Claims and Bad Faith Law Blog

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EXPERTS PARTICIPATING IN THE CLAIMS HANDLING PROCESS.

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

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

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

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

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

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

Negotiating Claims and Avoiding Bad Faith While Conducting Settlement Negotiations.

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

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

Staple, 2024 WL 4882649, at *5.

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

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

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

LENDER FORCE-PLACED INSURANCE IS NOT A PROFIT PLAN.

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

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

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

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

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

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

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

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

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

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

KEEPING THE SECRETS OF BUSINESS INFORMATION FROM COMPETITORS AND PUBLIC.

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

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

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

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

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

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

But not by the public.

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

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

 

TEXAS LAWYER GUIDES FIFTH CIRCUIT IN LOUISIANA BAD FAITH LAW.

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

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

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

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

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

ANOTHER FILED RATE DOCTRINE CASE APPEALED TO FEDERAL APPELLATE COURT.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Experts in Adjusting Claims.

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

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

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

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

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

 

 

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

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

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

            Period. 

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

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

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

DISCOVERING RESERVES IN A BAD FAITH CASE.

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

Here is what the Magistrate Judge said initially: 

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

Ockford, 2024 WL 4437820, at *3.

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

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

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

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

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

Ockford, 2024 WL 4437820, at *4.

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

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

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

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

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

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

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

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

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

HOW FORTUITOUS FOR THE CARRIER THAT REFUSED TO PAY.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Lynn, 2024 WL 4180731, at *4.   

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

  CONCLUSION

For these reasons it is

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

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

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

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

THE SEALING AND UNSEALING OF EXHIBIT 4.

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

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

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

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

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

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

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

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NO DEMAND IS NECESSARY. NEVER.

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

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

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

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

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

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

          No, he didn’t.

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

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

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

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

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

          Again, no, it didn’t.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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TWO RULES OF THREE, OR IS IT?

In the case of John F. Kennedy ex rel. Education Corp. of Am. v. Nat'l U. Fire Ins. Co. of Pittsburgh, Pa., No. 5:24-cv-00082-TES, 2024 WL 3891489 (M.D. Ga. Aug. 21, 2024), a federal judge applied two rules of three under Georgia bad faith law.  Or perhaps more accurately, the federal judge applied one rule of two with a complete defense, and one rule of three with a complete defense.

          Whatever.

          The only remedy for insurer bad faith under Georgia law is afforded by a statute, Ga. Code Ann. § 33-4-6.  Without strict construction of its three requirements, it has been held that the Georgia statute "would impose a penalty on any wayward company."  John F. Kennedy, 2024 WL 3891489, at *9.

          The statute requires that bad faith be proven by a plaintiff meeting three elements which the federal judge explained as follows:

1. "First, the claims must be covered under the policy."
2. "Second, the insured must make a demand for payment against the insurer within 60 days prior to filing suit."
3. "And third, the insured must prove that the insurer's failure to pay was motivated by bad faith."

  John F. Kennedy, 2024 WL 3891489, at *11.  However, Georgia law recognizes a complete defense to insurer bad faith claims if the insurance carrier "'has any reasonable ground to contest the claim[.]'"  John F. Kennedy, 2024 WL 3891489, at *11.

          In this case, the Estate of Education Corporation of America was the first named plaintiff and it was represented by Mr. Kennedy, its Receiver.  The plaintiff dismissed an earlier suit, sent a bad-faith demand letter, and then re-filed what became the instant case.  National Union raised several arguments in its motion to dismiss the bad faith claims at bar.  "Most notably, it argues Georgia law does not allow a plaintiff to dismiss a suit, send a bad-faith demand letter, and then refile under the renewal statute [Section 33-4-6]."  John F. Kennedy, 2024 WL 3891489, at *9.

          The Georgia bad faith statute interpreted by the federal judge in this case was held to have several requirements which some lawyers may call conditions precedent, although the Court does not appear to have used that description in this case.  The first requirement is that "the policyholder must first send a demand notifying the insurance company of an impending bad-faith claim."  John F. Kennedy, 2024 WL 3891489, at *9 (emphasis added).  The italicized language shows the nub of National Union's argument on this point:  The first time that the same claims were presented to National Union, it was apparently a lender and not the "policyholder" that presented them, which the policyholder cured if you will after it voluntarily dismissed its earlier coverage case and before it refiled its new case including claims for bad faith.

          The second requirement as the Georgia bad faith statute has been interpreted, requires that the policyholder's demand "must be sent 60 days before the policyholder files suit claiming damages and fees under § 33-4-6."  John F. Kennedy, 2024 WL 3891489, at *9.

          The third requirement is not really a condition precedent but is more in the nature of a complete defense to bad faith claims under Georgia law:  "This statute operates as the exclusive remedy for claims of bad faith in the world of insurance-coverage disputes governed by Georgia law."  John F. Kennedy, 2024 WL 3891489, at *9.

          On the facts alleged in the Amended Complaint before him, the federal judge presiding over this case denied National Union's motion to dismiss the bad faith claims alleged against it here.  John F. Kennedy, 2024 WL 3891489, at *11.

          The federal judge's opinion in this case was scholarly and well-researched.  It was also by far the most fun opinion I have read written by any federal judge appointed during the American Apocalypse between the afternoon of January 20, 2017 and the morning of January 20, 2021, as this judge was.  It would be interesting to read opinions written by this same judge involving different claims than the claims presented in this case.

Civil remedy notices of insurer violation, like the demand notices in the John F. Kennedy case in Georgia, are discussed in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH §§ 3:30 & 5:57 (Thomson Reuters West Publishing Co. 3d Edition & 2024 Supplements).  The defense that the carrier had a fairly or reasonably debatable claim is addressed in id. §§ 5:16 &  5:51.

          All these discussions concern third-party claims like those at issue in the John F. Kennedy case.  First-party cases are discussed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH §§ 9:21, 11:17  & 11:24 (Thomson Reuters West Publishing Co. & 2024 Supplements).

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DON'T LIKE NURSING STAFF STANDARDS? LAWSUIT! N.D. TEXAS, AMARILLO DIVISION.

Are you against nursing staff standards in Nursing Homes?  Too expensive, perhaps?  Pay lawyers instead!

          File suit!  Block the standards from taking effect!  Run Nursing Homes your way!  But where to file suit?  The answer comes in a moment.

          In American Health Care Association v. Becerra, Amended Complaint, DE 26, filed 06.18.24 (N.D. Tex. Case No. 2:24-cv-00114), the lead plaintiff led five other plaintiffs in filing suit in the Northern District of Texas, Amarillo Division.  For some reason, this is the courthouse of choice where plaintiffs include organizations that have been formed for the purpose of opposing allegedly "onerous" rules like standards for nursing staff in Nursing Homes.

          For some reason, there is only one judge assigned to the Amarillo Division.  That judge was appointed during the American Apocalypse between the afternoon of January 20, 2017 and the morning of January 20, 2021.

          For some reason, the same judge rules against the United States in these cases.

          In the lawsuit to block the "onerous" nurse staffing standards in Nursing Homes, something called the American Health Care Association and its five co-plaintiffs alleged:

That rule exceeds CMS’s statutory authority, effects a baffling and unexplained departure from the agency’s longstanding position, and creates impossible-to-meet standards that will harm thousands of nursing homes and the vulnerable Americans they serve.

          The rule is easy to understand to those who read it.  It turns out that the "agency's longstanding position" is a figment of the American Apocalypse, chiefly originating sometime between the afternoon of January 20, 2017 and the morning of January 20, 2021.  Not so longstanding.

          The "impossible-to-meet standards that will harm thousands of nursing homes" depends on how much of a Return on Investment you were counting on when you invested in Nursing Homes.  If you expected to profit from the relative absence of nurses to whom you have to pay salaries, then that would be one thing which would make hiring nurses to staff Nursing Homes "impossible," I suppose.

          The "vulnerable Americans" the nurses serve are the people who live in the plaintiffs' nursing homes.  The plaintiffs actually allege that these "vulnerable Americans" will be harmed by having more nurses on staff.

          Outside of Amarillo, none of this seems especially plausible.  Plausibility is of course the standard to measure whether an amended complaint like this one states a claim upon which relief can be granted.

          Undeterred by questions of plausibility, the Garland Department of Justice and the plaintiffs in this case have stipulated that the case should be resolved by both parties moving for the entry of judgment under a briefing schedule that runs into 2025.  American Health Care Ass'n v. Becerra, Joint Motion for Briefing Schedule, DE 45, filed 08.09.24 (N.D. Tex. Case No. 2:24-cv-00114).  A U.S. Magistrate Judge approved the stipulation.

          So it's on to 2025.  In the meantime, there does not seem to be anything to prevent the standards for nurses to staff Nursing Homes in the Northern District of Texas.  Or anywhere else in the United States, for that matter.  I cannot find any Order on the docket that says that the staffing standards are not in effect.

          However I do find several Orders granting leave to foreign lawyers to put in their appearances in the case.

          But no Orders enjoining the enforcement of the staffing standards for nurses in Nursing Homes, wherever they are located.  And as yet, no stipulations either.

          Time will tell, perhaps.

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DID THE SUPREME COURT OVERRULE THE FILED RATE DOCTRINE?

The filed rate doctrine suspends judicial inquiry into a claim.  It applies when the defendant has received approval from an authorized administrative agency to charge a rate which the defendant filed for the administrative agency's approval.  The filed rate doctrine or FRD has been applied to insurance cases.  2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:26.75, Insurance Cases and the Filed Rate Doctrine—Challenging the Filed Rate Doctrine Defense (West Publishing 3d Edition & 2024 Supplements).

          Query:  Has the Loper Bright Enterprises v. Raimondo, 144 S.Ct. 2244 (U.S. June 28, 2024) decision turned the filed rate doctrine into the judge rate doctrine?

          Answering this question fully would probably take a new book in itself.  In the interim, active practitioners should consider raising the issue in pending cases.

          Once that's done, after a while there will be enough case law and perhaps statute law that it will be time for that new book.

The various manifestations and justifications of the Filed Rate Doctrine in the previously decided case law, including in insurance cases, are addressed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH §§ 11:26-11:26.75 (West Publishing Co. 3d Ed.& 2024 Supplements).

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COMPARATIVE BAD FAITH. THE CONTINUING CASE OF A NONEXISTENT NEED.

 The Florida Legislature changed bad faith law in 2023.   This was a foretaste of what is to come.  Enacting a law drawn up by the insurance industry, in 2023 the Florida Legislature became the first State legislature to make a new defense of comparative bad faith.  It will not be the last.

            The 2023 Florida Legislature took the issue away from the Florida courts where, as in each and every other American jurisdiction, the courts rejected the very idea of comparative bad faith.  A federal judge's summation of the law was quoted in the article posted here yesterday; it is so clear and concise that it is well worth repeating:

This inquiry looks at the facts of each case and at the "totality of the circumstances." [Citations omitted.]  The proper focus of the inquiry is on the actions of the insurer rather than on the actions of the insured, the claimant, or the claimant's attorney.   Thus, when the evidence clearly establishes the insurer acted in bad faith, the insurer may not escape liability merely because the insured or the claimant may have contributed to the failure to settle the claim. [Citation omitted.]  At the same time, while the focus is on the insurer's conduct, the conduct of the insured or the claimant is relevant as part of the totality of the circumstance.[1]

The judge wrote this before granting the carrier's motion for summary judgment in that case.

            Before the legislature changed it in 2023, bad faith law in Florida, as elsewhere, focused on the carrier's conduct but took into account the relevant actions of the insured, the claimant, or their authorized representatives including attorneys.  Florida imported insurance bad faith law from Wisconsin no later than 1938, and it has been Florida law practically from the beginning to consider the totality of the circumstances when considering an insurance carrier's exposure to bad faith liability.[2] 

    It has been repeated so often since that sometimes the recitation of it can put you to sleep.    The "totality of the circumstances" standard of liability for insurer bad faith was recited in cases you might have heard of, even if you do not practice in Florida, in for example, Harvey v. GEICO General Insurance Co.[3] in 2018; Berges v. Infinity Insurance Co.[4] in 2004, and perhaps most famously in Boston Old Colony Insurance Co. v. Gutierrez[5] in 1980.

            In Auto Mutual Indemnity Co. v. Shaw, the carrier was awarded a new trial on bad faith in 1938.  In Boston Old Colony, a judgment against the carrier for bad faith failure to settle was reversed and the case remanded in 1980.  Perhaps the history of insurer bad faith law has been obscured by looking only at some  recent decisions.  But that is speculation, of course.

            The point is pretty clear:  Bad faith law considered the totality of the circumstances.  The totality of the circumstances always included the conduct of everyone on the scene:  the carrier, the policyholder, the claimant if there was one, and their authorized representatives including lawyers.  In 2023, that changed in Florida and it was the Florida Legislature that changed it, not a court.

            For the first time, a State legislature enacted a new law of comparative bad faith.  That the law was written by insurance carriers and their authorized representatives means that it will be introduced into other State legislatures across the United States in the near future.  It will address the nonexistent problem of "the bad faith setup;" insurance carriers have always had the ability to control their own conduct, as has been seen in many of the cases cited earlier in this article.

            The language in the new Florida statutes, and the implications for the rest of the country, are addressed in the next article to be posted here.  To be continued ....

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

 

[1] Wiseman v. Progressive Paloverde Ins. Co., No. 8:21-cv-2743-TPB-AAS, 2023 WL 8877842, at *11 (M.D. Fla. Dec. 22, 2023 (italics by the Court, boldface added), app. voluntarily dismissed,  No. 24-10187,  2024 WL 3436239 (11th Cir. May 7,  2024).

[2] The Florida Supreme Court adopted the law of insurer bad faith from Wisconsin in the case of Auto Mutual Indemnity Co. v. Shaw, 134 Fla. 815, 829-30, 184 So. 852, 858 (Fla. 1938), quoting with approval Hilker v. W. Auto. Ins. Co., 204 Wis. 1, 231 N.W. 257 (Wis. 1930).

[3] Harvey v. GEICO Gen. Ins. Co., 259 So. 3d 1, 7 (Fla. 2018).

[4] Berges v. Infinity Ins. Co., 896 So. 2d 665, 677 (Fla. 2004).

[5] Boston Old Colony Ins. Co.  v. Gutierrez, 386 So. 2d 783, 785-86 (Fla. 1980), cert. denied, 450 U.S. 922, 101 S. Ct. 1372 (U.S. 1981).

THERE IS NO "BAD FAITH SETUP PROBLEM" ....

....THE "BAD FAITH SETUP PROBLEM" DOESN'T EXIST.  AND COMPARATIVE BAD FAITH IS NO SOLUTION. 

Sadly, the "bad faith setup" has always been a myth.  It is sad because some part-time legislators in various States are being convinced to vote for solutions written by insurance companies to solve a nonexistent problem.  They could spend their time actually doing good work, but they spend their time on this.

    A federal judge summarized the Florida law of bad faith precedent in terms almost universally descriptive of bad faith law in United States jurisdictions.  Juries and judges almost always take the insured's and the claimant's conduct into account in first-party and third-party bad faith cases alike:  

            This inquiry looks at the facts of each case and at the "totality of the circumstances." [Citations omitted.]  The proper focus of the inquiry is on the actions of the insurer rather than on the actions of the insured, the claimant, or the claimant's attorney.   Thus, when the evidence clearly establishes the insurer acted in bad faith, the insurer may not escape liability merely because the insured or the claimant may have contributed to the failure to settle the claim. [Citation omitted.]  At the same time, while the focus is on the insurer's conduct, the conduct of the insured or the claimant is relevant as part of the totality of the circumstance.[1]

Under Florida law the insurance carrier received a summary judgment of no bad faith under the facts of this case.  So it has been since bad faith law was imported into Florida no later than 1938.

This changed in 2023 in Florida, from which we will take our lead example.  This quotation represents a bygone era in the bad faith inquiry in Florida cases.  In future articles, we will take a look at the Florida example of inventing comparative bad faith in the legislature when no judge who confronted the idea ever did anything other than reject it. 

To be continued ....

[1] Wiseman v. Progressive Paloverde Ins. Co., No. 8:21-cv-2743-TPB-AAS, (M.D. Fla. Dec. 22, 2023 (italics by the Court, boldface added), app. voluntarily dismissed, No. 24-10187, 2024 WL 3436239 (11th Cir. May 7, 2024).

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

SHARING CLAUSES, STIPULATED PROTECTIVE ORDERS, AND FEDERAL COURTS.

Courts generally accept stipulated protective orders proposed by the parties.  In federal courts, there is a prevailing conception that “sharing clauses” are frowned upon, in line with the usual prohibition on sharing discovery in one case with other cases. “Sharing clauses” can be found in stipulated protective orders authorized by the courts.

            However, it has been observed that federal courts disfavor sharing clauses. This observation was made by a U.S. Magistrate Judge in a case in which she refused to authorize a sharing clause.¹ In an opinion that may inadvertently become a guide for parties and their lawyers to make a showing in federal courts as to why a sharing clause should be given effect, the Magistrate Judge wrote in such a way as to illustrate two ways in which such a showing might be made successfully.  Careful readers of court opinions will see this right away when they read the opinion in this case.

            The first way lies in the decided case law analyzed by the Magistrate Judge to the effect that the courts have authorized the use of sharing clauses when the party seeking to share has made a showing that the discovery in question is “highly relevant to other litigation,” and so sharing the subject discovery among different cases would have the following salutary effects that might be attractive to a federal judge:

• avoiding duplication;
• promoting efficiency;
• minimizing discovery costs, and 
• conserving judicial resources..”²

            The second way of making such a showing in a case in federal court suggested by the Magistrate's opinion is to "articulate[] specific ways in which the sharing of information could be useful to this case."³ There may be overlap between these two ways of making a successful showing that a sharing clause is desirable in a given case, but the second way mentioned here allows the possibility of other proofs besides those at work in the first way.

 

[1]   SRH Holdings, LLC v. Gov't Emp's Ins. Co., No. 23-10325-DJC, 2024 WL 51279, at *1 (D. Mass. Jan. 4, 2024) (Boal, USMJ).

[2]  SRH Holdings, 2024 WL 51279, at *1.

[3]  SRH Holdings, 2024 WL 51279, at *2. 

 

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

PRIVATE EQUITY, ANESTHESIA AND HEALTH CARE, AND ANTITRUST.

The Federal Trade Commission filed a complaint against Anesthesia Partners, Inc. and the outfit, a private equity firm named Welsh Carson, that allegedly took it over before it resold it to a corporation formed for the purpose of the resale.   Download FTC v. U.S. Anesthesia Ptrs Inc. Redacted Public Version (of FTC Complaint) DE 69 filed Oct. 26 2023 (S.D. Tex. No. 4.23-cv-03560).  The FTC alleged that both Anesthesia Partners (USAP) and Welsh Carson committed antitrust violations.  The background of the FTC's case was previously explained here in several articles posted on September 29, 2023, on October 2, 2023, and on October 4, 2023. 

          USAP filed a motion to dismiss the FTC's lawsuit against it.  USAP predictably argued  that it was not violating antitrust laws, but it also argued that Section 13(b) of the FTC Act did not support the FTC's lawsuit where the FTC did not file a simultaneous administrative proceeding against USAP, and for good measure that the FTC is unconstitutional.  USAP also raised the issue in its motion to dismiss that the FTC based its claims on an impermissible market definition.

          USAP's motion to dismiss was denied by the District Court, and USAP filed an appeal from the District Court's denial of its motion to dismiss.  FTC v. Anesthesia Ptrs., Inc., No. 4:23-cv-03560, 2024 WL 2137649, at *6-*9 (S.D. Tex. May 13, 2024), app. docketed, No. 24-20270 (5th Cir. June 17, 2024).  In the course of denying USAP's motion to dismiss, the District Court quoted several of the FTC's allegations, including this one:

The FTC quotes an insurance executive describing USAP's consolidation strategy as “tak[ing] the highest rate of all ... and then peanut butter spread that across the entire state of Texas.” 

FTC v. Anesthesia Partners, 2024 WL 2137649, at *9. 

          The District Court granted Welsh Carson's motion to dismiss, in contrast.  FTC v. Anesthesia Partners, 2024 WL 2137649  at *4-*6.  Welsh Carson successfully argued that it, the private equity financier, did not violate and was not about to violate antitrust laws based on the allegations in the FTC's complaint.

          So it's on to the Fifth Circuit where USAP hopes that it will find a more receptive audience for its arguments including that the FTC is unconstitutional despite some 90 years of precedent to the contrary.

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

INSURANCE COVERAGE FOR RIGHT TO ABORTION ON COLORADO BALLOT.

Health insurance coverage for abortion shall not be prohibited in Colorado if a proposed Amendment to the Colorado Constitution is passed in November, 2024.

          In Dobbs v. Jackson Women's Health Organization, 527 U.S. 215, 142 S. Ct. 2228 (2022). the U.S. Supreme Court took away the right to choose an abortion which was formerly recognized under the  U.S. Constitution.  In an interesting response to that decision, an amendment to the Colorado Constitution is on the ballot which would not only recognize that right but bar "Government" from prohibiting health insurance coverage for abortion.  Here is the text of the proposal:

The right to abortion is hereby recognized.  Government shall not deny, impede or discriminate against the exercise of that right including prohibiting health insurance coverage for abortion.

This is the text of the final language of the proposed amendment which was filed with the Colorado Secretary of State in Initiative 89, available at   https://www.sos.state.co.us/pubs/elections/Initiatives/titleBoard/filings/2023-2024/89Final.pdf.  It was also published by ballotpedia at  https://ballotpedia.org/Colorado_Right_to_Abortion_and_Health_Insurance_Coverage_Initiative_(2024).  According to Initiative 89 filed with the Colorado Secretary of State, a previous iteration of the Colorado Constitution was misinterpreted to permit the prohibition of insurance coverage for abortion, and that is why the current proposal would address that issue.

The variety of responses to the Dobbs decision, and the many issues of insurance coverage that the Dobbs decision has spawned and may spawn, are addressed in Chapter 18F in  Volume 2 of CATASTROPHE CLAIMS / INSURANCE COVERAGE FOR NATURAL AND MAN-MADE DISASTERS (Thomson Reuters June 2024 Edition).  The new Chapter, by Dennis Wall, is titled, Catastrophes of the End of Privacy, the Overruling of Constitutional Rights, and Once Again the Activist Judicial Decisions.

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

THE MANY FACES OF BAD FAITH. This is one.

This article continues from the article posted here on Monday of this week, the first day of a new month.  In this continuation, we learn how the Florida intermediate appellate court ruled on the narrow question before it in the Markuson case.

The Court in the Markuson case concluded:

          We conclude that the trial court correctly determined that [the defendant liability insurance company] had no duty to enter into a consent judgment in excess of the limits of its policy. Having so determined, we hasten to add that our affirmance of the trial court’s ruling is limited to the [one] theory of bad faith the court addressed. The trial court erred by entering a final judgment in favor of [the defendant liability insurance company] to the extent the Appellants’ claims raised other theories of  bad faith governed by Boston Old Colony [Insurance Co. v. Gutierrez, 386 So. 2d 783 (Fla. 1980)] and its progeny. For that reason, we must reverse the partial final judgment and remand for further proceedings.[1]

[1] Markuson, 2024 WL 817545, at *4.

The questions in bad faith cases are explored in the Two Volumes of Dennis J. Wall's Book, LITIGATION AND PREVENTION OF INSURER BAD FAITH (West Publishing Co. 3d Edition, 2024 Supplements in process).  This blog article ©2024 Dennis J. Wall.  All rights reserved.  Please read the disclaimer.

NO IMMUNITY FOR BAD FAITH.

It does not take 20 pages to say that.  If you take 20 pages to say something other than that, you are deliberately sacrificing the truth behind your obscurity.  You are perhaps trying to immunize bad faith, for example.

 Crimes committed in an official capacity are still crimes.

          Crimes are always in bad faith.  Never in good faith.

          In a just world, there is never immunity from bad faith consequences.  Nor should there ever be.

          John Roberts took 20 pages to say the opposite.  (Westlaw has numbered his piece from page *6 through page *25.)  As practicing lawyers, we know the signs, don't we:  You do not take 20 pages to say the truth.  As in this case, the truth is often much easier to write in a shorter space.

          Twenty pages and six votes do not a Constitution make.  Not in 2024, and not ever.

Decisions on insurer immunity in bad faith cases are explored in the Two Volumes of Dennis J. Wall's Book, LITIGATION AND PREVENTION OF INSURER BAD FAITH (West Publishing Co. 3d Edition, 2024 Supplements in process).  This blog article ©2024 Dennis J. Wall.  All rights reserved.  Please read the disclaimer.