CONFIDENTIAL--ATTORNEYS' EYES ONLY" on disclosure or discovery material, then it is protected from public view.  Premier Valley Bank, 2021 WL 1164684, ¶ 2.11, at *2.  In other cases, including in the Central District of California, recent provisions have lowered the bar for recognizing "Protected Material" to material on which the lawyers have written, simply, "CONFIDENTIAL."  E.g., Diarian, 2021 WL 1163962, ¶ 2.13, at *3; Ramos, 2021 WL 1163575, ¶ 2.14, at *2; Orellana, 2021 WL 1163234, ¶ 2.14, at *3.  In all these cases as in most SPOs if not every SPO, the lawyers prevent material from being disclosed because they say it should not be disclosed.

         This may prove to be "too clever by half," as they say.   If "conversations" about confidential material disclosed or discovered in one case are prohibited in other cases, then the lawyers who wrote these agreements seem to have prohibited themselves  from representing the same clients on the same issues in future cases.  This can have real and not simply theoretical consequences, of course.

         For example, the defendant in the Orellana case is Target.  It is reasonably foreseeable that Target will be accused in other cases -- including in future cases -- of many of the same things that Target is accused of in the pending Orellana case.  If that ever happens, then the same lawyers may be prohibited from having "conversations" necessary to defend their client, Target, in any of those cases.

         This provision has echoes of the record in a recent Nondisclosure Agreement or NDA case in the Southern District of New York.  The record in that case reflects that the political campaign that wrote the NDA in that case, also attempted to enforce it in an earlier proceeding by alleging that a former campaign employee violated the NDA "'when she and her attorneys made statements about her lawsuit ....'"  Denson v. Donald J. Trump For President, Inc., No. 20 Civ. 4737 (PGG), 2021 WL 1198666, at *6 (S.D.N.Y. March 30, 2021) (emphasis added).  The Court ruled that the threatened enforcement of this sort of contract that restricts speech, 2021 WL 1198666, at *10, was invalid and unenforceable.

         The SDNY Court's reasoning concerning a Campaign's NDA is instructive concerning SPOs which have similar secrecy provisions.  "As to the scope of the [nondisclosure] provision" in that case, "it is -- as a practical matter -- unlimited."  It was unlimited in its vagueness, 2021 WL 1198666, at *14, just as the SPOs are equally unlimited in their own vagueness.

         Further, the New York Federal Court ruled, "[w]hether the scope of the restrictions in the non-disclosure provision is reasonable must be considered in light of what the Campaign contends are the 'legitimate interests' protected by this provision."  2021 WL 1198666, at *15.  "But even with respect to those categories the terms are not defined," and people purportedly bound by the secrecy provision are left with no idea how to comply with it. 

         "The non-disclosure provision's vague, overbroad, and undefined terms also render it unduly burdensome."  In short, because the effect of these burdens "is to chill the speech" of Campaign workers "about matters of public interest, the non-disclosure provision is harmful not only to them but also to the general public."  2021 WL 1198666, at *15.

         The same could be said of the Stipulated Protective Orders' "vague, overbroad, and undefined" terms such as "Protected Material" marked as 'Confidential' or 'Confidential-Attorney's Eyes Only' by the pens of lawyers, and such as undefined "conversations" that somehow "reveal Protected Material."

         One further thought, which the Federal Judge expressed in the case in the Southern District of New York.  Even if the Court were to set aside other standards of analysis in that case, "the non-disclosure provision is unenforceable under basic principles of contract law."  2021 WL 1198666, at *16.  It is impossible for a person "to know what speech she has agreed to forego" under such provisions, so that the supposed contract simply does not exist, there being "no possibility of mutual assent."  2021 WL 1198666, at *16.

         It seems equally impossible for a person to know what kind of speech she or he has agreed to forego in the stipulations quoted in the series of articles under discussion here.  If it is impossible for a person to know what "conversations" or speech she or he has agreed to forego under such provisions, the supposed stipulation is similarly void for vagueness, ineffective as a contract and unenforceable.  Submitting such provisions to a Federal Judge or Magistrate should not turn them into gold by some judicial alchemy; unenforceable provisions do not become enforceable simply because they have been signed by a judge.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.   

TO WHOM IT MAY CONCERN: QUESTIONS ABOUT YOUR SECRECY AGREEMENTS.

There is just enough time for a few questions in this special Thursday edition of Insurance Claims and Bad Faith Blog.                                                                                                                                                                                                                                                         

1. How did it happen that so many lawyers in so many cases used the same language for their Stipulated Protective Orders?  The lawyers in these and other cases used much the same language when they drew up their Stipulated Protective Orders.  Some of that language has already been quoted in past articles posted here.

          At the moment, I have been addressing three unrelated cases from the Central District of California because they were all decided on the same day.  The lawyers in these cases all used the same or substantially similar language when they wrote and signed the proposed orders they sent to the Courts in their separate cases.

         I cannot find a Model Protective Order in the Local Rules of the Central District of California and these stipulations did not reference any.  So where did this same language come from, to which each of these lawyers had the same access?  If any readers know the answer to this question, or if any reader knows of a Model Protective Order, please let me know.  I gratefully appreciate the information in advance.

2. Who drew up these stipulations for protective orders in these cases?  In many cases it is impossible to tell who drew up the Stipulated Protective Orders that somehow find their way to Judges and Magistrates, who sign them.  In most cases, the dockets just do not reveal how these proposed orders got to there in the first place.

          In at least one of these three cases, on the other hand, the docket reveals who filed the proposed order.  Clearly, the party that files the proposed order is the party that wants it the most.  It is reasonable to assume of course that the party that wants it the most is also the party that wrote it.  In the Orellana case, it was Target, the main defendant, that filed the proposed Stipulated Protective Order.   Orellana v. Target Corp., DE 30, proposed Stipulated Protective Order (C.D. Cal. Case No. 2:20-cv-06665 SVW (KSx)). 

3. What do they mean when they say "return or destroy" any material in "any format reproducing or capturing any of the Protected Material"?  In basic terms, a "return or destroy" provision requires that a person bound by the Protective Order shall either return what all the lawyers call "Protected Material" in all these cases, or destroy it.  The Premier Valley Bank stipulation in a fourth case is typical.  The Premier Valley Bank case was also decided on March 26, 2021, but in the Eastern and not the Central District of California.  It is typical in this regard not only among the subset of what has now become four cases, but it is also typical of the SPO case law at large.

         The Premier Valley Bank stipulation contains the requirement in its "return or destroy" provision that "'all Protected Material' includes all copies, abstracts, compilations, summaries, and any other format reproducing or capturing any of the Protected Material."  Premier Valley Bank v. Nguyen, No. 1:20-CV-00900-NONE-EPG, 2021 WL 1164684, ¶ 13,  at *7 (E.D. Cal. March 26, 2021) (emphasis added).  What does this mean?  Each of the three Central District cases contains the identical language that has been quoted here.  However, none of these cases offers much if any insight into what this language means.

         In particular, the reach of this provision to "any other format" "capturing any of the Protected Material" is vague.  It is also overly broad.  A Nondisclosure Agreement purporting to keep matters from being disclosed was recently held void for vagueness and overbreadth in Denton v. Donald J. Trump for President, Inc., No. 20 Civ. 4737 (PGG), 2021 WL 1198666 (S.D.N.Y. March 30, 2021).  If the same reasoning is applied to the language quoted here, it too should be held "invalid and unenforceable" for the same reasons.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

(Image = Editing,  LexisNexis.)

THREE FROM THE C.D.: "GOOD CAUSE STATEMENT" IN ALL OF THEM.

(Editing.  Lexis/Nexis)

Continuing our look at the three cases decided by Magistrates in the Central District of California on the same day (March 26, 2021), each of the three contained orders with this same language in the lawyers' "Good Cause Statement":

This action is likely to involve ... private information for which special protection from public disclosure and from use for any purpose other than prosecution of this action is warranted.

(Italics and boldface added.)¹

          In each case, this is the opening statement of the lawyers' Good Cause Statement, their lede if these were journalists writing a report for a newspaper, presenting their Statement of Good Cause to the Judge so that she or he will enter this protective order.

          The first question that arises from this single sentence is what exactly is the "private information" the lawyers had in mind?  Presumably, the rest of their Good Cause Statement will tell you, their reader, all they want you to know.  You be the judge.  Whether what the lawyers tell you is enough for you to know what they are talking about when they say, "private information," is up to you just as it will be up to their judge.

          A second question concerns when and whether "special protection from public disclosure" is "warranted."  In the past, Courts in the Ninth Circuit where these orders were entered have struck down so-called "confidentiality" provisions based on a statement that the lawyers would only designate things as "confidential" when they had a "good faith belief" that the things were in fact confidential.

         In each of these cases decided on March 26th, "good cause" was mentioned exactly once after the title.  Lawyers who practice in Federal Court know that they can only obtain a protective order for "good cause shown" to the Federal Court.  After the title of their Good Faith Statement in these three cases, the lawyers wrote a long paragraph without ever referring to "good cause," until they reached the end.  Then they declared that they would designate information "confidential" only when they had a "good faith belief" that the information they designate "confidential" is, in fact, confidential and that there is "good cause" to seal it from public view.  The reason that the old language was rejected by the Courts in the Ninth Circuit (and by many Courts in other Circuits) is because it gave too much power to the vague "good faith beliefs" of lawyers.

          Unfortunately, this present language is not an improvement over the past.  It is nondisclosure in a new shroud.  The new suffers from the same illness as the old.

          Last but far from least is the most important thought of all behind the Stipulated Protective Order.  The lawyers declare that they all seek special protection from public disclosure in their unique cases -- so unique that the same exact words are used by every lawyer in three separate cases -- "from use for any purpose other than prosecution of this action."

          I have been involved in trials since the 1970s.  I know enough  about trials to wonder what information is EVER used exclusively for "prosecution of this action," such that you would want to bar its use "for any purpose other than prosecution of this action."  I can't think of any.  Do you think otherwise?

          The real purpose comes clear now.  The real purpose is to prevent the use of information concealed by the lawyers in one case ever to be used in any other case "other than prosecution of this action."

To be continued ....

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

¹I do not like ellipses much.  Those are the three periods (...) that indicate that what we are reading is not the full quote.  As noted, the opening words of the Good Cause Statement are substantively identical in each of the "three cases from C.D.," with a few variations on the words chosen by the different lawyers in the different cases.  Here then is the statement in full:

This action is likely to involve commercial, financial, proprietary, and/or other private information for which special protection from public disclosure and from use for any purpose other than prosecution of this action is warranted.

This or very similar language is found in Diarian, 2021 WL 1163962, at *1; Orellana, 2021 WL 1163234, at *1 (which adds the words that this action is likely to involve "trade secrets, pricing lists and other valuable research, development" and "technical"), and Ramos, 2021 WL 1163575, at *1 (which substitutes the word, "confidential," for "commercial" in the above-quoted provision).

CAN THERE BE BAD FAITH OFF-SHORING TAX LIABILITY?

 

(Photograph courtesy of NASA)

Jesse Drucker has written an informative investigative report about off-shoring activities designed to reduce tax liabilities.  Apparently, if a corporation large enough to move certain financial activities off-shore -- such as Bristol Myers in this article -- and if that corporation retains its own accountants and lawyers to give it opinions that the off-shoring activity is "legitimate," "that can protect the company from accusations that it deliberately broke the law."  (Apparently, we only know about this particular activity because reporters were able to pierce the redactions in a report which the I.R.S. posted a year ago in April, 2020 about the Bristol Myers activity which actually took place in 2012-2013.)   Jesse Drucker, Slip-up Bared Tax Trick Used by Drug Giant / Bristol Myers Disputes $1 Billion I.R.S. Bill, New York Times, Friday, April 2, 2021, at A1.

          This possibility of legalized chicanery, if you will, raised some questions about Bad Faith in my mind that went beyond what was reported here.  Is there immunity "from accusations that it deliberately broke the law" if, hypothetically, a company deliberately hires accountants and lawyers for the purpose of giving it bogus opinions so that the company can shield itself from liability?

           If there is a "bad faith" exception to this kind of immunity, what would it look like?  Barring authorities on point, resort to general principles of good faith law like the principles governing insurance companies might well provide the answers.

           In the interim, if anyone knows what provisions of statutes or regulations confer the kind of immunity at issue in the Tax Trick article, supra, please leave a Comment below or send me an EMail via my website and let me know.  I have researched them myself, including via Westlaw, and I have come up empty so far.  Thank you for any help you can give.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

PUMPING OUT PROPOSED SECRECY ORDERS, GOOD CAUSE IN HIDING.

(Image via Central District of California website)

In three cases decided on the same day, three different U.S. Magistrate Judges in the Central District of California granted three of the same Stipulated Protective Orders, without saying why.

          Each of the three Stipulated Protective Orders said the same thing, except in one case the parties added the additional words I have [bracketed] in the quotation below:

[Disclosure and discovery activity] Discovery in this action [are] is likely to involve production of confidential, proprietary, or private information for which special protection from public disclosure and from use for any purpose other than prosecuting this litigation may be warranted. Accordingly, the parties hereby stipulate to and petition the Court to entire the following Stipulated Protective Order.

          We may never know why any of these three actions actually required "special protection from public disclosure" and "from use" beyond use in the lawsuit.  Not a single one of the three proposed Stipulated Protective Orders said what the case was about.

          Neither did the Magistrate Judges say what any of the cases was about in any of these three orders.

          Each of the three Magistrate Judges said that they entered the Stipulated Protective Orders because the parties in the case showed "good cause," but we will never know what the good cause shown may have been because none of the three said in any of the three cases what was shown or by whom or when, at least before they entered their orders.

          These are the three cases:  

Diarian v. First Transit, Inc., No. 2:20-cv-02957-FMO (AFMx), 2021 WL 1163962 (C.D. Cal. March 26, 2021) (Alexander F. MacKinnon, USMJ);

Orellana v. Target Corp., No. 2:20-cv-06665 SVW(KSx), 2021 WL 1163234 (C.D. Cal. March 26, 2021) (Karen L. Stevenson, USMJ), and

Ramos v. FCA US LLC, No: 2:20-cv-10440-DMG-AGR, 2021 WL 1163575 (C.D. Cal. filed March 26, 2021) (Alicia G. Rosenberg, USMJ).

We are not done.  To be continued ....

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

"NOTICE-PREJUDICE RULE" NOT FOR CLAIMS-MADE POLICIES IN KENTUCKY.

In Darwin Nat'l Assur. Co. a/k/a Allied World Specialty Ins. Co. v. Kentucky St. Univ., ___ S.W.3d ___, No. 2019-CA-1811-MR, 2021 WL 1045716 (Ky. Ct. App. March 19, 2021) (stated not final), the Kentucky Court of Appeals faced a question of first impression.

    "The issue is whether the notice-prejudice rule applies entitling KSU to coverage under a claims-made-and-reported policy after providing notice of the claim to Allied World three days late."  Darwin, 2021 WL 1045716, at *1.  "KSU" is short for Kentucky State University, which is the policyholder in this case.

    Darwin a/k/a Allied World issued a "claims-made-and-reported" professional liability policy to KSU.  After a time, KSU was confronted with claims of wrongful discharge and intentional infliction of emotional distress.  Darwin, 2021 WL 1045716, at *1. 

   
(Blizzard; Image courtesy of NASA)

Darwin-Allied contended that KSU reported the claims late under the policy;

 

(Florida; Image courtesy of Dennis J. Wall)

KSU contended that Darwin-Allied had to prove that it was prejudiced by the allegedly late notice, and KSU argued that the carrier was not prejudiced.

    To resolve this open question in Kentucky, the Court of Appeals turned to among other sources the Restatement of Liability Insurance (Am. Law Inst. 2019) and concluded that KSU failed to satisfy the "claims-reporting condition of the policy" after consulting the Restatement.  Darwin, 2021 WL 1045716, at *5. 

    Further, on the facts including the parties' negotiations surrounding the insurance policy at issue in this case, the Court rejected "application of the notice-prejudice rule to claims-made policies."  Darwin, 2021 WL 1045716, at *6.

    Open questions make new law, one way or another; sometimes broad questions depend for their resolution on the facts of particular cases and policies.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved. 

HOW ESTOPPEL LIVES IN TEXAS IN THE 21st CENTURY.

Editing.  (LexisNexis)

"It is well established that as an equitable doctrine, estoppel requires that one who comes into equity must come with clean hands. If not, the doors of equity are closed to one tainted with inequitableness or bad faith relative to the matter in which he seeks relief, however improper the behavior of the other party may have been."   Nasser v. Fin. of Am. Reverse LLC, NO. 4:18-CV-4695, 2021 WL 966007, at *3 (S.D. Tex. March 15, 2021) (emphasis added).

           That said, the federal judge denied a motion to strike a new or amended complaint because of the strange and convoluted history of amendments and complaints and orders involved in that case.  The denial was without prejudice and the judge specifically wrote that if the motion was brought up again, it could be ruled on at trial.

           Unresolved intimations of bad faith in the eyes of that judge, it seems.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

IT MIGHT ABUSE DISCRETION, BUT HAPPY ST. PATRICK'S DAY ANYWAY!

 

(Photo by Dennis Wall)

"The district court abused its discretion in permitting Defendants and the DEA to file their pleadings under seal."  In re:  Nat'l Prescrip. Opiate Litig. (HD Media Co. v. U.S. Dep't of Justice), 927 F.3d 919, 939 (6th Cir. June 20, 2019).

           The appellate panel followed this reasoning tree. First, there is a distinction in the Sixth Circuit (as in many courts) "between secrecy in the context of discovery," which is subject to a "good cause" showing, "and secrecy in the context of adjudication, which is generally impermissible due to the 'strong presumption of openness' of court records."  In re:  Nat'l Prescrip. Opiate Litig., 927 F.3d at 938-39 (emphasis added).  The line of demarcation between discovery and adjudication is crossed when the material in question is put in the court file.  At that point, the public presumptively has access to it.  See In re:  Nat'l Prescrip. Opiate Litig., 927 F.3d at 939.

           This "strong presumption in favor of openness" can be overcome and documents can be sealed from public view when, first, the party seeking to seal the information shows a compelling reason to seal them and, second, the seal is "'narrowly tailored to serve that reason.'"  In re:  Nat'l Prescrip. Opiate Litig., 927 F.3d at 939 (citations omitted).

           This case dealt with the issue of sealing or redacting "pleadings, briefs, or other documents that the parties have filed with the court, as well as any reports or exhibits that accompanied those filings[.]"  In other words, it was not merely the sealing of "pleadings and briefs" filed in the court file that was at issue in this case.  Also at issue was the sealing of "any reports or exhibits" attached to them and therefore also "filed with the court[.]"  These are all "the sort of records" subject to the presumption of public access and therefore subject to the compelling-reasons-and-narrowly-tailored standard before such records may be sealed away from public view.  See In re:  Nat'l Prescrip. Opiate Litig., 927 F.3d at 939.

           In this case, these documents also merited a further, stronger presumption "in favor of openness, ... given the paramount importance of the litigation's subject matter."  In re:  Nat'l Prescrip. Opiate Litig., 927 F.3d at 939.

            Following this reasoning tree to the end, a two-judge majority on the appellate panel held that "[t]he district court abused its discretion in permitting Defendants and the DEA to file their pleadings under seal."  In re:  Nat'l Prescrip. Opiate Litig., 927 F.3d at 939.

The panel's ruling has never been appealed.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

NO COVERAGE, NO BAD FAITH MEANT SEVERANCE IN THIS CASE.

The usual rule is no coverage, no bad faith.  That can mean severance for the insurance carrier where there are multiple coverage and bad faith claims in the same case against it.    See, e.g., Optical Works & Logistics, LLC v. Sent inel Ins. Co., No. 15-163-JJM-LDA, 2021 WL 928275, at *3 (D.R.I. March 11, 2021) ("The Court notes the well-established practice of severing a bad faith claim from a breach of contract claim because a defendant cannot be liable for bad faith if it did not breach the contract.  [Citations omitted.]  So, the Court bifurcates these two claims and orders a separate trial of the breach of contract claim, which will be heard first and then, if the jury finds Hartford liable for breach, the trial on the bad faith claim will take place.").

Please read the disclaimer.  ©2021 Dennis J. Wall. All rights reserved.

FLORIDA CIVIL REMEDY NOTICE OBSCURES ADVANCED PAYMENT, BARS BAD FAITH.

(Gridview_imagefull / Florida Department of Agriculture and Consumer Services)

The Fourth District Court of Appeal affirmed dismissal with prejudice of a policyholder's bad faith claim against his homeowner's carrier in Julien v. United Prop. & Cas. Ins. Co., ___ So. 3d ___, No. 4D19-2763, 2021 WL 824438 (Fla. 4th DCA March 3, 2021).

           On the facts, the appellate court pointed out that the carrier advanced payment to the policyholder while the carrier's investigation of his fire claim was pending.  The carrier also put him up in a hotel during that time.   Julien, 2021 WL 824438, at *1.  

           These facts did not determine the appellate court's holding in this case, however.  Its holding that a bad faith claim was not available under Florida law in that case was based instead on the quality of the policyholder's Civil Remedy Notice:

    Julien's civil remedy notice, it seems, listed every statutory provision and every policy provision available to him as the insured. For example, Julien included fourteen statutory provisions followed by twenty-one sections of the Florida Administrative Code. Furthermore, as the “specific policy language” relevant to the violation, Julien referenced the entire policy[.]

Julien, 2021 WL 824438, at *3.

           This behavior ran afoul of the Florida statute that authorizes bad faith actions against first-party insurers like Mr. Julien's homeowner's carrier in this case.  The Florida bad faith statute requires specificity of what was violated, in the Civil Remedy Notice that accuses the carrier of misconduct.  In this case, the CRN was woefully inadequate in the eyes of both the appellate court and the trial judge:

    Here, Julien did not substantially comply with the specificity standard and this was more than a mere technical defect. Julien listed nearly all policy sections and cited thirty-five statutory provisions. As a result, we conclude the circuit court correctly determined that Julien failed to satisfy the requirement that the insured identify the specific statute and specific policy provision relevant to Universal Property's alleged violation.

Julien, 2021 WL 824438, at *3.  Although the Florida appellate panel in this case issued this substitute opinion in March 2021 to supersede and replace the opinion it released in September 2020, the result did not change.  The panel affirmed the trial court's dismissal of Mr. Julien's statutory bad faith claim with prejudice, and denied his motion to certify a question of great public importance to the Florida Supreme Court for resolution.

           As seen by the Florida appellate panel in this case, the answer to the question was already clear to Florida lawyers and judges, and to the Florida public.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

PRESUMPTION OF PUBLIC ACCESS, BUT NO REVERSAL IN FIFTH CIRCUIT.

(Photo © Dennis J. Wall)

Of all Federal Courts, one of the ones you might least expect to uphold the presumption of public access to court records is the Fifth Circuit Court of Appeals.  Yet that is exactly what they have done.

           In what the Court itself described as a "run-of-the-mill case," a unanimous panel chose to identify the differences among a protective order, a stipulated protective order, and sealing evidence.  The entire opinion is worth reading. 

           Here is the reason for decision:

    Judicial records belong to the American people; they are public, not private, documents. Certainly, some cases involve sensitive information that, if disclosed, could endanger lives or threaten national security. But increasingly, courts are sealing documents in run-of-the-mill cases where the parties simply prefer to keep things under wraps.

    This is such a case. The secrecy is consensual, and neither party frets that 73 percent of the record is sealed. But we do, for three reasons. First, courts are duty-bound to protect public access to judicial proceedings and records. Second, that duty is easy to overlook in stipulated sealings like this one, where the parties agree, the busy district court accommodates, and nobody is left in the courtroom to question whether the decision satisfied the substantive requirements. Third, this case is not unique, but consistent with the growing practice of parties agreeing to private discovery and presuming that whatever satisfies the lenient protective-order standard will necessarily satisfy the stringent sealing-order standard.

Hoa Le v. Exeter Fin. Corp., ___ F.3d ___, No. 20-10377, 2021 WL 838266, at *5 (5th Cir. March 5, 2021).

           After losing its head in this rousing tribute to public access, the Fifth Circuit panel returned to its normal and affirmed a summary judgment for the defendant.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

HEARING WITHOUT FORM, SEALING WITHOUT GOOD CAUSE SHOWN.

Courtroom (Pacific Standard)

In Hunter v. Booz Allen Hamilton, Inc., No. 2:19-cv-411, 2021 WL 790208 (S.D. Ohio March 2, 2021) (Vascura, USMJ), a U.S. Magistrate Judge held an "informal" conference during which she formally ruled.

    The plaintiffs in the case requested an "informal" conference to resolve their dispute with the defendants over the defendants' response to production requests.  Hunter, 2021 WL 790208, at *2.   They got their wish.  The Magistrate Judge held the conference and resolved the dispute by ruling that the Defendants need not supplement their production.  She repeated this ruling in a written opinion issued by the Court.  Hunter, 2021 WL 790208, at *2.     

    After issuing a formal ruling at an "informal" conference in Court, and confirming it in writing, the Magistrate Judge officially issued another ruling that the Clerk of Court should mark "SEALED" all the documents that the parties submitted during the conference and that the parties had marked "Confidential" or "Highly Confidential."  Hunter, 2021 WL 790208, at *4.   That was enough for the Magistrate.  There was no other "good cause" shown for sealing the documents.

   Federal Rules of Civil Procedure 5.2(e) and 26(c)(1) both require a showing of good cause before documents and other evidence can be sealed by a Federal Judge or Magistrate Judge.  With the exception of Hunter v. Booz Allen Hamilton, Inc., of course.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

CYBERSECURITY TIPS FOR NATIONAL CONSUMER PROTECTION WEEK!

Notebook Workplace Desk (Courtesy of Free Photos)

During this National Consumer Protection Week, the U.S. Cybersecurity and Infrastructure Security Agency (CISA) encourages consumers to review the Federal Trade Commission's NCPW resource page and review the CISA tips, among others, you will find there

https://us-cert.cisa.gov/ncas/current-activity/2020/02/28/national-consumer-protection-week

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

IT'S NATIONAL CONSUMER PROTECTION WEEK!

Consumer Rights and Responsibilities (Gridview_imagefull  / Florida Department of Agriculture and Consumer Services)

Check out National Consumer Protection Week events by copying and pasting this link into your browser:  https://uspirgedfund.org/blogs/blog/usp/national-consumer-protection-week-2021:

Mon    Report on CFPB.

Tues    ID theft and fraud

Wed    Filing taxes

Thurs   Robocalls

Fri       Auto loans

Sat      Price gouging

U.S. PIRG Education Fund identifies as an independent, nonpartisan 501(c)(3) organization.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

GIVING SHAPE TO SHAPE-SHIFTING STIPULATED PROTECTIVE ORDERS: GOOD CAUSE.

Editing.  (LexisNexis)

"The parties must provide the requisite good cause, which is missing from their pending motions."  Thus did the Court succinctly summarize its ruling in Ramos v. Continental Auto. Sys's, Inc., No. 18-1900-pp, 2020 WL 8617482, at *1 (E.D. Wis. Sept. 3, 2020). 

    In the eyes of the Federal judge in that case, the parties and their lawyers showed no more good cause than their agreement to keep various things "confidential."  This by itself was not good cause, the Court ruled:

    The court acknowledges that the parties have stipulated that they will maintain the confidentiality of certain documents. Paragraph 8 of their stipulated protective order states that all confidential information that is filed with the court must be filed in an envelope marked sealed and such information shall be kept under seal until further order of the court. Dkt. No. 19 at 5; Dkt. No. 20. However, this court requires that the parties comply with General Local Rule 79(d) and Seventh Circuit case law, providing good cause for the requested relief.

Ramos, 2020 WL 8617482, at *1.

     The requirement of good cause determined the outcome.  In moving to seal certain documents, the party requesting confidentiality did not show good cause at that time.  The lack of good cause took the vitality out of that request.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

"DON'T LET THE DOOR HIT YOU ON THE WAY OUT":

 SUA SPONTE REMAND OF UM BAD FAITH CASE.

GEICO General Insurance Company removed a case from Florida State Circuit Court to U.S. District Court on February 5, 2021.

           On February 9, the District Judge issued basically a "show cause" Order (unwritten, known in the Middle District of Florida as an "Endorsed Order") why the case should not be remanded, the requisite jurisdictional amount not appearing from the file.  The Federal Judge acted on her own motion.

           GEICO General responded on the last day given by the Federal Judge to show a jurisdictional basis for the case being in Federal Court.  That was February 16, one week to the day as it turns out, from the date that the District Judge issued the "show cause" Order.

           Seventeen days after GEICO General Insurance Company filed the removal papers, this case was remanded.  Rocha v. GEICO Gen. Ins. Co., No 8:21-cv-291-VMC-AEP, 2021 WL 672701 (M.D. Fla. February 22, 2021).

           The Federal Judge did not say so, but a review of PACER (Public Access to [Federal] Court Electronic Records) reveals that this was an Uninsured Motorist case in two counts, one count for insurance coverage and the other count for alleged insurer bad faith.  Rocha v. GEICO General Insurance Co., Complaint, Doc. No. 1-1 (Exhibit 1 to GEICO's Notice of Removal), filed Feb. 5, 2021 (M.D. Fla. Case No. 8:21-cv-291-VMC-AEP).

           The complaint did not allege a sum certain for the plaintiff's alleged damages.  Not surprisingly, the plaintiff alleged only the jurisdictional amount in Florida Circuit Court where he filed his lawsuit in the first place, $30,000.00.  GEICO argued this deficiency was made up by the plaintiff's demand for $100,000.00 policy limits, by his Civil Remedy Notice of Insurer Violation that the case "was clearly worth" more than the $100,000.00 policy limits, and by his allegation of a "permanent injury."

           The demand was legally insufficient to support federal jurisdiction in an amount in excess of $75,000.00 exclusive of interest and costs because "demand letters do not automatically establish the amount in controversy."  Rocha, 2021 WL 672701, at *2.

           The Court looked for "additional factual support."  It did not find additional factual support in the plaintiff's Civil Remedy Notice required by Florida's bad faith statute.  In Florida, the CRN is merely a condition precedent to suing for bad faith later.   Rocha, 2021 WL 672701, at *2.

           That left the possibility that there was additional factual support in this record that the plaintiff's damages established an amount in controversy in excess of $75,000.00.  The District Judge did not find additional factual support in what the record showed about the plaintiff's damages, either.  "The only concrete damages incurred fall below $37,000, and no information has been provided to reasonably calculate other categories of damages."  Rocha, 2021 WL 672701, at *2.

           The amount in controversy not having been established in this case, the Federal Court found that it lacked subject-matter jurisdiction and remanded the case back to Florida State Court.

           The Federal judge did not mention the insurer bad faith claim one time.  The only time that the Court mentioned "bad faith" at all was in a parenthetical quoted from another case that CRN's "'are precursors to bad-faith-failure-to-settle claims that may be brought against an insurer in the future.'"  Rocha, 2021 WL 672701, at *2 (citation omitted).  That was all.

           Clearly, claims of insurer bad faith do not command the attention of judges regardless of everything else.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

NO SECRETS ON GEORGE WASHINGTON'S BIRTHDAY & NEVER IN SIXTH CIRCUIT.

George Washington Statue (University of Washington)

In Sweeney v. Nationwide Mut. Ins. Co., No. 2:20-cv-1569, 2020 WL 8265654 (S.D. Ohio Oct. 6, 2020), a United States Magistrate Judge applied settled Sixth Circuit case law and denied permission to file an Amended Class Action Complaint in secret and under seal.

    The excuse offered by the parties in that case was that they had agreed to keep things a secret that showed up in the amended complaint.  "The parties’ agreement to maintain confidentiality, standing alone, does not constitute a compelling reason for filing under seal."  Sweeney, 2020 WL 8265654, at *1.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

NO COVERAGE CLAIM, NO BAD FAITH CLAIM.

EMPTY JURY BOX (Brennan Linsley / Associated Press)

In many cases in many Courts across the nation, the argument has taken hold that if there is no coverage claim, there is no bad faith claim.  The main exception has been statutory unfair claims handling practices claims which can exist independent of the common law.

    "Similarly, Pennsylvania courts have held that if the insurer properly denied a claim, the policyholder is unable to state a bad faith claim."  Kahn v. Pa. Nat'l Mut. Cas. Ins. Co., No. 1:20-cv-781, 2021 U.S. Dist. LEXIS 23090, at *11 n.5, 2021 WL 422607, at *5 n.5 (M.D. Pa. February 8, 2021).

The issues of "no coverage claim, no bad faith claim" and statutory exceptions, are discussed at length in Volume 1, DENNIS J. WALL, LITIGATION IN PREVENTION OF INSURER BAD FAITH § 3:28 (Third-Party Cases) and in Volume 2, id. §§ 9:1, 9:14 (First-Party Cases) (Thomson Reuters West 3d ed. & 2021 Supplements in process).

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

CLAIMING GOOD FAITH TO AMEND NO GOOD IN THIS CASE.

(Gridview_imagefull / Florida Department of Agriculture & Consumer Services)

The plaintiff in an insurance bad-faith case sought "to add an additional breach of fiduciary duty theory under her existing Count I, a common law claim for intentional infliction of emotional distress (“IIED”), and a prayer for punitive damages."  Bertels v. Farm Bureau Prop. & Cas. Ins. Co., No. 20-2298-JWB-ADM, 2021 WL 533827, at *1 (D. Kan. February 12, 2021) (USMJ).

           Writing that she proposed her amendment  in "good faith," the plaintiff based her proposed amendment on deposition testimony.   The Case Management Scheduling Order set a deadline for amendments on October 9 but set a discovery cutoff months later on February 5, 2021.   Federal Rule of Civil Procedure 11 provides a basis for amendment if there is evidence to support it or it is likely that the evidence will support amendment after a reasonable opportunity in the future.  But as the Magistrate Judge pointed out in this case, the depositions were already taken two months earlier, in November.  Bertels, 2021 WL 533827, at *4.

           Another crucial date was set by the plaintiff herself:  She did not file a motion for leave to amend based on the November depositions until January 29, 2021.  This did not meet the Court's definition of "good cause" for seeking amendment at this late date under Federal Rule of Civil Procedure 16.  Bertels, 2021 WL 533827, at *1.

            Further, said the Court, the plaintiff "has not shown diligence by waiting two months to move to amend after she learned of the information she says gives rise to the amendments."  Bertels, 2021 WL 533827, at *4.

           Moreover, it is noteworthy that the plaintiff already pleaded claims in this case of breach of fiduciary duty, along with her claims of bad faith, negligence, and breach of contract.  Bertels, 2021 WL 533827, at *2.  Her existing alleged claims were more than noteworthy; their existence was determinative of the outcome along with the passage of deadlines in the eyes of the Court in this particular case.

           The Court ruled that the plaintiff sought to allege some new legal theories based on the same facts.  The facts were already known.  That is why the plaintiff alleged her claims in the first place.  The Magistrate Judge accordingly denied the plaintiff's January 29 motion for leave to amend her insurer bad-faith complaint in this case.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

THIS FEDERAL JUDGE GAVE A DAMN.

 

(Thomson Reuters West via LinkedIn)

PUBLIC ALLOWED TO ACCESS TESTIMONY ABOUT MEDICAL IMPLANTS THAT ALLEGEDLY MAIM AND KILL.

"This multidistrict litigation proceeding ('MDL') involves personal injury cases brought against Defendants C. R. Bard, Inc. and Bard Peripheral Vascular, Inc. (collectively, “Bard”). Bard manufactures and markets medical devices, including inferior vena cava ('IVC') filters. The MDL Plaintiffs have received implants of Bard IVC filters and claim they are defective and have caused Plaintiffs to suffer serious injury or death."  In re:  Bard IVC Filters Prod's Liab. Litig., No. MDL 15-02641-PHX-DGC, 2021 WL 462592, at *1  (D. Ariz. MDL Case No. 15-02641-PHX-DGC Feb. 9, 2021).

           The Court explained what an IVC filter is made to do:  "The IVC is a large vein that returns blood to the heart from the lower body. An IVC filter is a small device implanted in the IVC to catch blood clots before they reach the heart and lungs."  Bard IVC Filters, 2021 WL 462592, at *2.

           The Court also summarized the plaintiffs' claims as a result of allegedly suffering "serious injury or death" from their use of the defendants' IVC filters:

           The MDL Plaintiffs allege that Bard filters are more dangerous than other IVC filters because they have higher risks of tilting, perforating the IVC, or fracturing and migrating to vital organs. Plaintiffs further allege that Bard failed to warn patients and physicians about these higher risks.

Bard IVC Filters, 2021 WL 462592, at *3. 

           The defendants defended on many grounds not pertinent to this particular article.  What is pertinent are the defendants' claims that voluminous deposition testimony should not be made available to the public, nor should the public see reams of documents, all introduced at trial.

           In this case, the Court disagreed.  The Court attached an Exhibit to the Order cited above listing the testimony and exhibits that were introduced into evidence at a bellwether trial in this Multi-District Litigation, and that the Court held accessible by the public despite the parties' Stipulated Protective Order and despite the defendants' claims of confidentiality.

           This Court's landmark ruling and detailed list of dozens of depositions and multiple Trial Exhibits can be found here:  In re:  Bard IVC Filters Prod's Liab. Litig., Doc. No. 21727-2, Court's List of Publicly Accessible Trial Testimony and Exhibits, Filed Nov. 13, 2020 (D. Ariz. MDL Case No. 15-02641-PHX-DGC), Download In re Bard IVC Filters Prods Liab. Litig. Doc. No. 21727-2 Court's List of Publicly Accessible Trial Testimony and Exhibits at a Bellwether Trial Not Confidential Filed Nov. 13 2020 (D. Ariz. MDL Case No. 15.02641.PHX.DGC).

           The Court's treatment of these arguments is noteworthy for several reasons, among them that an ancillary purpose of an MDL, not the main purpose certainly but nonetheless in the reported cases a side-effect if you will, is to shield from public view allegedly harmful behavior on a massive scale.

Another reason is the time it must have taken and the resources that were required to address these issues and compile this list in massive litigation like this.

           This federal judge clearly gave a damn.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

ASKING LIFE INSURANCE COMPANIES FOR GOOD FAITH IN A PANDEMIC.

(Image via Consumer Federation of America)

There is a reported contagion spreading throughout Europe.  It is not the coronavirus itself, but it is a phenomenon directly related to Covid.  It is the reported behavior of some life insurance companies delaying or denying people life insurance coverage based on their having contracted Covid or on being suspected in some way of having contracted Covid.

    In the United States, more than 25 million people have tested positive for the coronavirus as of this writing.   In the face of these developments, the Consumer Federation of America has not waited for the disease of denials to spread to the United States.

    The CFA has issued a letter to the National Association of Insurance Commissioners calling for a new model rule.  Faced with the contagion spreading from Europe in which life insurance companies have denied claims and applications from people with Covid-related issues, the CFA is urging reasonable behavior from life insurers in the United States.

    “We understand reasonable precautions are needed, but to harm COVID patients and their families again is unacceptable. State regulators need to step in and issue a rule to protect consumers from arbitrary insurance company practices. Transparency and reasonableness in underwriting must be the standard,” said J. Robert Hunter, CFA’s Director of Insurance and former Texas Insurance Commissioner, who is quoted by the CFA in its press release.   Press release, Recovered COVID-19 Patients Facing New Life Insurance Hurdles in Europe, Protections Needed for American Consumers /

CFA Urges the National Association of Insurance Commissioners to Adopt Model Rule for Life Underwriters Denying Coverage to Applicants Who Had COVID-19; Group Calls on Insurers to Take Voluntary Action (February 1, 2021), https://consumerfed.org/press_release/recovered-covid-19-patients-facing-new-life-insurance-hurdles-in-europe-protections-needed-for-american-consumers/.

     In issuing its request for a rule of reasonableness, the Consumer Federation of America is essentially asking that life insurance companies in the United States act in good faith.  Dealing fairly with applicants and policyholders is the essence of good faith -- and the surest way to avoid the dreaded extracontractual risk of lawsuits for "bad faith."

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

"MATCHING" REQUIREMENTS FOR REPLACEMENT PARTS: FLORIDA STATUTE, INSURANCE POLICY.

 

(Image courtesy of NASA)

In SFR Serv's, LLC v. Lexington Ins. Co., No: 2:19-cv-229-FtM-29NPM, 2021 WL 322367 (M.D. Fla. February 1, 2021), the Court addressed many motions in limine.  The Court's rulings on one of them is addressed here:  the insurance carrier's motion in limine to prevent evidence and argument on the issue of matching replacement roof tiles on damaged property.

    The Court's opinion was written for the benefit of the lawyers and the parties in that particular case because so many details come clear only from reading the parties' filings on the electronic docket known as PACER or "Public Access to [Federal] Court Electronic Records," and not from reading the decision alone. 

    The plaintiff in this case is a roofing company.  It contracted with a condominium association to repair roofs that were damaged during Hurricane Irma.  The association gave the roofer an Assignment of Insurance Benefits.

    The roofing company asked the carrier to pay for the cost of replacing roof tiles, in pertinent part.  In pertinent part, the carrier refused to pay.  The roofer sued the carrier.  Its complaint was originally filed in Florida Circuit Court, and was then removed to U.S. District Court by the carrier.

    The complaint may seem to be bare-bones upon review on PACER, but it was good enough to withstand the carrier's motion to dismiss in federal court.  Obviously, the complaint in this case contained all the allegations for claims upon which relief can be granted.  However, the controversy over replacement roof tiles is not alleged in the complaint.  To understand that controversy, we need to turn to the Federal Judge's February 1, 2021 opinion.

    The carrier "seeks to preclude," first, "any evidence, testimony and comment regarding the Florida 'matching' statute, Florida Statutes § 626.9744."  SFR Services, 2021 WL 322367, at *1.  Section 626.9744, as quoted by the Court in this case, provides in part pertinent to the Court's holding:

Unless otherwise provided by the policy, when a homeowner's insurance policy provides for the adjustment and settlement of first-party losses based on repair or replacement cost, the following requirements apply:

...

(2) When a loss requires replacement of items and the replaced items do not match in quality, color, or size, the insurer shall make reasonable repairs or replacement of items in adjoining areas. In determining the extent of the repairs or replacement of items in adjoining areas, the insurer may consider the cost of repairing or replacing the undamaged portions of the property, the degree of uniformity that can be achieved without such cost, the remaining useful life of the undamaged portion, and other relevant factors.

 

SFR Services, 2021 WL 322367, at *1.  To summarize what has just been quoted, the features of the Florida statute that the Court saw as pertinent to this case by quoting this language from the statute, were:

• The statute applies by its terms to "a homeowner's insurance policy."
• The statute applies to the "adjustment and settlement of first-party losses based on repair or replacement cost."
• When "the replaced items do not match" in important respects, then the carrier must take certain actions specified in the statute.

The Court quickly held that Section 626.9744 simply did not apply to the carrier in this case:  "The Policy at issue is a commercial policy, not a homeowner's policy....  Therefore, this statute does not apply to Lexington in this case, and this portion of the motion in limine is GRANTED."  SFR Services,  2021 WL 322367, at *1 (boldface by the Court).

    The question of excluding "evidence or argument concerning an alleged requirement to 'match' under the insurance policy at issue" was a different story, however.  The Court denied the carrier's motion and allowed the plaintiff "to present evidence and argument that the Policy requires 'like kind and quality,' which includes matching tiles."  SFR Services,  2021 WL 322367, at *2.

    The insurance policy at issue in the SFR Services case provided the carrier "with the option of repairing, rebuilding or replacing the damaged property 'with other property of like kind and quality....'"  On the basis of this policy language, then, the carrier's motion to exclude all evidence and argument that the policy requires "matching tiles," was quite simply denied.  "It is up to a jury to decide" whether the carrier's argument that the "non-matching tiles" it proposed to use to repair the condominium roofs damaged by Hurricane Irma constituted property "'of like kind and quality'."   SFR Services,  2021 WL 322367, at *2.

    There you have the twin rulings of the SFR Services Court.  They do not match, but they addressed two different things.  One was a statute.  The other was an insurance policy.  In this case, the insurance statute did not govern the insurance policy;  it didn't even apply to it.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.