Claims and Bad Faith Law Blog

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COBLENTZ AGREEMENTS: PROFFER EVIDENCE OF REASONABLE AMOUNT AND GOOD FAITH.

In Nat'l Trust Ins. Co. v. Savoy Hotel Ptrs., LLC, ___ F. Supp. 3d ___, No. 23-20860-Civ-Scola, 2023 WL 8018880 (S.D. Fla. Nov. 20, 2023), a  federal judge in the Southern District of Florida followed and extended Florida law treating a Coblentz agreement as a special kind of settlement agreement.

          A Coblentz agreement is only enforceable in a case where an insurance carrier wrongfully refuses to defend its insured, the Court pointed out.    A settlement agreement is allowed under Florida law in such a case, whereby the insured settles the case itself with the underlying plaintiff, and the underlying plaintiff agrees to collect the amount of the settlement only from the insurance carrier.  Called a Coblentz agreement after an early case in which these arrangements were approved, the Court summarized the legal requirements of a Coblentz agreement as follows:

The enforceability of a Coblentz agreement depends on whether a plaintiff can show that (1) there was coverage under the policies at issue, (2) the insurance company wrongfully refused to defend, and (3) the settlement amount was both “reasonable” and made in “good faith.” 

National Trust Insurance Co., 2023 WL 8018880, at *2.

          In the National Trust Insurance Co. case, the Court granted the insurance company's motion to dismiss on the grounds that the plaintiff had not adequately alleged either that the settlement amount was reasonable or that the settlement was made in good faith.  However, the Court was not done in this case.  The Court granted the motion to dismiss with prejudice.  In case that was not enough, apparently, and since the plaintiff Savoy Hotel Partners, LLC had not asked for leave to amend, the Court added that dismissal was without leave to amend.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

TESTING THE UNTESTED ASSUMPTIONS ABOUT ACTIVISM AND BIAS.

My inclination is to research the stuffing out of an issue (an appropriate metaphor on the day before Thanksgiving, I think).  But after giving it some thought, I realized that no matter how much research I did for this article, I could not convince you if you aren't receptive to evidence in the first place.  Many people are not receptive to evidence.

         I am writing this article, as well as this blog, mainly for an audience of lawyers.  It is likely that some readers, perhaps many, are generally  receptive to evidence.  This is evidence of what I see as a definite trend in decisions issued by federal judges appointed between January 20, 2017 and July 19, 2021 ("the appointed judges").  So I will list 3 "citations" in support of my article instead of, say, 3,000.

1. Latest: An appointed District Judge in Arkansas ruled that voters cannot sue for redress of grievances under the 1965 Voting Rights Act.  (The District Judge is reportedly now questioning applicants to be his Clerk whether they politically support Israel or Palestine before he will hire them.)  He faulted the 1965 Voting Rights Act because it did not include language he thought should be added to the legislation.  His decision was appealed to the Eighth Circuit Court of Appeals, where it was affirmed in a  2-1 decision.  The panel majority's decision was written by an appointed Circuit Judge. 
2. N.D. Texas, one example among many from the Northern District: An appointed District Judge banned the Food and Drug Administration from mailing chemicals needed for medical abortion.  Like the District Judge in Arkansas, he thought that the legislation should have included language which it did not have.  The case is on its way to the Supreme Court after a brief stop at the Fifth Circuit Court of Appeals.  The same District Judge that ruled in this case ordered the Biden Administration in an earlier case to continue the requirement that people applying for asylum in the United States from Mexico must "Remain in Mexico" until their applications are decided.  He was ultimately reversed by the U.S. Supreme Court that time, and the case was returned to him.  After the case was returned to him, the same District Judge ordered a second time that the Biden Administration must continue the previous requirement.  He has also previously ruled that the Title X Family Programming Plan does not confer authority to fund contraception because he would have added language to Title X recognizing a requirement of parental consent and, since the requirement was not in the legislation, he issued an order to strike the law.  
3. An appointed judge in the Middle District of Florida ruled in a pandemic that it is wrong to require people to wear masks in crowded airplanes.

          Okay, that makes "3 supporting citations," but I want to add just one more:  appointed judge Aileen M. Cannon. 

          Well, there you have my "3 supporting citations."  It is up to you whether you can see where this is headed, or whether you are willfully ignorant of where this is headed.  Either way, I submit that it is pretty clear that this is headed toward cases decided by biased judges issuing activist rulings to add language to legislation or, if the language they want to add is not found in the legislation, to strike the legislation down for that reason.  Lacking the votes to enact or amend desired legislation, now as well as previously, these appointed judges have not hesitated to express their own personal opinions as representing the law in past cases.  There is no reason I have seen to think that they will hesitate to enshrine their own personal opinions as law in future cases.

          I will conclude by rephrasing (only slightly) a remark made by Benjamin Franklin at the conclusion of the Constitutional Convention:  "You have a republic, if you can keep it."

P.S.

Before I leave this article, Happy Thanksgiving tomorrow!   All of the appointed judges mentioned in this article are each and all members of the Federalist Society.  Every one.  A good lawyer tests assumptions for their truth or falsity.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

 

GIVE THANKS! THE 2023 FLORIDA LEGISLATURE WILL EVENTUALLY ADJOURN!

It was not the purpose of the 2023 Florida Legislature to lower insurance rates.  The insurance rates paid by Florida homeowners are still the highest in the United States.

    The 2023 changes were crafted for the insurance industry by the insurance industry.  It's going to take time for Florida consumers to be aware of positive results in their homeowner's insurance rates, the Florida Insurance Commissioner has testified.[1]  The Chair of the Florida Senate Banking & Insurance Committee has testified to much the same:

The full positive impacts of our efforts will take time to be fully experienced and felt by our constituents.[2]

    In other words, rates were not on the legislators' minds in 2023.  Something else caught their focus.  Not insurance rates, and certainly not homeowner's insurance rates, but something the insurance companies called "lawsuit abuse."

    In 2023 the Florida Legislature focused on "HB 837, a sweeping tort measure" which the Florida Bar News reported that "the insurance industry said was needed to combat 'lawsuit abuse.'"[3]  More precisely, the "sweeping tort measure" which was the focus of the 2023 Florida Legislature more than homeowner's insurance rates, was a Committee Substitute for a Committee Substitute for House Bill 837.

    Only one of the more celebrated statutory changes affected homeowner's insurance and that was a change that affected all types of insurance in Florida:  repealing the availability of attorney's fees in the event of prevailing in a dispute with an insurance company over coverage or over the amount of benefits due under an insurance policy.

TO BE CONTINUED ....

[1] Testimony of Hon. Michael Yaworsky, Florida Insurance Commissioner, to the Florida Senate Banking & Insurance Committee, Oct. 10, 2023, quoted in Jim Ash, More Insurance-Related Litigation Reform Bills Unlikely This Session, 50 FLA. B. NEWS, November 2023, at 9.  The Insurance Commissioner's testimony was supported by testimony from the Hon. Tim Cerio, CEO of "Citizens, the state-run property insurer of last resort." November 2023 Florida Bar News Insurance-Related Litigation Reform Bills article, supra, at 9, quoting Hon. Tim Cerio.

[2] Florida Senate Banking & Insurance Committee Chair Jim Boyd, Oct. 10, 2023, quoted in November 2023 Florida Bar News Insurance-Related Litigation Reform Bills article, supra, at 1.

[3] November 2023 Florida Bar News Insurance-Related Litigation Reform Bills article, supra, at 9.

The changes to Florida Insurance Law and particularly to Florida Insurance Bad Faith Law are brought to light -- and highlighted -- in Volumes 1 and 2 of DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (West Publishing Company 3d Edition and 2023 Supplements), especially in Chapters 3, 5, 9, and 11.  Many of the different and voluminous 2023 Florida Insurance Law changes are also hauled into the sunlight in the forthcoming editions of  CATASTROPHE CLAIMS:  INSURANCE COVERAGE FOR NATURAL AND MAN-MADE DISASTERS, and Insurance Litigation Reporter.

Please read the disclaimer.  This blog article ©2023 Dennis J. Wall.  All rights reserved.

FORGET TO RAISE A PRIVILEGE BEFORE PRODUCTION? STIPULATE!

In U.S.A. v. Cherokee Gen. Corp., No. 2:22-cv-00299-KKE, 2023 WL 7624807 (W.D. Wash. Nov. 14, 2023), the parties stipulated that the Court should enter a Protective Order saying that if the parties produced information during discovery that they later thought was privileged and so should not have been produced (perhaps reflecting a reasonable concern about notifying E&O or malpractice carriers), then the information should be treated as privileged and returned to the owner.  The federal judge in this case agreed and entered the parties' Stipulated Protective Order in this regard:  "Information produced in discovery that is protected as privileged or work product shall be immediately returned to the producing party."  Cherokee General, 2023 WL 7624807, at *6.

So, if you forget to raise a privilege before production, stipulate with your opposing counsel that you did not have to raise the privilege.  Perhaps a federal judge, a fellow lawyer, will look kindly upon you.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

CONTAMINATION EXCLUSION APPLIED TO ALLEGED COVID-19 DAMAGE.

COVID.  Billings, Montana Hospital ICU Hallway.  (Billings Clinic)

In Monarch Casino & Resort, Inc. v. Affiliated FM Ins. Co., ___ F.4^th ___, No. 22-1096, 2023 WL 7143487 (10^th Circ. Oct. 31, 2023), the Tenth Circuit applied Colorado law to hold that a Contamination Exclusion applied to alleged COVID-19 damage:

The Contamination Exclusion expressly prohibits coverage for “[c]ontamination,” which the policy defines as “any condition of property due to the actual or suspected presence of any ... virus.” [App'x] at 192, 229 (emphasis added). This exclusion precludes coverage for “the inability to use or occupy property or any cost of making property safe or suitable for use or occupancy” because of the presence of a virus. Id. at 192. And that is not all. The exclusion also denies coverage for “any cost due to contamination including the inability to use or occupy property.” Id.

          With that in mind, the Contamination Exclusion’s plain language precludes all-risk and business-interruption coverage on exactly what Monarch asks for: physical loss or damage associated with the presence of the virus, COVID-19.

Monarch, 2023 WL 7143487, at *4-*5.

 After examining the rest of the policy at bar in light of the record in that case, the Court further held that all coverage was excluded, for that matter, where "otherwise" there was no physical loss.  Monarch, 2023 WL 7143487, at *6.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

INVESTING IN SECRECY.

In Wallace v. Ameripro EMS, LLC, No. 3:23-cv-1249-MMH-JBT, 2023 WL 7282888 (M.D. Fla. Nov. 3, 2023), the defendant filed an "Unopposed Motion to Seal Response to Jurisdictional Order and for Confidentiality".  The motion was unopposed, as everyone can see from the title.

The Court denied this motion anyway.  The defendant lost an unopposed motion to seal.  Here is the background behind this motion.

Although the Court's opinion does not reflect the nature of the action, PACER reveals that this is a civil suit for alleged breach of contract and an accounting over an allegedly agreed purchase of an ambulance service's assets.   In what appears to be an ordinary order, the Court ordered the defendant to disclose certain limited information about its investors in order to establish the jurisdiction of the Court to hear this case:  "As relevant here, the Court explained that to establish its citizenship, AmeriPro must disclose both the identity and the citizenship of its members."  Wallace, 2023 WL 7282888, at *1.

Rather than simply identify its members and reveal their citizenship publicly, the Defendant filed a motion to seal that information and keep it out of the public eye.

The defendant said itself that it filed its very unusual motion in an effort to forever seal the identity of its shy investors who did not want to have their financial interests revealed publicly.  Wallace, 2023 WL 7282888, at *1.

This is the Court's summary of why it denied these shy investors' unopposed motion:

In the Motion, AmeriPro asserts that a seal is warranted because revealing the names of these silent members in the public record “would violate their right to privacy of their investments.” Id. Notably, AmeriPro does not cite any legal authority for this proposition.

    Upon due consideration, the Court finds that this interest alone does not constitute a compelling justification sufficient to overcome the public's right of access.

 

Wallace, 2023 WL 7282888, at *1.

 

It is interesting that at one point, the District Judge in this case was almost solicitous toward the Defendant.  See Wallace, 2023 WL 7282888, at *1 n.2.  The Court suggested that perhaps the defendant and its attorneys misunderstood the Court's order on jurisdiction.  In my over 45 years of practicing law, including in the Middle District of Florida, Jacksonville Division, where this case is pending, I do not recall an occasion when a federal judge was solicitous about parties or lawyers misunderstanding her or his rulings.  That's what motions for rehearing are for, in my experience.  I do vividly recall that federal judges uniformly expected us to obey their orders whether or not we liked them.

 

Investing in secrecy as a reasonable expectation for financial transactions?  Not today, not even in Florida.

 

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

 

LIFE INSURANCE INTERPLEADER, YES; CARRIER'S ATTORNEY'S FEES, NO.

In Minnesota Life Ins. Co. v. Alexander, No. 2:22cv207, 2023 WL 6290820 (E.D. Va. Sept. 25, 2023) the Court allowed a life insurance company to interplead various entities which did or could claim to be beneficiaries.  Minnesota Life, 2023 WL 6290820, at *4.

But the Court did not allow the life insurance company to recover its attorney's fees in the interpleader.  The Court ruled, in a case of apparent first impression within the Fourth Circuit, that the interpleading insurance company cannot recover its fees and costs where it is acting in the ordinary course of business in bringing the interpleader.   That was the case here, the Court ruled.  Minnesota Life, 2023 WL 6290820, at *4-*5.

Situations involving Multiple Claimants including but not limited to interpleader actions, are examined in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:45 (West Publishing Company 3d Edition, 2023 Supplements).

 

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

“INVESTIGATIVE EXPENSES” RECOVERABLE IN INSURANCE BAD FAITH, WASHINGTON CPA CASE.

Women's March in Washington, D.C., 2017.

“Investigative expenses” that are possibly a part of insurance coverage in an insurance bad faith case are recoverable under the Washington Consumer Protection Act, as opposed to “litigation expenses” that are not recoverable under the CPA, the Court held in Nielsen v. Cal. Cap. Ins. Co., No. 2:22-CV-0177-TOR, 2023 WL 6222537, at *5 (E.D. Wash. Sept. 25, 2023) (holding that, at a minimum in the eyes of the Court, “however, a genuine issue of material fact exists as to whether Dr. Soto’s [the treating physician’s] reply to Dr. Battaglia’s IME report and Mr. Dietz’s [the policyholder’s “insurance expert’s”] evaluation of Defendant’s alleged insurance malpractice related to the investigation of an unfair act or practice separate from the instigation of her CPA claim.”).

Women's March in Washington, D.C., 2019.  (Sarah Silbiger / New York Times)

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

“PROPERTY” UNDER WASHINGTON CPA INCLUDES DEMAND FOR INSURANCE POLICY LIMITS.

In Nielsen v. Cal. Cap. Ins. Co., No. 2:22-CV-0177-TOR, 2023 WL 6222537 (E.D. Wash. Sept. 25, 2023), Ms. Josie Nielsen sued her underinsured motorist carrier for bad faith and alleged violations of Washington State’s Consumer Protection Act (CPA), among other things.  She was injured in a motor vehicle accident with an underinsured tortfeasor, incurred medical specials totaling $83,365.37, demanded the UIM policy limit of $1,000,000, received treatments that raised her medical specials total to some $310,000 and her claim’s alleged total value to $2,450,000,  and kept her demand the same.  Her carrier responded by demanding an Independent Medical Examination, after which the carrier responded with a total offer of “$302,212.17 when the $100,000 from the at-fault driver, medical expenses, and PIP payments were included.”  See Nielsen, 2023 WL 6222537, at *1-*2.

The Washington Consumer Protection Act applies to “injury to a person’s business or property,” in part here pertinent.  See Wash. Rev. Code § 19.86.090.  The UIM carrier in this case argued that Ms. Nielsen’s claim under the CPA did not qualify as actionable injury to her “property.”  The Court in this case disagreed, and accordingly denied the carrier’s motion for summary judgment on the CPA claims for wrongful denial of benefits, in these words following a full discussion of Washington State case law interpreting the CPA:

Although Plaintiff’s demand for her policy limits stems from a personal injury, her allegations are better characterized as a demand for benefits than a personal injury claim.

Nielsen, 2023 WL 6222537, at *4.

Express statutory claims and causes of action alleged in first-party insurance bad faith cases are addressed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:14 (Thomson Reuters 3d Edition, 2023 Supplements), including claims and causes of action alleged under various State Unfair Business Practices Acts or Unfair Competition Laws, and Consumer Protection Acts.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

WHAT IS LEFT THAT IS NOT SEALED?

In Las Vegas Sands, Inc. v. Nat’l U. Fire Ins. Co., No. 2:22-cv-00461-JCM-BNW,  2023 WL 6929303 (D. Nev. Oct. 19, 2023) (Weksler, USMJ), a United States Magistrate Judge granted two motions to seal in an insurance case.  The defendant insurance company requested one set of documents to be sealed, and the plaintiffs requested another set of documents to be sealed.

The documents in question were submitted to the Court to consider in connection with the parties’ competing motions for summary judgment.

The Magistrate Judge granted the insurance company’s motion to seal exhibits that the carrier submitted to the Court with testimony in the form of a declaration or affidavit about the carrier’s claims handling guidelines.  The Magistrate Judge ruled that documents regarding claims handling are trade secrets and so should be sealed from public view, although they had been submitted to the Court to consider along with testimony about them.  Las Vegas Sands, 2023 WL 6929303, at *2.

The plaintiffs-policyholders requested that their previous settlement in a previous matter be sealed.  That, too, was sealed by the Magistrate Judge in this case.  Las Vegas Sands, 2023 WL 6929303, at *2-*3.

Although the Magistrate Judge’s opinion did not mention it, this is an insurance bad faith case, among other claims:

1. This action seeks declaratory relief and damages for breach of contract, violations of the Nevada Unfair Claims Practices Act, and breach of the covenant of good faith and fair dealing, arising out of AIG’s long-standing, bad faith refusal to acknowledge and then honor its contractual obligations under a private company liability insurance policy to pay LVS’s defense and settlement costs incurred in an underlying lawsuit styled Richard Suen & Round Square Co. v. Las Vegas Sands Corp., et al., No. A493744 (Nev. Dist. Ct., Clark Cnty.) (the “Suen Action”).

Las Vegas Sands, Inc. v. Nat’l U. Fire Ins. Co., Complaint, ¶ 1 at p. 2, filed March 14, 2022 (D. Nev. Case No. 2:22-cv-00461).  Download Las Vegas Sands Inc. v. National Union Fire Ins. Co. Complaint, DE 1, filed March 14 2022 (D. Nev. Case No. 2..22-cv-00461).

If claim handling guidelines are sealed from public view, and if settlement agreements are also kept out of the public eye, it’s a real question as to what if anything is open to public view in an insurance bad faith case.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved. 

COVID-19, CORONAVIRUS CASES DECIDED BY JUDGES, NOT EPIDEMIOLOGISTS.

COVID-19 Assisted Living Facility Nurse Catharine Best in AARP Article on Coronavirus.  (Image via AARP and Catharine Best)

In Happy Valley Road LLC v. Amguard Ins. Co., No. 3:22-cv-06115-LB, 2023 WL 6200063 (N.D. Cal. Sept. 12, 2023) (Laurel Beeler, USMJ), a respected U.S. Magistrate Judge reiterated a fairly noncontroversial ruling in a way worth noting.

The ruling previously issued by the Court in this case was that there was no insurance coverage for a plaintiff LLC that owns and rents high-end properties and that alleged the loss of rental income due to the presence of COVID-19 on the insured’s premises.  The Court accordingly granted the insurance carrier’s motion to dismiss.  “The court relies on its previous analysis:  the actual or potential presence of the COVID-19 virus is not a covered loss.^15”  Happy Valley, 2023 WL 6200063, at *4.  The ruling is fairly noncontroversial.  However, it is worth noting how the Court itself saw that previous ruling in its description of it in the Court’s own footnote 15.

The plaintiff did not allege that the property was unfit to live in but only that the coronavirus rendered its property uninhabitable.  It lost the battle and the war on the motion to dismiss because “[i]t did not cite any cases to counter the weight of authority concluding that the presence of the virus does not render a property uninhabitable.”  Happy Valley, 2023 WL 6200063, at *4 n.15.

Legal authority, not medical authority, decides the outcome in all these cases, including this one.  The deciding authority is clear, and it is not a physician that decides, it is a judge.  Perhaps a system run by judges can lead to no other outcome.

Perhaps.

Virus Exclusions and the Coronavirus Pandemic of Covid-19 are discussed in § 7:20 by Dennis J. Wall, in 1 CATASTROPHE CLAIMS / INSURANCE COVERAGE FOR NATURAL AND MAN-MADE DISASTERS (Thomson Reuters June 2023 Edition).

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

JOINT MOTION TO ENTER STIPULATED PROTECTIVE ORDER IS NOT ENOUGH.

A joint motion for entry of a stipulated protective order is not enough for a federal Court to enter the stipulated order.  “Rule 26(c) allows the Court to enter a protective order for good cause shown.”  Gordon v. Menard, Inc., No. 1:23-cv-00317-HAB-SLC, 2023 WL 6619427, at *1 (N.D. Ind. Oct. 10, 2023) (Collins, USMJ).  Good cause was not shown in Gordon, and here’s why the Magistrate Judge denied the joint motion without prejudice.

To begin with, the proposed stipulated protective order was overbroad on its face.  In pertinent part, “it seeks to protect information regarding current and former employees and agents,” but as the Court pointed out, there are many times when employee information is subject to disclosure such that an absolute ban on disclosure is contrary to the law.  See Gordon, 2023 WL 6619427, at *1.

Next, all parties failed to show good cause to protect “Defendant Menard Inc.’s training videos and materials, policy and procedure, information of Menard Inc. and its shareholders and directors, store surveillance videos, and blueprints and schematics.”  Gordon, 2023 WL 6619427, at *2.

An insurance carrier’s desire to protect its similar information from disclosure is obvious, particularly if the parties to an insurance case can get away with stipulating to protect something as ill-defined as otherwise unidentified “information of [the insurance company] and its shareholders and directors,” similar to what the parties tried to do in proposing their stipulated order in Gordon.  In Gordon, though, the parties’ stipulation to protect did not fly in this regard.  “The proposed order makes no effort to specify why the purported protected materials are confidential.”  Gordon, 2023 WL 6619427, at *2.

For a third drawback in the eyes of the Gordon Court, the proposed order would have allowed the parties to file documents marked “Confidential Material” under seal in their entirety, without redacting the supposedly confidential information.  This, too, is contrary to law.  See Gordon, 2023 WL 6619427, at *2.

For the benefit of the parties in the future, including if and when they redraft and resubmit their proposed stipulated protective order, the Court had two more things to say.  First, this Court “is unwilling to enter a protective order that suggests it retain jurisdiction of any kind after resolution of the case[.]”  Gordon, 2023 WL 6619427, at *2 (emphasis by the Court).

Second, the Court admonished the parties to modify their version of protected confidentiality of information once the case came to an end:

Similarly, the parties should expressly state that any provisions requiring the return or destruction of confidential or protected information at the end of this litigation—such as those in Paragraph 4 of the proposed order (ECF 16-1 ¶ 4)—do not apply to the Court or material filed with the Court.

Gordon, 2023 WL 6619427, at *2.

While entering all of these relatively clear and unambiguous rulings that leave no room for reasonable interpretation, the Court actually began its opinion in this case with a seeming ambiguity.  As was pointed out here, the Court began its rulings by referencing Federal Rule of Civil Procedure 26(c)’s requirement of “good cause” before any protective order can be entered by a federal Court.

However, the Court pointed out in a footnote that the same level of scrutiny of what exactly constitutes “good cause” varies from case to case, and that it was applying “a higher level of scrutiny” that was required here “[b]ecause the proposed order permits filing under seal without court permission[.]”  Gordon, 2023 WL 6619427, at *1 n.1.

This is an important concept for practitioners and judges to keep in mind when evaluating whether good cause has been shown to shield discovery, evidence, information, or anything else during litigation in federal Courts – including insurer bad faith litigation among the rest.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

A TALE OF TWO JUDGES, NO SURPRISES ACT, NO SURPRISES.

U.S. Supreme Court.  (Sarahbeth Maney / New York Times)

In a thorough opinion written by Senior District Judge Richard Leon, the Court upheld the rule that was issued in October 2021 to establish an independent dispute resolution process, namely arbitration, of disputes between health plans and out-of-network providers over the providers’ bills.  Ass’n of Air Med. Serv’s v. U.S. Dep’t of Health and Human Serv’s, No. 21-3031 (RJL), 2023 WL 5094881, at *1 & n.2 (D.D.C. Aug. 9, 2023).

The No Surprises Act was enacted on December 27, 2020.  The Act’s purpose, you may recall, was “to end ‘surprise billing’ for patients and to remove them from the middle of payment disputes between the patient’s group health plan or issuer and providers.”  Association of Air Medical Services, 2023 WL 5094881, at *1.

Out-of-network providers such as the plaintiff Association of Air Medical Services were understandably concerned with losing lucrative billings, whether their billings were paid for by patients or insurers.  Out-of-network providers successfully challenged limitations on billing and arbitration of their charges in the Eastern District of Texas, where parts of the rules were vacated.  The relevant agencies then rewrote and reissued the rules, including the arbitration rule challenged by the Association of Air Medical Services here.

Considering only the rewritten, reissued rule on arbitration that was before the Court, Senior District Judge Leon found “the defendants’ position to be eminently reasonable.”  Association of Air Medical Services, 2023 WL 5094881, at *3.  Judge Leon, an appointee of Pres. George W. Bush, has not always issued rulings favorable to the Government’s position, to say the least, but he did so here.

Judge Leon was satisfied as a judge in this case that the Government acted reasonably and in accordance with law, which is the test for whether the challenged Government action complied with the Administrative Procedure Act even if the judge’s own preferred reasoning might have been different from the Government’s reasoning.  As to the arbitration rule before the Court in this No Surprises Act case, the Judge held:  “That is the very type of well reasoned analysis the APA requires!”  Association of Air Medical Services, 2023 WL 5094881, at *7 (emphasis by the Court).

In the meantime, in the Eastern District of Texas, an air ambulance service provider and other out-of-network providers have been busy obtaining decisions from a district judge appointed in 2018 which reject the same well reasoned analysis.

The apparent differences between the rulings may be resolved in the future.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

EARTH MOVEMENT, FOUNDATION MOVEMENT, AND LEAKING PIPES.

In Mays v. “Meridian Sec. Ins. Co. State Auto Ins. Cos.,” No. 4:22-cv-1150-P, 2023 WL 6534213, at *1 (N.D. Tex. Aug. 25, 2023), the Court observed that the homeowner’s policy before the Court in that case provided coverage for loss caused by plumbing leaks:

Plaintiff's policy does cover “loss caused by an accidental discharge of water from a sewer pipe or plumbing system.” 

(Emphasis by the Court.)

The defendant carrier moved for summary judgment partly on the basis of an exclusion in the policy for damage caused by “earth movement.”  Mays, 2023 WL 6534213, at *1.

What the plaintiff alleged was apparently as simple as this:  Plumbing leaks caused soil erosion under the home’s foundation, resulting in the claimed loss.  Mays, 2023 WL 6534213, at *1.

In addition to denying coverage on the basis of its “earth movement” exclusion, the defendant carrier candidly alleged in its motion for summary judgment that the parties’ experts differed in their opinions as to whether the leaks in question caused the foundation movement in question.  Further, the defendant did not concede that the plumbing leaks were the cause of the foundation movement.  Mays, 2023 WL 6534213, at *1.

For this reason and on this record the Court ruled that there were genuine issues of material fact and denied the carrier’s motion for summary judgment in this case. Mays, 2023 WL 6534213, at *2.

Property Insurance Coverage Issues:  Exclusions are discussed at length in Chapter 7 by Dennis J. Wall in Volume 1 of Catastrophe Claims / Insurance Coverage for Natural and Man-Made Disasters (Thomson Reuters June 2023 Edition).  Earth Movement Exclusions in particular are addressed in § 7:9.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

SEEKING CLAIMS AND ALLEGATIONS IN COMPLAINTS: THE FINAL FRONTIER.

Continuing from articles posted here last Friday, September 29, 2023, "GOT COMPLAINTS?  YOU CAN KEEP THEM SECRET FROM THE PUBLIC," and on Monday of this week, October 2, 2023, POSTSCRIPT TO "GOT COMPLAINTS?  YOU CAN KEEP THEM SECRET FROM THE PUBLIC," I want to redirect our attention, yours and mine, back to insurer bad faith litigation in particular.

I am not sure how this will all fall out in any given case, but suppose with me that a policyholder possesses information – documents, transcripts of testimony, other evidence – but for whatever reason expects that the insurance company that will be a defendant in the case will fight to keep the information a secret.

Or perhaps to limit the use of the evidence to this case alone.

Or perhaps even to pressure the policyholder and her lawyers to agree to keep the information confidential.

In such cases, a policyholder-plaintiff might be sorely tempted to follow the path that the Federal Trade Commission seems to be blazing.  Witness the two complaints filed less than a week apart in late September, 2023 in which key allegations and claims were blacked out, or what lawyers euphemistically call "redacted." 

Take the FTC's explanation in its case against Amazon, for example, reported here on Friday, September 29, 2023:

The FTC blames Amazon for its redactions.  Plaintiff's Motion for Leave to Temporarily Seal Portions of the Complaint, DE 2 at 2, 3-4, filed Sept. 26, 2023 (W.D. Wash. No. 2:23-cv-01495-JHC).  Download Federal Trade Commission v. Amazon.com Inc. Motion for Leave to Temporarily Seal Portions of the Complaint DE 2 filed Sept. 26 2023 (W.D. Wash. No. 2.23-cv-01495).

What if our imagined policyholder-plaintiff similarly blamed the defendant carrier for the policyholder's redactions?  And what if the policyholder-plaintiff made it clear in her motion to temporarily seal the blacked out parts of her complaint, that she did not think they were confidential, just as the FTC has done in the Amazon case, again, for example:

The FTC said this:  "The FTC makes this request to comply with its regulations governing treatment of confidential information submitted to the FTC during its pre-complaint investigation and to give affected parties an opportunity to ask the Court to seal portions of the Complaint on a permanent basis.  The FTC is not claiming confidentiality with respect to any information that is the subject of this Motion."  Id. at 1-2.  [Emphasis added.]  The FTC also wrote that its request to seal was based on a "federal statute and FTC rules."  Id. at 3-4.  [Emphasis added.]

Our policyholder might allege that her request was made to comply with orders or rulings or an agreement with the carrier concerning the exchange of information before her instant lawsuit was filed or because of a presuit contention by the carrier that certain information should be confidential.  She might perhaps be as vague as the FTC, which did not identify any of the supposed regulations, statutes or rules on which the FTC was basing its request.  She might add, again following the tack taken by the FTC, that she is not claiming confidentiality with respect to any information that is the subject of this Motion.  

If the Court allows that approach, then that would put the onus on the carrier to explain to the Court why such evidence should be kept from public view right at the beginning of the lawsuit.  This seems to be the approach now being tested in Court by the FTC.  As the FTC wrote in its Reply to the author in regard to blacked out allegations and claims in its recent complaints:

Specifically, the Reply written by an FTC spokesperson, here:

In both cases, the companies and defendants who provided the information will have to provide legitimate justification for preventing redacted information from being revealed.

 Victoria Graham, FTC spokesperson.

E-mail from Victoria Graham, Spokesperson, Federal Trade Commission, to the author (Sept. 29, 2023, 12:32 PM ET)(on file with author).

Should policyholder counsel wish to pursue such a tack themselves, particularly in insurer bad faith cases, they should watch the results of the FTC's cases very closely – and so should counsel for carriers defending their clients in bad faith cases.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

POSTSCRIPT TO "GOT COMPLAINTS? YOU CAN KEEP THEM SECRET FROM THE PUBLIC."

I was working on a longer article that would include what I think the FTC strategy is in keeping some allegations and claims a secret in its recent complaints (of all places), but that is taking longer than expected.  I will post an article later in the week.

Today, I wanted to add the Reply that I got from the Federal Trade Commission.  Specifically, the Reply written by an FTC spokesperson, here:

In both cases, the companies and defendants who provided the information will have to provide legitimate justification for preventing redacted information from being revealed.

 Victoria Graham, FTC spokesperson.

E-mail from Victoria Graham, Spokesperson, Federal Trade Commission, to the author (Sept. 29, 2023, 12:32 PM ET)(on file with author).

P.S.

Although the FTC's Reply through Ms. Graham was apparently sent early in the afternoon on Friday, September 29, 2023, I was not notified by my spam filter that it had been blocked, until that Friday evening.  I am taking this opportunity on the next following working day to add this Postscript to Friday's posted blog article.)

Please read the disclaimer.  This blog article ©2023 Dennis J. Wall.  All rights reserved.

LOOK AT THE LENDER, NOT THE CARRIER.

The insurmountable bar of "third-party beneficiary" status in homeowners' actions against force-placed insurance carriers, is obvious now if ever it was in doubt.  These are lawsuits filed by homeowners who are forced to  pay insurance premiums without a corresponding legally recognized right to receive benefits under the policy when there is a loss.

In Zabala v. Integon Nat'l Ins. Co., No. 20-22221-Civ-Scola, 2020 WL 3977380 (S.D. Fla. July 14, 2020), the Court dismissed such a homeowner's complaint with prejudice because the lender and the carrier did not intend to benefit the homeowner when the lender ordered a force-placed insurance policy from the carrier, even though they charged the homeowner for the premiums.

(Parenthetically, Westlaw released the Zabala decision in the middle of September, 2023.)

The Court said that its decision derived in the first place from Florida law, which requires an intent of contracting parties to benefit the party claiming the right to sue as an intended or third-party beneficiary.  Zabala, 2020 WL 3977380, at *2.  This represents the general trend of the federal case law to deny homeowners who are forced to pay insurance premiums the right to sue when the insurance is denied, as was the case for example in Zabala.  See the article posted here on December 7, 2022, for example, WHEN DEFENDANTS, NOT JUDGES, SAY WHO CAN SUE.

In Zabala, as in most of these cases, the judge wrote that the Court's decision was based on the law, although the force-placed insurance policy also declared that the homeowner was not an intended beneficiary.  Zabala, 2020 WL 3977380, at *3. 

The reality is, however, that a lender and an insurance carrier can force a homeowner to pay premiums for an insurance policy that benefits only the lender simply by declaring that they do not intend to benefit the party paying the premiums.

The Zabala Court made this clear when it expressly rejected the homeowner's argument "that he has standing to pursue this action as a third-party beneficiary to protect his own interest as a homeowner for the insured property."  Zabala, 2020 WL 3977380, at *4.  This Southern District of Florida  Court then went on to reject reliance on contrary Middle District of Florida case law as "misplaced."  Moreover, the Middle District cases in question "did not involved policies" like the one at bar, the Zabala Court said.  Zabala, 2020 WL 3977380, at *4. 

That is certainly one view of the situation, and the result in Zabala exemplifies it.  A different view is available, however, which Zabala and its predecessors and progeny have left uncited and untouched.

The different view is the flip-side of the situation exemplified in Zabala where the homeowner sued only the carrier and not the lender.  The difference involves, rather, suing the lender, not the insurance carrier. 

When the lender's alleged failure to include the homeowner on the force-placed insurance policy is alleged as a breach of the lender's fiduciary duty, the homeowner-mortgagor's claims have been allowed:

Instead, the mortgagors alleged that the lender force-placed insurance (LFPI) was objectionable on the basis of two allegations:  (1) they were forced to pay excessive premiums under the  LFPI policy and (2)  the lender failed to include them on the policy.  On these two allegations, they claimed that the lender acted in bad faith and breached fiduciary obligations under Florida law as a result.

The case is Meyer v. Bank of Am., N.A., No. 3:21-cv-1088-HES-JRK, 2022 WL 18492520 (M.D. Fla. Aug. 18, 2022).  This decision and its implications were addressed in an article posted here on February 1, 2023, EXCESSIVE PREMIUMS & NOT INCLUDING MORTGAGORS ON LFPI POLICY:  CLAIMS ALLOWED.

The lesson from the case law is clear, it seems:  Before any lawsuit is filed by or on behalf of a homeowner forced to pay insurance premiums in such situations, look at the lender, rather than at the carrier; look at the mortgage contract rather than the force-placed insurance contract.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

GOT COMPLAINTS? YOU CAN KEEP THEM SECRET FROM THE PUBLIC.

 

In two cases filed within the space of a week, the Federal Trade Commission has kept the public from seeing complaints that have been filed on behalf of the American public.  Only the Courts, the defendants, and the FTC can see the public's complaints, so far. 

The first case is Federal Trade Commission v. U.S. Anesthesia Ptrs., Inc. (S.D. Tex. No. 4:23-cv-03560).  Download Federal Trade Commission v. U.S. Anesthesia Ptrs. Inc. Complaint DE 1 filed Sept. 21 2023 (S.D. Tex. No. 4.23.cv.03560).  In its 106-page complaint in that case, which the FTC filed on September 21, 2023, the FTC brought an antitrust lawsuit against a private equity firm for the first time.

The claims alleged in the complaint all come back to a central allegation that the private equity firm and its associated entities hiked the cost of reimbursement rates for anesthesia services in Texas through a conspiracy based on the acquisition of competitors.  However, the allegation is repeatedly blacked out, i.e., redacted.  See, e.g., id. at ¶ 91, p. 30; ¶ 107, p. 34; ¶ 111, p. 35; ¶ 115, p. 36; ¶ 118, p. 37; ¶ 128, p. 40; ¶ 133, p. 41; ¶ 140, p. 43; ¶ 148, p. 45; and many more.

We do not know why.  I researched the Local Rules of the United States District Court for the Southern District of Texas where this case was filed, but I could find nothing to explain this.  

I would show you the FTC's motion to seal portions of the complaint but I cannot.  It's not available to the public, meaning you and me.  It is available to the people's representatives, of course, meaning the FTC – the very party that sealed it from public view.

The FTC filed its motion to seal portions of the complaint "temporarily" but we cannot read the FTC's reasons for sealing any part of the complaint, or know what the FTC considers a "temporary" seal in that case.  Incredibly, the FTC filed its motion to seal under seal.

I am going to send an E-Mail to the FTC attorney who signed the complaint, Kara Monahan, Esquire, one of eleven FTC attorneys listed on the complaint. I will let you know if I get a meaningful Reply.

In the meantime, we can perhaps find some enlightenment from another case that the FTC filed in September, this one against Amazon.  (Or perhaps, not, as we shall see.)

In Federal Trade Commission v. Amazon.com, Inc. (W.D. Wash. No. 2:23-cv-01495-JHC), Download Federal Trade Commission v. Amazon.com Inc. Complaint DE 1 filed Sept. 26 2023 (W.D. Wash. No. 2.23-cv-01495) , the FTC alleged in a 172-page complaint it filed on September 26, 2023 that Amazon violated antitrust laws by favoring its own sales and putting up obstacles to competitors' sales on the Amazon website, in essence.  Amazon runs what it calls a "marketplace," also known as a "fulfillment center," which includes products offered for sale by third parties.

The FTC alleged in pertinent part that Amazon violated antitrust laws by the use of a "Project Nessie," which Amazon describes on its website apparently as a monitoring system.  However, once again we in the public do not know why "Nessie" allegedly offended antitrust laws.  All or nearly all of the allegations of Amazon's antitrust liability based on Nessie are blacked out. Id., ¶ 417, p. 123 of 172, through ¶ 463, p. 132 of 172. 

Even the amount of money that the FTC alleged that "Amazon's Project Nessie has already extracted ... from American households" is blacked out from public viewing.  The likely first example of this blackout is in id., ¶ 4, pp. 5-6 of 172.

The FTC blames Amazon for its redactions.  Plaintiff's Motion for Leave to Temporarily Seal Portions of the Complaint, DE 2 at 2, 3-4, filed Sept. 26, 2023 (W.D. Wash. No. 2:23-cv-01495-JHC).  Download Federal Trade Commission v. Amazon.com Inc. Motion for Leave to Temporarily Seal Portions of the Complaint DE 2 filed Sept. 26 2023 (W.D. Wash. No. 2.23-cv-01495).

The FTC helpfully highlighted the hidden complaint with the allegations Amazon contended before suit would be "confidential," id. at 4,  but we cannot see it.  The hidden complaint is, well, hidden.

The FTC helpfully also filed a public version of its complaint which, as we have already seen, is heavily redacted.  "Plaintiffs have filed a public version of the Complaint that redacts all information designated as confidential by the producing parties."  Id. at 4.

That raises the issue of why the FTC filed its request to seal parts of the complaint at all.  The FTC said this:  "The FTC makes this request to comply with its regulations governing treatment of confidential information submitted to the FTC during its pre-complaint investigation and to give affected parties an opportunity to ask the Court to seal portions of the Complaint on a permanent basis.  The FTC is not claiming confidentiality with respect to any information that is the subject of this Motion."  Id. at 1-2.  [Emphasis added.]  The FTC also wrote that its request to seal was based on a "federal statute and FTC rules."  Id. at 3-4.  [Emphasis added.]

In sum, the FTC motion to seal is expressly filed "pursuant to" regulations, a federal statute, and rules.  The FTC motion did not identify which regulations, statutes, or rules that the FTC had in mind when it filed this motion.

I am going to E-Mail the FTC lawyer, once again, in this case the FTC lawyer that signed this motion, Susan A. Musser, Esquire.  She is one of seventeen FTC lawyers on the complaint, in addition to dozens of lawyers representing multiple States.  Once again, I will let you know if I get a meaningful Reply.

Parenthetically, the FTC asked once again for a "temporary" seal, in this case, for "14 days."  The FTC is supposed to represent the people, but in this case the FTC is keeping secrets from the public including how much Amazon allegedly bilked them. That amount is something that the FTC is going to have to put in evidence anyway.

For its part, Amazon's general counsel, David Zapolsky, Esquire, said in a statement that the FTC complaint is wrong on the facts and on the law.  That may be, or maybe not.  We simply cannot evaluate such comments if we the public cannot even read the complaint.

The Local Rules of the Western District of Washington are clear, however.  Here is a link to the Local Civil Rules from the Court's website so that you can read the Rules yourself.  Local Civil Rule 5(g) begins with this sentence:  "There is a strong presumption of public access to the court's files."  There are "only two circumstances" when a party may file a document under seal in a lawsuit in the Western District of Washington:  one is if "a statute, rule, or prior court order expressly authorizes" it, and the other is by filing a motion in compliance with LCR 5(g)(2)(B) & LCR 5(g)(3).

We have already looked together, you and I, for a regulation, statute, or rule that expressly authorizes filing a partly-blacked-out FTC complaint, but we have not found any.  (As of this writing, no court orders authorizing secrecy have been entered in either case.)

As for FTC's motion to seal, you have the opportunity to do what the Court in Washington and perhaps Amazon is going to have to do, and that is compare the motion to the Local Civil Rules to see how closely the FTC motion followed the Rules.

"Only in rare circumstances should a party file a motion, opposition, or reply under seal."  LCR 5(g)(5).  Apparently, the amount and at least one of the methods by which Amazon allegedly gouged its customers and third-party vendors alike is one of those rare circumstances in the eyes of the Federal Trade Commission.

As I said earlier, if I receive meaningful Replies to my E-Mails I will let you know.  These and similar blackouts of all or parts of a complaint's allegations have ramifications for insurer bad faith cases.  TO BE ADDRESSED IN AN ARTICLE TO FOLLOW ....

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

BAD FAITH EXPOSURE EVEN THOUGH NO DEMAND WITHIN LIMITS.

After citing Illinois, South Dakota, and Tennessee cases, the Court in Sacred Heart Health Serv's v. MMIC Ins., Inc., ___ F. Supp. 3d ___, 2023 WL 3742544, at *26 (D.S.D. May 31, 2023). held that "an insurer may be liable for bad faith even if it did not receive a demand to settle within policy limits." 

Decisions involving the duty to initiate settlement negotiations in third-party cases like Sacred Heart, including the decisions relied on in that case, are discussed at length in § 3:16 in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (3d Edition West Publishing Company, with 2023 Supplements).

FLORIDA APPRAISAL DID NOT DETERMINE CARRIER'S LIABILITY OR INSURED'S DAMAGES.

Under the Florida Bad Faith Statute in first-party cases -- which is the only source of a bad-faith claim or cause of action in a first-party case in Florida -- there must first be a determination of the carrier's liability and of the insured's damages, among other things.  An appraisal award of the difference between Replacement Value and Actual Cash Value did not determine the carrier's liability, so it was held to be a legally insufficient springboard for the statutory first-party bad faith claim in Ricol Holdings, LLC v. Westchester Surplus Lines Ins. Co., ___ F. Supp. 3d ___, No. 3:23cv12248-TKW-ZCB, 2023 WL 4948005, at *3-*4 (N.D. Fla. July 26, 2023).

 

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.  Express statutory causes of action in first-party bad faith cases, including under Florida law, are discussed at length in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:14 (3d Edition West Publishing Co., 2023 Supplements).  Far from being overlooked or forgotten, third-party cases are discussed in multiple sections in Volume 1, id., including Statutory Bases of Liability for Bad Faith in claims involving Settlement, § 3:28, in claims involving Refusal to Defend, § 3:63, and in claims involving the Conduct of the Defense, § 3:92.

WHEN WILL FEDERAL COURTS SHUT DOWN IF GOVERNMENT SHUTS DOWN?

Reuters reports that if there is a government shutdown because there is no agreement in the U.S. Congress to continue funding the federal government past September 30th, then the federal Courts will shut down two weeks after that.  See Nate Raymond, US Judiciary Can Keep Operating For 2 Weeks if Government Shuts Down, REUTERS online September 19, 2023.

Please read the disclaimer.  This blog article ©2023 Dennis J. Wall.  All rights reserved.

INSURER BAD FAITH, FLORIDA CONFIDENTIAL, TRADE SECRETS, CERTIORARI, ALL!

In Progressive Select Ins. Co. v. Lloyd's of Shelton Auto Glass, LLC, 367 So. 3d 586 (Fla. 2d DCA 2023), an insured's assignee sued for insurer bad faith and to compel production of the insurance company's alleged secret pricing agreement with a windshield replacement company.  

    The trial court directed the release of the carrier's Provider Agreement, subject to a confidentiality agreement that the insured had entered into with the carrier.  Progressive, 367 So. 3d at 587.

    The carrier filed this appeal seeking certiorari review because, it contended, release of the Provider Agreement would reveal "trade secrets."

    The appellate court declined to review the order.  Progressive, 367 So. 3d at 587-88.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

Certiorari review of discovery orders concerning Claims Adjuster's Files in particular in first-party bad faith litigation is discussed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 12:5 (3d Edition West Publishing Company, 2023 Supplements in process).

 

 

 

TRIAL COURT DO-OVER FOR SEALED DOCUMENTS IN INSURANCE BAD FAITH CASE ....

AND DISCRETION REGARDING REFUSAL TO COMPEL DISCLOSURE OF DISCOVERY TO STRANGERS TO THE LITIGATION.

In Good v. Farmers Ins. Co., ___ P.3d ___, 2023 WL 5951464 (Okla. Ct. Civ. App., Div. 3, Decided Feb. 15, 2023 & Mandate Issued Sept. 13, 2023), the issue was public access to materials in a closed insurance bad faith lawsuit.

    The underlying, closed bad faith lawsuit arose out of the defendant carrier's denial of a homeowner's insurance claim for damage allegedly due to an earthquake.  As a part of that claim in litigation, the homeowners-plaintiffs alleged that the carrier "wrongfully engaged in a pattern and practice of denying earthquake damage claims."  Good, 2023 WL 5951464, ¶ 2, at *1.

    There were two kinds of materials at issue.  One kind consisted of "three hundred and fifty-two filings in the [underlying] case up to the date of the filing of the dismissal with prejudice."  Good, 2023 WL 5951464, ¶ 4, at *2.  The other set of publicly undisclosed materials consisted of more than "ten million pages of documents and multiple depositions of [the insurance carrier's] officers and executives[.]"  Good, 2023 WL 5951464, ¶ 5 n.5, at *2 n.5.

    The plaintiffs in the second lawsuit, Cole and Teri Newby, were also homeowners with an earthquake claim for coverage under a policy issued by the same carrier.  They filed a motion to intervene in the underlying case for the purpose of accessing both the sealed documents in the court file and the voluminous materials produced by the carrier in the underlying case.  Their motion was denied.

    On appeal, the Oklahoma Court of Civil Appeals first held in this case that the trial court had erred regarding its denial of access to the Newbys regarding the sealed documents in the court file of the underlying case.  The Oklahoma appellate court ruled that the nonparty Newbys had standing to intervene for the purpose of asserting the right of public access to all these documents and materials, the documents undisclosed and sealed, and the undisclosed discovery materials as well.  Good, 2023 WL 5951464, ¶ 8, at *3.

    This ruling that nonparties to an insurance bad faith lawsuit have standing to assert public access to materials involved in that lawsuit is potentially important to other insurance bad faith lawsuits in other jurisdictions in which trial courts have entered protective orders barring disclosure of such materials in similar cases.

    Further, as the Newbys contended, the Oklahoma appellate court ruled that the trial court failed to follow Oklahoma law when the trial court entered its Protective Order allowing documents in the court file to be sealed.  Good, 2023 WL 5951464, ¶¶ 9-12, at *4-*5.    However, the trial court's failure to follow Oklahoma law favoring public access did not necessarily mean that the trial court's failure made the documents subject to public access.

    Rather, or so the appellate court ruled in this case, although the trial court's Protective Order necessarily had to be reversed, still the matter would be remanded to the trial court to review the merits of the Newbys' request that the documents be made publicly accessible.  See Good, 2023 WL 5951464, ¶12, at *5.

    As to the materials made available by the carrier during discovery in the underlying case, the Oklahoma appellate court ruled that the Oklahoma trial court had the discretion to enter a Protective Order making them publicly accessible, or not accessible at all.  Good, 2023 WL 5951464, ¶¶ 13-14, at *5-*6.  In the precise context of this specific case, "the trial court did not abuse its discretion when it denied the Newbys' request for production of all unfiled discovery documents."  Good, 2023 WL 5951464, ¶ 17, at *7.

    Like the Newbys, nonparties to bad faith litigation in other jurisdictions may win the battle but lose the war of public access, so to speak -- but the potential exists for public access to documents filed in public court files in every case,  and so it existed here.  Most importantly for other litigation, nonparties have standing to sue to require public access in insurance bad faith litigation if this decision is followed elsewhere in that regard.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

Confidentiality and concealment of materials in first-party bad faith insurance cases like Good are discussed throughout §§ 9:28-9:28.100 in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (3d Edition West Publishing Company, 2023 Supplements in process).  The same issues in the context of third-party bad faith cases are discussed in 1 id., §§ 3:107-3:107.100.

THE OPPOSING VIEW: APPLY THE FRD (EVEN WITHOUT EVIDENCE).

In another case in the Western District of Washington, a different federal judge distinguished the Harvey v. Centene Management case we discussed here yesterday.

    In Epstein v. USAA Gen. Indem. Co., 636 F. Supp. 3d 1260 (W.D. Wash. 2022), an insurance case, the claimant alleged "that Defendants have violated the Washington Law Against Discrimination (WLAD) and the Washington Consumer Protection Act (CPA) by forcing lower-ranking servicemembers to pay more for auto insurance than higher-ranking servicemembers. Defendants move to dismiss all of the claims and to strike the request for equitable relief."  Epstein, 636 F. Supp. 3d at 1261.

    The Court applied the FRD in Epstein and distinguished the Harvey decision.  Here, in the eyes of the Court, the plaintiff's claims implicated the FRD.  Epstein, 636 F. Supp. 3d at 1266.  The Court was convinced that the FRD applied because it thought that the relevant administrative agency had approved the rates in question.

    If it was ever a proven fact that the relevant authority approved the rates in question in the Epstein case, I have not been able to find it in the opinion.  For all that appears, it was enough that the Judge thought that the relevant authority had previously approved the rates at issue in that case.  Or perhaps, as happens so often in the case law, the Judge thought it was a fact merely because the insurance companies said so.  Either way, insurance practitioners would do well to pay attention to how the Filed Rate Doctrine is decided in the case law.

Please read the disclaimer.  The filed rate doctrine is discussed particularly in the context of insurance cases in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH §§ 11:26-11:26.50 (3d Edition West Publishing Co., 2023 Supplements in process).  This blog article ©2023 Dennis J. Wall.  All rights reserved.

APPLYING THE FILED RATE DOCTRINE AFFIRMATIVE DEFENSE.

The filed rate doctrine is an affirmative defense.  Counsel should argue it as such.  Judges should treat it accordingly and require a fully developed record before they rule.  In Harvey v. Centene Mgt. Co., 357 F. Supp. 3d 1073 (E.D. Wash. 2018), that is exactly what the judge did.

   Even if a court is not completely convinced, one way or another whether the filed rate doctrine applies or not, the Court in Harvey v. Centene Management Company, LLC[1] rested its decision not to apply a filed rate doctrine at the pleadings stage on procedural grounds as well as substantive grounds at that stage.  The Harvey Court's decision was based on a motion to dismiss and "the better practice" in any case, the Court stated, is to address the filed rate doctrine either on a motion or motions for summary judgment, or at trial.[2]

 

[1] Harvey v. Centene Mgmt. Co. LLC, 357 F. Supp. 3d 1073 (E.D. Wash. 2018).

[2] Harvey, 357 F. Supp. 3d at 1084.

Please read the disclaimer.  The filed rate doctrine is discussed particularly in the context of insurance cases in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH §§ 11:26 - 11:26.50 (3d Edition West Publishing Co., 2023 Supplements in process).  This blog article ©2023 Dennis J. Wall.  All rights reserved.

COVERAGE FOR NATURAL DISASTERS: INSURANCE POLICIES AND CATASTROPHE BONDS.

It is an easy thing to overlook the broader trends of coverage when you focus on how individual claims and cases are decided.  

    It can also be more comfortable.  In Florida, where I live, home insurance companies are excluding coastal areas from any coverage at all, even as the carriers are no longer covering many of the insurable risks in the rest of the State.  Unfortunately, Florida is the tip of the spear as they say.  These trends are happening throughout the United States, not just in Florida.  See, e.g., Jacob Bogage, Home Insurers Cut Natural Disasters From Policies As Climate Risks Grow, WASHINGTON POST, online Sunday, Sept. 3, 2023.

    Also, it's not just insurance companies in the coverage market any more.  Some corporations are issuing their own catastrophe or cat bonds.  The total cat bond market reportedly is North of $41 Billion.  As one capital management director told The Washington Post, "I'm not renting out a room at the local Ramada and pitching a mass audience.  It's still an investment for sophisticated investors.  Our job is to answer the phone."  See David J. Lynch, As Cost of Climate Disasters Grows, Some Profit With Catastrophe Bonds, WASHINGTON POST, online Tuesday, August 29, 2023.

    The "sophisticated investors" who invest in catastrophe bonds include insurance companies eager to offload a risk.  Other investors appear to be venture capital funds and private equity companies, although as the quotation above reveals, these outfits may also sometimes be middlemen between the issuers of the cat bonds and the investors in the bonds.

    The role of private equity may not be precisely clear, but what is clear is that cat bonds are "all or nothing" investments with huge risk and huge returns.  They are issued regarding particular risks, "a particular risk or 'peril' affecting a specific geography, such as a named storm in Massachusetts or an earthquake in Japan."  Id.

Claims Handling Practices in Recent Catastrophes in Australia, Greece, Louisiana, Mississippi, Texas, California, Puerto Rico, Denver, New York, and Miami are explored in Volume 1 of CATASTROPHE CLAIMS / INSURANCE COVERAGE FOR NATURAL AND MAN-MADE DISASTERS § 2:13 by Dennis J. Wall (Thomson Reuters June 2023 Edition).

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

SETTLEMENT DEMAND, 3 1/2 YEARS OF MEDICAL BILLS, INADEQUATE FOR REMOVAL.

COVID ICU patient in Sarasota, Florida hospital.  (Shannon Stapleton / Reuters)

  A settlement demand for policy limits in a first-party case may not be enough to establish the amount in controversy in the face of other evidence in the record.  This was the state of the record in one such case, even though a settlement demand had been accompanied by three and a half years of past medical bills totaling $34,668.00[1]

 

[1] Gillespie v. Auto-Owners Ins. Co., No. 8:23-cv-296-CEH-AAS, 2023 WL 2755115, at *4 (M.D. Fla. April 3, 2023) ("Without any such support [from the record evidence], Plaintiff's demand of the $100,000 policy limit, or her statement that her damages exceed it, appears to be posturing rather than a reasoned evaluation of her claim.").

The Gillespie decision and other significant cases of alleged first-party insurance bad faith are discussed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:23, Removal and Remand (3d Edition, West Publishing Company; 2023 Supplements in process).  Please read the disclaimer.  This blog article ©2023 Dennis J. Wall.  All rights reserved.

WAIVER OF A DEFECT IN A CIVIL REMEDY NOTICE.

(Gridview_Imagefull/Florida DACS)

It has been held in a case under Florida law that defects in a Civil Remedy Notice of alleged first-party bad faith can be waived.  In that case, waiver existed when the carrier responded to the CRN without raising any objections to it.  Neal v. GEICO Gen. Ins. Co., 358 So. 3d 749, 752 (Fla. 4th DCA 2023).

Please read the disclaimer.  This blog article ©2023 Dennis J. Wall.  All rights reserved.  Waiver in the first-party insurance bad faith case law is examined in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:14 (3d Edition, West Publishing Company; 2023 Supplements in process).

FRAUD CAN DECEIVE A PERSON. BUT NOT EVERYONE, NOT ALWAYS.

In Discovery Land Co., LLC v. Berkley Ins. Co., NO. CV-20-01541-PHX-ROS, 2023 WL 2503634 (D. Ariz. March 14, 2023), the insureds bought a castle in Scotland, claimed that they were defrauded by their lawyers, added insureds to their policies after a known loss, and then apparently made claims to coverage.

    The two insurance carriers in the case "both filed counterclaims seeking rescission of the change endorsements, arguing Plaintiffs fraudulently added entities as joint insureds after they discovered the losses."  Discovery Land Co., 2023 WL 2503634, at *5.

    The Court entered a summary judgment of no coverage for both carriers.

Please read the disclaimer.  This blog article ©2023 Dennis J. Wall.  All rights reserved.  Fraud allegations in the context of first-party cases such as Discovery Land Company are discussed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:12 (3d Edition West Publishing Co., 2023 Supplements in process).

"DISABILITY IS MORE PERVASIVE THAN WE THINK ...."

(New York Public Library Digital Collections)

Look, more than 61 million adults in the United States – that's just adults – have one or more disabilities.  And that's before COVID.  We haven't had the post-COVID numbers with long haulers included in there.  Disability is more pervasive than we think, and so if we see disability as touching many more things, places and people than it already does then applying a disability lens becomes even more important.

Professor Jasmine E. Harris, Professor of Law, University of Pennsylvania Carey Law School, quoted in interview by Maya Srikrishnan published by CTR. FOR PUB. INTEGRITY (Aug. 18, 2023).

            Professor Harris is a co-author of a recently published Law Review article in which she and her co-authors suggest and practice providing what they call a "disability lens" to the recent decisions of the U.S. Supreme Court.  "[B]ut it remains possible to glean new insights if we review the Court's work from an alternative perspective, one that does not often inform mainstream accounts."  Jasmine E. Harris, Karen M. Tani, and Shira Wakschlag, The Disability Docket, 72 AM. U.L. REV. 1667 (2023). Download Jasmine E. Harris Karen M. Tani and Shira The Disability Docket 72 AM. U.L. REV. 1667 (2023)

 

Please read the disclaimer. This blog article ©2023 Dennis J. Wall.  All rights reserved.