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A Pennsylvania Court has overruled a decision promulgated by one-time Pennsylvania "Acting Insurance Commissioner" Teresa D. Miller. It appears that Ms. Miller, then the PIA, later the CIA (Confirmed Insurance Commissioner), approved business transactions between one Erie Insurance Exchange and Erie Indemnity Company through which Indemnity received, or kept, money paid as "installment and other service charges from Exchange subscribers.'” Ms. Miller administratively ruled that these exchanges did not violate "the [Pennsylvania] Insurance Holding Companies Act (IHCA)." The Pennsylvania Court vacated the Commissioner's decision. Erie Ins. Exch. v. Pennsylvania Ins. Dep't, No. 872 C.D.2015, 2016 WL 324682, at *1 (Pa. Commw. January 27, 2016).
Attorney's fees, costs, whatever. Sometimes people keep on paying for someone else's decisions.
While PIA, Ms. Miller previously decided, too, that fracking does not cause earthquakes. As a result of that decision, homeowner's insurance companies in Pennsylvania cannot issue homeowner's insurance policies with an exclusion for earthquake damages caused by fracking, because fracking does not cause earthquakes she said. See the articles posted on Insurance Claims and Issues Blog on April 20, 2015 and April 22, 2015, which contain links to other articles on the subject.
In Idaho, a bank which gave a homeowner's insurance payout without looking to a contractor for allegedly shoddy work, was held not to have control over the payout it made. Aliens made them do it, do you think, is that why they did not have "control?"
The "deed of trust" or mortgage which the bank received from the homeowners contained a standard provision allowing the bank to inspect the state of construction during "restoration and repairs." So, was the bank prevented from having "control" over the insurance proceeds during the repairs and restoration period, which was when it paid out the money without an inspection in this case?
No, said the Idaho Supreme Court, the bank did not have control over that money because the homeowner did not ask the bank to inspect the work it paid for, before the bank paid for it.
And since the homeowner was at fault because the homeowner did not ask, the bank was not in control of the insurance proceeds as the loss payee when the homeowner's house burned down.
I’m not making this up, as they say. SeeSkinner v. U.S. Bank Home Mortgage, No. 42065, 2016 WL 275312 (Idaho Jan. 22, 2016).
Long after Emergency Manager Darnell Earley presided over Flint's 'money saving' switch to polluted and untreated water which has poisoned many children, Michigan Governor Snyder appointed Mr. Earley as Emergency Manager once again. This time Governor Snyder appointed Mr. Earley as the Emergency Manager for the Detroit Public Schools where children are expected to learn under some horrible physical conditions.
When claims are filed to remedy the Detroit Public School conditions, instead of blaming teachers for the conditions as Mr. Earley and those who appointed him do, will the taxpayers of Michigan be able to claim insurance coverage because the results are "fortuitous?"
Or will the taxpayers be denied all coverage because the results of the appointment were a "known loss?"
The Federal EPA, among many other people and agencies, allegedly put the Michigan Department of Environmental Quality on notice that Flint's water was deadly.
Months before the Michigan DEQ admitted that this was true.
And months before the Michigan DEQ pilloried a pediatrician who said the same thing as the EPA.
Yet the NYT front-page report prominently displayed on Sunday says, in a "he said, she said" moment, that the Federal EPA is to blame too. The reporters on this story -- and there were at least three -- ignored the facts and went with opinions.
The people of Flint have been poisoned once already, by bad water decisions. They and we do not need to be poisoned a second time by bad reporting.
On Sunday, January 24, 2016 the New York Times ran a front-page story about the poisoning of Flint, Michigan's water supply. This prominently featured report was a failure and missed crucial pieces of the story, although it was written by three reporters who have earned respect in their past reporting.
Goldman Sachs thinks the value of its latest mortgage practices settlement is $1.5 Billion. That is the amount by which Goldman will reduce its 4Q earnings in 2015.
Since banks settle their mortgage practices exposure for about 2% of the money they take in from marketing, selling, and servicing their mortgages portfolio, we can reasonably assume that Goldman's take was about $75 Billion for the period in question, which is 2005 to 2007. That's an informed calculation, a reasonable estimate, of course.
The press has not said how much money Goldman took in from its mortgage practices in 2005 to 2007. That figure was probably not in Goldman's press release.
Take a look at the "soft money" category. Credits for mortgage forgiveness and refinancing breaks never involve the banks paying money in any case. Further, credits in similar amounts frequently appear in most of the banks' settlements of their mortgage practices. The banks demanded and received credits worth lots of money, they said, for previous mortgage relief.
There is no deal we can put objective values on. Not yet. It is not written.
However, I think we already know the value that Goldman puts on this settlement.
Goldman Sachs announced that it settled claims which a task force of Federal and State regulators might make against Goldman related to Goldman's marketing and sale of "faulty mortgage securities to investors." The press dutifully reported Goldman's press release that Goldman settled for "up to $5 Billion." See, e.g., Matthew Goldstein, "Dealbook Online / Goldman to Pay Up to $5 Billion to Settle Claims of Faulty Mortgages" (New York Times Online, posted on January 14, 2016); Ken Sweet Associated Press Copyrighted Report published in Washington Post Online, "Business / Goldman Sachs to Pay $5 Billion in Mortgage Settlement" (Online January 14, 2016).
Goldman's announcement disguised the true value which it put on the settlement.
It does not value this settlement anywhere near $5 Billion.
Speaking of recovery of damages allegedly the result of lender force-placed insurance, a Magistrate Judge ordered his Final Approval of Class Action Settlement in a South Florida case followed here and on Insurance Claims and Issues blog, Lee v. Ocwen Loan Servicing, LLC, No. 14-CV-60649, 2015 WL 5449813 (S.D. Fla. September 14, 2015) (Goodman, USMJ). The publicly accessible order is here: Download Lee v Ocwen Loan Servicing.Order Final Approval Class Action Settlement.091415 (SD Fla No. 14.60649).. A person objecting to the settlement appealed after the Magistrate Judge overruled her objections and granted Final Approval to the Class Action Settlement. That appeal is pending under the case style Margo Perryman v. Ocwen Loan Servicing, appeal docketed, No. 15-14630 (11th Cir. October 14, 2015).
I am continuing with my experiment taking Kevin O'Keefe's suggestion that short posts attract more conversation, and that people who read blogs are not looking to read articles. In particular, I want to see if this is good advice for popular posts on insurance coverage and bad faith issues here and on Insurance Claims and Issues blog.
The District Court in Maryland recently denied a motion to dismiss a breach of contract count where the plaintiff alleged in essence that he had already exhausted his administrative remedies. His homeowner's carrier cancelled his policy after he made a fire loss claim, then reinstated it after the mortgagee force-placed insurance on the homeowner and the homeowner filed a complaint about the homeowner's cancellation with the Maryland Insurance Administration (MIA). The homeowner's carrier then denied the claim after the policy was reinstated. "Although Nguti's insurance policy was reinstated after the MIA investigation, Nguti is seeking damages for the costs of the force-placed insurance coverage." Nguti v. Safeco Ins. Co., No. IDC-15-0742, 2016 WL 183521, at *4 (D. Md. opinion filed January 14, 2016).
A U.S. Magistrate Judge found that the following types of deposition conduct by counsel was unusual or unprofessional and assessed sanctions accordingly:
The vast majority of objections made by Plaintiff's counsel during these depositions did not relate to the privilege issues described above. These objections were based on often ersatz “form” objections, and the following: compound, asked and answered, overbroad, trade secrets, privacy, speculation, lack of foundation, argumentative, “untrue,” misstates the testimony, “I don't know what that means,” vague, ambiguous, out of context, assumes facts not in evidence, the document speaks for itself, misstates the document, improper or incomplete hypothetical, legal conclusion, improper hypothetical, calls for expert opinion. Outright coaching occurred (e.g., “It's a ‘yes' or ‘no’.” “Do you know that or are you assuming?” “Are you making an assumption now or are you assuming?” “If you're not sure or you don't know, just say so.” “That's a new question.” Answer “if you know.”). Simple harassment of the questioner also occurred (e.g., “Let's move on.” “Next question.” “What are you talking about?” “Bad question.” “Ask a good question.”). Objections were frequently launched in meaningless salvos.
Plaintiff's counsel repeatedly instructed the witnesses not the answer without an objection based on privilege, usually based on objections that a question had been asked and answered, but also based on questions counsel considered unclear or that lacked foundation. He provided answers before the witness responded, essentially testifying. (See e.g., Andorian, H. deposition, Doc. 354, sealed, at 120.) The witnesses were frequently confused and often changed or amended answers after objections. The attorneys seemed to spend as much time arguing over objections as examining the witness. When examining counsel complained, Plaintiff's counsel claimed he was just “doing his job.” The Court disagrees.
AKH Company, Inc. v. Universal Underwriters Ins. Co., No. 13-2003-JAR-KGG, 2016 WL 141629, at *3 (D. Kan. January 12, 2016) (Gale, U.S.M.J.).
I do not know this Magistrate Judge's background or previous practice area, of course. But I have seen the conduct described in the above quotation so much that it actually seems to be the standard practice of law in litigation. It is the standard practice of law for many lawyers in litigation, there can be no real doubt.
Perhaps the unusual feature of this decision to assess sanctions for such conduct is that the Court assessed sanctions. Perhaps if they did assess sanctions more often for such conduct now, they would not have to assess as many sanctions for such conduct in future cases.
P.S. regarding secrecy mania of Courts, parties and lawyers:
Did you notice this 'citation' in the above quote:
(See e.g., Andorian, H. deposition, Doc. 354, sealed, at 120.)
If the deposition is secret and "sealed," as the Court says, then how is anybody supposed to "see" it, e.g.?
Lawyers who meet more poor people than health insurers during their careers point out in the article that poor people are not generally aware enough of the Affordable Care Act to try to figure out ways to game it.
I understand that the health insurance companies helped to write the law.
In any case, we are left to wonder I suppose what complaint in 2016 these same health insurance companies would have, if the costs of providing health insurance were the same as they are now because all of the people signing up during the extension actually signed up before the original deadline?
Objecting to an extension reminds me of the occasions during litigation when a few lawyers were known to habitually complain about opposing counsel receiving an extension on a deadline in a court case. These same lawyers would often ask for an extension for themselves and their clients without blushing.
Member of the American Law Institute and of the ALI's Members Consultative Group on the Restatement Project drafting the Law of Liability Insurance. Author of numerous books and articles on insurance and bad faith law, including “Litigation and Prevention of Insurer Bad Faith" (Third Edition Thomson Reuters West, in Two Volumes, with 2016 Supplements in process).
Kim Marrkand, Esquire's article on the RLLI's Section 24 "Duty to Make Reasonable Settlement Decisions" brings the refreshing perspective of a practicing lawyer to the subject. The title of Ms. Marrkand's article says it all so far as I am concerned, and I agree with her perspective entirely: "Duty to Settle: Why Proposed Sections 24 and 27 Have No Place In A Restatement of the Law of Liability Insurance." To her credit, Ms. Marrkand puts her article's text at the service of her article's title, starting with her observation that the RLLI's "duty to make settlement decisions" is known to practicing lawyers as the liability carrier's "duty to settle." She fleshes out her very welcome article with a fine sense of accuracy, except perhaps in one particular. There is so much good in her article that I hesitate to point out the inaccuracy, except that it is an important one.
In the course of critiquing the Restatement's treatment of situations where the claimant does not make a settlement demand, Ms. Marrkand goes off the rails a little with a suggestion that "[t]he argument that insurers have a duty to initiate settlement offers has been rejected by courts …."[6] Actually, judicial recognition of a duty to initiate settlement offers under certain circumstances even where the claimant has not made a settlement demand, is a well-documented majority view.
In a forthcoming article in Insurance Litigation Reporter,[7] I have provided the results of a forensic examination of every case I found in which the issue has arisen of whether a liability carrier either has an affirmative legal duty to initiate settlement negotiations in the absence of a settlement demand from the claimant, or in which the issue of extracontractual or "bad faith" liability to go to the jury even though the claimant has not made a settlement demand.
The results are clear. When the additional factors are also present in any case that the insured's liability is probable and that the damages likely to be recovered by the claimant are "great" in the sense that they exceed the liability insurance policy limit, 16 Courts are in favor of submitting the issue to a jury of whether a liability carrier should be held liable in any given case for "bad faith" on account of the carrier's failure to even initiate settlement negotiations, and even though the claimant did not make a settlement demand.
In these 16 cases, and they represent the decided majority view on the subject, the Courts have made clear that the issue of a liability carrier's extracontractual, "bad faith" liability would be a jury question under such circumstances even though the claimant never made a settlement demand. It is also important to the outcomes in these cases that the carrier must have had a reasonable opportunity to settle the underlying claim before the carrier can be exposed to bad faith liability.[8]
Three other cases were found apparently holding to the contrary, but these authorities are what may be described as "soft" on the issue, each for its own reasons.[9] Out of a total of 19 cases, then, 16 rather "hard" authorities support the idea of a liability carrier affirmatively initiating settlement negotiations even in the absence of a settlement demand from the claimant, while only the remaining 3 rather "soft" authorities would not support the idea.
In the context of this special issue of the Rutgers University Law Review devoted to the RLLI, Ms. Marrkand is not alone in her erroneous alignment of case law on the issue of a liability carrier's exposure to bad faith liability when a claimant does not make a settlement demand. She quickly accepted the notion in one case in a 5-to-4 decision[10] which treated the Courts' imposition of an affirmative legal duty to initiate settlement negotiations more or less as the equivalent of a summary judgment or a directed verdict determining the carrier's exposure when it is really a jury issue under the circumstances outlined above.
Ms. Marrkand's article, however, ultimately does not go any farther down this rabbit trail. To her credit, she addresses the gist of the settlement issue in her 28 pages, whereas the four professors collectively spent 200 pages in their descriptions of it. Ms. Marrkand's article focuses attention on the central question of the reason for existence of Section 24 in the RLLI: How does the four-factor test in Section 24, even when buttressed by its numerous supporting comments offered by the Reporters, improve upon the one-factor test employed by the vast majority of Courts called upon to determine the appropriate measure of bad faith liability for a liability carrier's failure to settle the underlying case against its insured, to wit:
A liability insurer must give at least equal consideration to the insured's interests as to its own in determining whether and how to settle the underlying claim against its insureds.[11]
This is the test which is most often employed by the Courts. To the degree that it is not the test employed in the Restatement -- and it pretty clearly is not the same test as things stand now -- the Restatement is not a Restatement of the law at all but, as Ms. Marrkand so eloquently suggests, it is instead an unauthorized revision of the law and a "Restatement" in name only.
Given the design and structure of Section 24, a possible solution for improvement probably will not lie in proposed edits or revisions here and there. Instead, as the author has suggested elsewhere,[12] one solution may be to add two new subsections to the existing four subsections of RLLI Section 24, in order to clarify the text and conform Section 24 more nearly to the prevailing law:
(5) Bad faith on the part of an insurance company is failing to settle a claim when, under all the circumstances, it could[13] and should have done so, had it acted fairly and honestly toward its insured and with at least equal consideration[14] for her, his, its, or their interests.
(6) The lack of a formal settlement demand is only one factor to be considered in determining bad faith. Where liability is clear, and injuries so serious that a judgment in excess of the policy limits is likely, an insurer has an affirmative duty to initiate settlement negotiations. Whether and how a liability insurer initiates settlement negotiations, if at all, depends on the facts of each particular case.
[1] Kim V. Marrkand, "Duty to Settle: Why Proposed Sections 24 and 27 Have No Place In a Restatement of the Law of Liability Insurance," 68 Rutgers U.L. Rev. 201 (2015).
[2] Kenneth S. Abraham, "The Liability Insurer's Duty to Settle Uncertain and Mixed Claims," 68 Rutgers U.L. Rev. 337 (2015).
[3] Bruce L. Hay, "A No-Fault Approach to the Duty to Settle," 68 Rutgers U.L. Rev. 321 (2015).
[4] Leo P. Martinez, "The Restatement of the Law of Liability Insurance and the Duty to Settle," 68 Rutgers U.L. Rev. 155 (2015).
[5] Jeffrey E. Thomas, "The Standard for Breach of a Liability Insurer's Duty to Make Reasonable Settlement Decisions: Exploring the Alternatives," 68 Rutgers U.L. Rev. 229 (2015).
[6] Kim V. Marrkand, "Duty to Settle: Why Proposed Sections 24 and 27 Have No Place In a Restatement of the Law of Liability Insurance," 68 Rutgers U.L. Rev. 201, 216 n.74 (2015).
[7] Dennis J. Wall, "The American Law Institute and Good Faith Settlement Duties of Liability Carriers: The Scope of a Duty to Initiate Settlement Negotiations, What the ALI Restatement of the Law of Liability Insurance Has to Say About It, and the ALI Reporters' Notes," 21 Ins. Lit. Rptr. 597 (Dec. 23, 2015). A copy of this article is accessible at one of the author's websites: www.lenderforceplacedinsurance.com.
[8]Id. One of these jurisdictions is Arizona. The article contains citations to two cases, Safeway Insurance Co. v. Botma and Fulton v. Woodford. The full citation of Fulton is Fulton v. Woodford, 26 Ariz. App. 17, 22, 545 P.2d 979, 984 (Ariz. Ct. App. Div. 1, Dep't B, 1976).
[10]American Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842 (Tex. 1994). Without stating or implying any unintended disrespect for either the person or the institution, neither the author of the opinion in that 5-to-4 case nor the court that rendered that decision have made their mark on the world by demonstrating superior legal scholarship.
In addition, the cited decision was rendered only after a previous decision to the contrary in the same case was withdrawn; this 5-to-4 opinion was substituted for it on rehearing. Texas later addressed this issue in a 5-2-2 decision which appears to place Texas among the three more or less "con" jurisdictions on this subject discussed in the text of the current article: Rocor Int'l, Inc. v. National U. Fire Ins. Co., 77 S.W.3d 253, 261-62 (Tex. 2002).
[11] 1 Dennis J. Wall "Litigation and Prevention of Insurer Bad Faith" § 3:1, 2015 Supp. p. 12 (3d ed. Thomson Reuters West).
[12] Dennis J. Wall, "The American Law Institute and Good Faith Settlement Duties of Liability Carriers," supra note 7.
[13] Explicitly inserting the concept that in order to be liable for "bad faith" in settlement, it is necessary for the trier of fact to find first that the liability carrier "could" have settled the case against the insured, addresses the issue of the liability carrier confronting a "reasonable opportunity to settle within policy limits" without taking sides from among the competing cases as to which party has the burden of proof on this issue.
[14] Expressly injecting the "at least equal consideration" wording into the "without policy limits" notion already expressed in Restatement Section 24 strengthens the section's position as a Restatement of the law and not as an expression of advocacy for what the law has never been, but what it might be in the future.
"Coblentz agreements" are named after Coblentz v. American Surety Co., 416 F.2d 1059 (5th Cir. 1969). In many other jurisdictions they have other names, including generic titles such as consent judgments, but particularly in South Florida they are called Coblentz agreements, and they are special. They are valid only after a liability carrier has denied all coverage.
Moreover, in order to prevail under one of these agreements for a recovery in excess of liability policy limits, the crucial issue in the resulting "bad faith" case is whether the carrier's denial of coverage was wrongful.
An explanation and application of Coblentz agreements were offered by an appellate panel of the Federal Eleventh Circuit Court of Appeals in a case involving Florida substantive law:
Coblentz agreements permit an insured to “enter into a reasonable settlement agreement with the [plaintiff] and consent to an adverse judgment for the policy limits that is collectable only against the insurer.” Perera v. United States Fid. & Guar. Co., 35 So. 3d 893, 900 (Fla. 2010). If a plaintiff wishes to recover in excess of the policy limits, the plaintiff must establish that the insurer acted in bad faith in wrongfully denying coverage.
Garcia v. GEICO General Ins. Co., 807 F.3d 1228, 1230 n. 1 (11th Cir. 2015).
Since the crucial issue in the case was whether the carrier's denial of liability insurance coverage was wrongful, the panel held that the carrier was entitled to put on evidence that its coverage decisions were reasonable, and to put on evidence, specifically, of coverage decisions by the Florida Courts that supported the carrier's coverage decisions at the time the carrier made those decisions.