Claims and Bad Faith Law Blog

From the manuscript of the 2020 Supplement of LITIGATION AND PREVENTION OF INSURER BAD FAITH, which I am writing right now:

    In 2019, a federal court decided the question of whether an "injury in fact" was alleged in an action involving a consumer protection statute in New York State, N.Y. General Business Law § 349. The ruling came on a motion to dismiss. The Court equated plausibility of stating a substantive claim under the New York statute with plausibility of stating a claim of concrete and particularized injury for standing purposes, at least in a case of alleged "economic injury," namely, overpaying based on the defendant's affirmative misrepresentations.¹

¹ See Cummings v. FCA US LLC, 401 F. Supp. 3d 288, 304, 307 (N.D.N.Y. 2019).

 

The 2019 Supplement on "Injury in Fact:  What Happens to Bad Faith Statutes," is available courtesy of Thomson Reuters West and the author, at:

https://www.dennisjwall.com/attachments/dennis_j._wall__litigation_and_prevention_of_insurer_bad_faith

_section_3.28.50_(2019_supp.)_2.pdf

Please read the disclaimer. ©2020 Dennis J. Wall.  All rights reserved.

Conflicts and Separate, Independent Defense Counsel.

"After considering case law from New York to California and in between, and after considering statutes from California to Florida, it appears clear that lawyers' rules of ethics provide the bases for the conflict that requires liability carriers to provide their insureds with separate, independent defense counsel."

Dennis J. Wall, Conflicts Requiring Liability Carriers to Provide Independent Defense Counsel to Insureds, New Appleman on Insurance:  Current Critical Issues in Insurance Law 1 (Spring 2020).  PDF provided courtesy of copyright holder LexisNexis.

Please read the disclaimer. ©2020 Dennis J. Wall.  All rights reserved.

 

 

 

 

 

 

 

THE REAL ATTORNEY-CLIENT PRIVILEGE IN THE CLAIMS FILE.

In a bad-faith case arising out of denial of a life insurance claim, the Chief U.S. Magistrate Judge of a U.S. District Court took apart a claim of attorney-client privilege to bar discovery of a key memorandum from a claim file:

    The Court has considered the arguments by the parties and has reviewed the memorandum at issue. The memorandum is not written by an attorney and does not state that it conveys a confidential communication from Defendant’s counsel. Instead, the memorandum is written by Defendant’s Head of Claims and refers to business practices for contestable claims in states with a statute requiring that the condition that was misrepresented contributed to the loss.

Salopek v. Zurich Am. Life Ins. Co., CV No. 18-339 JAP/CG, 2019 WL 1746303, at *2 (D.N.M. April 18, 2019).

    The Court continued with regard to the attorney-client privilege claim:

Moreover, the substance of the memorandum merely advises claims handlers to refer contestable claims to a claim manager and for possible legal advice. For these reasons, the Court finds Defendant has not met its burden in proving the memorandum is privileged.

Salopek, 2019 WL 1746303, at *2.

But the Court was not finished. The Chief Magistrate Judge concluded that the memorandum in question is not only not privileged, but it is relevant:

    In addition, the Court finds the memorandum is relevant. Plaintiff’s claims involve a contestable claim and alleged misrepresentations on an insurance application. While the memorandum refers to statutes in states other than New Mexico, it also discusses Defendant’s business practices when presented with contestable claims and the effect of a misrepresentation. Therefore, is relevant to the claims and defenses in this case.

    IT IS THEREFORE ORDERED that Plaintiff’s Motion to Compel Zurich America Life Insurance Company to Produce an Unredacted Copy of a Memorandum, (Doc. 101), is GRANTED, and Defendant shall provide Plaintiff with an unredacted copy of Bates No. ZALICO_SAL0002235[.]

Salopek, 2019 WL 1746303, at *2-*3.

    So simply mentioning lawyers in a memorandum is not enough to keep the memorandum secret even in a bad-faith case. This is the universal or nearly universal rule and this decision exemplifies the rule.

Please read the disclaimer. ©2020 Dennis J. Wall. All rights reserved.

 

A Poem of Memories Alive During the Pandemic.

For a special treat during social distancing and the pandemic, here is a poem by Diane Neff. For those who can relate and remember some of the scenes in the poem, it will be a boost. Others can read it too. And for lots of reasons, it should be a boost to them too.

Here now, enjoy.

Disco Fever
by
Diane Neff
©2020 Diane Neff.
When the dancing paused, last call was heard.
Intoxicated? No just buzzing bright
atop the disco floor, what happy sight!
My vision seems unfocused, doubled, blurred,
and yet it feels so right, the beat unslurred.
I blame it on the neon flashing lights.
Who thought to place them in the floor tonight?
Who turned the music up? Can’t hear a word.
The heat’s still rising, no one walks away.
We push ourselves. With artificial knees,
gray hair, bad hips, we’re old, we’re boomers, man.
It’s not the seventies, no more, you say?
But dancing has no “best by” date for me.
Just play the songs, I’ll dance the best I can.

Published here with permission of the poet.

FOLLOWING THE RULES OF PUBLIC ACCESS, REJECTING SECRECY BY DECREE.

In Regional Local U. Nos. 846 & 847 v. Mile High Rodbusters, Inc., No. 1:20-cv-00673-SKC, 2020 WL 1865168 (D. Colo. April 14, 2020) (Crews, USMJ), yet again a U.S. Magistrate Judge confronted yet another motion to seal. This case was brought to enforce a judgment in a previous case. The judgment had been entered in favor of the plaintiffs on their complaints that the defendant employers violated a collective bargaining agreement. The plaintiffs including unions filed a one-paragraph motion to seal their complaint.

    But the result in this case was to allow public access and to refuse the plaintiffs' motion to restrict access to their complaint in this case. The USMJ began by publishing the standards adopted by Local Rule in the U.S. District Court for the District of Colorado where this action was brought.

    This is a procedural rule approved by the district judges and magistrate judges themselves. It may be easier for all judges to begin by following rules which they themselves have written, particularly when it comes to the subject of restricting public access to public documents, i.e., sealing them.

   For whatever reason, the USMJ began by looking at the Local Rule on restricting access in this case:

    Pursuant to Local Rule 7.2, motions to restrict must address the following factors:

(1) identify the document or the proceeding for which restriction is sought;
(2) address the interest to be protected and why such interest outweighs the presumption of public access (stipulations between the parties or stipulated protective orders with regard to discovery, alone, are insufficient to justify restriction);
(3) identify a clearly defined and serious injury that would result if access is not restricted;
(4) explain why no alternative to restriction is practicable or why only restriction will adequately protect the interest in question (e.g., redaction, summarization, restricted access to exhibits or portions of exhibits); and
(5) identify the restriction level sought.

D.C. Colo. Local Civil Rule 7.2(c).

http://www.cod.uscourts.gov/Portals/0/

Documents/LocalRules/

2019_Final_Local_Rules.pdf

  [Local Civil Rule 7.2 is located on pages 18-19 of the hyperlinked pdf on the District of Colorado's website.]

Regional Local Union, 2020 WL 1865168, at *1. Here, the plaintiffs requested in one paragraph that their complaint be sealed from public view. They represented that "some allegations" in their complaint "derived from" documents in their earlier case which was apparently filed in 2013 and in which a protective order had been entered.

    This request just did not comply with Local Civil Rule 7.2 in the eyes of this United States Magistrate Judge. More than that, the USMJ compared this request to the Local Rule and concluded, concisely, that the plaintiffs did not even attempt to satisfy the requirements of the Local Rule.

    As to the Constitutional presumption of public access, the Court again held the plaintiffs to the prevailing standard in such a case as this. In order to seal pleadings and other documents the plaintiffs requesting the seal in this case have to demonstrate "'real and substantial interest'" in depriving the public of access to records "'that inform [the court’s] decision-making process'[.]" Regional Local Union, 2020 WL 1865168, at *2 (emphasis by the Court).

    "This is especially true where, as here, a party wants to restrict access to a document that is at 'the heart of the issues' in the litigation, i.e., the Complaint itself." Regional Local Union, 2020 WL 1865168, at *2.

    The Constitutionally required standard to restrict public access to public documents was not met here.

    To sum up, the procedural requirements for restricting public access were not met here, and more importantly, neither were the Constitutionally required standards met here. Result: Motion Denied.

Please read the disclaimer. ©2020 Dennis J. Wall. All rights reserved.

WELLS FARGO WON THE PUNITIVE DAMAGES BATTLE, BUT LOST THE WAR.

In Dollen v. Wells Fargo Bank, N.A., ___ P.3d ___, No. A-1-CA-37194, 2020 WL 1699021 (N.M. Ct. App. April 6, 2020), the New Mexico Court of Appeals considered the standards for assessing punitive damages against Wells Fargo, a mortgage servicer in this case. The suit was also filed against an insurance carrier which had issued the deceased homeowner what the appellate court called a mortgage accidental death insurance policy, but the carrier was out of the suit by the time of this decision.

    The Court of Appeals set out the relevant factors, in pertinent part as follows:

    {19} The Due Process Clause of the Fourteenth Amendment entitles litigants to fair notice of conduct that may be punished by a state’s punitive damages system, and fair notice of severity of the penalty that a state may impose.

Dollen v. Wells Fargo, 2020 WL 1699021, ¶ 19, at *4.

    Accordingly, the Due Process Clause imposes certain constraints upon any assessment of punitive damages, according to the case law and to Standard Jury Instructions which are based on the case law:

    {20} One such constraint is the requirement of a reasonable relationship between the punitive damages award and the harm that was or could have been caused to the plaintiff(s). [Citations omitted.] Thus, New Mexico’s jury instructions with respect to punitive damages provide, in part, as follows:

Punitive damages are awarded for the limited purposes of punishment and to deter others from the commission of like offenses. The amount of punitive damages must be based on reason and justice taking into account all the circumstances, including the nature and enormity of the wrong and such aggravating and mitigating circumstances as may be shown. The property or wealth of the defendant is a legitimate factor for your consideration. The amount awarded, if any, must be reasonably related to the injury and to any damages given as compensation and not disproportionate to the circumstances.

UJI 13-1827 NMRA (emphasis added).

Dollen v. Wells Fargo, 2020 WL 1699021, ¶ 20, at *5.

    At that point, the punitive damages ball seemed to be rolling in Wells Fargo's direction in this case. And then it stopped. Wells argued too much by half, as it were, judging by the results. The New Mexico appellate court held that the punitive damages assessment against Wells should be remanded in spite of the evidence in the record that clearly established Wells' wrongdoing in servicing mortgages across the United States, according to the New Mexican judges in this case:

    {23} In arriving at its punitive damages figure, the district court in this case appears to have considered only avoiding an amount of punitive damages that might bankrupt Wells Fargo, rather than considering the amount that would accomplish but not exceed New Mexico’s goals of punishment and deterrence. [Citation omitted.] Because Wells Fargo raised no argument about its wealth, the district court assumed that “any amount it awards will not threaten Wells Fargo’s very existence.” This, coupled with the district court’s reference to findings that Wells Fargo services eight to nine million home loans in the United States, and systemically, remorselessly mishandles mortgage accounts for its own profit, indicates that the district court’s punitive damages award was aimed at deterring a national company with virtually unlimited assets from nationwide wrongdoing. This, again, violated Wells Fargo’s right to a process constrained by fair and permissible considerations, namely: punishment for harm to these Plaintiffs, and deterring only conduct in this state.

    {24} Accordingly, we reverse and remand the district court’s judgment on punitive damages, so that the court may reconsider its award within the constraints described hereinabove.

Dolan v. Wells Fargo, 2020 WL 1699021, ¶¶ 23-24, at *6 (italics in original; boldface added).

Constitutional, statutory, and common law standards for the assessment of Punitive Damages against insurance carriers in bad faith cases are analyzed at length in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 13:15 (3d ed. Thomson Reuters West, 2020 Supplements in process).

Please read the disclaimer. ©2020 Dennis J. Wall. All rights reserved.

COURT HOLDS NO INJURY FROM KICKBACKS, SO NO COMPLAINTS, PLEASE.

In Baehr v. Creig Northrop Team, P.C., 953 F.3d 244, 258 (4th Cir. 2020), the Fourth Circuit Court of Appeals held that on the record in that case paying kickbacks in real estate transactions for their homes was no injury in fact to the plaintiffs who complained about paying kickbacks.  Therefore, the court ruled, the plaintiffs could not sue as a result of being charged kickbacks.

    The plaintiffs sued under the Real Estate Settlement Procedures Act or RESPA. Congress expressly prohibited kickbacks in RESPA. The Fourth Circuit panel held that Congress did not mean to prohibit kickbacks in all cases. This was one of the outlier cases in their eyes.

    No complaints, please. Just pay the kickbacks.

Please read the disclaimer. ©2020 Dennis J. Wall. All rights reserved.

WHEN FIVE MEN RULED AMERICA. AND STOPPED THE VOTE. AGAIN.

"I do not doubt the good faith of my colleagues[.]"
Justice Ruth Bader Ginsburg, dissenting in Republican
Nat'l Committee v. Democratic Nat'l Committee,
___ U.S. ___, ___ S. Ct. ___, No. 19A1016, 2020 WL 1672702, at *3 (April 6, 2020)
(Ginsburg, J., dissenting).

Put this in context. Wisconsin is holding a vote on Tuesday, April 7, 2020. Before the Covid-19 pandemic, Wisconsin law required that mail-in ballots must be postmarked by election day in order to be counted. But many Wisconsin voters still have not received mail-in ballots to mail in.

    Wisconsin, like the rest of the country, is now in the midst of a pandemic. The evidence introduced in Federal Court shows that four days before the Supreme Court majority ruled, there were 1,550 confirmed cases and 24 deaths in Wisconsin as a result of Covid-19.

    In response to the pandemic in Wisconsin, the Governor of Wisconsin issued a stay-at-home order and called the Wisconsin Legislature into special session to allow for more absentee ballots so that people would not have to congregate together in order to cast their votes in person. The Republican leaders of the Wisconsin House and Senate refused even to take the matter up for a vote in their legislature.

    The Wisconsin Governor then issued another order, this one to cancel in-person voting on account of risks to public health. The Republican leaders of the Wisconsin House and Senate requested a stay from the Wisconsin Supreme Court so that voters in Wisconsin will be forced to make a choice: vote in person and risk infection, even death, or just stay home. They calculated that the Republicans on the Wisconsin ballot will stand a better chance of staying in power if Wisconsinites do not show up to vote.

     The Republican majority of the Wisconsin Supreme Court agreed. They voted as if there is no pandemic, and Wisconsinites must vote in person or with the absentee ballot rules they already have, rules which, according to such as the Republican leaders of the house and senate on the Wisconsin ballot, favor the Republicans in Wisconsin.

    On a parallel track at the same time, a Federal District Judge consolidated three cases, collectively aimed at extending the absentee ballot and at postponing in-person balloting during the pandemic. The District Judge declined to disturb Wisconsin's in-person voting requirements, but extended the time that voters would have to vote by mail and avoid Covid-19 under the circumstances.

    Them that want low voter turnout appealed to the Seventh Circuit Court of Appeals. The defendant members of the Wisconsin Election Commission did not appeal the District Court's ruling.

    However, the Republican National Committee intervened to appeal. The Seventh Circuit left the District Court's ruling intact.

    Then the Republican National Committee appealed the case to the U.S. Supreme Court. That is where the extent of the Court's "good faith" was on display. In an unsigned opinion, five Justices refused to give their names but we know who they are: Chief Justice Roberts, and Justices Thomas, Alito, Gorsuch, and Kavanaugh.

    They tried to rule anonymously that preexisting rules for absentee balloting in a pandemic are constitutionally required.  They actually ruled despite the evidence in the record, as they have done before. "The Court's order requires absentee voters to postmark their ballots by election day, April 7 -- i.e., tomorrow -- even if they did not receive their ballots by that date. That is a novel requirement." Republican National Committee, 2020 WL 1672702, at *3 (April 6, 2020) (Ginsburg, J., dissenting).

    This, then, is the background behind the ruling of the anonymous Gang of Five, Roberts, C.J., and Thomas, Alito, Gorsuch, and Kavanaugh, JJ. in favor of the Republican National Committee.

Please read the disclaimer. ©2020 Dennis J. Wall. All rights reserved.