Claims and Bad Faith Law Blog

OPPORTUNITY TO BE HEARD ON FORCE PLACED INSURANCE.

          The Federal Housing Finance Agency ("FHFA") has issued a Notice that it invites our Comments on restrictions it should consider placing on Lender Placed (Force Placed) Insurance under Mortgages involving Fannie Mae and Freddie Mac:  Download LPIregister32613.pdf.FHFA Notice of Restrictions Proposed on Lender Placed Insurance Terms and Conditions.  The FHFA is the Conservator for these two government sponsored enterprises ("GSEs").

          Specifically, the FHFA is interested in hearing from anyone interested in these areas in which the FHFA is considering restrictions on Lender Placed Insurance:

The specific practices related to lender placed insurance that FHFA has determined pose risks to the Enterprises or run contrary to the duties of the Conservator and for which actions are specified are practices where there are concerns regarding conflicts between parties to the insurance agreement, including:

1. Certain Sales Commissions. The Enterprises shall prohibit sellers and servicers from receiving, directly or indirectly, remuneration associated with placing coverage with or maintaining placement with particular insurance providers.

2. Certain Reinsurance Activities. The Enterprises shall prohibit sellers and servicers from receiving, directly or indirectly, remuneration associated with an insurance provider ceding premiums to a reinsurer that is owned by, affiliated with or controlled by the sellers or servicer.

 Id. at 4.

           The Comment period will end 60 days from publication of the FHFA Notice in the Federal Register.  In an abundance of caution, I am calendaring Friday, May 24, 2013 or the 60th day by my calculations after the Notice was signed by the FHFA Acting Director on March 25, 2013, in order to be absolutely certain my input makes the FHFA deadline.

          Here are the portals through which the FHFA will receive our incoming input:

FHFA will accept public input through its Office of Housing and Regulatory Policy (OHRP), no later than [INSERT DATE 60 DAYS AFTER PUBLICATION IN THE FEDERAL REGISTER], as the agency moves forward with its deliberations on appropriate action. Communications may be addressed to Federal Housing Finance Agency, OHRP, Constitution Center, 400 Seventh Street SW., Ninth Floor, Washington, DC 20024, or emailed to [email protected]. Communications to FHFA may be made public and posted without change on the FHFA Web site at http://www.fhfa.gov, and would include any personal information provided, such as name, address (mailing and email), and telephone numbers.

Id. at 4-5.

This is our opportunity to have our voices heard!  Won't you  join me in insuring that this opportunity is placed on Lender Placed Insurance?

A similar article on Wednesday, March 27, 2013 on Insurance Claims and Issues Blog similarly announced the opportunity provided by the FHFA to be heard on LPLI.

Please Read The Disclaimer.

Related articles

Force-Placed Insurance Issues in New York: Your State, Too.

New Jersey Bad Faith Law, Federal Class Action, Force-placed Flood Insurance.

UPDATE on the Whole Financial Catastrophe, JPMorgan Also.

 More on the Good Faith of JPMorgan.  (This post updates the article by the same name, posted here on Tuesday, March 19, 2013.)

It seems that for a brief moment, at least, the immense power of the United States Senate Permanent Subcommittee on Investigations focused public attention on the possible misdeeds and definite mistakes of JPMorgan executives and its chief.  See, e.g., Ben Protess and Jessica Silver-Greenberg, "Trading Hearings Put Focus Back on JPMorgan's Chief" p. B1, col. 5 (New York Times Nat'l ed., "Business Day" Section, Monday, March 18, 2013); Jessica Silver-Greenberg, "JPMorgan Executives Face Withering Questions at Senate Hearing" p. B1, col. 1 (New York Times Nat'l ed., "Business Day" Section, Saturday, March 16, 2013).

It bears repetition to make the following observation once more, as was published here on March 19, 2013:

    One ironic feature of interest in JPMorgan's suspect trading activities, apparently totally unmentioned in the newspaper reports, is that JPMorgan was trading in  Credit Default Swaps (CDS's), otherwise known as unregulated Credit Insurance.  See "JPMorgan Chase Whale Trades:  A Case of History of Derivatives Risks and Abuses," Report of the Permanent Subcommittee on Investigations, Committee on Homeland Security, United States Senate, in particular pages 29-30 and search the document for "credit default swaps" (307 pages; stated "Released in Conjunction With The Permanent Subcommittee on Investigations March 15, 2013 Hearing"):  Download REPORT - JPMorgan Chase Whale Trades (3-15-13)2[1].    

 

Force-Placed Insurance?  One person's "commissions."  Other people call them "kickbacks."

The New York State Department of Financial Services reportedly has noted publicly "that JPMorgan Chase has made about $600 million since 2006 by taking 75 percent of the profit from the force-placed business it gave" to insurance giant Assurant, the country's largest force-placed insurer at this time.  Karen Freifeld and Ashutosh Pandey, "UPDATE 4--Assurant Settles With New York Over 'Force-Placed' Insurance" (Reuters Online, posted Thursday, March 21, 2013).

 

Assumption of the Risk?  But this isn't a lawsuit and there is no "Assumption of the Risk" Affirmative Defense to a Bad Faith Claim.  You're right.  This isn't a lawsuit.

So, after some 5 years, the question has changed:  If someone keeps on keeping on, making money at my expense, not changing their ways of doing it, and if I do nothing about it, have I learned my lesson?  See Jesse Eisinger, "Lesson Learned After Financial Crisis:  Nothing Much Has Changed" (Dealbook, New York Times, March 19, 2013).  See, in addition, Moyers & Company, airdate Friday, March 22, 2013, Bill Moyers interview with Sheila Bair, head of the Systemic Risk Council and most recently, Chair of the Federal Deposit Insurance Corporation.

Please Read The Disclaimer.

Related articles

Tuesday in Tampa: JPMorgan Shareholders Deserve More Than Apologies.

Regulators, Like People, Matter.

When RISK MANAGERS Took Risks, Made Profits, Who Knew From Losses?

BREAKING LAW NEWS: Force-Placed Insurance vs. ....

.... Implied Covenant of Good Faith, Fair Dealing.

          This post updates the article which was posted in two parts, first here on Tuesday, March 5, 2013, "Force-Placed Insurance vs. Implied Covenant of Good Faith, Fair Dealing," and on Wednesday, March 13, 2013 on Insurance Claims and Issues Weblog.

           In what qualifies for one of the more recent decisions on this issue, a District Judge in the U.S. District Court for the Southern District of Florida has entered an Opinion and Order Denying a Motion to Dismiss in a Force-Placed Insurance Putative Class Action:

Martorella v. Deutsche Bank National Trust Co., 2013 WL 1137514 (S.D. Fla. March 18, 2013).

          In pertinent part, the District Judge recognized the settled rule in Florida, as in most if not all other jurisdictions in the United States, that "[a] covenant of good faith and fair dealing is implied in every contract."  Martorella v. Deutsche Bank National Trust Co., 2013 WL 1137514 *5 (S.D. Fla. March 18, 2013).  Here, the Mortgagor-Plaintiff specifically alleged that the "Defendants breached the [standard form] mortgage agreement and the covenant of good faith and fair dealing implied therein".  Martorella v. Deutsche Bank National Trust Co., 2013 WL 1137514 *3 (S.D. Fla. March 18, 2013).  In Florida, again as in most U.S. jurisdictions, where a contracting party is vested with discretion by the contract, "the implied duty of good faith and fair dealing attaches as a gap-filling default."  The implied covenant "fills the gaps" by imposing on the contracting party which is vested with discretion, a legally enforceable duty "to act in a commercially reasonable manner that satisfies the reasonable expectations of the parties."  Martorella v. Deutsche Bank National Trust Co., 2013 WL 1137514 *6 (S.D. Fla. March 18, 2013).  Breach of the implied duty of good faith and fair dealing is enforceable at law in damages, and the Court held that such is the case here:

         Here, the force-placed insurance clause granted Defendants discretion in determining whether to purchase force-placed insurance after a policy had lapsed, and under what terms. Plaintiff's allegations that Defendants failed to observe reasonable limits in exercising their discretion to force-placing policies at grossly excessive premiums in exchange for kickbacks from the insurance carriers fully states a claim for breach of the covenant of good faith and fair dealing.

Martorella v. Deutsche Bank National Trust Co., 2013 WL 1137514 *6 (S.D. Fla. March 18, 2013). 

          Parenthetically, the Court held that the Defendants' attempt to have class action allegations 'dismissed' was inappropriate for resolution in a case where the class was not yet certified and the Plaintiffs have not even filed a Motion to Certify the Class.  The Court declined to determine class certification "at this time."  Martorella v. Deutsche Bank National Trust Co., 2013 WL 1137514 *8 (S.D. Fla. March 18, 2013). 

          See, in addition, Karen Freifeld and Ashutosh Pandey, "UPDATE 4--Assurant Settles With New York Over 'Force-Placed' Insurance" (Reuters Online, posted Thursday, March 21, 2013):  "Assurant, the country's largest force-placed insurer, is the first to settle an industry-wide probe launched in October 2011 by DFS, New York state's insurance regulator....  In the United States, the force-placed homeowner's market  is dominated by Assurant and Australian insurer QBE."

 The Wages of Sin May Be Paying Attorney's Fees and Indemnity.

          There is a newspaper report on the troubles faced by the common Defendants in increasing litigation expenses caused by the Great Recession, including Force-Placed Insurance lawsuits -- featuring the very same Deutsche Bank that is the first-named Defendant in the Martorella case analyzed in this article.

          Reportedly, Deutsche Bank is required to set aside reserves, or "provisions," in order to cover litigation expenses such as its own attorney's fees and indemnity payments for settlements and judgments.  Its current "provisions" for litigation are ten (10) times greater than the entire net profit Deutsche Bank declared last year, or 2,400,000,000 (2 Billion, 400 Million) Euros which are currently set aside by Deutsche Bank as litigation provisions as compared with 237,000,000 (237 Million) Euros in declared Deutsche Bank profit in 2012.

          Deutsche Bank is reportedly required to "provision for legal liability" when it reaches a "reasonable certainty on timing and amounts of potential verdicts or settlements."  The litigation in which Deutsche Bank is involved includes Force-Placed Insurance Cases, as we have seen in this article today, and other litigation involving, for example, allegations and claims over Deutsche Bank's alleged involvement with Mortgage Backed Securities (MBS's) and manipulation of interest rates.  See Laura Stevens and Ulrike Dauer, "Deutsche Bank's Legal Bill Mounts" p. C1, col. 6 (Wall Street Journal, Thursday, March 21, 2013)(subscription required by the Wall Street Journal to access online).

Please Read The Disclaimer.

Related articles

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

Force-Placed Insurance Issues in New York: Your State, Too.

Force Placed Insurance and the Duty of Good Faith.

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

The Good Faith of JP Morgan.

    "While we have repeatedly acknowledged significant mistakes, our senior management acted in good faith and never had any intent to mislead anyone."  Unidentified JPMorgan spokesperson, quoted by Jessica Silver-Greenberg and Ben Protess, "Senate Inquiry Faults JPMorgan on Trading Loss / Rebuke for the C.E.O. / Bank Seen as Ignoring Big Risks -- Hearing is Set on Issues" p. A1, col. 6 (New York Times Nat'l ed., Friday, March 15, 2013).

"Let me be clear, JPMorgan completely disregarded risk limits and stonewalled federal regulators.  This bank appears to have entertained, indeed embraced, the fact that it was too big to fail."  Senator John McCain (R-Ariz.), quoted by Jim Puzzanghera, "Former 'London Whale' Boss at JPMorgan Admits Mistakes" (Los Angeles Times Online, posted Friday, March 15, 2013), in a newspaper report about the Senate investigation and report on "$6.2 billion" worth of JPMorgan "mistakes".

     JPMorgan Chase is far and away "the bank that enjoys the best reputation among its peers."  JPMorgan is also the largest trader in derivatives on the face of the earth.  Gretchen Morgenson, "Fair Game / JPMorgan's Follies, For All To See" p. 1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, March 17, 2013).      

     Reportedly when its London traders increasingly provoked JPMorgan's own internal measure of risk to sound the alarm that something  destructive might be happening or about to happen, JPMorgan changed the metric it used to measure risk.  The change was made in January, 2012 and enabled the London traders "to continue building the big bets, the [U.S. Senate] subcommittee found."  Jessica Silver-Greenberg and Ben Protess, New York Times, supra.  See, in addition, Jim Puzzanghera, Los Angeles Times, supra.

     The change was "personally authorized" by JPMorgan CEO Jamie Dimon.  Jessica Silver-Greenberg and Ben Protess, New York Times, supra.

     "No, that is not acceptable practice."  Testimony of Douglas L. Browstein, Vice Chair, JPMorgan, quoted  by Gretchen Morgenson, New York Times, supra.  Here is a link to the Witness Testimony and the senators' statements at the Hearing of the Senate Permanent Subcommittee on Investigations of the Committee on Homeland Security held on Friday, March 15, 2013. 

      "[F]ive former and current JPMorgan executives [were called] to testify about the trades at a six-hour hearing -- and they all sought to pass the buck."  Jim Puzzanghera, Los Angeles Times, supra.

     In the utmost Good Faith and with no intent to mislead anyone about the risk disclosed only to JPMorgan by JPMorgan by its original metric.  Absolutely.

    One ironic feature of interest in JPMorgan's suspect trading activities, apparently totally unmentioned in the newspaper reports, is that JPMorgan was trading in  Credit Default Swaps (CDS's), otherwise known as unregulated Credit Insurance.  See "JPMorgan Chase Whale Trades:  A Case of History of Derivatives Risks and Abuses," Report of the Permanent Subcommittee on Investigations, Committee on Homeland Security, United States Senate, in particular pages 29-30 and search the document for "credit default swaps" (307 pages; stated "Released in Conjunction With The Permanent Subcommittee on Investigations March 15, 2013 Hearing"):  Download REPORT - JPMorgan Chase Whale Trades (3-15-13)2[1].    

Please Read The Disclaimer.

 

RETURNING CALLS: GOOD CLAIMS HANDLING AFTER CATASTROPHES, ANY LOSSES.

This is an update to articles concerning Claims Handling After Sandy, which were posted here on Sunday, March 3, 2013 and on Thursday, March 7, 2013.

           As previously reported, many Policyholders are unsatisfied with what they consider to be insufficient offers from their Homeowners and other Property Insurance Carriers toward paying Sandy Damage Claims.  See, for example, the Comments printed in "Bucks / Troubles With Flood Insurance" p. B4, col. 1 (New York Times Nat'l ed., "Business" Section, Saturday, March 9, 2013), and published online following the post by Tara Siegel Bernard, "How Does Your Hurricane Sandy Claim Stand" ("Bucks" Blog at New York Times Online, Friday, March 1, 2013).  

          In particular, a commonly reported complaint of many Policyholders is that Adjusters are not returning their calls.

          One of the major goals of modern adjustment of Claims is or should be to avoid or prevent Bad Faith Claims, so far as possible.  Many seminars are held frequently in which presenters speak at length about how in their judgment Adjusters can do their best to avoid Bad Faith lawsuits.  Yet, one of the ways to avoid Bad Faith lawsuits is simply human.

          People do not like to be ignored, whether they are Policyholders or Adjusters.  Telephone calls should be returned.  This is not only simple courtesy, but it is a very good way to avoid angering somebody.  People do a lot of things when they are angry, that they might not think about doing, at least right away, when they are not angry.

          No-one is likely to sue you because you returned their calls.

          Further, they called you because they want to talk with you, not necessarily because they want to sue you or your Company.

          Hurricane and Other Catastrophe Claims Handling, and Avoiding Bad Faith While Handling Catastrophe Claims, are some of the articles featuring these tips in Claims Magazine, for example, and you can read them online or print them, free, from the Publications Page of my website.

Have a good St. Patrick's Day today!

Please Read The Disclaimer.

INSUREDS' REIMBURSEMENT OF INSURER'S DEFENSE COSTS: NOT IN WASHINGTON STATE.

            The Supreme Court of Washington has recently addressed the issue of whether a Liability Carrier which defends under a Reservation of Rights, including a reservation of its right to recoup its defense expenses for noncovered claims which the Carrier defended, and if a Court later determines that there was no Coverage, i.e., no Duty to Defend, may the Liability Carrier then recover its defense expenses from its own Insureds in such cases.  Many Courts have addressed this precise issue by answering "yes".  See generally Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 3:6, "Informing the Insured:  Insurer Assertion of Rights to Reimbursement From the Insured of Clearly Noncovered Indemnity and Defense Expenses" (West 3d Edition, 2013 Supplement in process).

            In a recent decision, the Supreme Court of Washington has answered "no" to this question.  As the majority of the Court put it at the outset of its opinion:

 ¶ 1 This court has long recognized that a liability insurer uncertain of its obligation to defend its insured may undertake a “reservation of rights” defense while seeking a declaration regarding coverage. The question in this case is whether the insurer may unilaterally condition its reservation of rights defense on making the insured absorb the defense costs if a court ultimately determines there is no coverage. We answer no. We recognize, however, that an insurer may avoid or minimize its responsibility for defense costs when an insured belatedly tenders a claim and the insurer demonstrates actual and substantial prejudice as a result. We affirm the Court of Appeals.

 National Surety Corp. v. Immunex Corp., 2013 WL 865459 *1 (Wash. March 7, 2013)(en banc).

            The majority's holding drew a sharp rebuke from a dissenting Justice in this case:

¶ 43 Rather than focus on the equities of the case at hand, the majority seizes on this opportunity to pronounce that insurers who defend under a reservation of rights may never recoup defense costs after a court determines that an insurance policy does not cover an insured's claim and that the insurer never had a duty to defend. This rule is both overly broad and unnecessary, and in the context of this case, it is unjust. I dissent.

 National Surety Corp. v. Immunex Corp., 2013 WL 865459 *11 (Wash. March 7, 2013).

             The issues are joined.  Although the division among the Courts is a close one, the Washington Supreme Court majority followed an apparent minority view in this case.  Liability Carriers in Washington State would be well advised to govern themselves accordingly.

 Please Read The Disclaimer.

PART PAYMENT OF FLORIDA PROPERTY CLAIMS.

          In Florida, the Unfair Claim Settlement Practices Act has been amended to apply to situations of “partial coverage”:

 (i) Unfair claim settlement practices.--

***

 e. Failing to affirm or deny full or partial coverage of claims, and, as to partial coverage, the dollar amount or extent of coverage, or failing to provide a written statement that the claim is being investigated, upon the written request of the insured within 30 days after proof-of-loss statements have been completed ....

 Fla. Stat. § 626.9541(1)(i)3e.  Paragraph (i) of Subsection 626.9541(1), quoted above, is made actionable by Fla. Stat. § 624.155(1)(a), “the Florida Bad Faith Statute”.

        A more recently enacted Florida statutory provision, Fla. Stat. § 627.70131(5)(a), provides in pertinent part:

    Within 90 days after an insurer receives notice of an initial, reopened, or supplemental property insurance claim from a policyholder, the insurer shall pay or deny such claim or a portion of the claim unless the failure to pay such claim or a portion of the claim is caused by factors beyond the control of the insurer which reasonably prevent such payment.

 Failure to comply with this provision is a violation of the Florida Insurance Code.  Fla. Stat. § 627.70131(5)(a).  "However, failure to comply with this subsection does not form the sole basis for a private cause of action."  Fla. Stat. § 627.70131(5)(a).  [Emphasis added.]

        It has therefore been held in the Florida case law that failure to comply with this subsection does not provide a separate claim.  However, the same Court that announced this holding also stated in apparent dicta that a violation of this statutory subsection could nonetheless be considered in evidence in a bad faith claim or a Department of Insurance review.  Buckley Towers Condo., Inc. v. QBE Insurance Corp., 2008 WL 2490450 *11 (S.D. Fla. June 18, 2008)(Torres, United States Magistrate Judge), report and recommendation adopted by United States District Judge in 2008 WL 2856457 (S.D. Fla. July 24, 2008).  Accord as to holding, QBE Insurance Corp. v. Dome Condo. Ass'n, Inc., 577 F. Supp. 2d 1256, 1261-62 (S.D. Fla. September 16, 2008).

        Perhaps in response to such Federal judicial decisions, a new statutory Unfair Claims Practice was thereafter enacted by the Florida Legislature:

       4.  Failing to pay undisputed amounts of partial or full benefits owed under first-party property insurance policies within 90 days after an insurer receives notice of a residential property insurance claim, determines the amount of partial or full benefits, and agrees to coverage, unless payment of the undisputed benefits is prevented by an act of God, prevented by the impossibility of performance, or due to actions by the insured or claimant that constitute fraud, lack of cooperation, or intentional misrepresentation regarding the claim for which benefits are owed.

 Fla. Stat. § 626.9541(1)(i)4.  The new provision applies to residential property insurance claims. 

           New Florida case law clarifies the meaning and application of the statutory mandates for paying undisputed parts of residential property insurance claims.

 To be continued on Insurance Claims and Issues Weblog ....

 Please Read The Disclaimer.

 

Sandy and Bad Faith Claims: And So It Begins MORE.

This is an update added to the article posted here on Sunday, March 3, 2013.

  "A disaster just happened and they're making money off of us.  That's just not right." Nicholas Dorman, New York City Firefighter with large Damage Claims from Sandy and small payment since, quoted by Sophia Hollander, "Sandy Stirs Legal Mess" (Wall Street Journal Online accessible without subscription, posted Monday, March 4, 2013).

    Another catastrophe continues to be reported after Sandy.  Policyholders say their Sandy Claims are not being paid in nearly the amounts they thought their Coverage would bring.  Insurance Carriers say their Policyholders have often not read their Policies.  These are events which fall under the old saying, "Everything is changing, nothing is new."

    What seems new about Sandy Claims is that somehow banks are reported to be holding up Insurance money until they are convinced by Property Owners that the money will be put to the banks' idea of good use.  It would be worthwhile knowing exactly what these payments involve.  Presumably they involve "Flood and other Hazard Insurance" paid for by Mortgagors-Homeowners to protect the banks' security interest in the mortgaged property.  In any case it would be good to know how unnamed, unidentified banks got such power.

    Another new Sandy Claims development surrounds how the Federal Taxpayer money is spent that was intended to help victims of the damage caused by Sandy.   Reportedly, fewer Sandy victims are receiving allocated FEMA payments for Flood Damage than received the same type of payments for Hurricane Katrina damage, for example.

    Finally, and as one person quoted in the following article observed, it seems "ironic" but Sandy left a need for even more lawyers.  See Sophia Hollander, "Sandy Stirs Legal Mess" (Wall Street Journal Online accessible without subscription, posted Monday, March 4, 2013).

    A catastrophe which leaves people at the mercy of banks and in need of lawyers to receive full compensation for their Damage Claims, is a catastrophe twice over, the first due to the weather, and again a second time after the storm passes by.

Please Read The Disclaimer.

WHAT'S "PRODUCTIVITY" GOT TO DO WITH IT?

With Apologies for fair use to Tina Turner.

    Newspapers have gone goofy, I think.  Reporters write as though they are truly puzzled because they attribute increased profits to gains in "productivity," yet there are increasingly fewer jobs.  It seems they just cannot figure this out.  See, e.g., Nelson Schwartz, "Recovery in U.S. Lifting Profits, Not Adding Jobs / Wall Street is Buoyant / A Gulf is Widening as Federal Budget Cuts Take Effect" p. A1, col. 6 (New York Times Nat'l ed., Monday, March 4, 2013).  It would help to understand, I submit, not to think in terms of "productivity" at all. 

    At least newspapers report the phenomenon of higher profits and fewer workers.  However, productivity in the sense of workers producing more things in less time while working the same number of hours, does not explain it.  "Productivity" has nothing to do with it.

Please Read The Disclaimer. 

Force-Placed Insurance vs. Implied Covenant of Good Faith, Fair Dealing

    Forcing the placement of insurance may be allowed by mortgage contracts.  The way in which the insurance is placed, however, has come under very close scrutiny recently.

    In an increasing number of cases, mortgagors are alleging claims associated with the forced placement of insurance by lenders.  These  claims often include claims based upon alleged breach of the implied covenant of good faith and fair dealing.  The implied covenant at issue in these cases is generally if not always the implied covenant of good faith and fair dealing which is implied in all contracts. This is very different from the basis for imposing the duties of Good Faith and Fair Dealing which are at issue in cases of alleged insurer bad faith. 

    In the cases which present claims resulting from force-placed or lender-placed insurance in the mortgage context, the implied covenant of good faith and fair dealing claims are frequently targeted by lenders with the argument that a Court should not entertain a claim for alleged breach of the implied covenant if there is an express contract between the parties.  These defendants argue that the mortgagors' alleged implied covenant claims ought to be subject to the ordinary rule that where there is an express contract between the parties, the rights and duties between them should be governed by their contract.

    This argument is not ordinarily found, if ever it is found, in cases of alleged insurance bad faith.  There is a good reason for that:  Courts imply what they term Insurers' duties of Good Faith and Fair Dealing because the Courts have deemed the Carriers' Insurance Policy Contracts  to be legally inadequate to provide redress to injured Policyholders and third parties allegedly harmed by 'Bad Faith' and Unfair Dealing in the Insurance Carriers' handling and negotiating settlement of claims.  See generally Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith (Third Edition West Publishing Co., 2013 Supplement in process).

To be Continued ....

Please Read The Disclaimer.

 

BAD FAITH CLAIMS ISSUES AFTER SANDY: AND SO IT BEGINS.

          Claims handling issues are surfacing after Sandy.  In particular, the new claims handling issues raise Bad Faith issues involving Flood Insurance Policies and the National Flood Insurance Program.

          It is another measure of the storm's devastating effects that the areas in which the largest number of Flood Insurance Claims come from, are also the areas which we can reasonably and unfortunately expect to present the largest number of Bad Faith Claims too.

          Claims handling questions are reported concerning low offers to compromise large Flood damage Claims.  Policyholders have been living with the damage that Sandy caused since Sandy made landfall in October of last year.  Besides low offers of compromise, Policyholders complain that Flood Insurance Adjusters are giving little time and short attention to evaluating the Policyholders' Claims.  See Tara Siegel Bernard, "Fighting the Insurer Over Hurricane Sandy Damage" p. B1, col. 1 (New York Times Nat'l ed., "Business Day" Section, Saturday, March 2, 2013).

          On the Insurance Coverage front, questions are being reported at the same time concerning the damaging effects of mold, and whether there is any Coverage for it.  See Sarah Maslin Nir, "Questions Emerge About the Mold That Hurricane Sandy Left Behind / Severity of Harm Remains Unclear" p. A14, col. 4 (New York Times Nat'l ed., Saturday, March 2, 2013).

          These unfortunate facts give rise to many questions which must be answered before Bad Faith Claims can arise.  Flood Insurance Policies are issued under and as part of the National Flood Insurance Program.  Are the Bad Faith Claims which follow Sandy claims handling preempted by this Federal law?

          Are the Flood Insurance Companies immunized under the National Flood Insurance Program?

          Who if anyone is subject to the applicable Unfair Claims Practices Act?  The answer to that question is important to the Flood Insurance Company, to FEMA which administers the National Flood Insurance Program, and to individual adjusters.

          Many Sandy Claims are understandably handled by Independent Adjusters hired by overwhelmed Carriers.  The Independent Adjusters also have an interest in finding out if they are potentially subject to individual liability for their Sandy claims handling.

          Some of these and similar questions have probably already been answered.  They need to be answered now, it seems, as Bad Faith allegedly follows in Sandy's wake.

 

Please Read The Disclaimer.