Claims and Bad Faith Law Blog

CHALLENGING CFPB's PROPOSED NEW RULE 11.

The Consumer Financial Protection Bureau has proposed a new "Rule 11," in its proposed new rule at 12 CFR 100618(g).  Supposedly the new rule is intended to affect debt collectors under the Fair Debt Collection Practices Act (FDCPA).

CFPB's proposed new rule is not authorized by the Fair Debt Collection Practices Act or otherwise. The proposed new Section 100618(g) regulates attorneys and not debt collectors.

The proposed rule provides immunity to debt collection attorneys, which the CFPB is not authorized to do. It does not "prescribe rules with respect to the collection of debts by debt collectors, as defined[.]" The proposed new rule relies on defining "meaningful attorney involvement case law," but that interpretation is up to judges to decide, and not to the CFPB.

Further, the CFPB's proposed new "Rule 11" in new 12 CFR 100618(g) omits relevant and important safeguards on attorney conduct prescribed by Rule 11 for all forms of attorney conduct in litigation of any kind in federal courts.

These are just some of the problems raised by this new "Rule 11."

Download CHALLENGING CFPB PROPOSED RULE 11 NEW CFR 100618(g).08.19.19.

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MORE ON "COMPUTER MODELLING MAKES FOOLS OF US ALL."

For years I have been writing about the use of computer modelling to predict damages from hurricanes. No, not simply using computers to predict hurricanes, but using computers to predict and process damages claims from hurricanes without investigating and evaluating the claims that are actually made after a hurricane has passed through.

Perhaps the approach of Hurricane Dorian is on my mind. We are sitting in the middle of its latest predicted path. We will know shortly if that prediction holds.

Courts have begun to address the use of computer models to predict and process other types of damages claims and found it to be an actionable abuse of computer models. In a recent case, a State court certified a class of GEICO policyholders who alleged that GEICO filtered their PIP claims through computer models instead of investigating and evaluating their PIP claims based on investigation. The case is Green v. GEICO General Ins. Co., No.: N17C-03-242 EMD CCLD, 2019 WL 4039609 (Del. Super. Ct. August 27, 2019) (stated UNPUBLISHED OPINION. CHECK COURT RULES BEFORE CITING).

Computer modelling makes fools of us all: Predicting damages using computer models instead of paying adjusters to adjust claims is not just a continuing practice. It has actually expanded, for example, from hurricanes to PIP injuries, as in this case.

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THE SHAME OF THE UNBALANCED BUDGET.

Trump Administration Will Divert Disaster Relief Funds to U.S.-Mexico Border Enforcement, Prompting Outcry From Democrats, WASHINGTON POST online Tuesday, August 27, 2019.

This is what comes of not putting limitations on your budget vote.

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Download 08.29.19.

 

TWO FOR THE INSURANCE COVERAGE BOOKS OF BUSINESS.

Two recently published articles will appeal to everyone concerned with insurance policy interpretation and to insurance coverage lawyers in particular. One article addresses general principles that apply to all insurance coverage cases. The other addresses a specialized niche. Both are available on Westlaw.

The first is by the estimable Kenneth S. Abraham, and the title of the article is self-explanatory. It will find a ready audience among insurance coverage lawyers generally: Plain Meaning, Extrinsic Evidence, and Ambiguity: Myth and Reality in Insurance Policy Interpretation, 25 CONN. INS. L.J. 329 (Spring 2019).

The other is addressed to a specialized niche of insurance coverage issues involving many insurance policies, many parties, and likely a lot of corporate money at stake. It is by James M. Fischer, Understanding the "Exhaustion of Coverage" Doctrine in the Context of Continuous Trigger Coverage, 25 CONN. INS. L.J. 263 (Spring 2019).

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PRIVATELY FUNDED PROTECTIVE ORDERS ARE THE LAW OF THE CASE.

The following language is typical. The following case is typical. That is not to say that either one is good or bad. It is to say that it is typical, meaning only that it is the way things are done more often than not:

    On July 2, 2018, the parties filed a stipulated protective order, which was entered by the court on July 11, 2018. [Docket Nos. 27 (“Protective Order”), 28.] The Protective Order permits the parties to designate certain materials produced during discovery as confidential in order to prevent their public disclosure. It states that a party “may challenge a designation of confidentiality at any time,” by initiating a dispute resolution process and “providing written notice of each designation it is challenging and describing the basis for each challenge.” Protective Order ¶¶ 6.1, 6.2. The Protective Order also states that if the parties cannot resolve a challenge through the meet and confer process, the designating party must file and serve a motion to retain confidentiality. Id. ¶ 6.3.

Economus v. City and County of San Francisco, No. 18-cv-01071-HSG (DMR), 2019 WL 3842008, at *1 (N.D. Cal. August 15, 2019) (Ryu, USMJ).

After an exhaustive review of many factors that the Magistrate Judge wrote should be taken into account in any secrecy equation in the Ninth Circuit, the Magistrate Judge in this case granted the defendants' motion to retain confidentiality of certain documents. The defendants in the case had marked the documents confidential under the Stipulated Protective Order even as they were submitted as part of the reason for the defendants' motion for summary judgment.

In other words, the defendants submitted evidence which they argued was in favor of their summary judgment, and which they also marked "confidential" and so not available to the public to see.

Seven pages later, the Magistrate Judge announced a ruling to keep the materials under seal because the plaintiff did not follow the Stipulated Protective Order to challenge the defendants' confidentiality designations:

    As Economus did not properly challenge the confidentiality designation of these documents pursuant to the terms of the Protective Order, that issue is not presently before the court. Accordingly, the court declines to lift the confidentiality designations on those documents.

III. CONCLUSION

For the reasons stated above, the court grants Defendants’ motion to retain confidentiality. The documents identified by Bates numbers CCSF_ECONOMUS 000837-841, 00117, and 002262-2267 shall remain confidential pursuant to the terms of the Protective Order entered in this case.

Economus, 2019 WL 3842008, at *8.

In other words, the plaintiff Economus did not follow the Stipulated Protective Order in this case, the defendants did, and so the evidence marked "confidential" by the defendants and filed under seal had to remain under seal.

Do you think that the real issue was whether either party followed the Federal Rules of Civil Procedure and in particular Rule 26?

Not now, not in this typical case. Parties are urged to follow not only the actual Rules of Civil Procedure in most federal courts but also to follow the terms of any Stipulated Protective Order which they have filed in their particular case -- just in case of a decision like this whether in the Ninth Circuit or not.

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BAD FAITH BEGINS WHEN THE NOTICE IS ELECTRONICALLY FILED.

A panel of Florida's Second District Court of Appeal, an intermediate appellate court, recently resolved the question: When does the statutory cure period of 60 days begin under Florida's so-called "Bad Faith Statute," Fla. Stat. § 624.155?

The statutory cure period is the period during which the accused carrier can "cure" the bad faith alleged in a Civil Remedy Notice filed under the statute. That makes the start-time question a big deal especially for carriers who want all the time they can get to cure the alleged bad faith -- and so not be sued under Florida's statute.

The appellate court held that the time starts when the Civil Remedy Notice (CRN) is electronically filed with the Department of Financial Services which houses the Florida Office of Insurance Regulation, i.e., the Florida Insurance Commissioner:

Therefore, we hold that the sixty-day cure period under section 624.155 begins when the CRN is electronically filed with the Department, and to avoid a bad faith action, the insurer must pay the claim or take corrective action within sixty days from the date the CRN is electronically filed.

Harper v. GEICO General Ins. Co., 272 So. 3d 448 (Fla. 2d DCA 2019) (page numbers unavailable at time of this publication).

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A PLEASANT SURPRISE FROM S.D. FLA.

A U.S. Magistrate Judge's opinion in a case in the Southern District of Florida is as worthwhile quoting as it is surprising. As one of many reasons, the Magistrate Judge ordered discovery of a settlement agreement entered into between the plaintiffs and a couple of the defendants in a case involving other defendants.

The Magistrate Judge wrote:

    In addition to the findings and analysis made previously in this Order, the Court additionally finds as follows. First, merely because settling parties label a settlement agreement as “confidential” and agree to confidentiality terms amongst themselves, does not mean that a federal court cannot order such settlement agreement produced in discovery if it is relevant and proportional under Rule 26(b)(1). “There is nothing magical about a settlement agreement.” Jen Weld Inc. [v. Nebula Glass Int'l, Inc.], 2007 WL 1526649 at *3 [(S.D. Fla. May 22, 2007)]. Secrecy is disfavored in our federal courts. Parties cannot insulate a document from discovery merely because they decide to label it as confidential; the federal courts are to decide such issue, not the parties.

Kadiyala, individually, and as assignee of Credit Union Mortgage Utility Banc, Inc. v. Pupke, No. 17-80732-CIV-Marra/Matthewman, 2019 WL 3752654, at *4 (S.D. Fla. August 8, 2019) (Matthewman, U.S.M.J.) (emphasis added).

It sounds like the presumption of public access may be alive and well in this case.

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COVERAGE FOR EL PASO AND DAYTON CARNAGE.

There may be coverage for the terrorism-produced carnage in El Paso and Dayton under a recent ruling in a bad faith and coverage case by a federal appeals court. In Universal Cable Prod's, LLC v. Atlantic Spec. Ins. Co., 929 F.3d 1143 (9th Cir. 2019), the federal appellate court held that covered terrorism under an insurance policy was not excluded by a "war actions" exclusion.  The appellate court remanded to the trial court for proceedings on the coverage claims and on the bad faith claims at bar.

More precisely as to the main coverage issue, the court held that an organization known for its violence was not a sovereign state the warlike actions of which would be excluded under an exclusion for "'warlike action by a military force' by a 'government, sovereign, or other authority.'” Instead the terrorist's actions were covered terrorism under the liability insurance policy at bar.

The appellate court applied California law to interpret the insurance policy at issue but relied on federal decisions from New York to reach this ruling. As California and New York go, so goes the coverage nation?

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HELL IN A HELOC.

Dolores Zirbser and Bruce Jon Spalla made a loan agreement for a home equity line of credit ("HELOC"). The loan originated with Wachovia Bank. Wachovia sold the loan to Wells Fargo.

Zirbser and Spalla sued Wells Fargo in December 2018 over billing them for allegedly "erroneous fees" and taking other payments that were not authorized by the loan contract. Wells successfully argued for dismissal of five of the six counts of the complaint on the basis of the statute of limitations, i.e., that the allegedly "illegal charges" were time-barred because they took place too long ago to sue on now.

Except for three charges that were within the time to sue on them. The federal judge denied Wells's motion to dismiss the last remaining count, which is alleged for breach of the implied covenant of good faith and fair dealing under New Jersey law. In New Jersey,

[t]o show a breach of the covenant of good faith and fair dealing, a plaintiff must show “(1) the defendant act[ed] in bad faith or with a malicious motive, (2) to deny the plaintiff some benefit of the bargain originally intended by the parties, even if that benefit was not an express provision of the contract.” [Citation omitted.] Proof of a party’s “bad motive” or “intention” must support a claim of breach of contract grounded on an alleged breach of the implied covenant of good faith and fair dealing.

Zirbser v. Wells Fargo Bank, N.A., No.: 19-cv-01099-RBK-KMW, 2019 WL 3244621, at *4 (D.N.J. July 19, 2019).

In this case, the federal judge held that the plaintiffs adequately alleged a breach of the good faith covenant that was implied in their loan agreement as to those unauthorized charges that were not excluded by the statute of limitations:

... Plaintiffs sufficiently allege bad faith because they state that the Defendant knowingly charged them for three fees outside the express terms of the contract. (Compl. at ¶¶ 21–22.) Defendant did so intentionally and therefore acted “in bad faith, dishonestly, or with improper motive” and “destroy[ed] or injure[d] the right of the [Plaintiffs] to receive the benefits or reasonable expectations of the contract.” (Id. at ¶ 129). Taking all inferences in the Plaintiffs’ favor, Plaintiffs were denied the benefit of their bargain because they contracted to pay for only those fees permitted by the agreement, not any others. (Id.)

Zirbser v. Wells Fargo Bank, N.A., No.: 19-cv-01099-RBK-KMW, 2019 WL 3244621, at *4 (D.N.J. July 19, 2019).

Alleged bad faith in a HELOC. If proven, that means hell in a HELOC. So wait for it: This case will settle now.

Download IBF 08.06.19.

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