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The Mix of Private Equity's Care for Profits, and Health Care's Concern for Patients.

Private equity and health care are a poor mix.  Their goals are almost mutually exclusive:  Profit Care vs. Patient Care.

    In the words of the authors of a recently published article in the Stanford Law Review, "Private equity's incursion into health care is especially concerning....  While it remains unclear whether private equity investment is fundamentally more threatening to health policy than other forms of acquisition and financial investment ... private equity presents a heightened threat of commercialization."  Erin C. Fuse Brown and Mark A. Hall, Private Equity and the Corporatization of Health Care, 76 Stan. L. Rev. 527, 527 (2024).

    Keep a clear eye on PE.

The mix of Private Equity and Medicare is examined by Dennis J. Wall in § 18C:6.50 of Volume 2, CATASTROPHE CLAIMS / INSURANCE COVERAGE FOR NATURAL AND MAN-MADE DISASTERS (Thomson Reuters Nov. 2024 Edition, and forthcoming July 2025 Edition).

Please read the disclaimer.  ©2025 Dennis J. Wall.  All rights reserved.  Interested in many things including Claims and Bad Faith Law?  Sign up for a free subscription to my Substack newsletter. 

Is Justice Juan Merchan the Modern "Man of La Mancha"?

(Author Photo)

I call him Judge because that’s what I’m used to saying.  You can call him Justice if you want.  Because that’s what he is doing.

A further thought occurred to me that I would like to offer to you so that you might also think about it.  The thought occurred to me after I published a previous article on Substack on January 6, 2025 and here on the Claims and Bad Faith Law Blog on January 8, 2025 with some thoughts on Judge Merchan’s Decision and Order of January 3, 2025.

Decision and Order of January 3, 2025 Page 1.  (Author Photo)

The further thought is this:  He did not have to set a sentencing date at all.

Like so many people, he could have just avoided trouble and let the sentencing issue come and go without stopping to write an order about it.  Surely Judge Merchan knew that entering an order would bring unwanted responses that would be unpleasant, at best.  He wrote the order nonetheless.

He said that he scheduled a sentencing hearing for two reasons.  First, it is his job.  The New York Statutes are laws, not simply recommendations.  It is the job of a trial judge in the New York State Courts to set a sentencing hearing when a Defendant has been convicted of crimes. 

Judge Merchan’s second reason is that he owes it to any Defendant to schedule sentencing within a reasonable time in any criminal case and so this Defendant “must be permitted to avail himself of every available appeal, a path he has made clear he intends to pursue but which only becomes fully available upon sentencing.”  (Decision and Order at page 17.)

Balancing the considerations raised by this case, Judge Merchan wrote, “a sentence of an unconditional discharge appears to be the most viable solution to ensure finality and allow Defendant to pursue his appellate options.”  (Decision and Order at page 17.)

It would have been easier for this judge to do nothing, to take no action and hope that he would be safe, or at least safer than if he denied Defendant’s Motion to Dismiss the Indictment and Vacate the Jury’s Verdict.  Judge Merchan denied the Defendant’s motion and scheduled the Defendant’s sentencing.  Even while scheduling the sentencing in this case,  Judge Merchan cut the Defendant some slack and allowed him the opportunity to appear for the sentencing hearing virtually rather than making this Defendant appear in person.  Judge Merchan did not have to do any of this, but he did.

We have entered a time when courage is mocked and honor will be forgotten if we do not memorialize them.  This is my small effort to remember what this one person has done in the face of enormous contrary pressures, to act honorably and with courage despite all of the many reasons that counselled against acting at all.

The entry of this Decision and Order under the circumstances, including at a time when so many people in prominent positions fail or refuse to perform the duties they once swore to do, reminds me of the ending lines of a song that was popular when the nation and I were younger, Man of La Mancha.   I offer you those lines here, slightly altered (you will see how and I am certain that you will understand why I thought of these lines):

And the world will be

Better for this

That one judge, scorned

And covered with scars

Still strove with his last

Ounce of coverage ....

To do justice.  Remember that we can all do justice.  Remember that at least one judge did.  We can all do justice and we can all remember.

Decision and Order of January 3, 2025 Page 18.  (Author Photo) 

The Defendant filed a number of appeals in different appellate courts after this Decision and Order was entered, seeking a stay.  Currently the reporting is candidly in a shambles as the people reporting obviously do not know the process themselves.  We know however that the Defendant filed a motion in the New York State trial court, the New York State intermediate appellate court, and in New York State's hightest court, the New York Court of Appeals, for an immediate stay of sentencing.  We also know from diligently following the reports that each of those courts has denied Defendant's stay motions.

There have also been reports that the Defendant is asking the U.S. Supreme Court for a stay, and reports that Justice Sonja Sotomayor is considering a stay motion before it gets to the full U.S. Supreme Court.  Maybe there is truth in all of the reports, as it appears that the Defendant and his lawyers are in another one of their frenzies so that maybe they filed stay motions in all of these courts.

Judges, including Justice Sotomayor, do your best.   Whatever happens, the fact of the Verdict and the fact of this Decision and Order will never change.

Remember.

Please read the disclaimer.  ©2025 Dennis J. Wall.  All rights reserved.  Interested in many things including Claims and Bad Faith Law?  Sign up for a free subscription to my Substack newsletter.   An earlier version of this article was published on Substack.

I call him Judge because that’s what I’m used to saying.  You can call him Justice if you want.  Because that’s what he is doing.

A further thought occurred to me that I would like to offer to you so that you might also think about it.  The thought occurred to me after I published a previous article on Substack on January 6, 2025 and here on the Claims and Bad Faith Law Blog on January 8, 2025 with some thoughts on Judge Merchan’s Decision and Order of January 3, 2025.

Decision and Order of January 3, 2025 Page 1.  (Author Photo)

The further thought is this:  He did not have to set a sentencing date at all.

Like so many people, he could have just avoided trouble and let the sentencing issue come and go without stopping to write an order about it.  Surely Judge Merchan knew that entering an order would bring unwanted responses that would be unpleasant, at best.  He wrote the order nonetheless.

He said that he scheduled a sentencing hearing for two reasons.  First, it is his job.  The New York Statutes are laws, not simply recommendations.  It is the job of a trial judge in the New York State Courts to set a sentencing hearing when a Defendant has been convicted of crimes. 

Judge Merchan’s second reason is that he owes it to any Defendant to schedule sentencing within a reasonable time in any criminal case and so this Defendant “must be permitted to avail himself of every available appeal, a path he has made clear he intends to pursue but which only becomes fully available upon sentencing.”  (Decision and Order at page 17.)

Balancing the considerations raised by this case, Judge Merchan wrote, “a sentence of an unconditional discharge appears to be the most viable solution to ensure finality and allow Defendant to pursue his appellate options.”  (Decision and Order at page 17.)

It would have been easier for this judge to do nothing, to take no action and hope that he would be safe, or at least safer than if he denied Defendant’s Motion to Dismiss the Indictment and Vacate the Jury’s Verdict.  Judge Merchan denied the Defendant’s motion and scheduled the Defendant’s sentencing.  Even while scheduling the sentencing in this case,  Judge Merchan cut the Defendant some slack and allowed him the opportunity to appear for the sentencing hearing virtually rather than making this Defendant appear in person.  Judge Merchan did not have to do any of this, but he did.

We have entered a time when courage is mocked and honor will be forgotten if we do not memorialize them.  This is my small effort to remember what this one person has done in the face of enormous contrary pressures, to act honorably and with courage despite all of the many reasons that counselled against acting at all.

The entry of this Decision and Order under the circumstances, including at a time when so many people in prominent positions fail or refuse to perform the duties they once swore to do, reminds me of the ending lines of a song that was popular when the nation and I were younger, Man of La Mancha.   I offer you those lines here, slightly altered (you will see how and I am certain that you will understand why I thought of these lines):

And the world will be

Better for this

That one judge, scorned

And covered with scars

Still strove with his last

Ounce of coverage ....

To do justice.  Remember that we can all do justice.  Remember that at least one judge did.  We can all do justice and we can all remember.

Decision and Order of January 3, 2025 Page 18.  (Author Photo) 

The Defendant filed a number of appeals in different appellate courts after this Decision and Order was entered, seeking a stay.  Currently the reporting is candidly in a shambles as the people reporting obviously do not know the process themselves.  We know however that the Defendant filed a motion in the New York State trial court, the New York State intermediate appellate court, and in New York State's hightest court, the New York Court of Appeals, for an immediate stay of sentencing.  We also know from diligently following the reports that each of those courts has denied Defendant's stay motions.

There have also been reports that the Defendant is asking the U.S. Supreme Court for a stay, and reports that Justice Sonja Sotomayor is considering a stay motion before it gets to the full U.S. Supreme Court.  Maybe there is truth in all of the reports, as it appears that the Defendant and his lawyers are in another one of their frenzies so that maybe they filed stay motions in all of these courts.

Judges, including Justice Sotomayor, do your best.   Whatever happens, the fact of the Verdict and the fact of this Decision and Order will never change.

Remember.

Please read the disclaimer.  ©2025 Dennis J. Wall.  All rights reserved.  Interested in many things including Claims and Bad Faith Law?  Sign up for a free subscription to my Substack newsletter.   An earlier version of this article was published on Substack.

Judges and lawyers are human beings.

New York County Courthouse.

  (New York Public Library Digital Collection)

The People of the State of New York, Decision and Order on Defendant’s Motion to Dismiss the Indictment and Vacate the Jury’s Verdict, Pursuant to NY Statutes.  

Judges and lawyers are human beings.  When they make rulings or rules, they make them as human beings.  With all that means.

 

It is not really true that some people are good and some people are bad.  We often like to think so.  I often like to simplify the people in my life that way, but I will readily admit that it’s not really an accurate way to describe people.  We all do good things and we all are sinners doing bad things.

That’s what it means to be a human being.  It means that sometimes we do good things and other times we do things that are not so good.  Some people, God knows, do things that are downright evil but in the long run I have learned that it’s probably best left to God to decide who they are, I think.  Here on earth, at least in the United States, we have the justice system.

At any rate, that was going to be my starting point for some articles that I would publish here in the near future at least:  Judges and lawyers are human beings when they make rulings and when they make rules; in short, when judges and lawyers do everything they do.

I have been a lawyer for the much greater part of Half a Century.  During that time I have known many judges and many lawyers.  I have seen them and worked with them and obeyed them including in courtrooms, in offices, in litigation, in mediation, and in negotiations.  All of those judges and lawyers have been human beings, by the way.

That is what I wanted to start out writing about in 2025.  The topic seems important.  The defense of cases will be a concern to many if not most of us given the coming behavior of suing people but more often threatening to sue you for real or imagined slights.  And for your actual behavior or an informant’s story of your deviation from the prevailing order of things, God forbid.

Either way, whether because of the fear of lawsuits coming against you, or because of the fear of threats of the government and its minions suing you, with the fear a result of the fact that most people do not know what it means to be involved in litigation or to share the company of judges and lawyers, I wanted to write about the defense of cases.  I can share with you what I have seen and heard and felt in litigation, from lawyers and judges, in courtrooms and in hallways of power.

However, Judge Juan Merchan cut that short.  You may recall Judge Merchan as the judge presiding over the criminal trial in New York State Supreme Court which resulted in a jury verdict of 34 felony convictions.  Judge Merchan cut short my writing plans by writing his Decision and Order of Friday, January 3, 2025.

By way of background, the Order was entered on Defendant’s Motion to Dismiss the Indictment and Vacate the Jury’s Verdict.  The Defendant’s Motion specifically invoked certain NY statutes which are identified in the Defendant’s Motion and addressed in the Court’s Decision and Order.

Three things stand out to me about this Order and I would like to share them with you here.

1. Under the New York statutes that the Defendant invoked, the Court was required to consider the character of the Defendant.

In other words, the Defendant and his lawyers gave Judge Merchan the opportunity to write about the Defendant’s character.  They, not Judge Merchan, made the Defendant’s character an issue.

The New York Statutes are the law.  They are not recommendations.  Trial judges like Judge Merchan are required to follow them because the statutes are the law.  The New York Statutes on which the Defendant based his Motion to Dismiss and to Vacate required the trial judge to consider the Defendant’s character.  It was not an option.

Think with me for a moment about what you or I would say about the Defendant’s character.  Instead of seizing this opportunity to deliver a sermon or write a speech, Judge Merchan’s response was not personal but instead described the Defendant’s character in terms of the system of justice.

Judge Merchan’s response is in two paragraphs out of 18 pages in his Decision and Order.

Here is what Judge Merchan wrote:

     Despite Defendant's unrelenting and unsubstantiated attacks against the integrity and legitimacy of this process, individual prosecutors, witnesses and the Rule of Law, this Court has refrained from commenting thereon unless required to do so as when ruling on motions for contempt of court. However, Defendant, by virtue of the instant motion, directly asks this Court to consider his character as a basis to vacate the jury verdict, and this Court must do so in accordance with the requirements of CPL section 210.40(1)(d).

     Defendant's disdain for the Third Branch of government, whether state or federal, in New York or elsewhere, is a matter of public record. Indeed, Defendant has gone to great lengths to broadcast on social media and other forums his lack of respect for judges, juries, grand juries and the justice system as a whole. Sec People's Response at Section IV. C. In the case at bar, despite repeated admonitions, this Court was left with no choice but to find the Defendant guilty of 10 counts of Contempt for his repeated violations of this Court's Order Restricting Extrajudicial Statements ("Statements Order"), findings which by definition mean that Defendant willingly ignored the lawful mandates of this Court. An Order which Defendant continues to attack as "unlawful" and "unconstitutional," despite the fact that it has been challenged and upheld by the Appellate Division First Department and the New York Court of Appeals, no less than eight times. Indeed, as Defendant must surely know, the same Order was left undisturbed by the United States Supreme Court on December 9, 2024. Good Lawgic, LLC, et al,, v. Merchan, 604 US 24A328 [2024]. Yet Defendant continues to undermine its legitimacy, in posts to his millions of followers. Indeed, this is  not the only instance in which Defendant has been held in contempt or sanctioned by a Court.  Defendant's character and history vis-a-vis the Rule of Law and the Third Branch of government must be analyzed under this factor in direct relation to the result he seeks, and in that vein, it does not weigh in his  favor.

(Decision and Order on Defendant’s Motion to Dismiss and Vacate, January 3, 2025, at pages 11-12.)

This part of the Order ends with the observation that considering the Defendant’s character in his sentencing “does not weigh in his favor.”  Notice that the language is restrained.  Very tightly restrained.  Judge Merchan could have written many things, but he said this in the way that a judge should say them, in the way that is expected from a judge.

A real judge that is. 

The best way to put these words in perspective, is to once again consider what you or I would have said in the same position.

I do not know Judge Merchan.  I haven’t always agreed with all his rulings.  There were times when I thought he might have handled things differently during the trial, and there were have been such times after the jury came back with its verdict.  This is not one of those times.

My conclusion from just the first thing that struck me about the Order:  This was written by a Judge, a Judge with a capital “J,” a real Judge, someone who does more than put on a robe and sit in judgment above the courtroom.  That is an important thing to know.

2. The Defendant and his lawyers made a “president-elect immunity” argument. That is, that since the Defendant is now the president-elect, he should have absolute immunity and the indictment and the jury’s verdict should be dismissed completely.

The second thing that struck me about this Order was that Judge Merchan could have written simply that this argument was rejected and the motion was denied.  That he did not tells us something.

Whether he intended to send us a message or not, he wrote instead a couple of times that he does not have the “power” to make a “president-elect immunity” defense exist where it never existed before, where no judge in any court ever made one in the past.

To me this is a message, intended or not,  to higher courts, especially to the current majority on the Roberts Court:  'The ball is in your court, U.S. Supreme Court, to fashion an immunity defense for presidents-elect or at least for this one.

But I won’t do it because I can’t.'

It is hard if not impossible for a lawyer or another judge to disagree with the proposition that it is not the place of a trial judge in the New York State Courts to invent a national immunity that never previously existed.

3. Sentencing is scheduled for January 10, 2025.

Just a day or so before the Order was released, the Defendant said that he would attend funeral services for President Jimmy Carter on January 9th in Washington, D.C.

Obviously this Order puts sentencing a day after that. 

It will be hard for the Defendant to complain about the scheduling although it seems reasonably certain, based on past performance inside and outside of courtrooms, that the Defendant and his lawyers will complain about the scheduling.  However, in this case Judge Marchan gave the Defendant the option of appearing virtually so he would not have to make the trip in person.  The virtual option takes the sting out of any real possibility for a complaint about scheduling.  Under the circumstances.

These are the three things that stand out to me about this 18-page Decision and Order of January 3, 2025.  Commentators have discussed and will continue to discuss many other aspects of this Order.  Other commentators have so far made the observation, for example, as Judge Merchan did in the Order itself,  that the Defendant himself invited sentencing after the election which he asserted continuously he was certainly going to win.  The commentary points out that as a result, the Court – and I would add, the public – could reasonably believe that the Defendant not only did not object to sentencing while he is the president-elect but that the Defendant actually invited sentencing after he became the president-elect.

But for the present, I have shared the three things that stand out to me from this Order.  I will continue to try to share my own experience when I think that it may shed some light on future legal goings-on.  It is my hope that you will find whatever light I can shed to be useful in both of us living with our heads up in the days ahead of us.

Please read the disclaimer.  ©2025 Dennis J. Wall.  All rights reserved.  Interested in many things in addition to Claims and Bad Faith Law?  Sign up for a free subscription to my Substack newsletter. 

DON’T MESS WITH MAKING MONEY IN NORTHERN DISTRICT OF TEXAS.

The Securities Exchange Act of 1934 (“Exchange Act”) requires “dealers” to register with the Securities and Exchange Commission, the purpose of registration being regulation of their conduct.  The Exchange Act defines a “dealer” as a person who is engaged in the business of buying and selling securities for her or his own account.  In common understanding, “a ‘dealer’ is a professional market-maker who matches the buyers and sellers of securities.”  Sec. & Exch. Comm’n v. Almagarby, 92 F.4th 1306, 1315 (11^th Cir. Feb. 14, 2024).

The Exchange Act exempts “traders” from registration and thus from the same sort of regulation as is accorded dealers.  The Exchange Act provides that a trader is a person who does not engage in a regular business of transacting in securities.

In the case that bears his name, the facts showed that Almagarby made $885,000.00 in quick turnarounds in 3 ½ years of transacting in securities.  He used modern methods in his business. 

In Almagarby, an otherwise divided panel of the Eleventh Circuit Court of Appeals took note of the modern role of securities transactions regulated by the Securities Exchange Act of 1934.  The Eleventh Circuit wrote that “[a]lthough the distinction between dealers and traders remains crucial for regulatory purposes, dealers’ and traders’ functions have somewhat converged. Today, high-frequency and algorithmic traders represent most of the trading volume in public market equities.”  Almagarby, 92 F.4^th at 1315. 

The Eleventh Circuit panel concluded that Almagarby made his business as a dealer rather than trader under the Exchange Act.  The District Court was correct in part here pertinent, the appellate panel said, in resolving the Securities and Exchange Commission’s civil case by ruling that Almagarby’s disgorgement was an appropriate remedy upon the facts presented.  Almagarby, 92 F.4^th at 1312.

The National Association of Private Fund Managers unsuccessfully filed an amicus brief on Almagarby’s behalf in the Almagarby case.

The National Association of Private Fund Managers did not give up.  It was more successful when it filed suit in its own name against the Securities and Exchange Commission a few months later in the Northern District of Texas.  In Nat’l Ass’n Private Fund Mgrs. v. Sec. & Exch. Comm’n, No. 4:24-cv-00250-O, 2024 WL 4858589 (N.D. Tex. Nov. 21, 2024), the Northern District of Texas ruled that the Securities and Exchange Commission exceeded its authority in enacting a Rule that take account of modern algorithms, as the Securities Exchange Act of 1934 did not address them.

The judge assigned to the Northern District of Texas case, Reed O’Connor, J., ruled that the SEC’s Rule was therefore vacated in its entirety, i.e., void.

The Almagarby case will be cited in the upcoming Edition of Catastrophe Claims / Insurance Coverage for Natural and Man-Made Disasters (Thomson Reuters, currently in its November 2024 Edition).

 Please read the disclaimer.  ©2025 Dennis J. Wall.  All rights reserved.  Interested in many things including Claims and Bad Faith Law?  Sign up for a free subscription to my Substack newsletter.    

Merry Christmas and Happy Holidays in 2024, and Happy New Year in 2025!

The Baby Jesus will appear in the Creche on Christmas Eve.  (Author Photo)

We will return after the Holidays.  In the meantime, Merry Christmas and Happy Holidays in 2024, and Happy New Year in 2025!

(Author Photo)

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.  Interested in many things including Claims and Bad Faith Law?  Sign up for a free subscription to my Substack newsletter. 

Christmas, Hanukkah, and Kwanzaa: All Say Hope in the Long Term.

In 2024, Christmas falls on December 25 as always.  Hanukkah begins on December 25 at dusk this year.  Kwanzaa begins the next day, December 26.

Merry Christmas! (Author Photo)

Hope is a spiritual muscle that needs exercise.

Hope is not optimism. The present day in particular does not generate optimism. There is no optimism for the near future at least.

But hope is long term. Using Rebecca Solnit’s definitions, optimism is a lot like its opposite characteristic, pessimism. Where pessimism is always certain that things will go wrong, optimism is always certain that it too knows the outcome which for an optimist will always be a good one.

Hope on the other hand, as Solnit phrases it, is the belief that things can get better even as we are fully aware of how bad things may be in the present moment. Hope lives in uncertainty but looks forward to working toward the possibility of a positive outcome, whereas optimism is always certain that the outcome will be positive.

I have found it useful to apply Rebecca Solnit’s definition of hope to the present day and compare it to Occupied Israel at the time of the Birth of Christ. I would like to share the comparison with you and hope that you will find it useful too.

Unlike today in America, then there was an entrenched regime. It was already in place. It was led by figures like Ceasar Augustus and a son of Herod the Great. Later it would be led by figures like Pontius Pilate and another king named Herod.

Today the United States looks to an incoming regime which in many ways is clearly in charge of the press, the Republicans in the House of Representatives, and our psyches already. They are in our heads. That is, they are in our heads unless we concentrate on what is essential to our daily lives.

Hope is the thing that is essential to our daily lives.

The belief that something more is coming. That indeed it is already here.

It can be misleading to look at the nation as it is now. The headlines take over the truth. The truth is not in the headlines.

As I wrote at the beginning, Christmas, Hannukah and Kwanzaa all fall at the same time this year. To a lawyer like me, a trifecta like that is not just a coincidence.

It signifies that something is at work. Something even more important than a jury verdict or the unchallenged opinion of a judge.

As I see it, Faith, Hope and Charity are at work alongside one another in this shared Holiday Season. Faith is the obvious starting point. Faith is central to all religious traditions.

Beyond that, faith is particularly needed at the present time and I do not mean at the Holiday Season. To me faith means focus. In writing this piece, for example, I have forced myself to focus on the Holidays and Hope at a time when there is so much temptation to comment on other things. I have no doubt for example that Joe Biden will sign a defense appropriations bill that strips healthcare away from some soldiers’ dependents because the dependents seek gender-affirming care which is covered under their military health insurance. Moreover, no reasonable person could mistake Chuck Schumer, Elon Musk, and Merrick Garland, or any other trio of politicians, billionaires, and nitwits for the Three Wise Men.

And so I do my best to avoid writing about all that stuff and concentrate instead on what is important. As I said, faith to me means focus. Having faith means staying focused.

Charity is next. At this time of year especially, it brings the familiarity and ease of sharing with others and caring about someone besides myself.

Sharing for my family means sharing food, clothing, donations of time and money. Or as many Catholic parishes like to frame it, donations of time, talent, and treasure.

Caring for us has manifested itself in texts, telephone calls, cards, and greetings. Hearing “Merry Christmas” can be uplifting all by itself, nothing more is required.

Next, hope involves looking around and taking a good look at the world with fresh eyes. Christmas, Hanukkah and Kwanzaa are still around. Centuries have been spent in the vain attempt to eradicate them but the attempts have failed miserably.

Hope remains. Hope abides. And hope lives.

Despite all attempts to remove it from every person’s way of living, from our daily lives, from our heads, hope remains.

What better sign of this is there, than Christmas, Hanukkah, and Kwanzaa all coming to us at the same time in this particular year?

The Holy Days – or what we can also call the Hopeful Days – are stronger than many people. Hope does not obey in advance. Hope does not resign in the face of hardship. Hope is much, much stronger than all of that.

Hope should not be judged by the people in power or who are about to come into power. Hope should be judged by people like us, people who refuse to make concessions to evil by calling it something else, but who instead rejoice in the truth.

And the truth this year, in 2024 soon to continue into 2025, is that hope is here and that hope, which thrives in the long term, will prevail in the long term.

Merry Christmas and Happy Holidays to all in 2024, and to all a Happy New Year throughout 2025!

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.  Interested in many things including Claims and Bad Faith Law?  Sign up for a free subscription to my Substack newsletter. 

ACTIONABLE MATERIAL MISREPRESENTATIONS UNDER THE FLORIDA BAD FAITH STATUTE.

Florida’s Good Faith Claims Handling Statute prohibits an insurance company from making a material misrepresentation of coverage available under its policy in order to effectuate settlement on less favorable terms than the coverage afforded under the policy at issue.  See Fla. Stat. § 626.9541(1)(i)(2).

Florida’s Good Faith Claims Handling Statute also prohibits an insurance company from misrepresenting facts or policy provisions relating to its coverages.  See Fla. Stat. § 626.9541(1)(3)(b).

Both provisions are made actionable by Florida’s Bad Faith Statute, Fla. Stat. § 624.155.

These provisions were at issue in the United States Sugar Corporation case where we left off in our last article posted here on Claims and Bad Faith Law Blog.  The U.S. District Judge “finds that the Plaintiff has adequately pled its statutory bad faith count” in that case.  U.S. Sugar Corp. v. Commerce & Indus. Ins. Co., No. 22-21737-Civ-Scola, 2024 WL 5040843, at *8 (S.D. Fla. Dec. 9, 2024).

Taking first the alleged misrepresentation of facts or policy provisions under Section 626.9541(1)(3)(b), the Court approved of findings by a U.S. Magistrate Judge on the plaintiff’s motion for leave to amend to add this count, and added:  “These same allegations also adequately plead that the Defendant misrepresented its coverage.”  United States Sugar Corporation, 2024 WL 5040843, at *8.

But it is the Court’s ruling  on the material misrepresentation to effectuate a settlement more favorable to the carrier that merits our close attention here.  For the guidance of Courts and counsel, here is what this Court held in this regard:

The Plaintiff pleads that the Defendant’s “claim handling and litigation tactics” “are intended to leverage the lowest possible payout.” FAC ¶ 10. The Plaintiff also alleges that “[a]fter wrongfully withholding millions of dollars and finally making a partial payment, C&I continued its effort to leverage U.S. Sugar into accepting less than what was still owed by serving a lowball Proposal for Settlement.” Id. ¶ 111 (emphasis added). These allegations are enough to plead that the Defendant engaged in bad faith conduct “for the purpose and intent of effecting settlement.” See Fla. Stat. § 626.9541(1)(i)(2).

United States Sugar Corporation, 2024 WL 5040843, at *9 (italics by the Court).

“In sum,” said the Court in this case, “the Plaintiff pleads the Defendant’s misrepresentations with adequate specificity.”  United States Sugar Corporation, 2024 WL 5040843, at *9.

The Court’s ruling on these allegations and on these statutory provisions is instructive for all cases, Courts, lawyers, policyholders, and carriers concerned with the similar provisions written into the National Association of Insurance Commissioners’ Good Faith Claims Handling Statute which has been adopted in some form in virtually every jurisdiction in America – and which is the basis of both provisions interpreted by the Court in the United States Sugar Corporation case.

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.  Interested in many things including Claims and Bad Faith Law?  Sign up for a free subscription to my Substack newsletter. 

CLAIMS FOR REIMBURSEMENT OF COVERED DEFENSE EXPENSES HELD “FIRST-PARTY.”

In U.S. Sugar Corp. v. Commerce & Indus. Ins. Co., No. 22-21737-Civ-Scola, 2024 WL 5040843 (S.D. Fla. Dec. 9, 2024), United States Sugar Corporation, a policyholder of Commerce and Industry Insurance Co., sued Commerce under various claims for insurer bad faith.  U.S. Sugar alleged that Commerce did not pay it, “as agreed under an insurance policy, defense expenses related to a putative class action concerning the Plaintiff’s pre-harvest sugarcane burning[.]”  U.S. Sugar, 2024 WL 5040843, at *1.

The Federal District Judge held that U.S. Sugar’s claims for reimbursement of covered defense expenses under its policy with Commerce were “first-party” claims.  As a result, the Court dismissed U.S. Sugar’s claims of common law bad faith with prejudice, because there is no common law of first-party bad faith under Florida law.   U.S. Sugar, 2024 WL 5040843, at *8.

A working definition of “first-party” insurance is the subject of § 9:1 in  Volume 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (Thomson Reuters West 3d Edition & 2024 Supplements).

The United States Sugar case decided other issues worth our attention, and these issues will be addressed in future articles in this space.

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THE FEDERAL TRADE COMMISSION INNOVATES THE WAY TO PUBLIC ACCESS.

Including, in this case, public access to evidence discovered during insurance bad faith litigation.

In Wright v. State Farm Fire & Cas. Co., No. 2:23-cv-179, 2024 WL 4979849 (W.D. Wash. Dec. 4, 2024), the policyholders filed two motions to seal.  Both were unopposed.  By rights, you might think that granting two unopposed motions would be automatic.  If you thought that, you would be wrong.

In this case, the policyholders’ motions to seal related to “several documents cited in their briefing [that] are covered by the parties’ stipulated protective order and should therefore be filed under seal.”  The Local Rules of the Western District of Washington where this action is pending, incorporate the “strong presumption of public access to the court’s files.”   To overcome this strong presumption, “a party seeking to file a document under seal must provide ‘[a] specific statement of the applicable legal standard and the reasons for keeping a document under seal, including an explanation of’ specific factors. LCR 5(g)(3)(B).”  Wright, 2024 WL 4979849, at *4. 

In the Wright case, the policyholders, the Wrights, were of course the parties “seeking to file a document under seal,” but they only provided a statement that State Farm had designated the documents in question “confidential” under a Stipulated Protective Order.

By rights, then, the Wrights’ motions to seal should simply have been denied because they did not provide the required specific statement in order to seal the documents.  But that is not what the Court in this case did.  Instead, this Court shifted the burden of proof entirely to the party claiming confidentiality, in this case, State Farm:

The Court does not reach the question of whether the presumption of public access has been overcome here. The Wrights seek to file the documents at issue under seal because State Farm “has designated [them] as confidential during discovery.” See LCR 5(g)(1)(A). Thus, to the extent State Farm wishes to maintain the confidentiality of these documents, it bears the burden of satisfying LCR 5(g)(3)(B).

Wright, 2024 WL 4979849, at *4 (emphasis added).

This was exactly the approach taken by the Federal Trade Commission in recent litigation, such as in Fed. Trade Comm’n v. Amazon.com Inc. (W.D. Wash. No. 2:23-cv-01495-JHC, which of course is the same Court as the Court in which the Wright decision was issued, and such as in Fed. Trade Comm’n v. U.S. Anesthesia Ptrs., Inc. (S.D. Tex. No. 4:23-cv-03560).  The FTC v. Amazon.com Inc. case is discussed in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:107.50 (Thomson Reuters West Publishing Co. & 2024 Supplements), and in 2 id. § 9:28.50, while the FTC v. U.S. Anesthesia Partners case is discussed in 2 id. §§ 9:28.50 and 9:30.   The discussion of both cases was accompanied by a prediction that perhaps litigants in insurer bad faith cases would take the position that a given document should be sealed only because another party (usually the defendant insurance company in such cases) designated the item “confidential” under a stipulation, leaving the burden of proof to rest where it should rest:   with the party that designated the item “confidential.”

That seems to be exactly what has now happened in the Wright case, for example.

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A TRUE STORY OF LOAN INSURANCE, MORTGAGE MACHINATIONS, AND APPRAISAL.

In Lynx Whole Loan Acquisition LLC v. Nationstar Mort., LLC, C.A. No. 2022-1203-LWW, 2024 WL 4943414  (Del. Ch. Dec.  3, 2024), a Vice Chancellor of the Court of Chancery of Delaware takes readers on an enlightening tour of the world of mortgage finance, syndication, and privatization.  The tour even includes a stop at the mystery altar of “EBOs,” or early buyout option loans.[1]

          What is of interest to us here is the claim that a valuation of mortgage servicing rights at issue in that case violated applicable New York law under the parties’ contracts, because the appraisals or valuations allegedly violated New York’s “fraud, bias or bad faith standard.”  Lynx, 2024 WL 4943414, at *20 & n.287.  (Yes, footnote 287!  There are even more after that.  Most of these footnotes are pain-staking citations to what must have been voluminous testimony and other evidence during the trial of this case, and which are a big reason that this opinion is so enlightening.)

          The Court ruled that the valuations at issue did not violate the New York standard; in fact, the Court pointed out that there was no evidence at all in the record that they did.

The world that gave and continues to give us collateralization, securitization, and many claims and issues of interest is touched upon throughout §§ 9:33 – 9:35 inclusive, in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (Thomson Reuters West Publishing Co. 3d Edition and 2024 Supplements).

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[1] Readers will have to read this excellent, enlightening opinion of a trial in order to find out how all this came together for one group of rich investors, their wealthy lawyers, and equity in the Court of Chancery of Delaware.

EXPERTS PARTICIPATING IN THE CLAIMS HANDLING PROCESS.

In Espinoza v. State Farm Lloyds, Case No. 1:23-CV-751-DII, 2024 WL 4919587 (W.D. Tex. Sept. 16, 2024), an experienced United States District Judge in Texas, the Hon. Robert Pitman, granted the homeowner’s carrier’s motion for summary judgment on all claims.

    The basis of all claims was damage allegedly caused by hail during the policy period.  The plaintiff-policyholder put forward the report of an expert who may have found hail damage, but affirmatively found that there was no "storm event"  on the date of loss alleged by the plaintiff.  Espinoza, 2024 WL 4919587, at *5 (“While this statement may raise a fact issue as to whether there is hail damage to the Property, it does not raise any fact issue as to whether the damage occurred during the coverage period of the Policy, let alone the alleged date of loss.”).

    Despite opportunities, the plaintiff declined to amend the allegation of the date when the alleged hail damage happened.

    The Court fairly reviewed evidence presented by the carrier and evidence presented by the plaintiff.  In a knowledgeable application of the law, the Court then granted the carrier’s motion for summary judgment after reviewing the evidence and comparing the evidence to all claims alleged by the policyholder in this case:  Breach of contract; “Extra-Contractual Claims,” and claims raised under the Texas Prompt Payment of Claims Act.

All types of experts and other witnesses are presented in first-party claims, including claims under homeowner’s policies as in Espinoza.  See an ”Overview of the Participants in the Claim Handling Process” by Dennis J. Wall, § 2:2 in 1 CATASTROPHE CLAIMS / INSURANCE COVERAGE FOR NATURAL AND MAN-MADE DISASTERS (Thomson Reuters Nov. 2024 Edition).

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Negotiating Claims and Avoiding Bad Faith While Conducting Settlement Negotiations.

In Staple v. LM Gen. Ins. Co., No. 24-3935, 2024 WL 4882649 (E.D. Pa. Nov. 25, 2024), the Court gave a short and insightful seminar on negotiating claims and avoiding bad faith in conducting them:

    Arbitrarily low settlement offers may be probative of bad faith when they are not reasonably based on the value of a claim. [Citations omitted.]   However, “an insurer’s low, but reasonable estimate of damages” does not “constitute bad faith.”  [Citations omitted.]  Similarly, “negotiating by offering a figure at the low end of the settlement range does not necessarily constitute bad faith, particularly when the valuation of the injuries and damages of a claim is difficult.”  [Citations omitted.]  Thus, to be probative of bad faith, an insurer’s settlement offer must be not only low, but unreasonably so given an objective valuation of the claim.

Staple, 2024 WL 4882649, at *5.

In the Staple UIM (underinsured motorist) case, the Court granted the insurance carrier’s motion to dismiss the bad faith claim but also granted the plaintiff leave to amend.

Bad faith claims in UIM cases, like the ones presented under the Pennsylvania bad faith statute at issue in Staple, are discussed throughout Chapter 9 of 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (Thomson Reuters West Publishing Co. 3d Edition & 2024 Supplements), but principally in § 9:12, Tortious Breach of Contract and the Tort of Bad Faith Breach, and in § 9:14, Express Statutory Causes of Action.

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LENDER FORCE-PLACED INSURANCE IS NOT A PROFIT PLAN.

In In re:  Blakey,  ___ B.R. ___, 2024 WL 4766216 (Bankr. W.D. Pa. Nov. 13, 2024), a secured creditor failed to meet its burden of proof on its claim for reimbursement of lender force-placed insurance premiums for coverage in excess of the worth of the bankrupt homeowner’s property.   In other words, the creditor-lender over-insured the property and requested a Bankruptcy Court to fund its extravagant premium payments.

          The Bankruptcy Court refused this request for payment, holding that the secured creditor-lender did not put on even a preponderance of the evidence in support of its request for money from the bankrupt’s estate.  In re:  Blakey, 2024 WL 4766216, at *3

          In doing so, the Court reached two holdings that apply to all lenders, even the ones who are not secured creditors in bankruptcy proceedings.  First, the lender at bar acted unreasonably in over-insuring the property in question, and the lender’s conduct must be held to a reasonableness standard:

In sum, it should be no surprise that the Lender would be held to an objective standard of reasonableness under the circumstances.

In re:  Blakey, 2024 WL 4766216, at *3

          The Court’s second holding goes to the heart of the force-placed insurance lending model, which is a model in which lenders rely on the existence of force-placed insurance rights to the exclusion of actually inspecting the property on which they are lending money:

    To the extent the Lender believes this result adversely impacts its existing business practices, the wound is self-inflicted. The Mortgage terms are within the Lender's control, so its practices should conform to its contractual rights and obligations. That said, the issue here seems more a failure of diligence than drafting because reasonableness is objective. Any potential exposure from force-placed insurance could be eliminated by simply confirming the property's range of value before obtaining a new policy.

In re:  Blakey, 2024 WL 4766216, at *3 (italics by the Court; boldfaced emphasis added). 

The background of lender force-placed insurance is explored in § 9:33 in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (Thomson Reuters West Publishing Co. 3d Edition and 2024 Supplements).  Substantive issues and the most frequently alleged claims and causes of action in the cases are examined in 2 id., §§ 9:34 and 9:35.  The author has familiarity with and passion for this area of the law, as he is also the author of LENDER FORCE-PLACED INSURANCE PRACTICES (American Bar Association Publishing).

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KEEPING THE SECRETS OF BUSINESS INFORMATION FROM COMPETITORS AND PUBLIC.

In BLST Northstar, LLC v. Santander Consumer USA, Inc., No. 22-cv-2210 (PAM/DJF), 2024 WL 4799847 (D. Minn. Nov. 15, 2024) (USMJ), a U.S. Magistrate Judge held that the documents and testimony at issue was subject to a common law presumption of public access.  (No word in the opinion about the Constitutional presumption of public access.)  This is apparently not an insurance case, but nothing in the opinion suggests that it does or does not involve insurance issues.

Holding that the common law presumption of public access applied to the materials at issue meant that the parties seeking secrecy had to demonstrate compelling reasons for keeping the materials secret.

The Magistrate Judge ruled that the parties met their burden in this case:  Writing after “reviewing” the secretive materials, apparently in camera, the Magistrate concluded that they contained “sensitive or propriety business information that is competitively sensitive or contractually subject to nondisclosure such that the parties’ and one or more third party's legitimate interests in maintaining confidentiality outweighs any public interest in unsealing the documents.”  BLST, 2024 WL 4799847, at *3.

The lesson for insurance cases may be this:  Whenever a party or the parties together, as in this case, can convince a magistrate that the materials they want to keep secret contain:

• “sensitive business information,” such as a claims manual perhaps,
• or that they contain “proprietary business information,” such as adjusters’ notes fed into a computer program,
• and that this information is “competitively sensitive” such that other policyholders or other insurance companies might take advantage of the defendant carrier’s disclosure,
• or that the information in question is ”contractually subject to nondisclosure” such as a nondisclosure agreement made by the policyholder, for example,

then the magistrate will enter an order that the materials will not be seen by anyone except the parties’ lawyers, perhaps the parties, and certainly the judge that decides their case.

But not by the public.

Secrecy determinations in third-party insurance cases are set out in §§ 3:107 through 3:107.100 in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (Thomson Reuters West Publishing Co. 3d Edition and 2024 Supplements), and secrecy rulings in first-party insurance cases are discussed at length in §§ 9:28 - 9:28.100, inclusive, in 2 id.

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TEXAS LAWYER GUIDES FIFTH CIRCUIT IN LOUISIANA BAD FAITH LAW.

In First Utd. Pentecostal Church v. Church Mut. Ins. Co., 119 F.4^th 417, 427 (5^th Cir. 2024), a panel of the Fifth Circuit Court of Appeals affirmed a trial judge’s holding which accepted as “credible” an expert’s adjustment to an Xactimate estimate of repair damage.  The panel said that this holding was not clearly error.

The trial judge sat in a federal court in Louisiana.  Despite this holding, the District Court held that the insurance company’s delay in paying hurricane damage claims was arbitrary or capricious or without probable cause, and therefore actionable as bad faith under Louisiana law.

The Fifth Circuit panel was composed of two Louisiana lawyers and one Texas lawyer.  The Fifth Circuit panel’s opinion was written by the Texas lawyer in this appeal from Louisiana.  The Fifth Circuit panel reversed the Louisiana District Judge and substituted its own judgment to the contrary.  Contrary to what the trial judge held in this regard, the Texas judge led the Fifth Circuit panel into a discussion of Louisiana insurance bad faith law and held that the record conduct of the carrier in question did not fall to the level of being arbitrary or capricious or without probable cause under Louisiana law.

Finding facts and legal holdings.  These can be hard things to deal with, apparently.

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ANOTHER FILED RATE DOCTRINE CASE APPEALED TO FEDERAL APPELLATE COURT.

What do you think the supreme court would do with this case if they get their hands on it?

In Wright v. USAA, No. 1:23-cv-11155-ADB, 2024 WL 4681749 (D. Mass. Nov. 5, 2024), a U.S. District Judge in Massachusetts denied an insurance carrier’s motion to dismiss coverage and bad-faith claims against it.

        The carrier then filed a motion to certify that Order for interlocutory appeal based on “the” Filed Rate Doctrine.  The carrier argued that a federal appellate court should decide the issue of whether it, the carrier, is immunized because it rates were approved by the Commissioner of the Massachusetts Division of Insurance.  The District Court granted the motion to certify its Order of Dismissal for interlocutory appeal based on “the” FRD.  Wright v. USAA, 2024 WL 4681749, at *4.

        The Court declared a dispute in the federal case law over the issue of whether to apply a Filed Rate Doctrine in any given case.  The Court landed on the idea that the origin of the federal courts’ dispute is whether the rates at issue were approved by a state or federal agency.  See Wright v. USAA, 2024 WL 4681749, at *3.

        It seems ill-conceived to quote a case from the U.S. District of Connecticut to establish the dispute, even in part, when the District of Connecticut’s case law has followed the idea that there is really only one Filed Rate Doctrine, and it is the Federal FRD.  The U.S. District Judge in Massachusetts did not entirely accept this phrasing of the FRD formula, however:

To be sure, states that have considered whether to apply the filed-rate doctrine have “overwhelmingly” embraced it, see S. Conn. Gas, 442 F. Supp. 3d [510, 516 & n.4 (D. Conn. 2020)] (listing states), but some states, Massachusetts included, vary in material respect from how federal courts approach the doctrine in cases involving state regulators.

Wright v. USAA, 2024 WL 4681749, at *3.  To say again, this seems ill-conceived.

        The misconception is illustrated by citation to case law from the U.S. District of Connecticut, but it does not begin there.  The misconception in this case begins with identifying “the” Filed Rate Doctrine as one and only one doctrine.  If it is true that whether the FRD applies because it makes a difference whether the rates in question have been approved by a state or federal agency, aren’t we really talking about two separate doctrines, one state and one federal?

        That’s certainly how at least some judges are looking at it.  To the Court’s great credit, it cited to these cases to illustrate the dispute.

        Soon we may get to see whether the judges on the panel of the First Circuit Court of Appeals see it that way too.

Cases involving “the” Filed Rate Doctrine defense, and whether and when a Filed Rate Doctrine defense has been applied in insurance cases, are explored at length in §§ 11:26 through 11:26.75 in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (Thomson Reuters West Publishing Co. 3d Edition & 2024 Supplements).

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POLICY LIMITATIONS PERIODS: CONTRACT CLAIMS AND PENNSYLVANIA STATUTORY BAD FAITH CLAIMS.

In Houtz v. State Farm Fire & Cas. Co., ___ F. Supp. 3d ___, No. 23-3579, 2024 WL 4556054 (E.D. Pa. Oct. 23, 2024), a Federal Judge in the Eastern District of Pennsylvania said that the suit limitations provision set out in the homeowners insurance policy at bar was enforceable in that case because it was reasonable.  Houtz, 2024 WL 4556054, at *2.

The Pennsylvania Bad Faith Statute required a different result because the statute contains its own suit limitations provision.  That is the limitations period to look at to determine a limitations defense to a Pennsylvania statutory bad faith claim.  Houtz, 2024 WL 4556054, at *3 n.1.

In this case, the Federal Judge consulted both the contractual limitations provision as to the policyholders’ breach of contract claim, and the statutory limitations provision as to the policyholders’ statutory insurer bad faith claim.  The Court in this case held that both claims are barred and accordingly dismissed the homeowners’ amended complaint with prejudice in this case.  Houtz, 2024 WL 4556054, at *5.

The Court in the Houtz case also began its examination of the statutory limitations period with this universal observation, which is also of universal interest in my judgment:  “Every insurance contract is governed by the well-established duty of good faith.”  Houtz, 2024 WL 4556054, at *3.  Clearly, for Mr. and Mrs. Houtz and policyholders similarly situated as they were in this case, the fact that there may be an implied covenant of good faith and fair dealing is not enough by itself to carry the day in an insurance bad faith case.

A raft of supporting case law is set out for the holding that a covenant of good faith and fair dealing is implied in every contract, including insurance contracts, in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 1:1, Brief Summary of the Area (Thomson Reuters West Publishing Co. 3d Edition & 2024 Supplements).  Contractual and Statutory Limitations Periods in first-party cases like Houtz are discussed in 2 id. § 11:15, Statutes of Limitations.

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CLASS OF ALL INSUREDS IN THE STATE? IT COULD HAPPEN.

In Desai v. Caresource Inc., ___ N.E.3d ___, C.A. No. 29965, 2024 WL 3738457 (Ohio Ct. App., 2d Dist., Aug. 9, 2024), the defendant health insurer was sued for multiple claims and causes of action:

    In March 2018, Plaintiffs filed a class action complaint for damages and declaratory and equitable relief against CareSource. The complaint alleged that Plaintiffs, on behalf of themselves and other similarly situated individuals, sought redress for CareSource's violation of [a pair of Ohio Statutes] and for CareSource's breach of contract, insurance bad faith, negligent misrepresentation, constructive fraud, and unjust enrichment.

Desai, 2024 WL 3738457, ¶ 3, at p. *1 (emphasis added). 

          The trial court denied class certification of the following class proposed in the complaint and granted defendant’s motion to strike the class allegations; the appellate court reversed and remanded for further proceedings, leaving it to those further proceedings where the following class will or may be certified:

All Ohio residents who purchased CareSource's Ohio Just4Me health insurance plans since 2014. 

Desai, 2024 WL 3738457, ¶ 30, at p. *6.

          Depending on the outcome in the “further proceedings,” of course, the Desai case may end up going to trial as a class action for insurance bad faith, among other things, against the defendant health insurance plan provider.

Note that the Ohio appellate court pointed out in this case that the Ohio Rules of Civil Procedure governing class action practice are based on the Federal Rules of Civil Procedure and are therefore to be consulted for guidance, along with the federal case law interpreting them.  It may well be that the obverse will become true here, and that federal courts might well consult State Court decisions like Desai for guidance in interpreting the Federal Rules of Civil Procedure which address class action procedure.

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Experts in Adjusting Claims.

In First Utd. Pentecostal Church v. Church Mut. Ins. Co., ___ F.4th ___, 2024 WL 4511240 (5th Cir. Oct. 17, 2024), one "Sonnier was offered as an expert in 'adjusting and general contract construction.'”  First United, 2024 WL 4511240, at *4.  Sonnier was offered as an expert by the policyholder, First United.

    Mr. Sonnier wrote a report while adjusting the policyholder's claims of damage in 2020 from Hurricanes Laura and Delta in Louisiana.  Sonnier relied on a computer program called Xactimate to conduct his adjusting activities during the course of which he prepared an estimate of the loss.  He testified that it is standard within the insurance industry to rely on Xactimate to prepare an estimate.  His testimony was unrebutted.  The Fifth Circuit panel therefore could not say that the trial court's qualification of Sonnier in this case was reversible error.  First United, 2024 WL 4511240, at *4.

    Further, Mr. Sonnier's report including his report's reliance on Xactimate was attacked on appeal as an impermissible ground for the trial judge to rely on concerning the valuation of damages.  However, there was no objection at trial and the insurance carrier was held to have waived the issue on appeal.  First United, 2024 WL 4511240, at *5.

    Not all was lost for the carrier in this case, however.  In the end, the Fifth Circuit panel reversed the trial court's judgment of insurer bad faith under Louisiana law.

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INSURER’S WAIVER OF OBJECTIONS TO CIVIL REMEDY BAD FAITH NOTICE.

In Bailey v. People’s Trust Ins. Co., 392 So.3d 123 (Fla. 4^th DCA 2024),  a Florida intermediate appellate court agreed with a homeowner-policyholder’s argument that “by responding to the CRN on the merits and failing to identify any specific defect with the CRN in its response, [her insurance carrier] waived the right to contest the validity of the CRN in the bad faith action. We agree.”  Bailey, 392 So. 3d at 124.

            By deciding to respond to the Civil Remedy Notice on the merits while  failing to identify a specific defect within the CRN, the homeowner’s carrier may have added icing to the cake, or in this case, to its waiver.  Under established Florida law applied in the Bailey decision, “an insurer waives its right to contest a defect in the CRN if it fails to identify the specific defect in its response to the CRN.”  Bailey, 392 So. 3d at 124.

            Period. 

            The appellate court accordingly reversed the trial court’s grant of summary judgment to the carrier on the issue of the CRN’s invalidity and remanded for determination of the bad faith claim.

Civil remedy notices and defenses to them that have been adjudicated in the first-party bad faith case law, like Bailey, are discussed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH §§ 9:21 and 11:24 (Thomson Reuters West 3d Edition & 2024 Supplements), while the defense of waiver generally in first-party bad faith cases is analyzed in 2 id. § 11:14.  Similar CRN issues are discussed in the third-party context in 1 id. §§ 3:30 and 5:57, and general waiver issues are discussed in the three types of third-party bad faith cases in 1 id. §§ 5:13, 5:32, and 5:48.

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DISCOVERING RESERVES IN A BAD FAITH CASE.

In Ockford v. Encompass Ins. Co., No. 24-1581, 2024 WL 4437820 (E.D. Pa. Oct. 7, 2024) (Hey, USMJ), a U.S. Magistrate Judge overstated the legal proposition behind discovering reserves in a UIM or underinsured motorist coverage case involving Pennsylvania substantive law and a bad faith claim.  Federal law governed work product issues and Pennsylvania law governed bad faith issues in this case.

Here is what the Magistrate Judge said initially: 

The determination of whether reserve information is discoverable in a bad faith case depends on whether the bad faith claim arises from a denial of coverage or the valuation of the claim. “[W]hen the bad faith claim is based on a denial of coverage and ‘does not involve the value of the claim or [the plaintiff's] estimation of liability ... the reserve information ... is neither relevant nor reasonably calculated to lead to the discovery of admissible evidence.’ ”  [Citations omitted.]

Ockford, 2024 WL 4437820, at *3.

Actually, the determination of whether reserve information is discoverable in a bad faith case depends on more than simply whether the bad faith claim is based on a denial of coverage or an incorrect estimate of value, i.e., of damages, as the Magistrate Judge recognized in the very next sentence of the opinion in this case:

    However, when the claim relates to the insurer’s failure to settle or involves a discrepancy in the valuation of the claim, the reserves are relevant and may be discoverable. 

Ockford, 2024 WL 4437820, at *3 (emphasis added).  The determinative feature, then, of discoverability of reserves in a bad faith case is whether “the claim relates to the insurer’s failure to settle,” which the Magistrate Judge naturally enough equated with “the valuation of the claim” in this UIM case.

She ruled in this case that the reserves information is discoverable:

Because Plaintiffs bring a bad faith claim based on the valuation of their claim, I find that the reserves are relevant and discoverable and not shielded by the work product doctrine.

Ockford, 2024 WL 4437820, at *4.

Decided case law concerning Discovery of Reserves on First-Party Claims like Ockford is discussed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 12:16 (Thomson Reuters West Publishing Company 3d Edition & 2024 Supplements).

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REASONABLENESS JUDICIALLY CONSIDERED: WHEN LIABILITY IS REASONABLY CLEAR, REASONABLE OFFERS.

In Urban v. Zurich Am. Ins. Co., ___ F. Supp. 3d ___, No. 21-CV-11182-AK, 2024 WL 4379927 (D. Mass. Sept. 30, 2024), a U.S. District Judge in Massachusetts considered whether the liability insurance carrier defendant had violated Massachusetts statutes by failing to make a reasonable offer after the policyholder’s-insured’s liability had become reasonably clear.

          As to whether the policyholder-insured’s liability was reasonably clear at any point during the underlying claim, this case involved the possibility of a jury finding of comparative negligence.  The Court pointed out that “[w]hile comparative negligence can, in some cases, prevent liability from becoming reasonably clear,” insurance carriers have an obligation to make a reasonable settlement offer, which they cannot avoid “by hiding behind the gamesmanship of anticipated success at trial.”  Urban, 2024 WL 4379927, at *21. 

          As to the reasonableness of the carrier’s offers, the Court noted that under Massachusetts law (as under the law in most if not all U.S. jurisdictions) all insurance carriers are subject to the following legal standard:  “Reasonableness can be measured by looking to the undisputed evidence indicating the damages suffered against the offer tendered.”  Urban, 2024 WL 4379927, at *6. 

          The Court in this case awarded double damages against the defendant carrier in the amount of “$2,841,358.26, plus attorneys’ fees” because it failed to make a reasonable offer after the liability of its policyholder-insured had become reasonably clear in the underlying case.  Urban, 2024 WL 4379927, at *25.

Statutory bases for liability in settlement, such as in the Urban case and Massachusetts General Laws chapter 176D, § 3(9)(f) which was the statutory provision involved in the Court’s determinations in that case, are discussed in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:28 (Thomson Reuters West Publishing Co. Third Edition & 2024 Supplements).

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.  Interested in many things including Claims and Bad Faith Law?  Check out my Substack newsletter. 

HOW FORTUITOUS FOR THE CARRIER THAT REFUSED TO PAY.

In Hansen Storage Co. v. Emp'rs Mut. Cas. Co., ___ F. Supp. 3d ___, No. 23-CV-362-SCD, 2024 WL 2272621 (E.D. Wis. May 20, 2024) (USMJ), the concept of fortuity as understood in Wisconsin law was expressed by a U.S. Magistrate in a bad-faith case in these terms:  "The proper focus is not whether the damage existed at the time the policy took effect, but rather whether the parties 'knew about or contemplated the damage's cause before the policy's issuance.'"  Hansen Storage, 2024 WL 227621, at *6.

    The commercial insurance policy at issue "does not list any specific covered perils.  Rather, it covers 'risks of direct physical loss unless the loss is limited or caused by a peril that is excluded.'"  Hansen Storage, 2024 WL 227621, at *4.  The Magistrate Judge described this as an "all risk" policy.  In Wisconsin, the burden of proof of fortuity is apparently placed upon the policyholder.  Hansen Storage, 2024 WL 227621, at *5.

    Here, the policyholder-plaintiff did not meet that burden in the eyes of the Magistrate Judge, who denied Hansen's motion for summary judgment.

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.  Judicial use and misuse of the "Fortuitous" concept as an Exclusion in decided cases involving all risks policies is explored by Dennis Wall in CATASTROPHE CLAIMS / INSURANCE COVERAGE FOR NATURAL AND MAN-MADE DISASTERS, § 7:4 (Thomson Reuters June 2024 Edition).

Interested in many things including Claims and Bad Faith Law?  Check out my Substack newsletter. 

INFORMATION ASYMMETRY, LONG-TERM CARE PREMIUMS, NO BAD FAITH HERE.

In Collins v. Metropolitan Life Ins. Co., ___ F.4th ___, No. 23-1351, 2024 WL 4247224 (8th Cir. Sept. 20, 2024), a panel of the Eighth Circuit Court of Appeals considered an appeal from a trial court order dismissing claims including claims of bad faith, intentional fraud and fraudulent concealment.  Although there were arguments that either Missouri or Illinois law applied, the panel ultimately decided that the claims were implausible under the law of either State and affirmed.

    To be more precise, although the panel stated in a footnote that its decision would be the same whether it applied Missouri law or Illinois law, in effect what the panel decided was that the fraud claims were implausible because they did not meet the threshold of Federal Rule of Civil Procedure 9 requiring specificity in alleging fraud.

    Although the trial court ruled on the basis of the filed rate doctrine in this case involving alleged fraud and concealment of fraud in the insurer's raising of long-term care insurance policy rates, still the panel declined to apply the filed rate doctrine here because of its ruling that the claims presented were implausible to begin with.

    As to the alleged bad faith claims here, the panel noted that the "information asymmetry" between an informed long-term care insurer and a relatively uninformed consumer did not establish a fiduciary relationship between them.  Collins, 2024 WL 4247224, at*4.  The panel affirmed the trial court's dismissal of all claims on the ground that the claims were implausible.

    The role played by information asymmetry in decided first-party cases like this one in the Eighth Circuit, is explored in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:5, The Question of Bad Faith -- Presence or Absence of Fault (Thomson Reuters West Publishing Co. 3d Edition & 2024 Supplements).

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.

THE DISCOVERABILITY OF POST-LITIGATION CLAIM EVALUATION AND REVIEW MATERIALS.

In Lynn v. State Farm Mut. Auto. Ins. Co., ___ F. Supp. 3d ___, No. 23-cv-03222-MDB, 2024 WL 4180731 (D. Colo. Sept. 6, 2024), a U.S. Magistrate Judge dealt with the thorny issue of discovery of post-litigation claim evaluation and review materials.

          The dispute was presented to the Court by the plaintiff-policyholder’s, Ms. Sheree Lynn’s, motion to compel.  Injured in an automobile accident, the other party’s insurance carrier paid her that policy’s bodily injury liability limits.  Ms. Lynn then claimed the underinsured motorist (UIM) benefits under her own policy with State Farm. 

            Ms. Lynn and State Farm disagreed over “the nature and extent” of Ms. Lynn’s injuries.  Lynn, 2024 WL 4180731, at *1.  She eventually brought the instant suit for insurer bad faith.

          “Plaintiff seeks an order requiring the production of Defendant’s post-litigation claim review materials.”  Lynn, 2024 WL 4180731, at *1.   Put another way, Ms. Lynn requested among other things, materials which State Farm obtained in discovery in this bad faith case.  Among the materials State Farm obtained in discovery in this bad-faith case were “over 40+ medical and employment Authorizations” from Ms. Lynn’s “’employers and medical providers,’” she told the Court.    Lynn, 2024 WL 4180731, at *1.

            She was not interested so much in these discovery materials per se, as in materials reflecting State Farm’s evaluation and review of this and other information after the bad-faith litigation commenced.   

            State Farm’s response to the plaintiff’s requested discovery included what the Court described as an admission “that it ‘continues to review information obtained post-suit[.]’  (Doc. No. 30 at 2-3, 5.)”  (All brackets and parentheses by the Court.)  The Court’s response was succinct insofar as establishing a right in this case to relevant, unprivileged claim evaluation material obtained and reviewed by State Farm regarding Lynn’s UIM claim after the bad-faith litigation began:

Plaintiff is entitled to know whether that review has been conducted in good faith and whether Defendant is adhering to its duty of good faith and fair dealing.

Lynn, 2024 WL 4180731, at *4.   That may seem to an outside observer to have ended the matter, but it didn’t.

          The reason that this was not the end of the matter lies in how the Court got to this point.  The Court’s inquiry into discoverability of these materials was informed by guidance from two sources:  federal proportionality of discovery, and Colorado doctrine concerning the duty of good faith and fair dealing here.  To the Court, proportionality of discovery in federal court meant that the defendant carrier should not be required to produce information for which the defendant “claims work product or privilege protections over post-litigation claim review materials,” i.e., “those objections” which the defendant “reflected in a [future] privilege log.”  Lynn, 2024 WL 4180731, at *4.   Parenthetically, the Court had previously noted that up until this point, “so far as the Court can tell,” the defendant had not yet put these materials on a privilege log to support its “work product argument[.]”  Lynn, 2024 WL 4180731, at *1.

          The second source informing the Court’s resolution of the policyholder’s motion to compel production of the post-litigation claims evaluation and review materials in this case, was Colorado law.  After wending its way through the thicket of Colorado cases involving the duty of good faith and fair dealing in third-party and in first-party bad faith cases (including at least one UIM case), the Court held that Colorado law would recognize a continuing duty of good faith and fair dealing in this case even after the bad-faith lawsuit was filed:

An insurer who continues to evaluate a claim is necessarily creating new discoverable documentation while the case is pending. However, unless and until Colorado law changes to relieve an insurer of its post-litigation duty of good faith, that duty must be tested through discovery. The difficulties this presents for courts should not give insurers a free pass on that discovery. Additionally, courts have many tools at their disposal to manage discovery, curtail it where necessary, and stave off discovery abuses. [Citation omitted.]   Thus, the concern over process will not deter this Court from ordering relevant and proportional discovery that will facilitate adjudication on the merits. [Citations omitted.]  Insureds are entitled to know whether their insurers continue to operate in good faith,, and post-litigation claim review materials are relevant to that determination.

Lynn, 2024 WL 4180731, at *4.   

          In the end, the issue of discoverability of post-litigation claim materials reviewed and evaluated by the defendant carrier in this insurer bad faith case required the Court to resolve the tug of Federal proportionality with the pull of State law.  The Court resolved the dispute in this matter with this succinct holding:

  CONCLUSION

For these reasons it is

ORDERED that Plaintiff’s Motion (Doc. No. 24) is GRANTED to the extent Defendant does not log the communication/document on a privilege log. It is DENIED without prejudice to the extent Defendant logs it on a privilege log within 10 days of this order.

Lynn, 2024 WL 4180731, at *4 (boldface in original).

The Court’s holding is so concise that I hesitate to say anything else about it.  It could not be clearer.  But, perhaps because I am a lawyer, I will speak.  The ball is now in the insurance carrier’s court (no pun intended) and this case will go from there, depending on what the carrier does.

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.  Interested in many things including Claims and Bad Faith Law?  Check out my Substack newsletter.  

THE SEALING AND UNSEALING OF EXHIBIT 4.

In Dye v. Omni Hotels Mgt. Corp., NO. 3:23-CV-692-WWB-PDB, 2024 WL 4170144 (M.D. Fla. Sept. 12, 2024) (Barksdale, Patricia D., USMJ),  the sealing of Exhibit 4 is something that concerns us even though this is not an insurance bad faith case.  Here’s why it is of concern to us who practice in insurance bad faith cases.

    Exhibit 4 is the defendant's “Loss Prevention Standard, Water Management Plan, and Operational Standard for Swimming Pool/Spa & Decorative Fountain.” S-Docs. 28-4/30-3.

Dye, 2024 WL 4170144, at *2.  The injured plaintiff filed this exhibit to establish that the defendant hotel failed to keep the area where the plaintiff was injured “’free of hazards’” and that the defendant’s policies were “’deficient’” in any case.

The plaintiff filed Exhibit 4 under seal because he had to, given his apparently stipulated protective order with the defendant, a usual provision of which is that if there is a contest over confidentiality, then the party seeking to have the “confidential” label removed must file the document under seal with an appropriate motion.

In this case, the defendant hotel also filed a motion to seal Exhibit 4.  The Court revealed why Exhibit 4 is so important to the hotel when it noted that “Exhibit 4 contains the defendant's confidential and proprietary internal guidelines, which are not available to the public.  Doc. 35 at 2; Doc. 36 at 5.” Dye, 2024 WL 4170144, at *2.

The Court granted the motions to keep Exhibit 4 under seal but pointed out that if the document was introduced into evidence at trial, the seal would be removed.  Dye, 2024 WL 4170144, at *2.

Similarly, if a defendant insurance carrier should succeed in keeping its own “confidential and proprietary internal guidelines” a secret under seal in any given case, should it establish any, then they too would be subject to public access if they were introduced at trial.  That might conjure up images of winning the battle during discovery but losing the war at trial.

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.  Interested in lots of things including Claims and Bad Faith Law?  Check out my Substack newsletter.

NO DEMAND IS NECESSARY. NEVER.

The duty of a liability insurance carrier to act in good faith in settlement does not depend on a demand from the injured claimant.  Not now, not for years.

        “The modern view is that absence of a third party's settlement demand will not insulate a liability insurer from exposure to liability to pay sums beyond its policy limits as a result of its bad faith and unfair dealing in settlement.  Regardless of other situations where good faith duties apply, courts now impose the good faith duty in settlement whenever:

• Liability is high
• Damages are relatively great
• The insured has either excess insurance or other financial resources beyond the liability insurer's policy limits, or the insured will be exposed to judgment beyond the policy limits.”

1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:14, Demand From Third Party (West Publishing Co. 3d Edition & 2024 Supplements)(citing authorities, pro and con; citations omitted here).

          From time to time a commentator will nonetheless declare that a liability carrier must receive a settlement demand, or what the injured claimant’s attorney will almost certainly call a settlement offer, before the liability carrier has good faith settlement duties. Sometimes these statements appear without warning in respected publications like Recent Case, Louis Jimenez v. GEICO Secure Insurance Company, ___ F. Supp. 3d ___, 2024 WL 1623155 (D. Nev. April 12, 2024), 46 Ins. Litig. Rptr. 397 (Aug. 19, 2024).  The Jimenez case and this case comment both illustrate the courts’ move away from concentrating on the presence or absence of a settlement demand in the bad faith case law.

          The comment recites that the judge in the Jimenez case “found the reasoning” in an earlier case “persuasive and applicable to Jimenez’s case.”  46 Ins. Litig. Rptr. at 398.

          No, he didn’t.

          The earlier case was  Chowning v. Nationwide which was decided by a magistrate judge in Nevada a year earlier.  Chowning v. Nationwide Ins. Co. of Am., No. 22-cv-00798-CDS-EJY, 2023 WL 2971435 (D. Nev. 2023) (USMJ).

          As the Jimenez Court wrote, “GEICO argues that I should follow Chowning, which held that a [statutory unfair claims settlement practices] claim was futile without a settlement demand from the injured party.”  Jimenez, 2024 WL 1623155, at *3.  But the Jimenez Court disagreed.  The district judge in that case did not find the decision by a magistrate judge in Chowning to be “controlling law”:

        The Supreme Court of Nevada has not decided the precise question of whether a settlement demand from the claimant is a prerequisite to an insurance bad faith claim. See Chowning, 2023 WL 2971435, at *6. Neither party cites controlling law on this point.

Jimenez, 2024 WL 1623155, at *3 (emphasis added).

          “However,” as the comment described the Jimenez Court’s decision,  “the court emphasized that this duty does not extend to proactively initiating settlement negotiations without a request or demand from the claimant or their representatives.”  46 Ins. Litig. Rptr. at 398.

          Again, no, it didn’t.

          Nevada law was involved in the Jimenez case and the Jimenez Court applied Nevada Supreme Court decisions which establish that a liability carrier cannot be held liable for its alleged bad faith in settlement if it “’has no opportunity to settle within policy limits … [o]r, if settlement is possible beyond policy limits, … that the insured would be willing to contribute the excess amount.’”  Jimenez, 2024 WL 1623155, at *2, quoting Allstate Ins. Co. v. Miller, 125 Nev. 300, 212 P.3d 318, 328 (2009) (en banc).

          Applying the Nevada law of bad faith, as interpreted by the Nevada Supreme Court and followed in the Jimenez case, the policyholder’s complaint at issue failed in its claim of bad faith in settlement because it did not contain any allegation that the defendant carrier had “an opportunity to settle, either within policy limits or outside of policy limits with Jimenez’s contributions.”  Jimenez, 2024 WL 1623155, at *3.

          Without an allegation that the defendant carrier had an opportunity to settle, both the common law claim of bad faith and the statutory claim of bad faith failed, and for that reason both of these claims were dismissed.   Jimenez, 2024 WL 1623155, at *3 & *4.

          The Jimenez decision is thoughtful and researched.  Not once did the Jimenez Court write that a demand (or offer) is necessary to a viable claim of bad faith in settlement; what Nevada law requires is what all modern jurisdictions require, which is an opportunity for the liability carrier “to settle within policy limits or in excess of policy limits with contribution” from the bad-faith plaintiff.  Jimenez, 2024 WL 1623155, at *4.

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.

BAD FAITH IN SETTLEMENT NEGOTIATIONS; “WASTING” POLICY DEFINED.

In Jenkins ex rel. CLJ Healthcare, LLC v. Prime Ins. Co., No. 23-4113, 2024 WL 4040386 (10th Cir. Sept. 4, 2024), the Tenth Circuit Court of Appeals applied the bad faith law of Utah which, in pertinent part, matches the majority view held by courts across the United States.

          The Tenth Circuit panel dealt with bad faith claims that boiled down on appeal to two ultimate facts:

1. Prime [the liability carrier] failed to tell CLJ [the policyholder] how much coverage was available.
2. Mr. Jenkins [the injured plaintiff] demanded $100,000 in settlement, but Prime counter-offered for less without telling CLJ that it could contribute to the settlement.

Prime, 2024 WL 4040386, at *6.  As interpreted by the panel, Utah law required the entry of an excess judgment in the underlying case:

    The district court concluded that the bad-faith claim would be untimely under a theory involving either contract or tort. On appeal, CLJ characterizes its bad-faith claim as a tort based on Prime's duty as a fiduciary.  So we address timeliness of the claim under a tort theory.

Prime, 2024 WL 4040386, at *6.  The appellate panel concluded that the bad-faith claim was potentially timely under a tort theory, and accordingly reversed the trial court’s summary judgment for the carrier in this case.

          It is worth noting before closing, that the Tenth Circuit panel in Prime was confronted with an underlying medical malpractice action against what it called “a physicians’ company,” CLJ.  The policy at issue in the case was “a wasting policy, where the amount for indemnity is reduced by the amount spent on defense costs.”  Prime, 2024 WL 4040386, at *1 (emphasis by the Court). 

The statute of limitations defense in third-party cases involving alleged bad faith in settlement negotiations is addressed in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 5:20, Statutes of limitation (West Publishing Co. 3d Edition & 2024 Supplements).

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.  Check out my Substack newsletter.

"REPLACEMENT COST" POLICY COVERAGE CONDITIONS, OBJECTIVELY VERIFIABLE GOOD FAITH INVESTIGATION.

The case of DIS Inv's, LLC v. Gt. Lakes Ins. SE, ___ F. Supp. 3d ___, No. NO. 23-23363-CV-WILLIAMS, 2024 WL 4005199 (S.D. Fla. Aug. 29, 2024), had at its center optional insurance coverage regarding "Replacement Cost."

          DIS made a claim for alleged damage from Hurricane Ian to its warehouse.  DIS's claim was made under a commercial lines policy it obtained from Great Lakes (GLISE).  The GLISE policy contained an optional "Replacement Cost" coverage which was determinative of the outcome in this breach of contract case.

          As quoted by the Court in this case, the GLISE policy specifically provided that DIS would have to repair the damage it claimed, before GLISE would have a duty to pay the "Replacement Cost":

          As it relates to coverage in this case, the Policy provides that Defendant “will pay for direct physical loss of or damage to Covered Property ... by or resulting from any Covered Cause of Loss.” (DE 38-1 at 29.) In the event of loss or damage, the value of Covered Property is determined by the “actual cash value as of the time of loss or damage” subject to certain exceptions. (DE 38-1 at 40.) One exception, as indicated on the Policy's Declaration Page under optional coverages, relates to the valuation of the building—here, the Warehouse—which shall be estimated according to its replacement cost value. (DE 38-1 at 28.) Under the terms of the Policy, replacement cost excludes any deduction for depreciation and GLISE “will not pay on a replacement cost basis for any loss or damage: (1) [u]ntil the lost or damaged property is actually repaired or replaced; and (2) [u]nless the repair or replacement is made as soon as reasonably possible after the loss or damage.” (DE 38-1 at 43.)

DIS Investments, 2024 WL 4005199, at *5 (emphasis added).

          It was an established fact that DIS did not repair or replace the damage to the warehouse.  In the eyes of the Court, it was a simple matter to apply the policy language to the established facts under Florida law, which governed this dispute:

          However, because Plaintiff [DIS] did not perform the necessary repairs to the Warehouse, the Court finds Plaintiff failed to comply with the Policy's conditions that would trigger GLISE's obligation to pay.

 DIS Investments, 2024 WL 4005199, at *5.  The Court accordingly granted the carrier's motion for summary judgment in this case.

          Some readers may wonder why no insurer bad faith claim was alleged in this case.  The carrier's response to the policyholder's claim was to immediately hire an outside adjuster to investigate it.  The independent, outside adjuster concluded that the claimed damage was not caused by Hurricane Ian but by risks not covered by the insurance policy.  However, the same independent, outside adjuster did not rest with that conclusion.  It recommended that the carrier also hire an engineer to investigate the claimed loss.

          The carrier accepted the adjuster's recommendation and also hired an engineer to investigate.  The engineer reached the same conclusions as the adjuster.  It was only then, on the strength of the adjuster's report and the engineer's report, that the carrier denied coverage for the claimed loss.  See DIS Investments, 2024 WL 4005199, at *1.

          Although the Court never said so, this conduct on the carrier's part may have been the reason for the complete absence of a bad faith claim in this case.  The carrier's investigation was frankly commendable, and the Court must have been impressed with these facts surrounding the adjuster's retention and report, and the engineer's retention and report, because there was simply no reason to mention them in what was otherwise a straight-forward "coverage" case.

An "Overview of the participants in the claims handling process" in first-party cases, including the retention of adjusters and engineers as in the DIS Investments case, is provided by Dennis J. Wall in § 2:2, CATASTROPHE CLAIMS / INSURANCE COVERAGE FOR NATURAL AND MAN-MADE DISASTERS (June 2024 Edition).

"The question of bad faith" in first-party cases involving "Timely investigation and evaluation before and after the first-party insurer is sued for bad faith" is explored in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:6 (West Publishing Co. Third Edition  & 2024 Supplements).

Finally, the issue of the "policy value of first-party claims" as one possible recoverable damage, is discussed in Chapter 13 on Damages in 2 id. § 13:7.

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.  Check out my Substack newsletter.

EVERY CONTRACT'S IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING.

"As this Court has explained, in New York, every contract contains an implied covenant of good faith and fair dealing."  1555 Jefferson Rd., LLC v. Travelers Prop. Cas. Co. of Am., ___ F. Supp. 3d ___, No. 23-CV-6347-FPG, 2024 WL 2023653, at *3 (W.D.N.Y.  May 7, 2024).

    In the overwhelming majority of United States jurisdictions, every contract contains an implied covenant of good faith and fair dealing.  See 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 1:1 (West Publishing Co. 3d Ed., with 2024 Supplements).

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.