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.** 

   

 

AFRAID OF THEIR OWN SHADOW. THEY'RE BEING VERY AFRAID.

I have developed a sixth sense for when a decision has already been made, usually when a judge rules against my client.  I will not disguise the fact that I do not agree with the Supreme Court majority's decision against a vaccine mandate in America's workplaces during a pandemic that has killed some 800,000 people so far.  But I do not write because I disagree with the substance of that decision.

          I write instead because nobody signed it.  I noticed that nobody signed the opinion when I saw that it was issued "Per Curiam."  That's a sure sign to any lawyer that the judges on that Court did not put their individual names on it.

          This was also a ruling on an application for a stay.  The ruling was that the Secretary of Labor, acting through the Occupational Safety and Health Administration (OSHA), does not have the power to mandate "that covered workers receive a COVID-19 vaccine[.]"

          This may be another example of the notorious shadow docket, or at least of the notorious use of the shadow docket to reduce publicity and avoid personal accountability.  It is also reasonable to say that judges who do not put their names to the opinions they write are ashamed of them.  The judges that do not sign their names to a decision use the shadow docket because they are afraid of their own shadow.  This decision shows that they are very afraid.

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

DUTY TO DEFEND FACTUAL ALLEGATIONS IN PENNSYLVANIA UNDERLYING COMPLAINT.

In Vitamin Energy, LLC v. Evanston Ins. Co., ___ F.4th ___, No. 20-3461, 2022 WL 39839, *1 (3d Cir. Jan. 5, 2022), the Court applied Pennsylvania law, where a liability insurance company's duty to defend is determined by comparing the allegations in the underlying complaint against the insured, with the provisions of the policy at issue.  In that case, Vitamin Energy "took its insurer to court" for declaratory relief, breach of contract, and "bad-faith denial of coverage[.]"  Vitamin Energy, 2022 WL 39839, at *2.  The appellate court determined that the underlying complaint adequately alleged an "Advertising Injury," holding that there is a duty to defend here.

          Note that Pennsylvania law on the duty to defend requires a comparison of the policy with the factual allegations in the underlying complaint.  Vitamin Energy, 2022 WL 39839, at *3, *6.

          The Third Circuit panel said nothing about the bad-faith claim.  The appellate court vacated and remanded in an appeal from a judgment on the pleadings, not intending "to signal how the coverage dispute here should ultimately be decided," but "focused now solely on the duty to defend."  Vitamin Energy, 2022 WL 39839, at *6.

Other jurisdictions determine the liability carrier's duty to defend differently, such as by comparing the policy to the claims alleged in the underlying complaint.  The different tests are examined in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH §§ 3:53-3:54 (West 3d edition, 2022 Supplements in process).

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

PREVIEW OF CATASTROPHE CLAIMS: THE COVID REPORT.

This is a preview of the Spring 2022 Supplement edition of Catastrophe Claims:  Insurance Coverage for Natural and Man-Made Disasters, § 7:20, Virus Exclusions and the Coronavirus Pandemic of Covid-19:

A couple of cases to consider before concluding this Section involve coverage claims under insurance policies arising from damages allegedly caused by the Covid-19 virus, but the policies did not contain a Virus Exclusion.  The cases merit consideration in this Section because the decisions illustrate the importance of Courts, counsel, and clients refusing to follow a "majority view" simply because they are told that it is a majority view, or that binding precedent has already decided the issues, without looking at the actual insurance policy involved in their cases.

          In K.C. Hopps, Ltd. v. Cincinnati Insurance Co.,^[1] the plaintiff claiming coverage "owns and operates ... bars, restaurants, catering services, and/or event spaces in the Kansa City metropolitan area[.]"^[2]  The "all-risk commercial property insurance policy" that the plaintiff purchased from the defendant carrier required "direct 'loss' to Covered Property" at the covered premises "'caused by or resulting from any Covered Cause of Loss.'"^[3]  As in the above cases considered in this Section, "loss" was a key to coverage under the policy.  "Loss" was only defined in the policy by reference to a pair of terms that were not themselves defined:  "'accidental physical loss or accidental physical damage'," yet a "'loss' is a prerequisite" to all of the coverages sought in the lawsuit.^[4]

          The K.C. Hopps Court looked behind the decisions in other cases, including an interpretation in a Covid-19 case by its governing Eighth Circuit Court of Appeals of an identically worded insurance policy issued by the same carrier, Cincinnati Insurance Company.^[5]  Instead of bowing to a platitude, namely, a party's invocation of binding Circuit precedent to determine the outcome in the present case, the K.C. Hopps Court read the Circuit Court's precedential decision in context:

    However, the Eighth Circuit did not determine that SARS-CoV-2 [Covid-19] can never cause “physical loss” or “physical damage.” Instead, the Eighth Circuit held that the “policy here clearly requires direct ‘physical loss’ or ‘physical damage’ to trigger business interruption and extra expense coverage. Accordingly, there must be some physicality to the loss or damage of property—e.g., a physical alteration, physical contamination, or physical destruction.”  [The Court was quoting from Oral Surgeons, P.C. v. Cincinnati Ins. Co., 2 F.4th 1141, 1144 (6th Cir. 2021)] (citations omitted). In turn, the Court agrees with Plaintiff that Oral Surgeons supports its position that “proof of physical contamination is sufficient to meet the Policy's requirement for physical loss or damage.”^[6]

          The Eighth Circuit's decision in Oral Surgeons came on the carrier's motion to dismiss.  The District Court's decision in K.C. Hopps was based on the record on competing motions for summary judgment.

          On that record, "unlike the plaintiff in Oral Surgeons, Plaintiff submits evidence supporting the inference that SARS-CoV-2 [Covid-19] is physical, contaminated its premises, and made Plaintiff's property unsafe."^[7]

          Simply put, said the K.C. Hopps Court, "[t]his theory of 'loss' is recoverable under the plain language of the Policy."^[8] The result was a holding that the Plaintiff's interpretation of the policy at bar prevailed:

    Accordingly, the Court finds that “physical loss” or “physical damage” under the Policy not only includes actual, tangible physical alteration of the property, but also includes physical contamination which renders the property unsafe.^[9]

          This was not the end of the story in the K.C. Hopps case, however, neither for the defendant carrier nor for the plaintiff policyholder.  The plaintiff would still have to prove what the record did not yet show, i.e., material facts were in genuine dispute as to whether the plaintiff had proven that the virus was in fact on its premises, that the coronavirus "actually caused a physical loss or physical damage to Plaintiff's premises," and that it had caused some or all of the damages complained of.^[10]

Interested in how the story of Catastrophe Claims is playing out so far in the coronavirus pandemic of Covid-19?  Check out the Two-Thousand page book Catastrophe Claims:  Insurance Coverage for Natural and Man-Made Disasters (Thomson Reuters, November 2021 edition available now, May 2022 edition forthcoming).

Please read the disclaimer.  This blog article ©2022 Dennis J. Wall.  All rights reserved.

 

[1] K.C. Hopps, Ltd. v. Cincinnati Ins. Co., ___ F. Supp. 3d ___, No. 20-cv-00437-SRB, 2021 WL 4302834 (W.D. Mo. Sept. 21, 2021).

[2] K.C. Hopps, 2021 WL 4302834, at *1.

[3] K.C. Hopps, 2021 WL 4302834, at *1.

[4] K.C. Hopps, 2021 WL 4302834, at *1.

[5] The Eighth Circuit decision came in  the case of Oral Surgeons, P.C. v. Cincinnati Ins. Co., 2 F.4th 1141 (8th Cir. 2021).  The Oral Surgeons decision is cited in note 4 in this Section, supra.

[6] K.C. Hopps, Ltd. v. Cincinnati Ins. Co., ___ F. Supp. 3d ___, No. 20-cv-00437-SRB, 2021 WL 4302834, at *6 (W.D. Mo. Sept. 21, 2021).

[7] K.C. Hopps, 2021 WL 4302834, at *6.

[8] K.C. Hopps, 2021 WL 4302834, at *6.

[9] K.C. Hopps, 2021 WL 4302834, at *8.

[10] K.C. Hopps, 2021 WL 4302834, at *14.

CLASS ACTION ARBITRATION, MASS ARBITRATION?

Interested in exploring the prospects of mass arbitration of your clients' claims, in a class action arbitration?  Explore the possibilities in your practice by consulting first with two informed and informative professors of law, Hila Keren, Divided and Conquered:  The Neoliberal Roots and Emotional Consequences of the Arbitration Revolution, 72 Fla. L. Rev. 575 (2020), and a Reply which Professor Keren invited, by David Horton, All Alone in Arbitration, 72 Fl. L. Rev. F. 75 (2021).

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

WHEN DOES AN EXCESS CARRIER HAVE DUTIES OF GOOD FAITH?

There is a theory by which primary carriers and policyholders assert that excess carriers have a duty of good faith and fair dealing even when the underlying limits defined in the excess policy have not yet been exhausted.  The theory is that if the underlying claims against the insureds  are big enough, then first of all, excess carriers have duties to address those claims, and second, when they address such claims they must act in good faith and deal fairly with such claims.

          The excess carrier's obligations under California law emphatically do not include that theory.  "The excess insurer's obligations begin only once a certain level of loss or liability is reached, i.e., once underlying limits are exhausted."  Vizio, Inc. v. Arch Ins. Co., No 2:20-CV-06864-ODW (ASx), 2021 WL 6135756, at *3 (C.D. Cal. December 29, 2021).

          And again:

An excess insurer's duties are triggered by exhaustion of the primary coverage, not by being put on notice that a claim might invade excess coverage.

Vizio, 2021 WL 6135756, at *3.

          There being no coverage under the excess policy for the underlying claim at the time that Vizio claimed it was owed duties of good faith and fair dealing by its excess carrier, the Court granted the excess carrier's motion to dismiss Vizio's claim of bad faith against the excess carrier.  Vizio, 2021 WL 6135756, at *5.

 The Relation of Primary Insurer With Excess Carriers and Reinsurers is addressed by Dennis J. Wall in Chapter 6, Volume 1 LITIGATION AND PREVENTION OF INSURER BAD FAITH (3d ed. West, 2022 Supplements in process). 

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

WHEN DAMAGES FOR DISTRESS ARE AVAILABLE IN "BAD FAITH" LAWSUITS.

In  Lindfors v. State Farm Mut. Auto. Ins. Co., No. 3:20-cv-00178-SLG, 2021 WL 6125771, at*2 (D. Alaska December 28, 2021), a federal district court granted a carrier's motion for partial summary judgment that the policyholder-plaintiff could not recover damages for emotional distress she incurred because of the litigation itself.  The Court was particularly persuaded by the fact that the Supreme Court of the forum state had not definitively ruled on the issue.

          On the other hand, damages are available in the policyholder's bad-faith lawsuit for stress resulting from delay of sums allegedly due to her under the policy at issue, including delay during the time of the bad-faith litigation.  Lindfors, 2021 WL 6125771, at *3.

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

WELCOME TO JAPAN, TAKATA AIRBAG LITIGATION POLICY SAYS.

Made a product that allegedly injured and killed motorists on U.S. highways, filed for bankruptcy and faced many personal injury claims you cannot afford to pay?  Want to buy insurance for that and make the claimants go after your insurance company in a land far far away?  No problem.

          This is what happened with Takata airbags and an insurance policy Takata purchased before it filed for bankruptcy but after Takata was sanctioned with a recall order by the National Highway Traffic Safety Administration.  The policy in question contained an express provision that it would apply to pay claims in the event a trustee pursued the policy proceeds for example.  However, the policy also expressly provided that the trustee in such a case would have to sue in Japan under the Takata policy's forum-selection clause.  This was essentially the decision by a Bankruptcy Judge in In re TK Holdings, Inc. (Green v. Mitsui Sumitomo Ins. Co., Ltd.), No. 17-11375 (BLS)Adv. Pro. No. 20-51004 (BLS), 2021 WL 6101496 (Bankr. D. Del. December 20, 2021).

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

INTEREST AGAINST CARRIER UNDER FLORIDA STATUTE WHEN ...

... INSURED PROVES MORE DAMAGES THAN WHAT CARRIER ALREADY PAID.

In Fed. Nat'l Ins. Co. v. Bocinsky, ___ So. 3d ___, No. 5D20-1210, 2021 WL 5969814 (Fla. 5th DCA December 17, 2021; stated NOT FINAL), one of Florida's intermediate courts of appeal reached an interesting conclusion (pun intended) that should be followed by all of Florida's appellate courts.

          The policyholder in that case sustained a property loss when a hurricane damaged her home.  She made a claim and her carrier refused to  pay the claim as it did not meet the amount of the deductible.  Thereafter she submitted a claim for more damages, sued the carrier for breach of contract, and sent the carrier a Civil Remedy Notice.  The carrier paid the entire amount due under the policy after receiving a Civil Remedy Notice.   Federated National, 2021 WL 5969814, at *1.

          The policyholder proceeded to trial anyway on the sole issue of interest on an untimely payment, under Florida Statute § 627.70131.  Although it went unmentioned in the appellate court's opinion, this statute provided in subsection (5)(a) then, renumbered as subsection (7)(a) now, in pertinent part:

Failure to comply with this subsection constitutes a violation of this [Florida Insurance] code. However, failure to comply with this subsection does not form the sole basis for a private cause of action.

Fla. Stat. § 627.70131(5)(a), renumbered as Fla. Stat. § 627.70131(7)(a).

A jury found that the carrier's payment was untimely under the statute but that the policyholder had not proved that her damages exceeded what the carrier had paid her.

          The trial judge entered two judgments on the same verdict.  First, the trial judge entered judgment in favor of the carrier because the insured had no provable damages in excess of the policy proceeds, which the carrier had already paid by the time of trial.  Second, the trial judge entered judgment in favor of the policyholder and against the carrier on the issue of the carrier paying interest, apparently on the amount of money that it had already paid to the policyholder.  Federated National, 2021 WL 5969814, at *1.

          The Florida appellate court reversed.  The Court followed settled Florida case law that the amount of a claim for purposes of prejudgment interest is fixed when a jury decides the amount, and prejudgment interest is then payable thereafter.  Here, the jury concluded that the insured had no damages that exceeded the amount she was already paid so that the carrier owed her nothing in the eyes of the appellate panel.  Federated National, 2021 WL 5969814, at *1.

          More generally, it may be said that the Court concluded in this case that the statute simply does not require interest to be paid to a policyholder when, as here, the policyholder has not proven that her damages exceeded the amount she was already paid under her policy.  See Federated National, 2021 WL 5969814, at *1-*2.

Florida's Section 627.70131 is discussed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:27, Insurer's Payment of Undisputed Covered Amounts--Part Payment of Property Insurance Claims (Thomson Reuters West 3d ed., 2022 Supplements in process).  Prejudgment interest is the subject of § 13:11, Prejudgment Interest, in Volume 2, id.

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

REINSURERS ARE NOT LIABILITY CARRIERS ... UNLESS THEY ACT LIKE THEM.

Reinsurers generally are not liable for extracontractual, "bad faith" damages.  Four exceptions have been recognized, and the biggest exception is where the reinsurer acts like a liability carrier in the situation at hand.  It is significant as well that the reinsurance contract can provide, expressly or implicitly, that the reinsurer is basically just another liability carrier for a common insured.  See 1 DENNIS J. WALL, § 6:11, Primary and Excess Insurers and Reinsurers:  A Working Definition of Reinsurance--The Effect of Reinsuring Agreements or Treaties, LITIGATION AND PREVENTION OF INSURER BAD FAITH (3d edition Thomson Reuters, 2022 Supplements in process).

          In a recent decision in a federal court in Illinois, the Court held that 215 Ill. Comp. Stat. (ILCS) 5/155 does not apply -- and consequently there is no statutory bad-faith claim under Illinois law -- to agents of a reinsurer under these general principles applied in a host of cases decided under Illinois law.  Stonegate Ins. Co. v. Fletcher Reins. Co., No. 21 CV 3523, 2021 WL 5769528, at *7-*8 (N.D. Ill. December 6, 2021).  In the words of the Court:  "Given this precedent, it is clear that Section 155 does not permit a bad faith claim to be brought against a reinsurer’s agents, such as the Defendants. In other words, Stonegate cannot bring a claim against Defendants under Section 155, because Section 155 pertains only to insurance contracts – not reinsurance contracts."  Stonegate, 2021 WL 5769528, at *8 (emphases by the Court).

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

THE PLACE WHERE FILED RATES ARE SET AND DOCTRINES BEGIN.

In Duke Energy Carolinas, LLC v. South Carolina Office of Reg. Staff, 864 S.E.2d 873, 884-88 (S.C. October 27, 2021), the Supreme Court of South Carolina upheld a state administrative agency's determination that Duke could not include certain costs in its filed rates.  The costs at issue were Duke's costs of complying with laws passed in the wake of the notorious coal ash spills in North Carolina.

          This case turned on the fact that the source of approved filed rates is the administrative agency if any that is authorized to approve them.  In the case of insurance rates, that is a state administrative agency if any administrative agency is authorized to approve filed insurance rates.

          This decision shows yet again that the authorized administrative agency is clearly the place where filed rates are set and so it is the place where filed rate doctrines begin.

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

ANOTHER FORCE-PLACED INSURANCE POLICY BARS HOMEOWNER FROM SUING INSURER.

In James v. American Sec. Ins. Co. [ASIC], No. 21-1861, 2021 WL 5795292 (E.D. La. December 7, 2021), another force-placed insurance policy written by a force-placed insurance company barred a homeowner from suing the carrier that wrote the policy, this time for bad faith.  Ironically, perhaps, the Court's opinion was released on Pearl Harbor Day.

          As should be expected, the carrier did not write the policy for the homeowner or include the homeowner as a named additional insured.  The force-placed policy was paid for by the homeowner, of course, but the policy was written for the lender who force-placed it on the homeowner.

          Under Louisiana law, that left the homeowner with one option to have standing to sue the force-placed insurance carrier:  Be an intended third-party beneficiary.

          Here, the homeowner paid the premium and owned the property that suffered the insured loss.  The carrier did not contest that the loss was insured.

          But the carrier did contend that the contract it wrote did not show on its face that the homeowner was a third-party beneficiary.  In Louisiana, as in many jurisdictions in the United States, the contract must show on its face that the party suing on the contract is a third-party beneficiary or that party cannot sue on the contract, regardless of the reality of the case and regardless of the actual facts.  James, 2021 WL 5795292, at *2.

          This decision illustrates the fatal flaw not so much in force-placed insurance practices, as in third-party beneficiary law.  If judges ignore the reality of a situation when they determine whether the contract itself furnishes a basis for a party to sue a force-placed insurance carrier that wrote the contract in question, they really are deciding the case strictly on whether the party is a named insured or a named additional insured in the written contract of insurance.  They are not then deciding the case on any other basis, regardless of what they may say.

          The federal judge dismissed the homeowner's bad-faith complaint against the carrier with prejudice because, said the Court, it was not "plausible" that the homeowner could have standing to sue for the force-placed carrier's alleged bad faith in this case.  James, 2021 WL 5795292, at *3.

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

NON-RETAINED EXPERT WITNESSES, COLORADO INSURANCE CASE: DISCLOSURE INVALID, NO SANCTIONS.

In Roof Rehab, LLC d/b/a Rhino Roofing, LLC v. Travelers Cas. Ins. Co. of Am., No. 20-cv-01863-RMR-NYW 2021 WL 5579053 (D. Colo. November 30, 2021) (Wang, USMJ), a United States Magistrate Judge wrestled with an unusual motion.  The defendant insurance carrier filed a motion to exclude the testimony of expert witnesses who had not been retained in an insurance case.  The carrier contended that the experts in question had not been disclosed as the Federal Rules of Civil Procedure require non-retained expert witnesses to be disclosed.

          The federal magistrate judge agreed that the non-retained expert witnesses in this case were not disclosed by the plaintiff as the Rules require, but that was not the only thing that the Court had to decide in order to resolve the defendant's motion to disqualify their testimony.  The Court also had to consider the Rules regarding sanctions including prohibiting an expert's testimony.

          The starting point was Federal Rule of Civil Procedure 26:

    Before considering whether Plaintiff's expert disclosures should be stricken and the experts precluded from testifying at trial, the court must first determine whether there was a Rule 26(a) violation. As set forth above, Rule 26(a) requires that expert disclosures of non-retained expert witnesses include (1) the subject matter on which the witness is expected to present evidence and (2) a summary of the facts and opinions to which the witness is expected to testify. Fed. R. Civ. P. 26(a)(2)(C)(i)-(ii).

Roof Rehab, 2021 WL 5579053, at *2.

          The non-retained expert witnesses in question were Ryan Verstreater, Kyle Larson, and Toni Morrow.  For various reasons, the plaintiff's disclosures failed to satisfy Rule 26(a) as to each of them.  For some, the plaintiffs only disclosed that the witness would testify in accordance with documents that had been produced including in one case a report; for another the plaintiffs disclosed the same thing, namely that the witness would testify according to a report, but the plaintiffs had not produced the report.

          For all these reasons, none of the non-retained trio of expert witnesses were sufficiently disclosed under Rule 26(a).  However that did not end the matter.  The Magistrate Judge went on to consider whether sanctions should be imposed under Federal Rule of Civil Procedure 37.  The defendant carrier had requested that the experts' proffered testimony be barred from this litigation.

          The Magistrate Judge ruled that prohibiting the opinion testimony of these proffered experts was too severe a sanction under Rule 37 for the plaintiff's clear noncompliance with Rule 26(a).   Instead, the Magistrate followed the Tenth Circuit's standard In exercising her discretion that when a party seeks to exclude evidence because of alleged misconduct in discovery, the misconduct at issue must be shown to substantially interfere with that party's preparation for trial, in sum and in substance.  The Court found that there was no such substantial interference here.  Roof Rehab, 2021 WL 5579053, at *8.

          "In sum," said the Court, ...

while I find that Plaintiff's affirmative expert disclosures failed to comply with the substantive requirements of Rule 26(a)(2)(C), I find that any prejudice resulting from this failure can be cured by requiring Plaintiff to supplement its disclosures. Accordingly, the Motion to Strike is DENIED insofar as it seeks to strike the expert testimony of Messrs. Verstreater and Larson and Ms. Morrow. In so ruling, the court does not pass on the admissibility of any of Plaintiff's non-retained expert testimony, a determination which is reserved for the presiding judge. In addition, Plaintiff is ORDERED to produce supplemental expert disclosures which comply with Rule 26(a)(2)(C) [i.e., "with specific information reflecting (1) the subject matter upon which the witnesses is expected to present expert testimony; and (2) a descriptive summary of the facts and opinions to which the witness is expected to testify"], no later than December 10, 2021. 

Roof Rehab, 2021 WL 5579053, at *8 (emphasis in original).

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

SETTLEMENT FOR BAD FAITH CLAIM NOT A FLORIDA COLLATERAL SOURCE.

ONE FOR THE FIRST OF DECEMBER. 

In Ellison v. Willoughby, 326 So. 3d 214 (Fla. 2d DCA 2021), one Willoughby asserted claims for Uninsured Motorist coverage and for bad faith against his UM carrier.  Mr. Willoughby settled all his claims for a single undivided amount.  In other words, Willoughby's settlement with his UM carrier did not state how much would go to coverage and how much was paid on account of the alleged bad faith.

          Florida's Second District Court of Appeal held that under these circumstances, and perhaps in any case involving settlements of bad faith claims, not a penny of Mr. Willoughby's settlement was a "collateral source" under Florida law here:

    Moving on to whatever portion of the settlement is allocable to Mr. Willoughby's claim for bad faith damages, the above-cited cases (upon which the trial court relied to deny setoff) involved settlements for UM benefits within the applicable policy limits. We have uncovered no case law addressing the question of whether extracontractual damages paid to a first-party claimant on a UM bad faith claim are subject to setoff. By statutory definition, “collateral sources” means “payments made to the claimant ... pursuant to ... automobile accident insurance that provides health benefits or income disability coverage; and any other similar insurance benefits.” § 768.76(2)(a) 2 (emphasis added). An extracontractual payment on a bad faith claim does not appear to meet this definition because it is not a payment of “benefits.”

Ellison v. Willoughby, 326 So. 3d at text following Headnote 10 (page numbers not available from Westlaw at the time of this blog article).

          The appellate court had previously affirmed the trial court's holding that UM coverage payments were not "collateral sources" under Florida law, either.

          The appellate court certified its decision on the UM settlement of "Mr. Willoughby's claim for bad faith damages" to the Supreme Court of Florida as a question of great public importance, in the following words:

IS A SETTLEMENT PAYMENT MADE BY AN UNINSURED MOTORIST INSURER TO SETTLE A FIRST-PARTY BAD FAITH CLAIM SUBJECT TO SETOFF UNDER SECTION 768.041(2) OR A COLLATERAL SOURCE WITHIN THE MEANING OF SECTION 768.76?

Ellison v. Willoughby, 326 So. 3d at text following Conclusion.

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

HEAD-SCRATCHING FROM OKLAHOMA EARTHQUAKE EXCLUSIONS.

New Dominion engaged in oil and gas operations in Oklahoma.  It obtained a Commercial General Liability Policy from National American Insurance Company (NAICO).

          New Dominion's operations allegedly caused seismic activity which resulted in New Dominion being sued for both bodily injury and property damage claims for injuries and damages allegedly occurring between 2012 and January 2016 when what came to be called "the Earthquake Suits"  were filed against New Dominion.  Nat'l Am. Ins. Co. v. New Dominion, LLC, ___ P.3d ___, Nos. 118490 & 1184962021 (Consolidated), 2021 WL 5459471, ¶14, at *3  (Okla. November 23, 2021).

          The Oklahoma Supreme Court affirmed a trial court's declaratory judgment, in part here pertinent, that a Subsidence and Earth Movement Exclusion in several years of policies (inception and renewal policies) that NAICO issued to New Dominion clearly and unambiguously excluded all claims in the underlying Earthquake Suits against New Dominion.    

          In several of the years in question, if not all of the years in question, the Subsidence and Earth Movement Exclusion clearly and unambiguously excluded property damage only.  The Court reviewed all three years of Subsidence and Earth Movement exclusionary language at issue.  Parenthetically, there was a fourth year in which NAICO issued a GL policy to New Dominion but the parties stipulated that the fourth policy excluded all coverage.  See NAICO, 2021 WL 5459471, ¶¶ 35-42,  at *7-*8.

          Nonetheless, as noted, the trial court declared in part that the Subsidence and Earth Movement Exclusions over the years barred the Earthquake Lawsuits, and the Oklahoma Supreme Court affirmed:

The trial court's finding that the Subsidence and Earth Movement Exclusions in all four policy periods clearly and unambiguously preclude coverage for the Earthquake Lawsuits is affirmed. 

NAICO, 2021 WL 5459471, ¶ 54, at *11.

          What a head-scratcher.  I have looked at this opinion three or four times now, and each time it seems to say that all coverage is excluded by an exclusion that only excludes property damage.  I am going to take another look, but this opinion is still a head-scratcher.

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

EXPERT WITNESSES IN INSURANCE BAD FAITH CASE IN FEDERAL COURT.

In 5205 Lincoln LLC v. Owners Ins. Co., No. CV-19-5218-PHX-JJT, 2021 WL 5446461 (D. Ariz. November 22, 2021), a federal district judge confronted a bad-faith case involving the collapse of a roof at one of three buildings insured under a single policy.  The owners of the buildings, located at a commercial center, leased two of the three buildings including the one whose roof collapsed.

          When the roof was not repaired in a timely enough fashion, the tenant declared a constructive eviction and terminated its lease with the plaintiffs for both buildings.

          The plaintiff owners and the carrier could not agree on the extent of insurance coverage.  The issue before the court in this iteration of the case was "the admissibility of the testimony of the parties' expert witnesses on the subject of insurance claim handling."

          The court's ruling with regard to the opinion testimony of one of the defendant's proffered experts, one Hromas, is worth noting here.  "[T]o the extent that Mr. Hromas does not state the factual basis for his opinions [in his expert's report required under the rules of civil procedure and exchanged in discovery], supports his conclusions with only 'the totality of the claim file,' or attempts to state a legal conclusion, the Court will exclude his testimony."  5205 Lincoln LLC, 2021 WL 5446461, at *3.

          The court's ruling was otherwise "to the extent that his opinions are supported by facts or data articulated in his written report, or to the extent he explains how his experience leads to an opinion"; then, the court ruled,  "Mr. Hromas may testify regarding these opinions."  5205 Lincoln LLC, 2021 WL 5446461, at *3.

          Expert's reports:  Facts, data, and experience on display with reasonable specificity are the keys to admissibility of opinion testimony in federal courts and in all the courts that follow the federal procedure for admission of opinion testimony in bad faith cases as well as in other kinds of cases.

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

FIRST-PARTY BAD FAITH FRAUD NOT AUTOMATICALLY EXCEPTION TO PRIVILEGE.

In Younger v. Safeco Ins. Co. of Am., No.: 1:20-CV-67, 2021 WL 5402535 (N.D.W. Va. September 8, 2021) (USMJ), the plaintiff alleged first-party bad faith in a jurisdiction, West Virginia, which recognizes that the kind of fraud that can be involved in a first-party bad faith claim can lead to the crime/fraud exception to attorney-client privilege.

          In other words, in an appropriate case involving West Virginia law, or involving the law of other states that look the same way at fraud in a first-party bad faith claim, it may be possible to show that the defendant first-party insurance carrier involved its legal counsel in a scheme to defraud of some kind in the course of committing actionable bad faith, and so pierce the attorney-client privilege in that case.

          "However, a plaintiff must still show that defendant involved their legal counsel in some kind of scheme to defraud, such that the crime fraud-exception applies."  Younger, 2021 WL 5402535, at *5.  Allegations alone are not enough, even when the allegations are of first-party bad faith in a jurisdiction which recognizes that bad faith can provide the civil fraud necessary to pierce the attorney-client privilege under the crime/fraud exception.  There must be a showing involving proof in the record:

    In the context of the matter at bar, there is not sufficient demonstration by Plaintiff that a violation was ongoing or about to be committed, let alone a demonstration of a close relationship between any attorney-client contact and the tortious conduct alleged. Courts are reluctant, for good reason, to find that the crime-fraud exception applies, given the sanctity of the privileges at issue.

    The nature of these claims are fact-driven. The Court, having had the benefit of an in camera of the entire, unredacted claims file, including those documents substantially redacted pursuant to claims of attorney-client privilege and work product doctrine, has found no facts in this case to support the granting of a crime-fraud exception.

Younger, 2021 WL 5402535, at *5.

The Younger case will be discussed in the 2022 Supplements along with other first-party bad faith cases already analyzed involving the crime/fraud exception to attorney client privilege, in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 12:8 regarding discovery of Insurance counsel's files (3d Edition Thomson Reuters West & 2021 Supplements).

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

THIS TIME, A TRAMPOLINE PARK WITH NO COVERED COVID CLAIM.

In Jump Buffalo Grove, LLC v. Cincinnati Cas. Co., No. 21 C 2015, 2021 WL 5396696 (N.D. Ill. November 18, 2021), the Court quoted from the insurance policy at bar:

6. “Loss” means accidental physical loss or accidental physical damage.

Jump Buffalo Grove, 2021 WL 5396696, at *2.  That policy definition determined the outcome here.  The Court dismissed the trampoline park operator's coverage claims based only on the COVID-19 pandemic including government orders to shut down the park's business operations.

          This holding is consistent with the vast majority of holdings in cases involving similar coverage issues presented by different policyholders across the country.  This time, it was a trampoline park with no coverage for COVID-caused claims that in the judge's eyes did not involve "accidental physical loss or accidental physical damage."

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

Today is the 58th anniversary of the murder of a President in Dallas, Texas.  Many things have changed over the years, but to coin a phrase, "nothing is new."

BEWARE THE FILED insurance RATE 'DOCTRINE'!

Filed Rate Doctrine cases emphasize that people adversely affected by regulated rates have a remedy available in regulatory law.

          A Florida case recently published on Westlaw (so recently published that Westlaw has not yet assigned page numbers at the time of this blog article) gives the lie to this bromide, at least in the field of insurance.  The case was decided months ago.

          In the case of Compass Pt. Condo. Ass'n v. Florida Office of Ins. Reg., 325 So. 3d 227 (Fla. 1st DCA 2021), Florida's most industry friendly court was confronted with exactly this issue.  Compass Point filed a written complaint with OIR under the Florida Insurance Rating Law.  Florida law gives OIR the power to deal with rate filings that violate statutory requirements.

          Compass Point complained that Citizens' insurance rate filings did not comply with the statutory requirements of the Florida Insurance Rating Law.   This administrative proceeding was initiated by a condominium association of homeowners, i.e., by the people aggrieved by the allegedly illegal rate filings, it deserves mentioning.

          OIR found Compass Point's complaint legally sufficient.   The OIR also "invited Citizens to correct the noncompliance" and "informed Citizens of its right" to request an administrative hearing.   The Court's opinion advises that Citizens filed a petition for administrative hearing; there is no mention that Citizens did, or did not, "correct the noncompliance" with the statutory requirements for insurance rate filings.

          The opinion is admittedly murky but after several readings it becomes clear that OIR opened an "administrative regulatory proceeding against Citizens."  The First District also called this "a rate compliance proceeding with a regulated insurer," and "an administrative regulatory action against the license of the insurer."

          Under the regulatory scheme of the Insurance Rating Law, the policyholder which filed  a complaint alleging noncompliance in filed rates is not a party to the OIR proceeding.  That is central to the decision in Compass Point.

          It is also the source of the trap in applying the Filed Rate Doctrine to insurance.

          The state government agency responsible for regulating insurance, the Florida OIR in this case, settled with the insurance company.  "Under the terms of the consent order" that settled the proceeding, said the First District, Citizens dismissed its request for an administrative hearing, OIR issued a finding that Citizens complied with the Law's rate filing requirements, and "the regulatory proceeding initiated by Compass Point's complaint under section 627.371 was closed."

          The Filed Rate Doctrine exists in contexts outside of insurance because the regulatory schemes are said by judges to allow remedies for rate filings.  In the Compass Point case, the remedy was an empty one for the party aggrieved by insurance rate filings that did not comply with the regulatory scheme.  Compass Point was not allowed to challenge the OIR settlement with Citizens. 

          In the end, decisions like Compass Point  make it clear that knowledge of the Filed Rate Doctrine and experience with insurance regulation are both essential before addressing the issue where it is an open one, of whether to transplant the Filed Rate Doctrine that works with federally regulated utilities, to insurance rates regulated by the states.

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

RELIABILITY, NOT CORRECTNESS: FEDERAL STANDARD FOR EXPERT IN INSURANCE CASE.

In Conrad v. Owners Ins. Co., No. 20–cv–02173–KMT, 2021 WL 5280188 (D. Colo. November 12, 2021) (Tafoya, USMJ), a federal Magistrate Judge applied the federal standard for admissibility of expert testimony to a proffered expert in an insurance case:  Reliability, not correctness.

          The Court described the proffered expert as an experienced attorney, and a former Colorado Insurance Commissioner.  Conrad, 2021 WL 5280188, at *1.

          The witness will be permitted to testify to insurance industry standards.  Conrad, 2021 WL 5280188, at *2.

          However, the witness will not be allowed to testify to legal conclusions.  This includes the expert's testimony about Colorado's version of the Unfair Claim Settlement Practices Act.  "While [the proffered expert] is permitted to testify as to insurance industry standards and may testify that defendant's conduct did not conform with those standards, he may not apply legal standards from caselaw or statutes to state an opinion that defendant's conduct violated caselaw or statutes."   Conrad, 2021 WL 5280188, at *3.

          Finally, the witness will be permitted to testify on the duty of good faith and fair dealing implied in the Underinsured Motorist insurance contract at bar, even though bad faith and unfair dealing was not alleged as a cause of action separate from breach of the UIM contract at issue.  Conrad, 2021 WL 5280188, at *4.

          Reliability, not correctness.  That is the standard for admitting expert opinions into evidence in federal court, including in insurance cases.

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

POSTSCRIPT TO GOOD FAITH AND RESTATEMENT OF CONSUMER CONTRACTS LAW.

In one of yesterday's articles published here, I mentioned that the American Law Institute was holding a Meeting of Advisers and Members Consultative Group of the Restatement of the Law, Consumer Contracts.  I noted especially that we would be discussing "good faith" in the Preliminary Draft No. 4 (October 2021).

          My small contribution was to suggest that the Consumer Contracts Law Restatement needed to clarify that the implied covenant of good faith and fair dealing in insurance contracts is governed by the ALI's Restatement of the Law of Liability Insurance.  Full disclosure:  I served on the ALI's Liability Insurance Project.

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

GOOD FAITH AND THE RESTATEMENT OF THE LAW OF CONSUMER CONTRACTS.

Today in the American Law Institute Meeting of Advisers and Members Consultative Group, we will be discussing "good faith" in the Preliminary Draft No. 4 (October 2021) of the Restatement of the Law, Consumer Contracts.

          The ALI Reporters wrote the current Preliminary Draft of the Consumer Contracts Restatement to follow the Uniform Commercial Code § 1-201(b)(20), in which the term, "good faith," is defined as "honesty in fact and the observance of reasonable commercial standards of fair dealing."  This statute has been enacted without substantive change in many jurisdictions, including in Florida in this link provided by the Florida Legislature, Fla. Stat. § 671.201(20).

          The Reporters of the Consumer Contracts Restatement wrote that this definition is not intended to change the meaning of the implied covenant of good faith and fair dealing.  That being said, it is still open to question what role this definition may play in cases of consumer insurance contracts.

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

STRIKING THE INDUSTRY STANDARDS FROM COLORADO BAD FAITH COMPLAINT.

In Smith v. State Farm Fire & Cas. Co., No. 21-cv-00866-CMA-NYW, 2021 WL 5195326 (D. Colo. Nov. 9, 2021) (Recommendation of U.S.M.J. Wang), a Magistrate Judge in the federal District of Colorado recommended that certain industry standards be stricken from the plaintiffs' bad faith amended complaint:

    Defendant is specifically concerned with subparagraphs u, v, and w. See [Doc. 38 at 6]. Paragraph 4(u) alleges that "[i]nsurers should not in any manner tie any claim personnel's compensation with insurer profitability based on delay or denial of claims.” [Doc. 26 at ¶ 4(u)]. Paragraph 4(v) alleges that "[i]nsurers should not use their claims department as a profit center.” [Id. at ¶ 4(v)]. Paragraph 4(w) avers that “[i]nsurers may not violate the Unfair Claims Settlement Practices Act.” [Id. at ¶ 4(w)]. This court agrees that these statements are not factual allegations regarding standards generally accepted in the insurance industry as to how a first-party insurance claim should be adjusted. Rather, they are more akin to public policy statements that are not relevant to whether State Farm was reasonable in its conduct when adjusting the Smiths’ claim. In addition, Paragraph 4(w) is a type of statement regarding applicable law that generally is reserved to the trial court. 

Smith v. State Farm, 2021 WL 5195326, at *5.

          The Magistrate Judge also recommended that subparagraphs (a) through (d) of the same paragraph 4 be stricken as well.  She did not recite their allegations in her opinion. 

          A review of paragraph 4 of the bad faith complaint on PACER (the portal of "Public Access to [Federal] Court Electronic Records") reveals that subparagraphs (a) - (d) are simply recitations of what laws have been invoked by the plaintiffs.    

         The Magistrate Judge's opinion does not disclose where all of these "industry standards" came from before they found their way into the allegations of plaintiffs' bad faith complaint.  The operative or Amended Complaint recites that in pertinent part these allegations are statements taken from the Unfair Claims Settlement Practices Act as adopted by the Colorado Legislature.  See Paragraph 4 of Download Smith v. State Farm Amended Complaint Doc. 26 filed April 16 2021 (D. Colo. Case No. 21-cv-00866).

Wherever the UCSPA set out lynchpins of liability, however, the Magistrate Judge recommended that the motion to strike them be denied.  Instead, they will remain in the Amended Complaint and set the issues for fact discovery in this bad faith case. 

Parenthetically, the plaintiffs alleged that the defendant which allegedly violated common law and statutory duties of good faith, is their homeowner's carrier.  See Paragraph 5 of their Amended Complaint, Download Smith v. State Farm Amended Complaint Doc. 26 filed April 16 2021 (D. Colo. Case No. 21-cv-00866).

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

OKLAHOMA, UMBRELLA/EXCESS-PRIMARY, U.M., AND GOOD FAITH DUTIES.

In Desmet v. Scottsdale Ins. Co., No. CIV-20-330-J, 2021 WL 5173637 (W.D. Okla. October 21, 2021), a federal judge in the Western District of Oklahoma confronted and resolved issues of Oklahoma law concerning Umbrella/Excess Policies, Primary Policies, Uninsured Motorist Coverage, and Good Faith Duties among all of it.

          In this case, an Umbrella Policy was at bar.  This particular type of Excess Policy required Underlying Insurance, of course.  Duties did not incept or begin under the Umbrella Policy until the Underlying Insurance was exhausted, in sum and in substance.

          Further, Oklahoma law made and makes Uninsured Motorist Coverage primary.  In this case, the Underlying Insurance including primary insurance was not exhausted before the plaintiff sued the Umbrella for alleged bad faith.  (Under Oklahoma law, only primary carriers are required to offer U.M. Coverage but in this case, the Umbrella Policy offered U.M. Coverage as a part of the Umbrella contract.)

          Moreover, the terms of the contract are equally clear that all underlying insurers must have paid or been held liable to pay the full amounts of their UM coverage policies before the Umbrella Policy was triggered. Umbrella Policy at 9, 24, 27, 32. As such, Defendant's liability did not attach until the insurers of all the underlying insurance had paid or been held liable to pay the full amount of their respective UM coverage liability.

Desmet, 2021 WL 5173637, at *4. 

          Since the Umbrella Carrier was sued before its Duties of Good Faith ever incepted or even began, the Court granted its Motion for Summary Judgment on the bad faith claims alleged against it in this case. 

          The plaintiff requested leave to amend but the time for amendments established by the Court's Scheduling Order had already passed, and even if the request to amend were to be considered, the Court wrote that it was presented only with general arguments that 'justice requires leave to amend' without any particularized grounds to amend, the lack of good cause, and the issue of diligence, among other things mentioned by the Court while denying leave to amend here.

          In the end, as the Rolling Stones never sang, 'Time Is Not On My Side, oh no, it's not.'

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

"OFF-SHORING" THE FRD: TEXAS INSURANCE FILED RATE DOCTRINE IN WISCONSIN.

In French v. Northwestern Mut. Life Ins. Co. & Northwestern Long Term Care Ins. Co., No. 20-cv-1090-bhl, 2021 WL 5162646 (E.D. Wis. November 5, 2021), the Texas Insurance Filed Rate Doctrine was off-shored in a case filed in Wisconsin federal district court.

            The plaintiffs in that case had previously purchased long-term care insurance policies in Texas.  They complained because eleven years later the defendants raised both of their annual premiums by $4,285.70.

            Parenthetically, at or shortly after the time they filed their complaint, the plaintiffs proceeded pro se in this case and as pro se plaintiffs they opposed the defendants' affirmative defense of the Texas Insurance Filed Rate Doctrine.

            The premium increase of $4,285.70 apiece represented a 62% increase on each policy.  The Texas Department of Insurance, which regulates insurance in Texas, ginned the defendants' request down from 86%.  French, 2021 WL 5162646, at *2.

            Texas applies an Insurance Filed Rate Doctrine.  It found a willing federal judge in Wisconsin who applied it here. 

            That should have been the end of this case:  Texas has an Insurance FRD, the Texas Department of Insurance regulated the insurance policies in this case, and that administrative agency in Texas approved the rate increase filed by the defendants, discussed above.  That is how the Filed Rate Doctrine works.

          Texas law applies to this case, therefore the Texas Insurance FRD bars the claims.  To say again, that should have been the end of the case.  Except for a possible discussion of why or why not applying the Texas Insurance Filed Rate Doctrine might have been against the public policy of Wisconsin so that Wisconsin's choice of law doctrine would have rejected the Texas Insurance FRD.

            But there was no such discussion by the federal judge in this case in Wisconsin.  Failing that, a decision in the case was straight-forward.  In dicta, the Wisconsin federal judge went on to write a long opinion on why the Filed Rate Doctrine was invented in federal courts and why it should be applied to cases like this insurance case.  He also wrote to reject one or two legal arguments that the pro se plaintiffs thought it was good to raise.

          This may have resulted in his longest opinion since he assumed the bench in September 2020.  It is however dicta.

          Sometimes lawyers are given the opportunity to write about many things, when only one thing is necessary to decide their clients' cases.  On those occasions, lawyers face a great temptation which many other people do not have to face.  For some federal judges, those occasions appear to be part of their new job description.

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

P.S. TO FIFTH CIRCUIT STAY OF VACCINATING U.S. WORKERS.

Here is the Fifth Circuit panel's stay issued within 24 hours from when the plaintiffs filed their complaint over workers being vaccinated in the U.S.:  Download 5th Cir Next Day Stay Order Filed 11.06.21.

          I just took a look at the name of one of the plaintiffs, "Trosclair Judge Perez L.L.C."  This limited liability company bearing the name of a very wealthy owner of Louisiana supermarkets and other businesses also bears the name of Judge Perez.  Who was he, I wondered?

          Judge Perez is an unusual story.  For starters, he was such a segregationist that he was excommunicated for it.

          He also engaged in pervasive efforts to stop Black people from voting in his Louisiana Parish, efforts that today would be called voter suppression.

          Quite a cast of characters in this litigation.

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

FIFTH CIRCUIT, VACCINES, AND HOPE REGARDLESS.

On Friday, the State of Texas and others representing the Republican Party sued to stop the Federal Government from vaccinating the workers of the United States.

          On Saturday, a panel of the Fifth Circuit Court of Appeals (there was no U.S. District Court involvement that I know of) issued a stay to prevent the United States from vaccinating its workers.

          The response in corporate and legal media to this decision within 24 hours of when the complaint was filed, has largely been the usual response to judicial decisions, which is that we don't know what these judges have in mind, and courts are inscrutable.

          That is ridiculous, in this case and in many others.

          Here is the real story in this case:  Two of these three judges on the Fifth Circuit panel were appointed by The Former Guy.  The third was a lawyer for the Republican Party of Texas.  (She is famed not so much for knowing the law as inventing it when she wants; for example, she overruled a Mississippi District Judge about Mississippi insurance law in a case which the Mississippi Supreme Court has rejected by name because it does not represent Mississippi law.)

          That is the panel and what it is likely to do in this vaccine mandate case is not inscrutable.  We can make a reasonable guess what these judges have in mind, based on experiencing what they have left behind during their careers.  Do you really think that the odds are that Republicans will fail with them?

          We cannot truly hope for justice until we know the odds against it.  We cannot know where we are going until we know where we are.  It is my hope that justice will prevail nonetheless, even at the hands of these judges in this particular case.

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

RECONSIDERATION, EXPERTS, MOTIONS IN LIMINE, IN ONE BAD-FAITH CASE.

In an unusual development, the Federal District Judge in Rap Indy, LLC v. Zurich Am. Ins. Co., No. 1:19-cv-04657-JRS-MJD, 2021 WL 5029520 (S.D. Ind. September 15, 2021) reversed himself when he reconsidered several of his prior rulings in the case.

          Taken together, the District Judge's prior rulings excluded all expert testimony on claims handling whether proffered by the plaintiffs or by the defendant.  It was unusual for a federal judge to reverse earlier rulings he himself had made in the case, but to this judge's credit, he did.

          When the judge entered his new rulings in this first-party bad-faith case, they were not unusual.  In fact, the new rulings represent the prevailing views across the nation on the subject of admitting the opinion testimony of expert witnesses in bad-faith cases:

    Upon reconsideration, the Court finds that expert testimony as to industry standards for property claims handling practices will assist the jury to understand the evidence in this case particularly with respect to the bad-faith claim. [Citations omitted.]  The Court will not allow expert testimony as to the law governing this action, nor will the Court allow testimony as to legal duties or any opinions that a party violated (or did not violate) those legal duties; however, the Court will allow expert testimony as to customs, practices, and standards in insurance claims handling and as to how Zurich did or did [not] meet such customs, practices, and standards.

Rap Indy, 2021 WL 5029520, at *1.

            The Court was not done, however.  The Court clearly explained the purpose and function of a motion in limine in federal practice:

    Finally, the granting of a motion in limine is not a final ruling on admissibility of the evidence. An order granting a motion in limine precludes any party from eliciting testimony or otherwise mentioning an issue in the presence of the jury without first seeking leave of Court outside the jury's presence.

 Rap Indy, 2021 WL 5029520, at *2.  Candidly, that is the clearest explanation of motions in limine and orders granting them that I have read or heard in 43 years of practice.

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

UNDERINSURED MOTORIST CLAIMS v. BAD FAITH CLAIMS IN TWO UIM CASES.

The nature of underinsured/uninsured motorist coverage in a given jurisdiction can determine the outcome of a bad faith claim against the UM/UIM carrier.

          In Washington, uninsured/underinsured motorist coverage is secondary to liability coverage, which is primary:

Plaintiff received $95,000.00 and left over $1 million in liability insurance coverage on the table. Thus, Plaintiff cannot now argue that the available liability insurance coverage was inadequate to compensate for his injuries.

    The purpose of UIM coverage is to place the insured in the same position as if a tortfeasor carried adequate liability insurance. [Citation omitted.] Thus, a UIM insured is not entitled to be put in a better position by virtue of colliding with an uninsured or underinsured motorist than by colliding with a tortfeasor that carries adequate liability insurance. [Citations omitted.]

    In Washington, an “underinsured motor vehicle” is one for which “either no bodily injury or property damage liability bond or insurance policy applies at the time of an accident,” or where the “the sum of the limits of liability under all … insurance policies applicable to a covered person after an accident is less than the applicable damages which the covered person is legally entitled to recover.” RCW 48.22.030(1) (emphasis added). The fundamental policy underlying UIM is that liability insurance is primary, while UIM insurance is secondary. The intent is that UIM insurance supplement but not supplant liability insurance.

Dean v. GEICO Ins. Agency Inc., No. 2:20-cv-01496-BAT, 2021 WL 4963638, at *3-*4 (W.D. Wash. October 26, 2021) (Tsuchida, USMJ).

          When an insured settles for less than the liability limits, as here, the insured's settlement is evidence in Washington that the insured's damages are less than the available UIM limits.  Accordingly, the Magistrate Judge granted the UIM carrier's motion for summary judgment on all claims including the bad faith claim in this case and dismissed the case with prejudice.  Dean, 2021 WL 4963638, at *4.

          On the day before the Magistrate Judge in Washington ruled in the Dean case, a U.S. District Judge ruled in another UIM case, this one in Nevada.  The defendant once again is GEICO.  Sahinov v. GEICO Adv. Co., No. 2:21-CV-919 JCM (VCF), 2021 WL 4954311 (D. Nev. October 25, 2021).

          The defendant UIM carrier filed a motion to dismiss an insured's extracontractual claims.   The insured pled three groups of extracontractual claims.  The District Court dismissed them all without prejudice, and all for the same reason:  The claims were not alleged with enough facts but were alleged with slogans in the eyes of the District Judge, so that the claims were not plausible when they were presented to the District Judge in this Nevada case. 

          First, in Nevada there is an implied covenant of good faith in every contract.  That includes underinsured motorist insurance contracts.  However, the insured in this case pled the same facts that the insured pled in support of a claim for breach of contract.  There are not two claims for the same breach of contract under Nevada law, and an alleged breach of the implied covenant is redressable as a contract claim under Nevada law.  Sahinov, 2021 WL 4954311, at *2-*3.

          Second, there is an actionable tort of bad faith under Nevada law.  That can include an alleged bad faith denial of UIM benefits.  However, the insured must allege what was not alleged in this case:

    To state a claim for bad faith, the insured must plausibly allege that: (1) an insurer denied a claim; (2) without any reasonable basis; and (3) with the knowledge or reckless disregard of any reasonable basis to deny coverage.  [Citation omitted.]  Bad faith requires an insurer was actually or impliedly aware that there was no reasonable basis to deny the claim.

Sahinov, 2021 WL 4954311, at *3.

          Third and finally, the Nevada Unfair Claim Settlement Practices Act conveys a statutory claim or cause of action for bad faith.  Once again, however, the allegations in the complaint in this case did not convey plausibility on the statutory claim here.  Sahinov, 2021 WL 4954311, at *4-*5.

          Accordingly, the District Judge in Nevada dismissed all extracontractual claims without prejudice in this case.

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

BAD FAITH EXPERT WITNESS, RETAINED IN EARLIER CASE, NOT DISQUALIFIED.

In Hayward Prop., LLC v. Commonwealth Land Title Ins. Co., No: 17-cv-06177 SBA, 2021 WL 4923379 (N.D. Cal. August 31, 2021), the District Court for the Northern District of California applied the same test in a bad faith case that is applied in many other United States District Courts when confronted with a motion to disqualify an expert witness:

    Generally, “disqualification of an expert is warranted based on a prior relationship with an adversary if (1) the adversary had a confidential relationship with the expert and (2) the adversary disclosed confidential information to the expert that is relevant to the current litigation.” Id. 1092-93 (citing Wang Labs, Inc. v. Toshiba Corp., 762 F. Supp. 1246, 1248 (E.D. Va. 1991)). If only one of those two factors is present, disqualification likely is inappropriate.

Hayward Properties, 2021 WL 4923379, at *2.  The same expert witness was retained in what might be called an underlying action to testify on different issues, the expert testified by declaration:

It did not concern “any issues relating to title insurance, coverage, duties to defend, breach of contract, bad faith, or ‘Brandt’ fees,” i.e., the matters at issue in this action.

Hayward Properties, 2021 WL 4923379, at *2.

          In part here pertinent, the Court found that "the two actions do not involve the same defendant, the same causes of action, or the same underlying legal issues."  Hayward Properties, 2021 WL 4923379, at *4. 

          The motion to disqualify this expert in the bad faith case was denied under the universal standard for expert witness disqualification applied to the facts in the record here.

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

AND A LITTLE MAGISTRATE FROM NEVADA SHALL LEAD THEM ....

In Kinney v. GEICO Cas. Co., No. 2:20-cv-02167-GMN-DJA, 2021 WL 4851089 (D. Nev. September 3, 2021) (Albregts, USMJ), an insurance case, a U.S. Magistrate Judge refused to enter a Stipulated Protective Order written by the parties, not without modifications commanded by the law, in the eyes of the Magistrate.

          The Court added provisions required by the law throughout Federal Courts and particularly in the Ninth Circuit where this case is pending.  Some of the more significant additions demanded by the law are:

1. The Court's execution of the proposed order is not a ruling that any specific document or testimony is confidential and so a secret.
2. The "compelling reasons" burden of proof remains on the party seeking to seal. The Court explicitly set out the "compelling reasons" standard, so if any party or its lawyers did not know what that was, they do now.
3. The "good cause" exception is a narrow one, and the Court explained how this exception operates to the required default showing of compelling reasons to seal testimony or a document in the Court file.
4. Last but not least, the Court made clear that the Rules abide and trump the parties' Stipulated Protective Order wherever they may be in conflict.

The Court made all these things clear by adding the following provisions to the proposed order written by the parties, and all before the Court signed the proposed order:

• The Court has approved the instant protective order to facilitate discovery exchanges, but there has been no showing, and the Court has not found, that any specific documents are secret or confidential. The parties have not provided specific facts supported by declarations or concrete examples to establish that a protective order is required to protect any specific trade secret or other confidential information pursuant to Rule 26(c) or that disclosure would cause an identifiable and significant harm.

* * *

• Specifically, a party seeking to seal judicial records bears the burden of meeting the “compelling reasons” standard, as previously articulated in 447 F.3d 1172.  Under the compelling reasons standard, “a court may seal records only when it finds ‘a compelling reason and articulate[s] the factual basis for its ruling, without relying on hypothesis or conjecture.” Ctr. for Auto Safety, 809 F. 3d at 1097. (quoting Kamakana, 447 F.3d at 1179). “The court must then ‘conscientiously balance[ ] the competing interests of the public and the party who seeks to keep certain judicial records secret.”  Ctr. for Auto Safety, 809 F.3d at 1097.
• There is an exception to the compelling reasons standard where a party may satisfy the less exacting “good cause” standard for sealed materials attached to a discovery motion unrelated to the merits of the case. “The good cause language comes from Rule 26(c)(1), which governs the issuance of protective orders in the discovery process: ‘The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.’ ” Id. (citing Fed.R.Civ.P. 26(c)). “For good cause to exist, the party seeking protection bears the burden of showing specific prejudice or harm will result if no protective order is granted.”  Phillips v. General Motors, 307 F.3d 1206, 1210-11 (9th Cir. 2002).  

* * *

• To the extent any aspect of the stipulated protective order may conflict with this order or Local Rule IA 10-5, that aspect of the stipulated protective order is hereby superseded with this order.

Kinney v. GEICO Casualty Co., 2021 WL 4851089, at *1-*2 (emphasis by the Court).

          This precise and scholarly ruling begs the question of why GEICO and the other parties need a stipulated protective order in an insurance case.

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