Claims and Bad Faith Law Blog

Claims and Bad Faith Law -- Author's Note: Commercial Advertising Not Authorized.

    **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.** 

   

 

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.

NFL SACKED BY JUDGE ALSUP AND THE LAW.

The case of Dent v. Nat'l Football League, No. C 14-02324 WHA, 2021 WL 4817749 (N.D. Cal. August 31, 2021) is a class action by former football players against the NFL alleging improper administration of pain medications.  As required by the terms of the Stipulated Protective Order the parties wrote in the case, the players filed a motion to have the Court seal the exhibits to their motion for certification of their class, for the sole reason that the NFL designated all those documents "confidential."

          The absurdity of such a common provision in SPOs became clear when the NFL did not file anything in support of the sealing request.  The NFL lost; the exhibits are not sealed.

           Reference to a stipulated protective order is insufficient to establish that the documents are sealable. Civ. L.R. 79-5(d)(1)(A). The NFL has not filed a declaration in support of sealing.

          Therefore, the motion is DENIED.

 Dent, 2021 WL 4817749, at *1.

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

AND IN THE DISTRICT COURT, LISA NEWMAN LED THEM TO SUCCESS.

In articles posted here on October 7 on Claims and Issues Blog and here on October 12, we explored together the saga of how the U.S. Department of Justice obtained a preliminary injunction against the Texas abortion law.

          The United States had ten (10) lawyers listed on the docket of that case in the District Court, in other words, the trial court.  After a review of the District Court file, one of those lawyers clearly emerges as the lead attorney in this successful lawsuit in the trial court:  LISA NEWMAN, ESQUIRE.

          Ms. NEWMAN signed all the significant motions and pleadings filed by the United States, including the complaint and the emergency motion for Temporary Restraining Order/Preliminary Injunction.  She was obviously entrusted with great responsibilities by the Department of Justice, and the results show the wisdom of that decision.

          It is interesting that Ms. NEWMAN has only been a Trial Attorney in the Civil Division, Federal Programs Branch since October 2020.  Before that, she did many things of distinction:

• She was a law clerk at the Western District of Texas for two years before she went to the DOJ. (She may have either known, or known of, the federal District Judge in the Western District of Texas who decided this case.  He was on the bench when Ms. NEWMAN clerked in the Western District.)

• She got both her B.A. from the University of Texas, and her law degree from the University of Texas School of Law.

• To say again, the fact that ten lawyers followed Ms. NEWMAN'S lead is a testament to her legal skills.  The current department of justice would be well-advised to look to her lead again in other cases.

Including in Texas's current appeal from its loss to the team led by Ms. NEWMAN in the District Court.

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

JUSTICE IS MORE LIKELY THE RESULT OF COMMITMENT, THAN CONNECTIONS.

You may already know that the department of justice's successful efforts to bar the Texas abortion law were led in the District Court by LISA NEWMAN, ESQUIRE.  See AND LISA NEWMAN SHALL LEAD TEN OF THEM ....  If you do not already know that, look for tomorrow's article here as well.

          The doj's success was fleeting, though.  Texas won the initial skirmish on appeal.  A motions panel in the appellate court, which means a panel of judges that was gathered together to hear motions in all the appeals pending in the appellate court, granted Texas' motion to lift the District Court's injunction of the Texas law in this case, as we reported in an article here on Saturday, October 9, 2021.

          Technically, the motions panel only granted a motion to stay the injunction in this case, in other words, to keep the Texas abortion law in place, for so long as it may take for the Fifth Circuit Court of Appeals to decide the motion.  See FIFTH CIRCUIT MOTION PANEL ORDER REINSTATING TEXAS ABORTION STATUTE FOUND!, posted here on Saturday, October 9, 2021.

          In reality, of course, this is the Fifth Circuit.  Things are looking grim for the doj.  The department of justice needs to maximize its chances of reaching the judges who sit on the Fifth Circuit, which covers Texas, if the United States is going to have any chance of prevailing on the merits of this case on appeal.

          The doj replaced the successful trial lawyer, LISA NEWMAN, on the appeal.  That is not unusual, that an appellate lawyer at a big firm, or in this case at the doj, comes in to handle an appeal rather than the trial lawyer who won the case.  In this particular case, it should be noted that NEWMAN is from Texas, went to the University of Texas undergrad, and then went to the prestigious University of Texas Law School.  The judges on the Fifth are likely to listen to her.

          Or they would have been.  Ms. NEWMAN has been replaced on appeal with one DANIEL WINIK, ESQUIRE.  He signed the USA's Opposition to Stay which was filed a day ahead of the deadline.  (Sorry I cannot provide a copy of it here as the blogging platform, Typepad, could not download it to this blog which is a first.  Suffice it to say that Mr. WINIK's memorandum opposed the idea of a stay in the Fifth Circuit which would necessarily reinstate the Texas abortion law.)

          MERRICK GARLAND, did someone tell you this is a good decision, removing the successful trial lawyer from the appeal?  Just asking for the country.

          Mr. WINIK is a White male who went to Yale.  Good luck relating to the judges down in the Fifth Circuit.  Not extremely likely that they'll listen to you, Mr. WINIK, but maybe.  Time will tell.  Not a winning strategy on appeal, in any case.

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

DEBATING FAIRLY DEBATABLE CLAIMS MEANS NO TEXAS BAD FAITH CLAIMS.

In Texas, "[a]n insurer can deny debatable claims without being liable for breach of the duty of dealing in good faith."  Aspen Spec. Ins. Co. v. Yin Inv's USA, LP, No. 6:20-cv-00153, 2021 WL 4666775, at *3 (E.D. Tex. October 7, 2021).

          If there is no common-law claim for breach of the duty of dealing in good faith in Texas, then there are likewise no statutory claims available under Texas Insurance Code § 541 (prohibiting unfair methods of competition and unfair or deceptive acts or practices), Texas Deceptive Trade Practices Act § 17.41 (prohibiting the same methods, acts or practices), and Texas Insurance Code § 542 (requiring prompt payment of claims), all of which were also at issue in Aspen Specialty.   The predicates are the same whether the claims are alleged on the basis of the Texas common law or on the bases of the cited Texas statutes.

          Summary judgment for the carrier on the Texas common-law claims in Aspen Specialty meant summary judgment for the carrier on these statutory claims as well.  Aspen Specialty, 2021 WL 4666775, at *3.

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

FIFTH CIRCUIT MOTION PANEL ORDER REINSTATING TEXAS ABORTION STATUTE FOUND!

(Texas /Austin American Statesman)

After a long search, I have found the Fifth Circuit's Order of October 8, 2021 reinstating the Texas abortion ban statute.  Following recent Fifth Circuit precedent, the Order was issued by a three-judge motions panel without an opinion and without briefing or oral argument.  Technically, the Order is in effect until the Fifth Circuit disposes of the 'emergency' motion to stay the statute pending appeal.

          The United States has been ordered to file a response by Tuesday, October 12, 2021.

You can find the Fifth Circuit motions panel Order here for your ease of reference:  Download Order 5th Circuit Emergency Stay United States v. State of Texas No. 21-50792 (5th Cir. October 8 2021).

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

DOING NOTHING IS NO DEFENSE TO BAD-FAITH SETTLEMENT CONDUCT.

For years, some defense lawyers have counselled their insurance company clients that an insurance company has no legal duty to do anything in settlement negotiations.  This insistence on the theoretical obscures the reality of bad-faith claims decided by judges and juries.  If a carrier follows such advice, the consequences can include exposure to extracontractual liability and the policy limits will be irrelevant in such a case.

 

SETTLEMENT DUTIES OF INSURANCE CARRIERS:  THE THEORETICAL UNIVERSE vs. THE PRACTICAL, THE REAL, THE ACTUAL WORLD.

 

          In Nichols v. Zurich Am. Ins. Co., ___ S.W.3d ___, No. 2020-SC-0284-DG, 2021 WL 4487529 (Ky. September 30, 2021)(stated not final and not yet to be cited as authority in Kentucky courts), the Kentucky Supreme Court confronted just such a case, i.e., a case in which the record showed that the carrier did little to nothing to settle an Uninsured Motorist (UIM) claim.

          The carrier's settlement conduct was bound up in its belief that there should not have been any UIM coverage under the policy at bar.  On a previous appearance of this case in the Kentucky Supreme Court, the Court disagreed.  The Court held that the policy at issue provided UIM coverage at all material times, in effect.  The case presented many issues the first time around, but the one we are concerned with here relates to the Supreme Court's treatment of the carrier's conduct concerning settlement negotiations.

 

RECORD EVIDENCE OF DOING SOMETHING TO INITIATE SETTLEMENT NEGOTIATIONS IN GOOD FAITH.

 

          Putting evidence into the record can go a long way toward proving the carrier's settlement conduct in good faith; having no evidence in the record can be bad.   See generally 1 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith, § 3:16, Duty to initiate settlement negotiations.

          "When insurance companies investigate the applicability of policy provisions to individual claims, their conduct is governed by the UCSPA [Unfair Claims Settlement Practices Act] as well as common law principles of good faith and fair dealing."  Nichols, 2021 WL 4487529, at *4.

          The Uniform Claims Settlement Practices Act has been enacted in much the same form across the country.  See generally 1 Dennis J. Wall, supra, § 3:28 Legal bases of liability in settlement--Statutory (third-party or liability insurance bad-faith claims); 2 id., §§ 9:14 & 9:15 (Express and Implied statutory causes of action in first-party bad-faith claims). 

          As the Nichols Court pointed out, the UCSPA incorporates a duty of good faith to attempt to effectuate "prompt, fair and equitable settlements of claims in which [the insured's] liability has become reasonably clear."   Kentucky's version of this duty is embodied in Ky. Rev. Stat. Ann. § 304.12-230(6):

    It is an unfair claims settlement practice for any person to commit or perform any of the following acts or omissions:

* * *

    (6) Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear[.]

The Kentucky Supreme Court applied this statutory standard in Nichols.

 

EVIDENCE OF POST-LITIGATION SETTLEMENT CONDUCT

 

          There was one crucial addition in this case that applies in most States, not just in Kentucky:   The Kentucky Supreme Court's case law is predicated "on the understanding that the insurer's duty of good faith to the insured does not end until the claim has been settled."  Nichols, 2021 WL 4487529, at *6.

          That observation led the Court in Nichols to consider the discovery of post-litigation materials, meaning discovery of materials generated by the insurance carrier after the bad-faith lawsuit was filed.  The Court made it clear in Nichols that "even evidence of settlement behavior is not automatically admissible."  Nichols, 2021 WL 4487529, at *6.  In fact, in this case, the Court expressly ruled that "Nichols is entitled to the internal Zurich documents relating to the insurer's initial denial of his claim."  Nichols, 2021 WL 4487529, at *7.

          The Supreme Court further cautioned "that in all circumstances trial courts must remain vigilant and cautious prior to admitting any post-litigation evidence."  Earlier in its opinion, the Kentucky Court noted that "[t]he trial court granted Nichols' discovery requests in part, limiting it specifically to Zurich's settlement conduct." Nichols, 2021 WL 4487529, at *4.

          Later in its opinion, the Kentucky Supreme Court added this observation regarding evidence of the carrier's post-litigation settlement conduct in this case:

However, since Zurich simply opted out of engaging in the settlement process entirely, Nichols has no other remedy under our procedural rules.

Nichols, 2021 WL 4487529, at *7 (emphasis added).

 

CONCLUSION

 

          In the end, doing nothing is no defense.  Simply opting out of engaging in the settlement process entirely is not a good option, even in those few jurisdictions which do not require insurance carriers to do something to initiate settlement negotiations.

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

KENTUCKY LAYS OUT ELEMENTS OF BAD-FAITH CAUSE OR CLAIM.

In Nichols v. Zurich Am. Ins. Co., ___ S.W.3d ___, No. 2020-SC-0284-DG, 2021 WL 4487529 (Ky. September 30, 2021)(stated not final and not yet to be cited as authority in Kentucky courts), the Kentucky Supreme Court laid out the elements of a bad-faith cause of action or claim under Kentucky State law.

          This was an uninsured motorist (UIM) case.  The carrier denied all UIM coverage under Nichols's employer's policy.  On this record and with the history of this particular case, the Kentucky Court previously reached a decision that Nichols's UIM claim was covered here.

          In the present iteration of this case, the Court declared the elements of proving bad faith in Kentucky:

        In an insurance bad-faith cause of action, the claimant must prove the insurer (1) was obligated to pay the claim under the terms of the policy; (2) lacked a reasonable basis in law or fact for denying the claim; and (3) either knew it had no reasonable basis for denying the claim or acted with reckless disregard for whether such a basis existed.

Nichols, 2021 WL 4487529, at *1.

          With this declaration of elements, the Kentucky Supreme Court joined a number of courts which essentially require the party claiming bad faith to prove that the carrier had no reasonable basis to contest coverage or liability, i.e., that the carrier "lacked a reasonable basis in law or fact for denying the claim," not simply that the claim was covered or that the carrier lacked any basis for denying the claim.

          In our next article, we will address an even more significant aspect of the Kentucky Court's decision:  The Court's decision on the potentially devastating consequences to an insurance carrier of the carrier's failure even to initiate settlement negotiations.

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

MR. KELLY'S 8 LAWYERS vs. 3 PROSECUTORS: KELLY GUILTY ON ALL COUNTS.

Mr. R. Kelly was famously found guilty by the jury on all 9 counts, which break down into a gutsy, novel Racketeer Influenced Corrupt Organizations (RICO) count and 8 counts under the Mann Act addressing sexual relations with underage victims.

          Mr. Kelly was defended by 8 lawyers according to the docket on PACER (Public Access to [Federal] Court Electronic Records).  He was successfully prosecuted by three prosecutors from the U.S. Attorney's Office for the Eastern District of New York.

          Each of the three prosecutors is a woman.  Each is a very accomplished, very successful criminal lawyer.

          They were led by ELIZABETH GEDDES, ESQUIRE.  Ms. GEDDES, a member of the U.S. Attorney's Office for 15 years, heads the Civil Rights Section of the Criminal Division at E.D.N.Y.  As is so clearly evidenced by this case, her specialty is the prosecution of racketeering and organized crime.

          Like each of the three prosecutors, Ms. GEDDES has a distinguished resume apart from her work at E.D.N.Y.  She is an adjunct at N.Y.U. in Clinical Law.

          NADIA SHIHATA, ESQUIRE has been with E.D.N.Y. for 10 years and has been the Chief of the Organized Crime and Gangs Section for nearly 2 and 1/2 years.  She graduated from the University of Michigan Law School in 2003, where she was the Editor-in-Chief of the prestigious Law Review.  At Michigan Law, she also received the Order of the Coif, one of the higher honors any law student can receive.

          Ms. SHIHATA's distinguished resume does not stop there, however.    She got an L.L.M. from N.Y.U. in 2008.  She is an adjunct at Columbia Law.

          The third member of the prosecution trio is MARIA E. CRUZ MELENDEZ, ESQUIRE.  She is the Deputy Chief of the Civil Rights Section at E.D.N.Y.  She graduated from Harvard in 2001 and in an unusually positive mark of distinction for Notre Dame Law School, she is a 2006 graduate of Notre Dame Law.

          These accomplished lawyers are demonstrably competent and so they compare very favorably with the department of justice personnel who have appeared in past articles posted here.  The doj could not do better than making use of the talents of these three lawyers in every case they can handle for the United States.

          MERRICK GARLAND, let those who have eyes to see, let them see; let those who have ears to hear, let them hear.  Bring these people in to your depleted department and let them prosecute the January Sixers, and others.  That would be a terrific solution.  The results will speak for themselves.

          The results speak for themselves now.

This article was posted in a slightly different version on Claims and Issues Blog on the last day of September, 2021.  Reprinted here with permission.

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

COVID CAUSES GOOD FAITH TO SET ASIDE DEFAULT. ISSUE, FIRST-FILING?

In the case of Wells Fargo Bank, N.A. v. Ameritas Life Ins. Corp., No. 4:21-CV-3118, 2021 WL 4401440 (D. Neb. September 27, 2021), the Court confronted a good-faith issue raised by a party and a second good-faith issue raised by the Court itself.

          The good-faith issue raised by a party was raised by a defendant's motion for relief from default judgment.  One of the factors for a federal judge to consider on such a motion is "whether the movant acted in good faith."  Ameritas, 2021 WL 4401440, at *1.  Here, the Court found that Ameritas "sufficiently explained the reason for its delay in responding to the complaint in this case, and that the defendant acted in good faith."  Ameritas, 2021 WL 4401440, at *2. 

          Ameritas explained the reason for its delay in responding to the complaint because of changes in procedures in clocking in the mail during the COVID-19 pandemic.  Ameritas, 2021 WL 4401440, at *1.  The plaintiff did not dispute the defendant's good faith in this case.  Ameritas, 2021 WL 4401440, at *2 n.3. 

          The good-faith issue which arose on the Court's own motion was its consideration of whether it should abstain because of the pendency in parallel litigation between the same parties in New Jersey.  The parties themselves admitted that the Nebraska case "is a mirror image" of the case in New Jersey.  "The threshold issue in determining whether to abstain due to the pendency of concurrent federal proceedings" is to determine whether one or another proceeding was filed first, in essence.  However, if "the first-filing party acted in bad faith," for example, then the filed-first rule as the Court called it, may not apply.  Ameritas, 2021 WL 4401440, at *3. 

          The Court decided, again on its own motion, to stay the case before it and await the New Jersey court's determination of whether it had jurisdiction over the parties there.  Ameritas, 2021 WL 4401440, at *3, *4.

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

LATE NOTICE, NO COVERAGE. THEREFORE NO BAD FAITH IN GEORGIA.

In Currie v. Auto-Ins. Co., No. 1:20-CV-02160-ELR, 2021 WL 4354188 (N.D. Ga. August 12, 2021), a policyholder sued a homeowner's carrier for statutory bad faith late payment of his claim under Georgia law.  His excuse for being late with his notice was that he did not know the defendant was his homeowner's carrier.

          The homeowner's carrier defended its conduct against the bad faith claim with this argument:  "Defendant asserts that Plaintiff's bad faith claim fails as a matter of law because Defendant had a reasonable, non-frivolous reason for rejecting Plaintiff's Claim."   Currie, 2021 WL 4354188, at paragraph immediately following title of Section IV of the Court's Opinion (page numbers not provided as of the time that this article is published).

          The federal court agreed and entered summary judgment for the homeowner's carrier in this case.  Currie, 2021 WL 4354188, at Section IV.B of the Court's Opinion (page numbers not provided as of the time that this article is published).

          The morals of the story here are two:  (1) There are apparently better excuses for being late in notifying your homeowner's carrier of your claim, and (2)  Your lateness does not impose an obligation on your homeowner's carrier in Georgia, as in most places.

P.S. SUBSEQUENT HISTORY AS OF WED., 09.29.21:

Since this article was posted, Westlaw has provided the following information on the subsequent history of the Currie case:  appeal docketed, No. UNAVAILABLE (11th Cir. Sept. 10, 2021).

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

TWO CHALLENGES TO FILED RATES FROM THE FRD CASE LAW.

The filed rate doctrine is coming in insurance law.  Indeed in some places it is already here.

          Since the filed rate doctrine originated with rates charged by utilities and regulated by federal or state government agencies, a good start in learning how to challenge the filed rate doctrine in insurance cases comes from studying FRD case law.  In Public Citizen, Inc. v. Fed. Energy Reg. Comm'n, 7 F.4th 1177, 1198 (D.C. Cir. August 6, 2021),  the federal statute authorizing FERC provides for a way to challenge the filed rates that FERC approves: 

    As the Commission agrees, Section 206 allows a complainant to allege that market manipulation led to unjust and unreasonable rates. See Rehearing Order ¶ 14 (J.A. 131–132); Oral Arg. Tr. 35:2–5 (Oral Arg. Rec. 45:38–45:52). Yet the Commission's orders wholly failed to adequately address Public Citizen's allegation that Dynegy's market manipulation produced unjust and unreasonable results in the 2015 Auction.

(Emphasis added.)  Because the Commission did not adequately explain its conclusion about "just and reasonable" rates based on the evidence presented, the Circuit Court of Appeals remanded "to the Commission for further analysis and explanation."  Public Citizen, 7 F.4th at 1200.

          In a similar way, if the regulatory body charged with determining just and reasonable insurance rates, for example, fails to adequately explain its conclusion that the filed insurance rates at issue in the given case were just and reasonable, one way to attack the filed insurance rates is to attack the way in which the rates were approved by the regulator.

          Further, where customer charges were made "additionally imprecise" because of the defendant utility's billing practices, even though the rates were set by private contracts they could be successfully challenged particularly where the billing practices were set by the utility without disclosing "what it was doing either to its customers or to the Commission."  Hanson v. Kansas Corp. Comm'n, 490 P.3d 1216, 1227 (Kan. 2021).

          Similarly, where charges are included in the premium paid by the consumer or by the policyholder, or by the homeowner in the case of force-placed insurance, by a parity of reasoning even filed insurance rates approved by the appropriate regulator should be subject to challenge where the rates are set by private contracts following formulas that are not disclosed either to the customers or to the regulator.

          There are challenges to filed rates approved by regulatory agencies extant in the FRD case law.  Insurance counsel should consult them whenever faced with filed insurance rates approved by the appropriate regulatory agency.

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

'LAWSUIT MADE WHEN FILED, NOT WHEN UNSEALED' & NO COVERAGE, ...

NO BAD FAITH UNDER KENTUCKY LAW.

The case of Springstone, Inc. v. Hiscox Ins. Co., ___ F. App'x. ___, No. 20-6014, 2021 WL 4240779 (6th Circ. September 17, 2021) may not have made the official reporters but it has many issues of note.

          Too many issues to mention them all here.  Two that deserve especial mention at this time are the disposition both by the trial court and by the appellate court of a coverage issue and of a bad faith issue.

          The appellate panel affirmed the trial judge's determination of the requirement of the policy at bar that a "Claim first [be] made ... during the Policy Period[.]"  Both the trial court and the appellate court determined that this policy requirement was not satisfied here.  In this coverage case, an underlying  qui tam lawsuit was filed before the policy period but was unsealed during the policy period.

          That did not satisfy the policy requirement in the eyes of the trial judge nor in the eyes of any of the three judges on the Sixth Circuit panel in this case.  "A lawsuit is first produced or created when it is filed not when it was unsealed."  Springstone, 2021 WL 4240779, in second full paragraph of Section III of the Sixth Circuit's opinion (pinpoint page numbers not available at the time that this blog article is written).

          On the bad faith issue, the Sixth Circuit panel affirmed the trial court's determination that under Kentucky law, there is no bad faith cause of action where there is no insurance coverage.  The panel cited to a "Ky. App. 2005" officially unreported decision.  Springstone, 2021 WL 4240779, in penultimate paragraph of Section III of the Sixth Circuit's opinion (pinpoint page numbers not available at the time that this blog article is written).  This is the view held by most courts in most jurisdictions in the United States.  

          Although there is not room enough here to address all of the issues surfaced in the Sixth Circuit's brief opinion, it is an opinion well worth reading and I will reproduce here the opening paragraph because it is so succinct and covers the crux of the case:

          Responding to lawsuits and investigations is expensive (even when they are without merit). That reality played out when Plaintiff Springstone, Inc. incurred substantial legal fees responding to a government subpoena based on a sealed qui tam lawsuit. Springstone thought, however, it was in luck. After all, it had purchased insurance from Defendant Hiscox Insurance Company, Inc. to cover it from certain legal claims. But its coverage does not extend so far. Springstone’s policy does not cover qui tam actions filed before the coverage period, nor does it cover subpoena responses. Accordingly, the district court’s judgment is AFFIRMED.

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