Claims and Bad Faith Law Blog

U.M.: DISPUTING DAMAGES, AVOIDING ATTORNEY'S FEES TO INSURED IN OREGON.

In Spearman v. Progressive Classic Ins. Co., 276 Or.App. 114, 127-28, 366 P.3d 821, 828 (Or. Ct. App. 2016), the appellate court held en banc that by disputing the types of damages alleged by the plaintiff, the defendant U.M. carrier was not disputing U.M. "coverage" so as to entitle the insured to attorney's fees in Oregon even though the dispute could include a contention that the insured was not entitled to a certain type of damages at all:

    Our determination that “damages due the insured” is a reference to the amount of damages (if any) that the insured would be entitled to recover from the uninsured motorist provides a clear answer to the remaining question. Although we agree with plaintiff that defendant's pleadings were enough to put at issue the possibility that plaintiff would recover no benefit in the UM action, the allegations raised issues only as to the damages that the insured would be entitled to recover from the uninsured motorist.

    In its answer, in response to plaintiff's allegation that he sustained noneconomic damages, defendant admitted that plaintiff sustained “some” injury in the collision with the uninsured motorist but disputed “the nature and extent of [p]laintiff's alleged injuries.” On its face, that allegation disputes only the amount of plaintiff's damages. Although plaintiff contends the allegation could have permitted a determination that plaintiff is entitled to zero noneconomic damages, ORS 742.061(3) does not preclude disputes about individual categories of damages. A dispute about whether plaintiff sustained economic damages would still be a dispute regarding the amount of the damages due the insured as a result of the collision.

    Next, in response to plaintiff's allegation of economic damages for medical expenses, defendant's answer disputed “the reasonableness and necessity of some of [p]laintiff's accident-related medical expenses.” In response to two of plaintiff's requests for admissions, defendant similarly disputed some, but not all, of plaintiff's alleged injuries: “Admit that Plaintiff sustained ‘some’ injury as a result of the accident alleged in the Complaint; however, Defendant denies the nature and extent of Plaintiff's injuries” and “Admit that some of the treatment was necessary; Defendant denies the reasonableness, necessity, relatedness and extent of some of Plaintiff's treatment.” Again, facially, those allegations dispute only the amount of plaintiff's damages.

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with  Supplements).  "Attorney's Fees" payable to insureds by their insurance companies are addressed in particular in Volume 2 id., § 13:12.  All rights reserved.

NO "Buss" TO ALASKA FOR FEES DESPITE POLICY, DISREGARD AGREEMENT.

The Alaska Supreme Court just answered these two certified questions, effectively letting the tires out of the "Buss" for liability carriers seeking to recoup defense fees and costs in cases where they defend counts and claims which they do not cover, even with their insureds' concurrence and agreement to the carriers' reserved rights of reimbursement, when at the same time the carriers defend counts and claims their policies affirmatively do cover:

1. Does Alaska law prohibit enforcement of a policy provision entitling an insurer to reimbursement of fees and costs incurred by the insurer defending claims under a reservation of rights, where (1) the insurer explicitly reserved the right to seek such reimbursement in its offer to tender a defense provided by independent counsel, (2) the insured accepted the defense subject to the reservation of rights, and (3) the claims are later determined to be excluded from coverage under the policy?
2. If the answer to Question 1 is “Yes,” does Alaska law prohibit enforcement of a policy provision entitling an insurer to reimbursement of fees and costs incurred by the insurer defending claims under a reservation of rights, where (1) the insurer explicitly reserved the right to seek such reimbursement in its offer to tender a defense provided by independent counsel, (2) the insured accepted the defense subject to the reservation of rights, and (3) it is later determined that the duty to defend never arose under the policy because there was no possibility of coverage? 

    The answer to both questions is “yes.”

Attorneys Liability Protection Society, Inc. v. Ingaldson Fitzgerald, P.C., No. S–15683, 2016 WL 1171299, at *1 (Alaska March 25, 2016) (STATED BY WESTLAW AS NOT PRECEDENT BECAUSE "THE CASE WAS ENTERED IN THE WESTLAW DATABASE BEFORE THE TIME FOR REHEARING HAD EXPIRED.").

          So, read the answers in this case for what they are worth in other words.  Assuming that these answers to certified questions remain unchanged, Alaska will clearly join the minority view on these questions.

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with  Supplements).  The majority and minority views on these questions, including the ground-breaking views expressed by the California Supreme Court in its Buss v. Superior Court decision, are set out in 1 id. § 3:6, "Informing the Insured:  Insurer assertion of rights to reimbursement from the insured of clearly noncovered indemnity and defense expenses," and in 2 id. § 13:21, "Damages payable to insurer--By insured."  All rights reserved.

FLORIDA UM BAD FAITH CLAIM ABATED UNDER SECTION 624.155.

In Johnson v. State Farm Mut. Auto. Ins. Co., No: 6:15–cv–1942–Orl–31TBS, 2016 WL 1127748 (M.D. Fla. March 21, 2016) (Presnell, J.), the plaintiff in State Court received a jury verdict in excess of policy limits on a UM claim.  She then asked for and received leave to amend to allege a bad faith claim.    The Florida State Court Judge left entry of the judgment open, however.

The UM carrier removed the case to Federal Court.  The Federal Judge denied the plaintiff's motion to remand the case to State Court.  The UM carrier then asked the Federal Judge to dismiss the bad faith claim.   As there was no final determination of damages in the UM case because there was no final, appealable judgment, the Federal Court granted relief but refused to dismiss.  Instead, the Federal Judge abated the UM bad faith claim "pending entry of judgment and any appeal taken by State Farm."  Johnson v. State Farm Mut. Auto. Ins. Co., No: 6:15–cv–1942–Orl–31TBS, 2016 WL 1127748, at *2 (M.D. Fla. March 21, 2016) (Presnell, J.).

The Federal Judge did not say so, but his reasoning was apparent that the State Judge retained jurisdiction over the UM case for at least the purpose of entering judgment on the jury verdict.

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with  Supplements).  Abatement of UM bad faith claims in particular is discussed in Volume 2, § 11:24, "Other defenses:  Defenses potentially available in all claims and cases of first-party insurance bad faith."  All rights reserved.

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Abate That Premature Bad Faith Claim? Dismiss? What to Do?

FLORIDA INSURER SETTLED "COVERAGE" CASE, MORTGAGE SERVICER WAIVED PRIVILEGE.

In Lender Processing Services, Inc. v. Arch Insurance Co., 183 So. 3d 1052 (Fla. 1st DCA 2015), Lender Processing Services was a policyholder and a plaintiff which sued its liability carriers for alleged defense coverage for a class action against it, among other things.   Lender Processing Services was described by the court as "a provider at the time of mortgage processing, loan servicing, and default management services to the mortgage lending industry".

At least one of its carriers settled the "coverage" case with Lender Processing Services.  After that part of the case settled, the settling carrier filed a motion to enforce the settlement based on an EMail exchange with Lender Processing Service's in-house counsel.

Lender Processing Services opposed the motion, at least in part.  It contended that its in-house counsel did not have settlement authority on behalf of its officers and directors.  The settling carrier replied that having settled through its in-house counsel as outlined in the submitted E-Mails, Lender Processing Services did not have the legal right in good faith to alter the terms of the settlement with the carrier.

After injecting the issue of its in-house counsel's settlement authority or lack thereof on behalf of its officers and directors, Lender Processing Services claimed that the carrier's questions about the in-house counsel's authority were protected from revelation by the attorney-client privilege.

Both the Florida trial court and the Florida appellate court disagreed.  Both courts held that Lender Processing Services waived any attorney-client privilege by putting its communications with counsel at issue.  Lender Processing Services, Inc. v. Arch Insurance Co., 183 So. 3d 1052, 1062 (Fla. 1st DCA 2015).

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with  Supplements).  The issues addressed by the Florida courts in Lender Processing Services are addressed in particular in Volume 1, § 8:14, "Considerations applicable to discovery by insurers" including questions of attorney-client privilege.  All rights reserved.

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FLORIDA Coblentz CONSENT JUDGMENT FACT QUESTION.

FLORIDA Coblentz CONSENT JUDGMENT FACT QUESTION.

In Florida, a crucial element "of enforceability of a Coblentz agreement, whether the settlement is reasonable and in good faith, is a fact-intensive inquiry."  St. Paul Fire & Marine Ins. Co. v. Cypress Fairway Condo. Ass'n, 114 F. Supp. 3d 1231, 1238 (M.D. Fla. 2015) (Presnell, J.).

For those who do not use the term, "a Coblentz agreement" is a negotiated final consent judgment.  Under this type of agreement, a consent judgment is entered against an insured which was not defended by the insurer.  The name comes from a case which arose in South Florida, Coblentz v. American Surety Co., 416 F.2d 1059 (5th Cir. 1969).

The third party seeking to execute on the consent judgment and to enforce the settlement agreement in the context of a Coblentz agreement must prove three things.  First, the plaintiff must prove both a wrongful refusal to defend and that the policy in question indemnified the policyholder or other insured in the underlying case.  Finally, the Coblentz plaintiff must prove that the Coblentz agreement was reasonable and made in good faith, the Court in this case held.  This case involved a consent judgment for $2.5 Million.  St. Paul Fire & Marine Ins. Co. v. Cypress Fairway Condo. Ass'n, 114 F. Supp. 3d 1231, 1236 (M.D. Fla. 2015) (Presnell, J.).

 Parenthetically, the Court did not recite the policy limits involved, noting only that "St. Paul issued several policies to [a construction] project's general contractor".   St. Paul Fire & Marine Ins. Co. v. Cypress Fairway Condo. Ass'n, 114 F. Supp. 3d 1231, 1233 (M.D. Fla. 2015) (Presnell, J.).

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with  Supplements).  See in particular § 7:2 in Volume 1 which addresses the issues which were addressed in the St. Paul v. Cypress Fairway case, including the nature and proof of Coblentz agreements, "Actions by Third Parties--Assignment."  All rights reserved.

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Pay No Attention to the Settlement Behind the Curtain.

Class Action Settlements Become Legalized Weapons of Mass Destruction.

SOUTHERN DISTRICT OF FLORIDA CASE PRECEDENT:  A LOOK AT THE facts.

Happy St. Patrick's Day!

On the facts in the pending case, Lowe v. Loancare, LLC (S.D. Fla. No. 1:15-cv-23700-KMM), declarations filed by the defendants do not appear to attach any documents with an Insurance Commissioner's "APPROVED" stamp on the insurer's rate filing.  The same lawyers representing defendants in the Lyons case in New York filed that kind of proof there.  For that reason alone, Lyons of New York is not precedent for applying the filed rate doctrine in the Lowe case in Florida.

The declarations filed in the Lowe case do not present documents that tend to prove that the Florida Office of Insurance Regulation approved an insurance carrier's filing for an insurance premium rate.  Instead, the declarations filed by the defendants in Lowe present testimony that the Florida Office of Insurance Regulation approved insurance rate requests filed by the insurance carrier involved, American Security Insurance Company or "ASIC," including in 2013.

The Florida Office of Insurance Regulation disapproved and rejected a rate request filed by the insurance carrier involved, ASIC, including in 2013.

The evidence of ASIC's filed rate requests for approval of its insurance premiums in Florida -- including ASIC's filed rate request that was denied and rejected by the Florida Office of Insurance Regulation -- is easy to find, including rate requests filed by ASIC seeking approval of its insurance premium rates for 2013.

The evidence is in the public record.  It is included in four pages in Chapter 6, n. 35, of my book on Lender Force-Placed Insurance Practices published by the American Bar Association in 2015. 

In conclusion, based on the law that applies to the claims and defenses in Lowe, and on the facts in the record in Lowe, there is much for the Chief Judge of the Southern District, the Honorable K. Michael Moore, and the U.S. Magistrate Judge on the case as well, the Honorable Chris M. McAliley, to consider before issuing what will probably be a short order refusing to grant a motion to dismiss based on the filed rate doctrine in another insurance case pending in the Southern District of Florida, Lowe v. Loancare, LLC (S.D. Fla. No. 1:15-cv-23700-KMM).

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with  Supplements).  The recent defense of the Filed Rate Doctrine in insurance cases is addressed by itself in a new Section § 11:26 in 2016.  All rights reserved.

SOUTHERN DISTRICT OF FLORIDA CASE PRECEDENT:  A LOOK AT THE law.

Happy St. Patrick's Day!

There are other decisions in the Southern District of Florida that reject the filed rate doctrine in insurance cases.  Many of them are cited by the plaintiffs in their reply memorandum to the defendants' motions to dismiss in the pending case, Lowe v. Loancare, LLC (S.D. Fla. No. 1:15-cv-23700-KMM).

So, Trevethan is by no means the only Southern District decision on point.  In reality, Trevethan is perhaps the only Southern District decision that applies the filed rate doctrine to an insurance case.  Certainly it is only one of a handful of such decisions if there are more than one.

The Rothstein decision by a panel of the Second Circuit stands on similar precedential ground.  The filed rate doctrine was doggedly adopted by the Rothstein panel in spite of the law governing insurance cases and contrary to the record in Rothstein, as examined in detail in the Insurance Litigation Reporter article available at www.lenderforceplacedinsurance.com for free and with the permission of Thomson Reuters Westlaw the copyright holder.

Moreover, other Circuit Courts of Appeal have rejected the filed rate doctrine in insurance cases.  These include the Third and Ninth Circuit Courts of Appeal, for two examples.  Decisions of Courts rejecting the filed rate doctrine by other Circuits can of course be cited as easily as a decision of a Second Circuit panel which was overly determined to apply the filed rate doctrine.  There ought to be no obstacle to bringing these decisions to the attention of the Chief Judge of the Southern District, the Honorable K. Michael Moore, and the U.S. Magistrate Judge on the case as well, the Honorable Chris M. McAliley, who will decide whether the filed rate doctrine applies in another insurance case pending in the Southern District of Florida, Lowe v. Loancare, LLC (S.D. Fla. No. 1:15-cv-23700-KMM).

In our next and final article on these issues on St. Patrick's Day 2016, we will take a look at the facts in the Lowe case pending in the Southern District of Florida.

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with  Supplements).  The recent defense of the Filed Rate Doctrine in insurance cases is addressed by itself in a new Section § 11:26 in 2016.  All rights reserved.

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SOUTHERN DISTRICT OF NEW YORK PRECEDENT IN SOUTHERN DISTRICT OF FLORIDA?

SOUTHERN DISTRICT OF NEW YORK PRECEDENT IN SOUTHERN DISTRICT OF FLORIDA?

Image copyright 2016 by Dennis J. Wall.  All rights reserved.

Happy St. Patrick's Day!

We start today with a question:  Why is the Lyons case decided in the Southern District of New York important to a case pending in the Southern District of Florida?

The answer is:  Because Lyons relies on a panel decision of the Second Circuit Court of Appeals.  The judge in Lyons had to rely on the Second Circuit because that judge's District Court is in the Second Circuit.  District Judges in the Second Circuit have to obey the Second Circuit.  So the Lyons judge relied on the discredited Rothstein decision of a Second Circuit panel in July, 2015.    See Dennis J. Wall, "Force-Placed Insurance / Filed Rate Doctrine Imported From Utilities Regulation to Insurance Law / Second Circuit Court of Appeals Panel Applies Doctrine to Texas, New Hampshire, and New York Lender Force-Placed Insurance Practices / Rothstein v. Balboa Insurance Co., 794 F.3d 256 (2d Cir. 2015), 37 Insurance Litigation Reporter 435 (October 6, 2015).  A reprint of this publication © Thomson Reuters, reprinted with permission, is available at www.lenderforceplacedinsurance.com.

A District Judge in a previous Southern District of Florida case also relied on the Second Circuit panel decision in Rothstein.  The Florida judge's court is not in the Second Circuit and the Florida judge did not have to obey the Second Circuit panel; he chose to.  The previous case is Trevethan v. Select Portfolio Servicing, Inc.

The defendants have accordingly cited Trevethan and filed copies of Rothstein and Lyons to persuade yet another District Judge, the Chief Judge of the Southern District, the Honorable K. Michael Moore, and the U.S. Magistrate Judge on the case as well, the Honorable Chris M. McAliley, to apply the filed rate doctrine in another insurance case pending in the Southern District of Florida, Lowe v. Loancare, LLC (S.D. Fla. No. 1:15-cv-23700-KMM).

Next we take a look at the dispute on the law in the context of the pending Southern District of Florida case, followed by a look at the facts in the same context.

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with  Supplements).  The recent defense of the Filed Rate Doctrine in insurance cases is addressed by itself in a new Section § 11:26 in 2016.  All rights reserved.

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THE LESSONS OF Lyons, FROM SOUTHERN DISTRICT TO SOUTHERN DISTRICT.

PENNSYLVANIA DELAY OVER UNCERTAIN VALUE, NECESSARY INVESTIGATION, NOT BAD FAITH.

In a case decided under Pennsylvania law, it was held that there was no First-Party Bad Faith under a commercial property insurance policy.  The carrier's delay in paying the claim was attributable to the claim's uncertain value, and a need to investigate further.  The case involved Pennsylvania's bad faith statute, 42 Pa. Cons. Stat. § 8371.  Great Lakes Reins. (UK) PLC v. Stephens Garden Creations, Inc., 119 F. Supp. 3d 297, 306 (E.D. Pa. 2015).

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with  Supplements).  See in particular § 9:6 in Volume 2 which addresses the issues which were addressed in the Great Lakes case, "The Question of Bad Faith -- Timely Investigation and Evaluation Before and After The First-Party Insurer is Sued for Bad Faith."  All rights reserved.

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No Coverage, No Bad Faith Under Pennsylvania Law.

CYBERINSURANCE LIABILITY COVERAGE:  NO IT'S COVERAGE FOR "DAMAGES."

Pennsylvania Supreme Court: "Yes" to Assigning Statutory Bad Faith Claim.

THE LESSONS OF Lyons, FROM SOUTHERN DISTRICT TO SOUTHERN DISTRICT.

Miami-Dade County Courthouse.  Image courtesy of New York Public Library.

The lessons of Lyons seem clear.  First, when the affirmative defense of the filed rate doctrine is raised by a motion to dismiss, the defendants should be required to put proof in the record supporting their filed rate contentions.  The evidence should be sufficient to prove that the applicable State regulatory authority over insurance rates had the power to approve, and did approve, the rates requested in the rate filing -- which included any alleged kickbacks or commissions or other charges which the loan contracts did not authorize.

Second, the plaintiffs faced with a filed rate challenge to their complaints should not sit idle.  They should instead treat a motion to dismiss supported by the defendants with evidence as requiring rebuttal every bit as much as a motion for summary judgment supported by evidence requires rebuttal.  The plaintiffs should file rebuttal evidence, or otherwise challenge the evidence presented by the defendants, or be prepared to suffer the entry of judgment.

The same lawyers who argued the defendants' filed rate doctrine defense in Lyons are arguing that the Southern District of New York's decision in that case should be imported to the Southern District of Florida, in a sense.  They have raised Lyons as a reason that the Court in Florida should apply the filed rate doctrine in another lender force-placed insurance practices case, Lowe v. Loancare, LLC (S.D. Fla. No. 1:15-cv-23700-KMM).

Next up:  Lowe, Lyons, and is the Southern District of Florida an extension of the Southern District of New York concerning the filed rate doctrine in insurance cases (perhaps the "really Southern" branch of the Southern District of New York in insurance cases)?

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of "Lender Force-Placed Insurance Practices" (American Bar Association 2015).  All rights reserved.

IS NEW YORK'S SOUTHERN DISTRICT FLORIDA'S SOUTHERN DISTRICT, TOO?

Florida field.  Image copyright by Dennis J. Wall.  All rights reserved.

We left off our discussion of Plausible Complaints and imPlausible Judgments noting that the judge who wrote the opinion in the Clarizia case in the Southern District of New York attached a copy of his slipsheet opinion in the earlier case of Lyons v. Litton Loan Servicing LP, No. 1:13-cv-513 (ALC)(GWG), ___ F. Supp. 3d ___, 2016 WL 415165 (S.D.N.Y. February 2, 2016).  Lyons is a useful example of everything Clarizia and Rothstein are not.

The defendants filed declarations with attached documentation that they said reflected "APPROVED" file-stamps of the Florida Office of Insurance Regulation of their relevant premium rate filings.  The defendants argued that this "evidence" was "undisputed."  Without arguing here whether the evidence was admissible and so whether it was legally sufficient to support an ultimate judgment of dismissal with prejudice, the procedures on display in Lyons show how the filed rate doctrine should be argued and applied in an insurance case, if at all.

The defendants in Lyons came forward with both testimonial and documentary evidence to support their filed rate doctrine affirmative defenses.  The plaintiffs for whatever reason did not appear to rebut any of this evidence.  I could not find any rebuttal evidence in the record from my review of the Lyons Electronic Court File on PACER.  I do not mean that the plaintiffs filed materials in rebuttal and that in my humble opinion those materials were legally insufficient; I mean that I could not find any materials filed in rebuttal.

This seems to be the reason that the Court did not mention any materials filed to rebut the defendants' filed rate showing when the Court entered its Order granting the defendants' motion to dismiss plaintiffs' claims because of the filed rate doctrine.  There weren't any.

Next:  The lessons Lyons teaches.

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of "Lender Force-Placed Insurance Practices" (American Bar Association 2015).  All rights reserved.

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IN NEW YORK'S SOUTHERN DISTRICT, NOBODY DARES ASK QUESTIONS.

IN NEW YORK'S SOUTHERN DISTRICT, NOBODY DARES ASK QUESTIONS Clarizia III.

Courthouse, Newburgh, New York.  Image courtesy of New York Public Library.

This article continues the last previous series installments published on Insurance Claims and Issues Blog on Wednesday, March 9, 2016.  Here they are, in order: one, two, and three.

Just as the Clarizia defendants relied only on Rothstein and not on the record, so the District Judge relied on Rothstein and not the record.  The Court in Clarizia dismissed the lender force-placed insurance claims at issue and directed the Clerk "to terminate this case."

As the defendants attached a copy of the Rothstein case to their letter in Clarizia, so again the judge in Clarizia attached to his opinion a copy of his own opinion in a previous case, Lyons v. Litton Loan Servicing LP.

The next article in this series will explain why Lyons v. Litton Loan Servicing LP was recently raised in a case in South Florida by the same lawyers who successfully wrote a letter to  a judge asking the judge to dismiss Clarizia in Southern New York.

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of "Lender Force-Placed Insurance Practices" (American Bar Association 2015).  All rights reserved.

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Bank's Alleged Bad Faith Withholding New Jersey Fire Insurance Proceeds.

REPLACING PERHAPS INSUPPORTABLE COMPLAINTS WITH DEFINITELY UNSUPPORTED JUDGMENTS

 

Appellate Courthouse in New York City (Second Circuit).  Image courtesy of New York Pubic Library.

To recap a discussion that was started here on Thursday, March 3, 2016:

The old notion about lawsuits was that people and some businesses filed complaints for no good reason.  The lawsuits and the people who filed them were mostly thought of as frivolous.  They served no purpose, it was thought, other than to cost the defendants time and money.

Today lawsuits are judged by whether the judge thinks the lawsuit is "plausible" from the beginning.  This test was thought up by a Federal judge, naturally.  "Plausible" means not just "possible" but whether a judge thinks that the lawsuit is "believable," somewhere between the merely "possible" and the definitely "probable" (although the opinions expressed by judges in decided cases are much closer to declarations that the judges have to be convinced that the lawsuit is believable meaning probably true, or they will throw out the lawsuit).

Using this subjective procedure, perhaps insupportable complaints have been replaced by definitely unsupported judgments.

Under the plausibility test, again meaning whether a judge thinks that a complaint or a lawsuit has a believable if not probably true story to tell, plaintiffs and defendants both can file exhibits either to show the judge that the complaint is plausible, or to show the judge that it is not.

This is what happened in an insurance case in which the defendants raised an affirmative defense called the filed rate doctrine.  When we started this discussion, we promised that we would illustrate how the plausibility test determines outcomes, by taking a look at how judges look at motions to dismiss insurance cases because of the filed rate doctrine.

In Rothstein v. Balboa Insurance Co., 794 F.3d 256 (2d Cir. 2015), the defendants filed their motion to dismiss and they filed exhibits to show the trial judge that the force-placed insurance complaint in that case was just not plausible.  The trial judge still thought that the complaint was plausible anyway.  The appellate judges thought otherwise, and reversed with directions to grant the defendants' motion to dismiss the complaint because of the filed rate doctrine.  Judgment for the defendant on a motion to dismiss.

The appellate panel unfortunately was mistaken in what the defendants' exhibits said about the law of one state, New Hampshire.  The appellate panel misread the exhibits to reflect the opposite of what the New Hampshire Insurance Commissioner had to say.  See Dennis J. Wall, "Force-Placed Insurance Rothstein v. Balboa Insurance Co. (2d Cir.)," 37 Insurance Litigation Reporter 435 (October 2015), available for download at www.lenderforceplacedinsurance.com.

However, the appellate panel did not say what they thought the exhibits revealed about the law of the other two states at issue in that case, namely, New York and Texas.  For the panel, although not for the trial judge it bears repeating, it was enough to dismiss the complaint based on the defendants' allegation that the complaint was implausible and the defendants did not apparently have to do any more than say so.

At any rate, that is all that the appellate panel needed to hear before they ordered the complaint dismissed, i.e., that the defendants said that the complaint was implausible under the filed rate doctrine.

Was the appellate panel correct in not looking to whether the state laws at issue would authorize the filed rate doctrine defense to be applied?

Or is more required to prove that the filed rate doctrine defense applies than was required in Rothstein, at least on appeal?

In further articles, we will take a look at the answers to those questions.

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of "Lender Force-Placed Insurance Practices" (American Bar Association 2015).  All rights reserved.

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IGNORANCE OF THE FILED RATE LAW IS NO EXCUSE … YOUR HONOR.

WHEN "PLAUSIBLE" LAW MEANS "imPLAUSIBLE" JUDGMENTS.

The "plausibility" standard determines whether a complaint in Federal Court states a claim upon which relief can be granted.  The results of applying that standard have not received much discussion.  They should receive more attention than they and the "plausibility" standard have gotten.  One of the only known treatments of this topic is in a recent blog post by Dennis J. Wall & Casey Hall, "Changing Plaintiffs' Standard Gives Defendants Cheap Judgments:  Unintended Consequences?" Thomson Reuters Legal Solutions Blog, posted February 24, 2016.

The old notion that somehow "implausible" complaints survived in Federal Courts has been replaced with the present reality that implausible judgments are often -- "regularly" may be nearer the truth of the matter -- given to the other side of the litigation. 

When current judges think that claims are "implausible," the claims are dismissed with prejudice.  Experienced practitioners know that judges generally allow a plaintiff to amend at least once even after the defendant files its answer, but this is not always followed in cases applying the "implausibility" standard of jurisprudence.

Courts enter a final judgment and direct the clerk to close a case each time they dismiss a complaint with prejudice.  This means of course that the plaintiffs have no opportunity thereafter to amend to even try to allege a claim which the given judge sees as more "plausible." 

This procedure is illustrated by the constantly increasing results in an equally increasing number of insurance cases in Federal Courts.  In these cases, defendants raise the filed rate doctrine in motions to dismiss the complaints as "implausible."

The FRD originated in utilities regulation.  There, it is an affirmative defense.  As an affirmative defense, the FRD has required defendants who raise it, to meet their burdens of proof on several elements.

One element which must be proven in utilities cases is that the rate in question was approved by a regulatory agency which was given the statutory power to approve the rate.  The power to approve a rate request involves the power to require a lesser rate.  It also involves the power to require certain documentation and other evidence, among other things.

Another element which must be proven in utilities cases is that the utility filing the rate request is required to address certain issues and submit listed documentation, all of which are identified in applicable statutes and regulations.  In Florida, for example, insurance rate filings are governed both by Statute and by Regulation.  This required element of proof was more fully addressed in previous articles here, here, and here.

In contrast to the law applied in utilities regulation matters, courts faced with insurance and other cases often fail to require any proof that the filed rate doctrine applies at all.  Perhaps the judges simply do not know how to apply the FRD in an insurance case, the doctrine having been imported from utilities regulation.  In any event, this lack of proof does not prevent judges from entering judgments based on the FRD in insurance cases.

The decided cases will be examined here in a forensic investigation never before conducted, so far as is known.  More than that, the results of that forensic examination will be put on display for you to see for yourself.

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with  Supplements).  All rights reserved.

IN FLORIDA, INADEQUATE DEFENSE IS A BREACH OF CONTRACT.

In Florida, an inadequate defense provided by a liability insurer is actionable as a breach of contract and contract damages are recoverable upon proper proof:

Florida law requires an insurer to provide an adequate defense of a claim against its insured that is covered by a policy. If the defense is not adequate and it is reasonable for an insured to retain its own counsel, then an insured may recoup attorney's fees from an insurer because it has, in effect, forced the insured to retain its own counsel.

Maronda Homes, Inc. v. Progressive Exp. Ins. Co., 118 F. Supp. 3d 1332, 1335 (M.D. Fla. 2015) (Presnell, J.), appeal docketed, No. 15-13998 (11th Cir. Sept. 8, 2015).

 Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with  Supplements).  The consequences of providing an inadequate defense are considered in Volume 1, § 3:90.  All rights reserved.