Claims and Bad Faith Law Blog

"IN GOOD FAITH?" THAT IS THE QUESTION.

What good faith means is embedded in the question "What would I want?"

This article puts good faith on display on the beaches of California and Hawaii:  Yomi S. Wrong, "A Perfect Beach Day in California Takes Some Prep if You're Using a Wheelchair, But it Can Be Done" (Los Angeles Times online, July 30, 2018).

Have you ever gone to the beach with a handicapped person and shared their reflected experience of being unable to go down to the beach once you get there?

Have you been or are you now handicapped yourself, and unable to navigate the sands?  Not just in California, or in Hawaii, but anywhere else there is beach sand including Florida for example?

The linked article reports that California and to some degree Hawaii are in the business of making their beaches accessible to people with handicaps that otherwise prevent them from visiting.

Most handicapped people pay taxes you know.

Most of them hold down jobs and participate in the economy.

And most handicapped people vote.

When the facilities are made available, handicapped people plan vacations around actually visiting the beach and navigating the seashore like other people.

And like other people, they do not expect handouts.  In fact, as reported in the linked article even in California and certainly in Hawaii the facilities that are made available are few and far between.

But the number is not the point.  Their existence is what matters.  The facilities are actually there.

Something to plan for.  Something to look forward to.  Something to live for.

Coming full circle, the meaning of good faith is embedded in the question "What would I want?"

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THE OHIO GENERAL ASSEMBLY AND THE AMERICAN LAW INSTITUTE.

In what I will call an omnibus bill, the Ohio General Assembly has apparently written the American Law Institute's Restatement of the Law of Liability Insurance out of the law of Ohio before it ever got in it.

Ohio's 132nd General Assembly has passed a Substitute for Senate Bill 239 which addresses many subjects (thus an "omnibus" bill), including in this particular case, regional councils of governments and tourism development districts, and naming "portions" of three highways, in addition to the Restatement:

AN ACT

To amend sections 102.01, 167.02, 167.04, 167.07, 715.014, 940.07, and 2744.07 and to enact sections 3901.82, 5534.403, 5534.811, and 5534.911 of the Revised Code to modify the law concerning regional councils of governments to clarify that a municipal corporation eligible to designate a tourism development district may designate more than one district, to specify that the American Law Institute's approved "Restatement of the Law, Liability Insurance" does not constitute the public policy of Ohio, to designate a portion of U.S. Route 33 in Meigs County as the "Steve Story Memorial Highway," to designate a portion of Interstate Route 270 in Franklin County as the "Officers Anthony Morelli and Eric Joering Memorial Highway," and to designate the portion of U.S. Route 24 in Henry County as the "Henry County Veterans Highway."

This is what Ohio calls an "engrossed" version as of June 27, 2018.  Westlaw also lists this version among "Pending/Proposed" statutes in Ohio.  If and when this bill is signed into law, it will enact a new Ohio statute:

Sec. 3901.82. The "Restatement of the Law, Liability Insurance" that was approved at the 2018 annual meeting of the American law [sic] institute [sic] does not constitute the public policy of this state and is not an appropriate subject of notice.

Section 1, Ohio S.B. No. 239.  (There are only 2 sections in Senate Bill 239, the substantive section and the enactment section.  Section 1 goes on for 9 pages.)

So, I guess the judges in America's courts are left to decide the law by choosing between the wisdom of the Ohio General Assembly, or the American Law Institute.

Such a choice.  I wonder if we have ever seen anything like this since the reaction to the Civil Rights movement of the 1960's.

Published here with the permission of Claims and Issues Blog.  Please Read The Disclaimer.  ©2018 Dennis J. Wall.  All Rights Reserved.

Ohio's 132nd General Assembly has passed a Substitute for Senate Bill 239 which addresses many subjects (thus an "omnibus" bill), including in this particular case, regional councils of governments and tourism development districts, and naming "portions" of three highways, in addition to the Restatement:

AN ACT

To amend sections 102.01, 167.02, 167.04, 167.07, 715.014, 940.07, and 2744.07 and to enact sections 3901.82, 5534.403, 5534.811, and 5534.911 of the Revised Code to modify the law concerning regional councils of governments to clarify that a municipal corporation eligible to designate a tourism development district may designate more than one district, to specify that the American Law Institute's approved "Restatement of the Law, Liability Insurance" does not constitute the public policy of Ohio, to designate a portion of U.S. Route 33 in Meigs County as the "Steve Story Memorial Highway," to designate a portion of Interstate Route 270 in Franklin County as the "Officers Anthony Morelli and Eric Joering Memorial Highway," and to designate the portion of U.S. Route 24 in Henry County as the "Henry County Veterans Highway."

This is what Ohio calls an "engrossed" version as of June 27, 2018.  Westlaw also lists this version among "Pending/Proposed" statutes in Ohio.  If and when this bill is signed into law, it will enact a new Ohio statute:

Sec. 3901.82. The "Restatement of the Law, Liability Insurance" that was approved at the 2018 annual meeting of the American law [sic] institute [sic] does not constitute the public policy of this state and is not an appropriate subject of notice.

Section 1, Ohio S.B. No. 239.  (There are only 2 sections in Senate Bill 239, the substantive section and the enactment section.  Section 1 goes on for 9 pages.)

So, I guess the judges in America's courts are left to decide the law by choosing between the wisdom of the Ohio General Assembly, or the American Law Institute.

Such a choice.  I wonder if we have ever seen anything like this since the reaction to the Civil Rights movement of the 1960's.

Published here with the permission of Claims and Issues Blog.  Please Read The Disclaimer.  ©2018 Dennis J. Wall.  All Rights Reserved.

Consumer and Tenant Law Webinars Starting Soon!

The Florida Bar Public Interest Law Section's Consumer and Tenant Working Group of the Florida Bar is putting on webinars starting soon!  These webinars are intended for consumer and tenant attorneys.

Here is a link to the first webinar coming up soon, titled Representing Consumers and Tenants when Hurricanes or other States of Emergency Happen on Wednesday, July 25, 2018:  

https://attendee.gotowebinar.com/register/6051705794319507201 

Thanks for your interest!

FURTHER THOUGHTS ON ALVAREZ-MEJIA (Fla. 3d DCA 2016).

This article picks up and carries forward the article posted here on Sunday, July 15, 2018.

           On the record of the Alvarez-Mejia appeal, where the plaintiff homeowner put on evidence in the trial court but the defendant did not, it is almost an open question whether there would have been a different result if the plaintiff had been the one who filed the motion for summary judgment, all other things being equal.^[1]

          The Alvarez-Mejia case was seen in a significantly different way by the dissenting judge.  He expressed his own opinion on whether it was "economically feasible" to restore or repair Ms. Alvarez-Mejia's home, which was that "I believe it is not 'economically reasonable' or 'practicable' to do so."^[2]   To say again, the legal issue was whether the restoration or repair was "economically feasible" under the quoted mortgage provision; the words, "economically reasonable" or "practicable" reflect the interpretation that the dissenting judge substituted for that term.

          On the law of what is "economically feasible" as used in paragraph 5 of this standard mortgage, the dissenting judge honestly reported that "[e]lectronically assisted research of all federal and state case law discloses just one case where a court has attempted to define the phrase."  That was the case of Vongohren v. Citimortgage, Inc., an unreported decision by a federal judge in Maryland, also decided in 2016.^[3]  It has been cited by only one judge since then, and that is the dissenting judge in Alvarez-Mejia.^[4]

To be continued with further discussion and analysis of both decisions, Vongohren and Alvarez-Mejia.

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[1] But in this case "a genuine issue of material fact exists as to the cost of repairs to the property."  Alvarez-Mejia, 208 So. 3d at 799.

[2] Alvarez-Mejia, 208 So. 3d at 800 (Shepherd, J., dissenting).

[3] Vongohoren v. Citimortgage, Inc., No. JFM-14-3549, 2016 WL 739070 (D. Md. February 25, 2016).

[4] Alvarez-Mejia, 208 So. 3d at 800 (Shepherd, J., dissenting).

Lenders and Other Mortgagees Withholding Insurance Carrier's Payment of Loss

    There is a recurring issue in the current handling of homeowner's and other property insurance claims.  It comes up over and over again:  Whether the insurance company's payment on a loss under its first-party policy can be taken by the mortgagor and applied to anything it wants -- such as its own bank account, whether the insurance company's payment on the loss should be applied to restoration or repair of the property that is collateral for the mortgage?

    Resolution of this question always or nearly always depends on the terms of the mortgage.  By those terms, the bank, mortgage company, other lenders, or their assignees are made loss payees "ATIMA."  This means that the insurance company must put them on the check "as their interests may appear."  Since their names are on the insurance policy, their names will be on the check.  The check cannot be negotiated without their signature or consent, in other words, in terms of the way things work under a mortgage.

    In reality, of course, the homeowners-borrowers are the first ones to sign the insurance company's check paying on the loss, then they turn the check over to the mortgagee so as to apply the proceeds to restore or repair the property, i.e., the homeowners' home.

    Except that very often they don't.

    The mortgagee keeps the money.  Their only defense under the mortgage is that restoration or repair of the property is not required when one of two things both happen.  First, the restoration or repair is not "economically feasible."  Second, "the Lender's security" is "lessened."   This is what the standard uniform mortgage instrument approved and issued by Fannie Mae and Freddie Mac says on their websites.

     The standard language of the UNIFORM INSTRUMENT approved by Fannie Mae and Freddie Mac for Single-Family homes in Florida is representative of the same standard language found in mortgages across the United States.  Paragraph 5 of the Florida uniform mortgage form addresses this issue:

Unless Lender and Borrower otherwise agree in writing, any insurance proceeds, whether or not the underlying insurance was required by Lender, shall be applied to restoration or repair of the Property, if the restoration or repair is economically feasible and Lender’s security is not lessened.[1]

Exactly the same language was at issue in Alvarez-Mejia v. Bellissimo Properties, LLC, a 2016 2-to-1 decision by a panel of Florida's Third District Court of Appeal in an appeal from the entry of summary judgment for Bellissimo, a defendant and a mortgagee.[2]

    The term, "economically feasible," is not defined in the Uniform Mortgage Instrument, and of course it was not defined in the mortgage at bar, either.  That was the key to the outcome.

    The plaintiff homeowner put on evidence through her affidavit "that it is economically feasible to repair the property because the value of the property with repairs will be significantly greater than the outstanding balance of the mortgage."[3] 

    The mortgagee-movant Bellissimo did not put on any proof otherwise at or any time after it filed its motion for summary judgment.  It "did not provide an estimate of the value of the property after repairs, and therefore did not meet its burden of proof that no genuine issue of material fact exists."[4]

    The appellate panel therefore reversed a summary judgment which the trial court entered in favor of the lenders' assignees, Bellissimo Properties, LLC and Vista Goebel, LLC in this case.  On the facts, the panel already made clear that there were genuine issues of material fact that prevented the lenders' assignees from obtaining a summary judgment.

    On the law, the majority in the state court case was willing to allow the possibility that a jury could determine that repair of the property that increases "the value of the property with repairs will be significantly greater than the outstanding balance of the mortgage."[5]

Please Read The Disclaimer.  ©2018 Dennis J. Wall.  All Rights Reserved.

 This article was originally published on Claims and Issues Blog on July 13, 2018.  Reprinted here with permission.

[1] Paragraph 5 of Fannie Mae/Freddie Mac Form 3010 01/01 FLORIDA--Single Family at page 7 (emphasis added).

[2] Alvarez-Mejia v. Bellissimo Prop's, LLC, 208 So. 3d 797 (Fla. 3d DCA 2016).  Paragraph 5 of Ms. Lily Alvarez-Mejia's mortgage is identical to paragraph 5 of the Uniform Mortgage Instrument quoted in the text.  See Alvarez-Mejia, 208 So. 3d at 798.

          Bellissimo also "withheld the insurance proceeds" pursuant to section 11 of the mortgage.  The majority mentioned this once, as a fact, and then never mentioned it again, nor did they ever quote it.  Alvarez-Mejia, 208 So. 3d at 798.  The dissenting judge neither quoted nor mentioned paragraph 11 of the mortgage, at all.

          Paragraph 11 of the UNIFORM INSTRUMENT relates to "Assignment of Miscellaneous Proceeds; Forfeiture."   Paragraph 11 of Fannie Mae/Freddie Mac Form 3010 01/01 FLORIDA--Single Family at page 10 (boldface in original).  Paragraph 5 of the UNIFORM INSTRUMENT, titled "Property Insurance," was the provision which contained the language at issue in the case.

[3] Alvarez-Mejia, 208 So. 3d at 799.

[4] Alvarez-Mejia, 208 So. 3d at 799.

[5] Alvarez-Mejia, 208 So. 3d at 799 (emphasis added).

BAD FAITH CATASTROPHIC HARMS TO HEALTH.

Some of the worst effects of catastrophes like the major hurricanes inflicting our country in recent years are man-made.  The failure to deliver needed care to victims of these disasters is a policy of bad faith.  It is a fact, for example, that as the New England Journal of Medicine has reported:

Health care disruption is now a growing contributor to both morbidity and mortality in natural disasters.  In the United States, this phenomenon has been observed in the aftermaths of Hurricane Katrina, Superstorm Sandy, and more recently Hurricanes Harvey and Irma, in which nursing home residents and those dependent on life-sustaining equipment were disproportionately affected.[1]

 

[1] Nishant Kishore and 15 other authors (et al.), "Special Article / Mortality in Puerto Rico After Hurricane Maria" text on unnumbered pages between endnotes 37 and 40 (New England Journal of Medicine May 29, 2018), online at https://www.nejm.org/doi/full/10.1056/NEJMsa1803972 (last accessed on Friday, July 13, 2018).

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A WORD ABOUT CLAIMS AND ISSUES BLOG & THE FOURTH OF JULY!

Our sister blog, Claims and Issues, formerly Insurance Claims and Issues, has moved!  Claims and Issues blog's new address is a lot like its old address:  claimsissues.typepad.com.

Our address here at Insurance Claims and Bad Faith Law blog stays the same, right where you found us today.

And, have a Happy and Safe Fourth of July!

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JEFFERSON BEAUREGARD SESSIONS AND JAMES MATTIS SADDLE THE POSSE COMITATUS?

What was signed on June 20, 2018 has been called an Executive Order, but many people are saying that it does not look like one.  On the other hand, it was clearly intended in some respects at least to be an order.  For purposes of this article, the document will be called an order.

The order of June 20, 2018 provides instructions to the Secretary of Defense:

The Secretary of Defense shall take all legally available measures to provide to the Secretary [of Homeland Security], upon request, any existing facilities available for the housing and care of alien families, and shall construct such facilities if necessary and consistent with law.

We do not really know all of what the United States armed forces may be doing in response to this order.  We do know that the Department of Defense has reportedly been ordered to provide housing for children and adults detained by Immigration and Customs Enforcement (ICE) which operates under the Department of Homeland Security (DHS), although there does not appear to be a copy of the order readily available at this time.

Secretary of Defense James Mattis has apparently authorized this use of military facilities.  Is this authorization of military use a violation of the Posse Comitatus Act, 18 U.S.C. § 1385?

To answer that question, here is the full text of the statute:

1385. Use of Army and Air Force as posse comitatus

Whoever, except in cases and under circumstances expressly authorized by the Constitution or Act of Congress, willfully uses any part of the Army or the Air Force as a posse comitatus or otherwise to execute the laws shall be fined under this title or imprisoned not more than two years, or both.

I don't know the answer, but you can apply your own reasoning and come up with your own answer.  Seems like a very good argument that there is an issue here that needs to be addressed, though.

It is ironic that this law was passed after the Civil War as a measure to prevent the Union Army from being used to enforce the law including federal law in the South, and given its origins, Attorney General J.B.  Sessions of all people may be involved in asking the United States Army to enforce the federal law in the South.

If and when there are disturbances on the military facilities where people are going to be imprisoned as a result of the presidential order, Mr. Sessions' directive, and Secretary Mattis' authorization, there is some precedent that the military can take action to enforce the security of its own installations.  That begs the question, of course, of whether the United States Armed Forces can be forced to enforce immigration law -- or at least the current administration's interpretation of immigration law -- in the first place.

One other thing we know, and that is that Mr. Sessions has reportedly asked Secretary Mattis for the loan of a number of military lawyers ("JAG," or Judge Advocate Generals Corps lawyers), and that reportedly Secretary Mattis has authorized that use of military personnel too.

Is this a possible violation of the statute authorizing the Judge Advocate Generals Corps and defining the permissible scope of their duties in the first place? It appears that the Judge Advocate General presiding over the JAG Corps in each branch of the service is the responsible party for issuing assignments to JAG officers, see 10 U.S.C. § 806:

806. Art. 6. Judge advocates and legal officers

 (a) The assignment for duty of judge advocates of the Army, Navy, Air Force, and Coast Guard shall be made upon the recommendation of the Judge Advocate General of the armed force of which they are members. The assignment for duty of judge advocates of the Marine Corps shall be made by direction of the Commandant of the Marine Corps. The Judge Advocates General, and within the Marine Corps the Staff Judge Advocate to the Commandant of the Marine Corps, or senior members of their staffs, shall make frequent inspections in the field in supervision of the administration of military justice.

So, have the recommendations of the Judge Advocate Generals been made of the duty assignments of the JAG officers under their respective commands?

Assuming that the Judge Advocate Generals involved have made those recommendations, when can we see them, there being no exception for secrecy here?

And if they have made those recommendations, did they say why they made them, exactly?

Did they say there was an "emergency," like Mr. Sessions apparently said when he made the request?

And if they did, what "emergency" did they describe, if any?  Was it an "emergency" for national security reasons because Mr. Sessions did not have enough lawyers to prosecute and imprison children?

 Did each and every one of the Judge Advocate Generals involved -- as the law on its face requires them to do -- really say in writing that they were reassigning these military lawyers, paid with taxpayer dollars, and did they say that they made the reassignment of these military officers because children were endangering the national security of the United States?  That would be something to see.

The whole world is watching as they say.

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