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It was so held, for example, in Johno v. Doe, 187 So. 3d 581, 585 (La. Ct. App., 4th Cir., 2016), in which the Louisiana Court of Appeals held that an assignment of "contractual" rights did not include an assignment of insurance bad faith rights. The Court observed in that case that "[i]t is settled that a bad-faith failure-to-settle claim arises not from the contract of insurance itself but rather from an insurer's violation of its statutory duties under La. R.S. 22:1973." (Emphasis by the court.)
In First Mercury Ins. Co. v. Nationwide Sec. Serv's, Inc., No. 1–14–3924, --- N.E.3d ----, 2016 IL App (1st) 143924, 2016 WL 2927799 (Ill. App. Ct., 1st Dist., 3d Div., May 18, 2016), the claimants and the policyholder settled claims for 3,671 "blast faxes" against the policyholder although there were no claims for bad faith against the policyholder's carrier. The carrier at all times denied indemnity coverage for the harm allegedly caused by the policyholder's blast faxes, but provided the policyholder with an independent defense under a reservation of rights.
The policyholder settled anyway. The claimants, who took an assignment of rights against the carrier, asserted that the carrier could not contest the settlement because it acted in bad faith.
However, because neither the claimants nor the policyholder had ever alleged a claim of bad faith against the carrier, instead the Illinois appellate court ruled that they could not estop the carrier to contest the settlement:
¶ 18 As a preliminary matter, we address CE Design's argument that First Mercury breached its duty to settle in good faith and therefore is estopped from contesting coverage. Neither Litt nor CE Design filed a complaint or countercomplaint alleging a cause of action for bad faith refusal to settle. (Citation omitted.) Such an argument is therefore not properly before this court.
The Illinois appellate court affirmed a judgment of no coverage in favor of the carrier in this case.
This is a ruling that it is fitting to report here on Insurance Claims Bad Faith Law Blog. Alice of Insurance Land (a fictional character) could tell this real-life tale if she were so inclined.
In Griffith-Fenton v. JPMorgan Chase/Chase Home Finance, No. 15 CV 4108 (VB), 2015 WL 10850340 (S.D.N.Y. Nov. 12, 2015) borrowers-homeowners complained that Chase, among other things, backdated and force-placed insurance on their home "'thus requiring borrowers to pay for retroactive coverage despite the fact that no loss occurred during the lapsed period.'"
We know that the federal judge knew this because the federal judge quoted from page 24 of the complaint in his opinion where this allegation apparently appears.
Reality did not intrude on the ruling however. The federal judge ruled anyway in accord with courts that have rejected similar claims "because banks would have no protection against loss immediately following a lapse." Griffith-Fenton v. JPMorgan Chase/Chase Home Finance, No. 15 CV 4108 (VB), 2015 WL 10850340, at *7 (S.D.N.Y. Nov. 12, 2015).
To say again, the homeowners alleged and therefore had to prove the simple fact that "no loss occurred during the lapsed period." The federal judge nonetheless said that the banks' need to be protected by insurance premiums paid by the homeowners during the lapsed period was "persuasive" -- even when no loss occurred and so no insurance was necessary during the lapse period.
Alice, are you listening?
As I have written and said before, there is no such thing as "backdated insurance." It is not insurance at all. It is a penalty.
The results of arbitration will show whether arbitrators rule favorably toward so-called "start-ups" in similar numbers to their rulings in disputes involving large corporations. Start-up corporations have already placed their bets.
A debt collector's return on investment was made clear when the debt collector filed suit to collect a $66.00 chiropractic bill. The debt collector easily convinced a judge to enter a judgment for $275.000, which is $209.00 more than the original debt. Looked at in a different way, the judgment debt totals an amount that is over 3 times greater than the amount of the original debt.
The $209.00 excess judgment reportedly represents costs, attorney's fees, and interest. Nearly half that amount is a part of the collector's return on investment, and the rest is expense. But even that is not the entire amount of the return on investment collecting a $66.00 debt.
Debt collectors start with a percentage of every amount they collect. The debt collector's percentage is of course not revealed by the judgment debt.
So, in this case which was one of "100 randomly selected cases" filed in Nebraska and reviewed by ProPublica, the debt collector probably made a profit of up to 1 1/2 times the amount of the debt, or up to 150%, conservatively estimating the amount of its percentage and the interest at about $100.00, with expenses in court costs and attorney's fees totaling perhaps $109.00, and of course the original debt of $66.00, all of which together would total the amount of the $275.00 judgment. And the debt collector's expenses in pursuing the debt in court were all returned, to the penny, as a part of the eventual judgment against the debtor. Not a bad business model, perhaps, if you are interested in pursuing that line of work.
In another case reported by ProPublica, a debt collector garnished at least two of a debtor's paychecks after the case against the debtor was closed. It took the collector "more than a month" to return the amounts it garnished from those paychecks, money which it had no legal right to garnish in the first place at that point. SeePaul Kiel, "For Nebraska's Poor, Get Sick and Get Sued" (ProPublica, posted on April 28, 2016).
You cannot get any more "bad faith" and unfair dealing, it seems, but there's more in the ProPublica article.
Policyholders and other insureds sued by their liability carrier for a declaration of no coverage contended "that Cornhusker [their liability carrier, which sued them for the declaration of no coverage for underlying claims] committed bad faith by commingling its defense and coverage files related to SQI's claim and by failing to produce its claims filed during discovery in this case. (See Def. Mot. at 2–3, 23–25.) Defendants provide no authority showing that either of these types of conduct constitutes bad faith, and the court has located none." Berkshire Hathaway Homestate Ins. Co. v. SQI, Inc., 132 F.Supp.3d 1275, 1293 (W.D. Wash. 2015).
In that case, the Federal District Court granted the carrier's motion for summary judgment, denied the insureds' motion for summary judgment, entered a declaratory judgment of no coverage, and dismissed the insureds' "extra-contractual" counterclaims including for alleged insurer bad faith.
… WITH FORCE-PLACED FLOOD INSURANCE PREMIUM DOES NOT INCREASE MORTGAGE LOAN EVEN THOUGH IT IS ADDED TO THE MORTGAGE LOAN PAYMENT.
The American Bankers Association sent a letter on April 22, 2016 to three bank regulators "Re: The Force-Placement of Flood Insurance as a MIRE Event." In that letter, the ABA argued that the increased insurance premium of force-placed insurance, which is always added to a homeowner's monthly mortgage payment, did not actually "increase" the mortgage loan. (The Flood Disaster Protection Act regulates national banks with regard to "making increasing, renewing or extending (MIRE event) a designated loan," to quote from the ABA's letter.) The ABA argues in its letter that the banking regulators-addressees cannot interpret the FDPA to cover the act of increasing a mortgage loan payment, when a bank increases that monthly mortgage payment by adding the monthly premium amount of collateral protection insurance placed by the bank.
It is the ABA's stated position that if the increased premium of the force-placed insurance did increase the mortgage loan, then the bank force-placing the flood insurance would be "prohibited" by the Flood Disaster Protection Act from adding the amount of the premium for the collateral protection insurance purchased by the bank to protect itself, to the borrower's monthly mortgage payment.
The ABA does not say so in its letter, but that is a reasonable interpretation that many knowledgeable, experienced practitioners would make.
Time will tell how the three banking regulators respond to ABA's letter. Parenthetically, the Consumer Financial Protection Bureau apparently found out about the letter from reading the newspapers. The ABA did not even "cc" the CFPB on the letter.
There are several other very interesting points in the ABA April 22, 2016 letter. They are worth exploration in further articles to be posted here.
Flood insurance carriers, servicers, and related defendants were immunized from liability under the Racketeer and Influenced Corrupt Organizations Act ("RICO"), a court held in Melanson v. U.S. Forensic, LLC, No. 15–cv–4016 (ADS)(GRB), 2016 WL 1729493 (E.D.N.Y. April 30, 2016). "In general, the Plaintiff alleges that the Defendants participated in a fraudulent scheme to deny his claim for insurance proceeds arising from property damage he sustained during Superstorm Sandy." Melanson v. U.S. Forensic, LLC, No. 15–cv–4016, at *1 (ADS)(GRB), 2016 WL 1729493 (E.D.N.Y. April 30, 2016).
The defendants allegedly denied or assisted in denying payment of Superstorm Sandy claims, but they were held to be immune from liability because of the National Flood Insurance Act. The court in that case held that the National Flood Insurance Act or "NFIA" restricts any liability of participants in flood insurance programs to the sanctions, if any, imposed by regulations issued under the NFIA.