Claims and Bad Faith Law Blog

Show the Truth: Cutting the Disabled.

The Good Faith Monologues.

    The Republican National Convention in Tampa seems to be steeped in what is either denial or ignorance, or perhaps a third way of life:  Disdain.  One guess may be as good as another as to the cause, but it is undeniable that some people are not often seen there and are discussed even less often.

    Scott Maxwell is a columnist for the Orlando Sentinel who is attending the "RNC".  He writes in a revealing, eloquent way about the troubles faced by a mother and her disabled son following cuts to Medicaid contributions championed by Florida Governor Rick Scott.  He also addresses the specter of proposed cuts to Medicaid spearheaded by Rep. Paul Ryan (R-Wis.), the Vice Presidential nominee of the Republican Party in 2012.  Mr. Maxwell displays in words the effects all these cuts will have on one disabled man, who is 31 years old and 73 pounds, and his full-time caregiver now, his mother.  See Scott Maxwell, "Taking Names / These RNC Protestors Are Determined to be Heard" p.A3, col. 1 (Orlando Sentinel, Wed., August 29, 2012).  Author's Note:  I tried to close any takeover advertising in this link.  However if any remains blame the Orlando Sentinel, not this author, and thank you.

    It seems so theoretical, so philosophical even, to discuss cuts to Medicaid without mentioning let alone considering the effects those cuts have and will have on people who depend on Medicaid to live their lives each day.  Good Faith really can never be divorced from reality, or it is not Good Faith.

    Bad Faith is Good Faith severed from the real world.

 The author is Co-Chair of the Health, Life and Disability Insurance Subcommittee of the American Bar Association, a Subcommittee of the Litigation Section's Insurance Coverage Litigation Committee.

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Words for Today: Health Insurance Exchanges.

    The Affordable Care Act relies upon competition to keep healthcare prices down.  "The law will set up markets, known as exchanges, where people under 65 can shop for private insurance and get subsidies to help pay for it."  Robert Pear, "Despite Democrats' Warnings, Private Medicare Plans Find Success" (New York Times Online, posted August 25, 2012).  Feel free to ignore the misleading headline on the linked newspaper article.  It was put there by an unknown person who clearly does not know anything about the subject.

The author is Co-Chair of the Health, Life and Disability Insurance Subcommittee of the American Bar Association Litigation Section.

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No Bad Faith Delay in Discovery, No Sanctions.

    Federal Rule of Civil Procedure 37 provides for sanctions in the event a party fails to make requested discovery available.  It has been copied in many States and other jurisdictions.

    Sanctions are authorized under Rule 37 when discovery has been requested and has been ordered to be made by Court Order, but discovery has not been provided.  Sanctions depend upon the Trial Court making findings of willfulness, Bad Faith, or fault.  "Fault" in particular has been held to mean "objective reasonableness."  Download Citizens Ins. Co. v. LG Electronics, USA, Inc. *2 (S.D. Ind. August 21, 2012.rtf; Hussmann, USMJ)

      Bad Faith in this situation must be established by clear and convincing evidence.  So must willfulness or  fault be established by clear and convincing evidence or sanctions will simply not be imposed.  See Download Citizens Ins. Co. v. LG Electronics, USA, Inc. *3 (S.D. Ind. August 21, 2012.rtf; Hussmann, USMJ).

    In the Citizens Ins. v. LG Electronics decision, LG definitely failed to provide requested discovery when compliance was due.  However, LG found that it made a mistake and provided the discovery once it discovered its mistake.  In other words, LG demonstrated objectively verifiable Good Faith.  The United States Magistrate Judge denied Citizens Insurance Company's Motion for Sanctions as a result: 

    Plaintiff has not demonstrated by clear and convincing evidence that Defendants willfully withheld information.  Nor has Plaintiff fully justified why any sanctions should be issued.  Defendants did make a mistake, but they did remedy that mistake and have now disclosed everything Plaintiff requested.

Download Citizens Ins. Co. v. LG Electronics, USA, Inc. *3 (S.D. Ind. August 21, 2012.rtf; Hussmann, USMJ).  [Emphasis added.]

    In every arena in which Good Faith is contested, objectively verifiable Good Faith is a winner.  Purity of heart is a Beatitude, but by itself it is not often a good defense in a U.S. Court.

Dennis Wall is a featured speaker at this year's National Institute on Bad Faith Litigation in Orlando, Florida on November 28 and 29, 2012.  Readers of this blog can receive a $200.00 discount on registration by entering the code, "BFB 200," at the American Conference Institute's website:  www.americanconference.com/badfaith.

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Become a Questioning Consumer About Tests, Diagnoses and Prescriptions.

Where Healthcare and Health Insurance are concerned, becoming a questioning consumer can be an antidote for being overtreated.

    "Not every mystery has to be solved, and not every problem has to be addressed.  That's hard to get your brain around." Ms. Kathryn Gullo, quoted by Tara Parker-Pope, "Well / Overtreatment is Taking a Harmful Toll" p. D1, col. 3 (New York Times Nat'l ed., "Science Times" Section, Tuesday, August 28, 2012).

    These are all different ways to describe the same thing:  People are being overtreated and their Healthcare is harming them, not helping them for as long as they accept their tests, diagnoses and prescriptions without even questioning what the effects that these tests, diagnoses and prescriptions will have on their lives.  This Healthcare and Health Insurance model also holds the national economy in a  stranglehold.  See David Leonhardt, "Economic Scene / No. 1 Book, and It Offers Solutions" (New York Times Online, posted December 19, 2007), reporting Mr. Leonhardt's choice of Shannon Brownlee's book, "Overtreated," as "the economics book of the year." 

The author is Co-Chair of the Health, Life and Disability Insurance Subcommittee of the American Bar Association Litigation Section.

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EXPERTS IN INSURANCE BAD FAITH CASES: TESTIMONY, REPORTS, DEADLINES.

     Experts in Insurance Bad Faith Cases are bound by the same rules, written and unwritten, that bind other Experts.  They will ultimately be expected to testify persuasively in Court.  An unpersuasive or worse yet, an Expert whose Trial Testimony seems to the Judge or the Jury as not based on reality, can be devastating to the party's own case.  See, e.g., Ocean View Towers Ass'n v. QBE Insurance Corp., 2012 WL 882577 *2 (S.D. Fla. March 15, 2012), Download Ocean View Towers Ass'n v. QBE Insurance Corp. (S.D. Fla. Order on Motion for New Trial Filed March 15, 2012) PUBLIC ACCESS, in which a Federal Judge denied a Plaintiff Condominium Association's Motion for New Trial in a breach of contract case against the Association's Insurance Company, after a Jury Verdict "finding no breach of contract" by the Insurance Company.  The Court in that case held that the "great weight of the evidence supports the jury's verdict" in favor of the Defendant Insurance Company, with the Court's main reason for that decision being the Trial Testimony of the "principal expert" of Policyholder Condominium Association.  The Expert "offered utterly incredible testimony concerning the amount [the Insurance Carrier] should have paid for [the Condominium Association's loss.  His varying estimates were all over the map, and he admitted on cross that he would say anything his client asked of him because '[t]hat's how I get paid.'...  This testimony was so bad that it prompted the Court to remark, outside the jury's presence, that 'I have been a Judge for a long time and I have heard a lot of witnesses and I must say that ... [the Expert in question] has to rate in the top [as] one of the worst witnesses as an expert I have ever heard.'"  OceanView Towers Ass'n v. QBE Insurance Corp., 2012 WL 882577 *2 (S.D. Fla. March 15, 2012), Download Ocean View Towers Ass'n v. QBE Insurance Corp. (S.D. Fla. Order on Motion for New Trial Filed March 15, 2012) PUBLIC ACCESS.

     Moreover, the Expert's Affidavit or sworn Report in the case should be the Expert's legally reliable foundation for admissible Testimony.  See, e.g., Sheffield Woods at Wellington Condo. Ass'n v. Scottsdale Ins. Co., 2011 WL 7069785 *1 (M.D. Fla. March 7, 2011)(record made it "difficult, if not impossible, for anyone to give a reliable opinion regarding the amount of damage to the Property that occurred in any one or more specific past years or periods," granting motion to preclude testimony by Expert "regarding his opinions as to the specific dollar amount of damage that occurred during any one or more specific years or period."), Download Sheffield Woods at Wellington Condo. Assn v. Scottsdale Ins. Co. (M.D. Fla. Case No. 8.09cv1148, Order Filed March 7, 2011) PUBLIC ACCESS; cf. Curatolo v. Allstate Ins. Co., 2011 WL 2116459 *4 (N.D. Ohio May 27, 2011)(witness's summary of other people's recorded statements failed "to satisfy the personal knowledge requirement" for any affidavit), Download Curatolo v. Allstate Ins. Co. (N.D. Ohio No. 5.10CV607, Memorandum of Opinon and Order Filed May 27, 2011) PUBLIC ACCESS.  The Federal Courts' online docket, PACER, reflects that an Order granting a stipulation for dismissal with prejudice was filed in the Sheffield Woods case on April 4, 2011, and that the Curatolo case was similarly dismissed with prejudice based on a settlement agreement, on June 10, 2011.

     The content of any Expert's Reports including "supplemental" Reports will not generally be permitted to take the place of compliance with Report requirements in the first place.  If the Expert must render a Report which addresses certain subjects required by Court Order or Rule, then it must do so or the Expert runs the risk of not being allowed to testify.  E.g., Kendall Lakes Towers Condo. Ass'n v. Pacific Ins. Co., 2011 WL 6372198 *5 (S.D. Fla. December 20, 2011)(Goodman, U.S.M.J.; allowing Expert who produced a "supplemental" Report which did not meet certain deadlines and requirements to testify, but only if lengthy and detailed proscribed conditions were met first), Download Kendall Lakes Towers Condominium Assn v. Pacific Ins. Co. (S.D. Fla. Case No. 10.24310, Order of USMJ Filed Dec. 20, 2011) PUBLIC ACCESS; Tadehara v. State Farm Mut. Auto. Ins. Co., 2011 WL 4048782 *6 & n.1 (D. Colo. Sept. 12, 2011)(late-filed Policyholder's "expert report prepared by ... an attorney[-Expert]," and late-filed Insurance Company's expert report also prepared by an attorney-Expert, both appearing to contain impermissible legal conclusions, were not considered on issue of reasonableness of Defendant Insurance Company's conduct), Download Tadehara v. State Farm Mut. Auto. Ins. Co. (D. Colo. No. 09.cv.02893, OpinIon and Order Filed Sept. 12, 2011) PUBLIC ACCESS.  PACER, the online docket of the Federal Courts, reflects that a stipulation for dismissal with prejudice after a settlement was filed on or about March 6, 2012 and that an Order of Dismissal was entered the following day in the Kendall Lakes case.

     Of course, the Expert in an Insurance Case should abide by the deadlines established by Court Order or by Rule.  Otherwise, the Experts or their Reports may be stricken by a Court ruling.  See House of Clean, Inc. v. St. Paul Fire & Marine Ins. Co., 2011 WL 2118633 *12-*13 (D. Mass. May 27, 2011)(motion to strike Plaintiff's Expert's "Third Expert Report" would be "allowed with respect to" the determination of the Insurance Company's Motion for Summary Judgment, which in turn was granted in part and denied in part; however, the Expert in question would be permitted to testify at Trial "on the condition that [the Plaintiff-Policyholder] makes [the Expert] available for a short, supplemental deposition at defendant's convenience and plaintiff's expense before [the Expert] testifies at trial."), Download House of Clean, Inc. v. St. Paul Fire and Marine Ins. Co. (D. Mass. No. 07.10839 Memorandum and Order Filed May 27, 2011) PUBLIC ACCESS.  PACER records a settlement and an Order of Dismissal in the House of Clean case, on or about August 16, 2011.

     To summarize the rulings in these cases, the same rules, written as well as unwritten, bind Experts in Insurance Cases that bind Experts in other kinds of cases.

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Good Faith in Florida Mediations: The "Authority to Settle" Amendments.

     A previously posted article on Insurance Claims and Issues weblog on Wednesday, August 22, 2012 relates some of the more significant amendments in effect in 2012 to the Florida Mediation Rule, Florida Rule of Civil Procedure 1.720 (Download Florida Rules of Civil Procedure 2012 and see in particular pages 81 and 82 of the attached pdf from the Florida Bar website).

For a further reflection on the Florida Mediation Rule Amendments, see Faried, "In the Flesh:  New Requirements in the Mediation Rules Expand 'Authority to Settle' Requirements" 31 Trial Advoc. Q. 21 (2012) (subscription required).

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When Policyholder Settles and Assigns Claim to Injured Claimants, Arbitrate?

     There could not be many more interesting decisions in August, 2012 than the officially unpublished opinion by a panel of the Ninth Circuit in Allied Professionals Insurance Co. v. Kong, 2012 WL 3525353 (9th Cir. Opinion Filed August 16, 2012), Download Allied Professionals Insurance Co. v. Kong (9th Cir. No. 10.56968, Opinion Filed August 16, 2012) UNPUBLISHED.

    Apparently the case involved a denial of all Coverage by Allied Professionals Insurance Company when its Policyholder, anonymous in the panel's opinion, was sued by Ms. Joanne Kong.  Kong settled with the Policyholder "purportedly awarding Kong $1,115,000 compensatory damages and assigning Kong the right to enforce the award against Allied."  Allied Professionals Insurance Co. v. Kong, 2012 WL 3525353 *1 (9th Cir. Opinion Filed August 16, 2012).

    The panel's opinion is also silent on whether this sum was within Allied's Policy Limit.

    Suit was filed first in Florida State Court.  It was removed to the United States District Court for the Middle District of Florida, representing a second suit, and in which the Florida Federal Judge denied Ms. Kong's Motion to Remand and granted Allied's Motion to Compel Arbitration in Orange County, California.  Allied Professionals Insurance Co. v. Kong, 2012 WL 3525353 *1 (9th Cir. Opinion Filed August 16, 2012).  The Ninth Circuit panel refused to review this Florida District Court decision.

    A third lawsuit was apparently then filed in California after an Arbitration was held in California, and after the Arbitrators ruled in favor of Allied.  (It is of interest that in Florida, Insurance Coverage is not an issue for Arbitration, but for a Court.)   The California Federal Judge entered an Order affirming the Arbitration Award in favor of Allied.  Allied Professionals Insurance Co. v. Kong, 2012 WL 3525353 *1(9th Cir. Opinion Filed August 16, 2012).

    The Ninth Circuit panel affirmed.  The Appellate panel held that "Kong has failed to demonstrate that the arbitration award constitutes manifest disregard of the law."  Allied Professionals Insurance Co. v. Kong, 2012 WL 3525353 *2 (9th Cir. Opinion Filed August 16, 2012).  This necessarily means, it would appear, that Allied won the Coverage Issue or Issues "because the subject of the arbitration was whether the Allied policy at issue covered an injury Kong suffered and the enforceability of an agreement between Kong and Allied's insured purportedly awarding Kong $1,115,000 compensatory damages and assigning Kong the right to enforce the award against Allied."  Allied Professionals Insurance Co. v. Kong, 2012 WL 3525353 *1 (9th Cir. Opinion Filed August 16, 2012).  [Emphasis added.]

    When all Coverage is denied, if the Liability Insurance Company believes strongly enough in its Coverage position then the result of decisions in cases like Kong will inevitably be that further cases will be reported (both those officially published and those officially unpublished alike) involving Liability Insurance Companies' demands for Arbitration of resulting Settlement Agreements between Policyholders and Injured Claimants for which the Carriers contend there is no Coverage in the first place.

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FAIR DEALING: THE LAW ALREADY GOT THERE. Update: MORE IS NEEDED.

Not From the Law.  From the Lawyers.  This is an update to the post here on Tuesday, August 14, 2012.

         As was noted in the previous post, much has been written about Municipal Bond Insurance and related matters including issues involved in bond issuance.  See in addition posts here and especially under the category of Bond Insurance addressing the roles of duties of Good Faith and Fair Dealing in this arena.  The previous post in particular addressed duties of Fair Dealing in agency rules and regulations. 

          It turns out that there is a higher authority in place.  By Act of Congress, municipal advisers are "fiduciaries".    The statute's effect is that municipal advisers owe an undivided loyalty not simply to investors but to issuers of municipal securities, really, to so-called "munis" (municipalities, school boards, water management districts, and so on) in their issuance of bonds to finance things like municipal wastewater projects, sewers, schools, and other local community projects.

          The statute, to say again, has been passed.  The Act of Congress in question is known as the Dodd-Frank Act.  As it is wont to do, Congress left it to regulatory bodies to define key words and phrases in rules and regulations.  One of those key words is "fiduciaries".

          The Municipal Securities Rulemaking Board was given jurisdiction by Congress to propose the necessary rules.  The Board duly proposed that its preexisting "fair dealing" rule be expanded to require securities underwriters "to make sure local officials understand the risks of complex  bond deals, and to disclose any incentives they may have for supporting certain transactions."  Mary Williams Walsh, "Municipal Bond Rule Mired in Legislative Limbo" p. B1, col. 4 (New York Times Nat'l ed., "Business Day" Section, Tuesday, August 14, 2012).   The Securities and Exchange Commission is required to approve rules promulgated by the Municipal Securities Rulemaking Board, and the SEC approved this proposed rule change by a vote of 3-to-2.

          The two dissenters in the SEC were the only two Republicans who sit on the SEC.  Although their dissent is reported in the linked newspaper article, the fact that they are the only Republicans on the SEC is not reported there.  That fact is reported here. 

          So far so good.

          Then the proposed rule change, and the provision of the Dodd-Frank Act which authorizes the change in the first place, was attacked by a bill filed by a Republican Congressman which was finally reported out of a House Subcommittee just as Congress recessed.  The bill would eliminate the provision of the Dodd-Frank Act that municipal advisers should be treated as fiduciaries in the issuance of securities by munis.

          When the House of Representatives (finally) returns to work in September, more argument, er, debate is expected.  One of the debates left hanging is a proposal by banks that they should be excluded from the rule definition of "fiduciaries," even though in reality "bankers often do advise municipalities."  Mary Williams Walsh, "Municipal Bond Rule Mired in Legislative Limbo" p. B1, col. 4 (New York Times Nat'l ed., "Business Day" Section, Tuesday, August 14, 2012).

          Apropos of the observation in Tuesday's article that "the Securities and Exchange Commission seems to be overloaded with George W. Bush-era political appointees who still see their mission as doing nothing so that others can accuse the Federal Government of not acting":  The SEC reportedly settled another subprime mortgage investigation for pennies on the dollar, rather than trying the case.  This settlement was with Wells Fargo for less than the cost of doing business:  4/100 or 1/25 of one percent of its earnings last year.  Just a few days ago, the SEC announced for the first time in recorded history, or just about, that it, the SEC, was not going to pursue criminal charges against Goldman Sachs.  See Ben Protess, "Wells Fargo Settles a Securities Case" p. B7, col. 1 (New York Times Nat'l ed., "Business Day" Section, Wednesday, August 15, 2012).  The SEC is not the place to go for Fair Dealing, it seems.

          Note to Mary Schapiro, the current Chair of the SEC:  You get good press.  Why?  It is because of who you are -- or who you are not, and not what because of what you do.  You are not your predecessor.  All in all, that is not much but it is something. 

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Fair Dealing: The Law Already Got There. More is Needed.

    Much has been written about Municipal Bond Insurance.  That includes posts here and especially under the category of Bond Insurance which address the need for enforcement of duties of Good Faith and Fair Dealing in this arena.

    Now comes news that "fair-dealing rules" have been in place "for decades" in the municipal bond market.  "Rules requiring fairness in this market state that participants must not be deceptive, dishonest or unfair in their practices.  The regulations apply to the sale of municipal bonds to investors and to underwriters' interactions with issuers; fraud need not be alleged in a fair-dealing case."  Gretchen Morgenson, "Fair Game / Police Protection, Please, for Municipal Bonds" p. 1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, August 5, 2012).

    From recent news coverage it is clear that at least certain firms and individuals who make their money from Wall Street, have taken advantage of relatively less financially sophisticated school board members or water management district board members, for example.  Even so, the Securities and Exchange Commission seems to be overloaded with George W. Bush-era political appointees who still see their mission as doing nothing so that others can accuse the Federal Government of not acting.  The SEC has recently asked for more power to enforce regulations in the municipal bond market while ignoring the regulations that have existed for almost as long as the SEC itself.  This is perhaps an exaggeration, but only a slight one.

    This is an area deserving of research.  "So far, the commission's reticence to act on behalf of municipal issuers has left those issuers to take on Wall Street alone.  Few have done so."  Gretchen Morgenson, "Fair Game / Police Protection, Please, for Municipal Bonds" p. 1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, August 5, 2012).

    There does not seem to be a similar impediment to lawsuits involving allegedly failed advice to munis when they are investors rather than issuers.  The City of St. Petersburg is one example.  The City successfully sued for over $10 Million in a case involving alleged failure or unfair dealing in financial advice to the City on an investment.  See "Bad Faith Financial Services:  No Comparative Negligence in Lawsuit," posted on April 5, 2012.

    This area is worth taking time to research the law so that the law may be applied.

    It is worth your time, too.

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WRITS USED TO ATTACK BAD FAITH CLAIMS & CAUSES OF ACTION.

         Procedural vehicles for dismissal of both Third-Party and First-Party Bad Faith claims and causes of action may be available as a defense in some cases.  See Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" §§ 5:57 & 11:24 (Third Edition West Publishing Company 2011, 2012 Supplement).   Writs may also be a vehicle for attacking the legal validity of First-Party Bad Faith claims and causes of action, while seeking review of an Appellate Court on another matter.

         Certiorari jurisdiction was exercised in General Star Indemnity Co. v. Atlantic Hospitality of Fla., LLC, 2012 WL 3023162 (Fla. 3d DCA July 25, 2012), Download General Star Indemnity Co. v. Atlantic Hospitality of Fla., LLC (Fla. 3d DCA No. 3D11.3199, Opinion Filed July 25, 2012) STATED NONFINAL; PUBLIC ACCESS, over a petition arising from a discovery request.  In that case, the appellate court took certiorari jurisdiction; the petitioner requested review of "a supplemental request for production propounded by Atlantic," the Plaintiff-Policyholder which sued for First-Party Bad Faith claim handling under a "commercial property insurance policy".

          The Appellate Court not only took jurisdiction on certiorari review of the Trial Court's Order "overruling [the Insurance Company's] objections to discovery of materials concerning its business practices and policies," but the Appellate Court also quashed the discovery Order on the ground that as a matter of law the complaint failed to state a cause of action for Bad Faith in that case.  See General Star Indemnity Co. v. Atlantic Hospitality of Fla., LLC, 2012 WL 3023162 *2 (Fla. 3d DCA July 25, 2012).

          Even more directly, a Writ of Prohibition was successfully requested in Liberty Insurance Corp. v. Milne, 2012 WL 3101718 *1-*2 (Fla. 4th DCA August 1, 2012), Download Liberty Insurance Corp. v. Milne (Fla. 4th DCA No. 4D12.926, Opinion Filed August 1, 2012) STATED NOT FINAL; PUBLIC ACCESS, to prohibit a Trial Court as a matter of law from exercising further jurisdiction over a Policyholder's Third-Party Bad Faith cause of action.  The Policyholder alleged the Bad Faith cause of action in a third-party complaint.  The Policyholder alleged Liberty's "bad faith failure to settle by failing to timely tender its policy limits" in that same case.   Liberty requested the Appellate Court to issue a Writ of Prohibition against the Trial Court exercising jurisdiction over the third-party complaint in that case, "and to quash the trial court's order denying its motion to dismiss the third-party complaint."   As noted, Liberty's Writ of Prohibition was successful on both counts in that case.

           Writs may be a means of acquiring appellate review of Trial Court Orders declining to dismiss Bad Faith claims and causes of action, well before an appeal from a final Judgment.   Policyholders and Insurance Companies, and their Counsel, should be prepared.

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REQUESTS FOR PRODUCTION IN A BAD-FAITH CASE: ...

...  OF OFFERS TO SETTLE IN THE UNDERLYING CASE.

      Requests for Production of documents and other things are practically mandatory in Bad Faith cases.  For suggested Forms, see, for example, Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" Appendixes 11-B (First-Party Plaintiff Requests to Produce) and 11-D (First-Party Insurance Company Requests to Produce) for suggested forms to consider in First-Party Bad-Faith Cases, and Appendixes  11-F (Third-Party Plaintiff Requests to Produce) and 11-H (Third-Party Insurance Company Requests to Produce) for possible use in Third-Party Bad Faith Cases, (3d Edition West Publishing 2011, 2012 Supplement).

     One possible form is suggested by the ruling of a United States Magistrate Judge in a recent Third-Party Bad-Faith case.  The Magistrate Judge limited a Defendant Liability Insurance Company's requested production to the following requested production of documents from the Plaintiffs; his ruling is framed here as though it were a paragraph of a possible request for production:

All documents reflecting [the Liability Insurance Company's] communications to the Plaintiffs or their counsel about offers to settle from the date of the claim through the issuance of the mandate.

Hilson v. GEICO General Insurance Co., 2012 WL 3128953 *1 (M.D. Fla. August 1, 2012), Download Hilson v. GEICO General Insurance Co. (M.D. Fla. No. 8.11cv13, USMJ Order Filed August 1, 2012) PUBLIC ACCESS.  In that case, GEICO assumed the Duty to Defend the Plaintiffs in the underlying liability case against them.  GEICO's request for production was otherwise deemed overbroad and its Motion to Compel other production was accordingly denied by the Court.  "Otherwise, GEICO has failed to show that any other documents in its unparticularized requests for production would have any relevance to a claim or a defense at issue in this case."  Hilson v. GEICO General Insurance Co., 2012 WL 3128953 *1 (M.D. Fla. August 1, 2012).

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Remand in Florida: You Can't Argue Fraudulent Joinder Without Fraud.

    In Taylor v. Admiral Insurance Co., 2012 WL 3113909 (S.D. Fla. July 31, 2012), Coverage and Bad Faith denial were alleged by an assignee of Miami-Dade County against an Excess and Surplus Lines Insurer.  The basis of the claim is Miami-Dade's reliance on a Certificate of Insurance.  The Carrier contended that Brown & Brown, a Florida corporation which issued the Certificate, was not authorized to issue a Certificate for Coverage with the Carrier.  Taylor v. Admiral Ins. Co., 2012 WL 3113909 *1 (S.D. Fla. July 31, 2012).

     The lawsuit was originally filed in Florida State Court in Miami.  The Carrier, Admiral, was the sole Defendant. Admiral had previously issued a General Liability Insurance Policy to the host of an "event" in Miami-Dade County.  Admiral was sued for alleged breach of contract, common law bad faith, and statutory bad faith for its denial of Miami-Dade County's request to Admiral "to defend and indemnify it".  Miami-Dade County asserted that it was Admiral's Additional Insured.  After the assignee was severely injured from a fall at the "event," she sued both Miami-Dade County and the host (Admiral's Policyholder) for damages.  Taylor v. Admiral Ins. Co., 2012 WL 3113909 *1 (S.D. Fla. July 31, 2012).

Admiral removed the case to Federal Court.  There, the Plaintiff successfully requested leave to amend the complaint and in it added a Defendant and two claims.  The added Defendant is Brown & Brown.  Adding Brown & Brown, a Florida corporation and a Florida resident for purposes of Diversity Jurisdiction, had the effect of destroying Federal Diversity Jurisdiction since both the Plaintiff and Brown are Florida residents.

     Brown & Brown filed a Motion to Remand accordingly.  Admiral opposed the motion essentially on the ground of fraudulent joinder, without arguing fraud.  Instead, Admiral argued that Brown should be dropped as a party.  Taylor v. Admiral Ins. Co., 2012 WL 3113909 *2 (S.D. Fla. July 31, 2012).

     The District Court granted the Motion to Remand.  In so ruling, the Court expressly declined to grant a rehearing on its prior ruling giving the Plaintiff leave to amend the Complaint to add Brown (and also to add one claim of "ratification" against Admiral while also alleging one claim of fraud against Brown & Brown).  The District Judge politely wrote:  "I decline Admiral's offer to reconsider my initial decision permitting the joinder of Brown & Brown, and drop Brown & Brown as a party."  Taylor v. Admiral Ins. Co., 2012 WL 3113909 *2 (S.D. Fla. July 31, 2012).

     There being no diversity upon which to any longer base Diversity Jurisdiction in this case, the case was accordingly remanded to the Florida State Court.

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RECORD: NO BAD FAITH FAILURE TO INVESTIGATE FIRST-PARTY CLAIM.

     In Scorpio v. Underwriters at Lloyd's, London, 2012 WL 2010168 (D.R.I. June 5, 2012), the Federal District Court in Rhode Island was confronted with an alleged claim of First-Party Bad Faith denial of a Property Insurance claim.  Specifically, the Plaintiff-Policyholder submitted a claim for Property Damage after a building containing six (6) residential apartment units was damaged by rainwater which accumulated on the roof during heavy rain storms during the policy period, on July 24, 2008.  Scorpio v. Underwriters at Lloyd's, London, 2012 WL 2020168 *1 (D.R.I. June 5, 2012), Download Scorpio v. Underwriters at Lloyd's, London (D.R.I. No. 10.325, Memorandum and Order Filed June 5, 2012) PUBLIC ACCESS.

    The Plaintiff claimed Bad Faith as a result of the Defendant Insurance Company's alleged failure "to properly investigate the claim."  Scorpio v. Underwriters at Lloyd's, London, 2012 WL 2020168 *6 (D.R.I. June 5, 2012).  The District Court held that the evidence of record disputed every element of this claim.

    In its ruling granting Defendant's Motion for Summary Judgment on this Bad Faith claim, the District Court compared the record evidence in that case, to every element of First-Party Bad Faith required by Courts in most jurisdictions, including Rhode Island.  First, the Federal Court announced the applicable State Bad Faith standard of liability:

    In order for Plaintiff to succeed on her bad faith claim she must “demonstrate an absence of a reasonable basis in law or fact for denying the claim or an intentional or reckless failure to properly investigate the claim and subject the result to cognitive evaluation .” Skaling v. Aetna Ins. Co., 799 A.2d 997, 1012 (R.I.2002).

 Scorpio v. Underwriters at Lloyd's, London, 2012 WL 2020168 *7 (D.R.I. June 5, 2012).

     Next, the Federal Court compared each relevant item of record evidence to that standard of Bad Faith exposure.  Recast in bullet points, the following complete quotation from the Court's opinion illustrates this comparison:

•  Defendant's actions do not even approach the bad faith standard.
• The record reflects that Defendant acted in a reasonable manner by timely and appropriately investigating the claim,
• engaging its own expert,
• and reviewing the appropriate information, including Plaintiff's engineer's report, before denying the claim.
• Defendant's denial letter noted the pertinent policy provisions and that the policy provided that a building that is still standing is not considered to be in a state of collapse.
• Defendant's actions, in addition to the Court's conclusion that the collapse provision is ambiguous and thus the claim is fairly debatable, leads this Court to conclude that Plaintiff's bad faith claim cannot survive Defendant's motion for summary judgment.

 Scorpio v. Underwriters at Lloyd's, London, 2012 WL 2020168 *7 (D.R.I. June 5, 2012).

     This is a "case study," if you will, in the kind of record evidence -- and the kind of conduct in First-Party claim handling -- that can defeat a claim of First-Party Bad Faith in most Courts.

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