Claims and Bad Faith Law Blog

GIVING THANKS FOR ... SELLING MORE STUFF?

War on Thanksgiving, Combat on Family Values. 

          Some people think that you and I will donate money to their cause, which involves putting our money in their pockets at the expense of inflicting hurt upon families.  They think that you and I will join them on of all days, Thanksgiving.  They are even betting that you will give up part of your own Thanksgiving holiday to give them some of your money.  That is what they  believe.

          The people that think you and I will donate our money to their pockets at the expense not only of our bank accounts but also at the expense of other people can be found at these stores on Thanksgiving.  They are reportedly open for business and ready to take our money during all or part of the one-day holiday.   These stores are identified by Elizabeth A. Harris, "Shopping, Before the Turkey Gets Cold" (New York Times Online, posted November 13, 2013):

• American Eagle.
• J.C. Penney.
• Macy's.
• Old Navy.
• Target.
• Toys "R" Us.
• Walmart.

These and some other stores will require employees to sell you things on Thanksgiving.  The store owners receive the profits.  You and I contribute the profits, and the employees contribute their families.

          Some store owners draw the line at profit-taking on Thanksgiving Day.  They are satisfied with opportunities for profit they enjoy, more or less, on other days including "Black Friday," one day after Thanksgiving.   The stores they own are identified in the blogs linked below, and they include:

• Barnes and Noble.
• Costco.
• Home Depot.
• Marshall's.
• Nordstrom.
• Sam's Club.
• T.J. Maxx.

           The employees that work at places like these are blessed that their bosses are not requiring them to interrupt their family values so as to put more money in the owners' pockets.  Whenever possible, vote with your wallet by shopping there.  I intend to.

 © 2013 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

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Will You Shop on Thanksgiving?

Keeping Closed on Thanksgiving a Badge of Pride for Some Retailers

9 Stores Keeping Doors Closed on Thanksgiving

Stores opening on Thanksgiving spark debate

 

FORECLOSE, BUY, RENT ... WHITHER HOMEOWNER'S INSURANCE?

Foreclosures result in judicial sales.

"[I]nvestors have snapped up foreclosed homes and bid up prices in the past year."  "Pending Home Sales Fall Again," p. B8, col. 6 (New York Times Nat'l ed., Tuesday, November 26, 2013; Associated Press Copyrighted News Report).

Pending home sales have fallen for the last five months in a row.  The number of pending sales -- where there is a signed contract but not a completed sale -- is at the lowest reading calculated by the National Association of Realtors since December, 2012.  "October Pending Home Sales Down Again, But Expected to Level Out" (National Association of Realtors Press Release, November 25, 2013); see "Pending Home Sales Fall Again," AP report published in the New York Times, supra.

I have  not seen any reports or studies on the purchase of property insurance by the investors that purchase these properties.

Moreover, since these investors do not carry mortgages, they do have no need to buy mortgage insurance.

Further, the number of homeowners is necessarily declining since fewer homes are being sold and purchased in 2013.  It seems that as a consequence the number of homeowner's insurance policies must also decline.  That will have clear results in falling homeowner's insurance sales and premiums.  What effects will it have on the handling of homeowner's insurance claims in a tightening market?

There is potentially good news on the other hand for sellers of tenants and renters insurance policies.  Investors are buying the foreclosed homes in order to rent them.

Simple math.  That is one reason, at the least, why home ownership is in decline.  There are fewer homeowners because there are fewer homes bought and sold; instead, homes in 2013 are increasingly bought and rented.

 

© 2013 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

 

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FEDERAL REGULATION OF INSURANCE ...

The New Bailout.

           There has been lots of talk about something called the Federal Insurance Office, by whatever name, taking over the regulation of insurance.  As you know, States and State Insurance Commissioners have regulated insurance ever since insurance was regulated.

          There has been one major exception that comes to mind.  As a part of the Affordable Care Act or the Obamacare law, the new Federal Insurance Office was given the authority to regulate rates for new Health Insurance coverages.

          Maybe it is not such a good idea to expand that authority, at least not right now, if ever.  The current White House's failure at www.healthcare.gov needs no amplification, no highlighting.  It is a spectacular failure.  The failure of www.healthcare.gov can be directly traced to the people supposedly in charge of regulating the new health insurance.  They have demonstrated that they simply do not know what they are doing here.

          In the past, the major supporters of giving the Federal Government the authority to regulate insurance and taking that authority away from the States, have been drawn from a small pool of people:  insurance company executives.  Insurance companies have found it hard, their representatives say, to comply with regulations in 50 States and the District of Columbia.  They say further that they would prefer to deal with one set of national regulations.

          Parenthetically, State regulation of insurance has never seemed to be an obstacle to making vast profits in the insurance industry.

          But, even accepting past arguments from a small number of insurance company executives at face value, I wonder if they would still maintain the position that, even now in the face of actual evidence and unquestionable failure, a Federal Insurance Commissioner would still be preferable in their eyes to State Insurance Commissioners who for a long time have demonstrated a much higher degree of competence, even success at what they do, even now.

 

© 2013 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

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RENEWING CANCELLED HEALTH INSURANCE .... A Postscript.

  In my article posted on Sunday, November 17, 2013, I reported that most of the State Insurance Commissioners seemed to think that President Obama's political fix might work.  President Obama's proposed fix to his political problem of credibility was to allow insurance companies to renew cancelled policies for one more year, thereby allowing people in America to "keep" their insurance plans if they like them regardless of the Affordable Care Act, something the president had represented more than once.

   It turns out that maybe not so many of the State Insurance Commissioners are on board with the president's fix, at least not quite yet.  Reasonably, many Commissioners want to discuss the proposal among themselves before they commit to any position on the proposal in a meeting with the president.  See Susanne Craig and Michael D. Shear, "Some State Insurance Officials Decline to Meet With Obama" (New York Times Online, posted Wed., November 20, 2013).

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RENEWING CANCELLED HEALTH INSURANCE ....

STATE INSURANCE COMMISSIONERS GIVEN TEST THAT WHITE HOUSE POLITICIANS FAILED. 

 Things have nowhere to go but up.

           Previously, I wrote about the Health Insurance Exchange website problems.  "Mr. Obama, Fix This Exchange, NOW!" posted on Sunday, October 27, 2013.  This week I am writing about a separate Health Insurance problem.  This problem has the same cause but unlike Health Insurance Exchanges, it has nothing to do with the internet or with technical capabilities.

          It started out with health insurance companies cancellling health insurance policies.  The reason that the health insurance companies gave was the Affordable Care Act or ACA a/k/a Obamacare.  Let's not address the health insurance companies' declarations about their cancellation for now.  The fact is that they cancelled a number of health insurance policies that people in America wanted to keep.

          That is a problem for President Obama.  He famously said, many more times than once, that a reason to support the ACA was that "if you like your health insurance policy, you can keep it."  However, you can't keep a policy if the insurance company cancels it.

          This was politically awkward for the president, at best. 

          The health insurance companies, moreover, apparently did not tell President Obama that they were going to cancel policies before they cancelled them.

           A political perception apparently draws a political fix only.  In the face of his political problem of cancelled health insurance policies, supposedly cancelled because the ACA required cancellation, President Obama's political fix was to allow the health insurance companies at this late date to keep their health insurance policies for another year -- and so allow people in America to keep their health insurance policies for another year, too.

          The problem with President Obama's political fix was not with the health insurance companies, so much as it was and is a problem for the State Insurance Commissioners who have to regulate the health insurance companies which includes reviewing their rate requests for next year's health insurance policies.  But, the rate filings for these policies never happened because the health insurance companies were never going to extend those pre-existing policies for another year, or ever.

          President Obama did not talk to the State Insurance Commissioners before he announced his political fix of allowing health insurance companies to keep their now-cancelled health insurance policies for another year.

          The State Insurance Commissioners are understandably upset with this whole situation.  At the last minute, the problem of governing this ACA implementation issue has been shifted to them and to make the president's fix work to solve it.  See Jonathan Weisman, "In Fracas on Health Coverage, Some Democrats Feel Exposed" p. 1, col. 1 (New York Times Nat'l ed., Sunday, November 17, 2013).

          Maybe the president's fix will work; right now, it looks to most State Insurance Commissioners that it will work.  See Reed Abelson and Suzanne Craig, "After Meeting, Health Insurers Question Proposal's Workability" p. A12, col. 1 (New York Times Nat'l ed., Saturday, November 16, 2013).

          The president's political fix in this situation was unfair to the State Insurance Commissioners.  (Perhaps for that reason alone, the president did not tell them it was coming.)  But it may have replaced Bad Faith with Good Faith for the country on this issue.  Perhaps the president's fix will work with the State Insurance Commissioners in chare of making it work, and the president's political advisers apparently no longer in control of this issue.

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FHFA ANNOUNCES RESTRICTION ON LENDER-PLACED INSURANCE.

    The Federal Housing Finance Agency has issued a press release to announce "that it has directed Fannie Mae and Freddie Mac to prohibit [mortgage] servicers from being reimbursed for expenses associated with captive reinsurance arrangements."  FHFA News Release, "FHFA Directs Fannie Mae and Freddie Mac to Restrict Lender-Placed Insurance Practices," November 5, 2013.  Download FHFA.LPI_news_release_110513.  In its release, the FHFA also noted that Fannie Mae and Freddie Mac will together provide "aligned guidance" on an unspecified future date "to sellers and servicers to prohibit these practices, including implementation schedules."

    What this means, for now, is that Fannie Mae and Freddie Mac will in the future stop using Federal public funds to pay for expenses submitted by mortgage servicers for payment, when those expenses are "associated with captive reinsurance arrangements" on mortgages owned by Fannie Mae or Freddie Mac.

    The date for implementation of this directive is unknown.  It is to be hoped that this new procedure will be implemented soon.  Another opportunity for hope is presented by the types of expenses submitted by mortgage servicers to Fannie and Freddie which are apparently going to continue to be reimbursed with funds taken from the Federal Treasury, principally so-called "commissions".  The FHFA should now turn its attention to those sorts of so-called "expenses," at least to the extent of FHFA's jurisdiction over the matter which is to the extent of expenses submitted by mortgage servicers to Fannie and Freddie Mae for payment with public funds.

    In researching this article, I could not find any other source for this "directive" than the FHFA press release.  There is nothing else I could find about it on the FHFA website, nor could I find any new rule or regulation.  Further, the news reports citing to this development all so far refer only to the same FHFA press release, reflecting that they too have not found or been provided with any other source of this information.  If any of my readers know of any other source of this FHFA directive to Fannie and Freddie, I would gratefully appreciate knowing, and thanks in advance to anyone who cares to share it.

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Federal Sixth Circuit Offers Dicta to Kentucky State Law Question.

    The focus of Kentucky's tort of insurer bad faith is on the insurance company's denial of covered claims, as it is in every other jurisdiction in the United States which allows the tort cause of action.  It is an element of the Kentucky tort, as it is an element of the insurer bad faith tort wherever it has been adopted in the United States, that there was a denial of all coverage, not merely inconvenience or as in a recent Sixth Circuit Court of Appeals' decision, "expenses and hardship in contesting coverage".  Philadelphia Indemnity Insurance Co. v. Youth Alive, Inc., 732 F.3d 645, 652 (6th Cir. 2013).

    There was no denial of coverage by the liability insurance company in the Youth Alive case.

    To the contrary, in that case the liability insurance company defended its insured, a long way from denying all coverage.

   Third, the liability insurance company in that case settled and then paid the settlement amount required to dismiss the underlying case against its insured -- without requiring that the coverage issue be determined first.

    Although the liability insurance company raised a coverage defense in its reservation of rights, the liability insurance coverage issue it raised presented a question of first impression in the forum State.   The Sixth Circuit panel wrote that it had an opportunity to address the open question in the Youth Alive case of whether by raising this insurance coverage question the liability insurance company had a "fairly debatable" defense to the bad-faith action, but respectfully the panel should have stopped at affirming the district court's dismissal of the bad faith claim in this case based on the actual record.

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HOMEOWNER'S INSURANCE FRAUD MADE POSSIBLE ... AND IMMUNIZED, TOO.

          The Bureau of Consumer Financial Protection has issued regulations and a "Supplement to Part 1024--Official Bureau Interpretations".  Popularly known as the Consumer Financial Protection Bureau or "CFPB," it has made homeowner's insurance fraud possible, and immunized it, too.

          The CFPB Official Interpretations make substitute or force-placed "hazard insurance" synonymous with substitute "homeowners' insurance" or substitute "property insurance".  Of course, force-placed insurance is not homeowner's insurance.  Force-placed insurance provides coverage only against a small number of risks or "hazards" such as fire, and in almost every case it only protects lenders, not homeowners.

           The truth is that force-placed insurance is collateral protection insurance.  That is not the Bureau of Consumer Financial Protection's interpretation, however.

          Congress enacted the Real Estate Settlement Procedures Act in part to require lenders and their agents, known as mortgage servicers, to send notices to homeowners-mortgagors with specific language before insurance can be placed by force upon the homeowner.  The language these congressionally required notices are supposed to contain is codified in 12 U.S.C.A. § 2605(l)(1)(A), (B) and (C).  The CFPB previously issued proposed forms mirroring the identical language in Appendix MS-3-Mortgage Servicing Model Forms and Clauses.

          The statute and the Mortgage Servicing Model Forms and Clauses which are supposed to implement the statute, all refer specifically to forced placement of substitute "hazard" insurance.  That is actually what is being placed by force, namely, substitute "hazard" insurance to protect lenders against damage to or loss of collateral protection.

          Now, the CFPB interprets the notices which are required to be sent to borrowers to refer to substitute "homeowner's" insurance.   To say again, the insurance that is thereby placed by force is substitute collateral protection insurance.

         Worse than that, the same Official CFPB Interpretation would immunize "good faith compliance" with its "Interpretation" from liability.  It is scheduled to take effect on January 10, 2014.  The Comment period has expired.  If the Bureau does not withdraw this "interpretation," it will apparently be up to Congress to nullify it.

          The official cite for the Official CFPB Interpretations is 12 C.F.R. 1024, Supp. I, and the official site is somewhere on http://www.consumerfinance.gov/regulatons.  When there, check out the "2013 Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) Mortgage Servicing Final Rules".

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