Claims and Bad Faith Law Blog

UNFAIR & DECEPTIVE PRACTICES ACTIONS AND IMPLIED COVENANT BREACH ACTION TOGETHER.

(Aurora From ISS Image Courtesy of Captain Kelly & NASA)

In a decision that has just been published, Precision Cranes, Inc. v. Tester Drilling Serv's, Inc., No. 4:18-cv-00019-JMK, 2020 WL 13538683 (D. Alaska Nov. 18, 2020), the plaintiff Precision was allowed to amend its complaint against two defendant insurance carriers that issued payment bonds on a project in the Arctic.  Precision had already sued on what is generically known as a UDAP (Unfair & Deceptive Practices) statutory claim, in this case, specifically under the Alaska Unfair Trade Practices and Consumer Protection Act (“UTPCPA”).  Now Precision requested leave to add a claim for breach of the implied covenant of good faith and fair dealing, apparently at common law.

The District Court granted Precision's motion for leave to amend its complaint even though the motion came late and over the objections of the defendant carriers.  Precision, 2020 WL 13538683, at *3.  This case involved Alaska substantive law, which the federal Court clearly read as allowing both a UDAP action and a bad faith action based on the same facts, even though the two causes of action are similar but distinct on the law.

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

SOMETIMES PARTIAL PAYMENT MAY NOT BE ENOUGH GOOD FAITH.

 

(Black Hole Image Courtesy of NASA)

Sometimes even partial payment may not be enough to establish good faith as a matter of law.  In Rutledge Inv's L L C v. Scottsdale Ins. Co., No. 2:21-CV-00364, 2022 WL 3704212 (W.D. La. Aug. 26, 2022), the Court denied the property carrier's "motion for partial summary judgment to dismiss" a "bad faith claim related to Hurricane Laura."

This despite the fact that the record shows that the carrier made an advance payment one week after the Hurricane struck and, further, that the carrier agreed to "issue payment on the undisputed claim" five weeks after that.  Rutledge, 2022 WL 3704212, at *1.

Proof of loss:  advances are the subject of § 2:10 by Dennis J. Wall, in JOHN K. DiMUGNO, STEVEN PLITT, and DENNIS J. WALL, CATASTROPHE CLAIMS / INSURANCE COVERAGE FOR DISASTERS (Thomson Reuters May 2022 Edition).

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

TFG v. USA UPDATE: WHY IS THIS CASE HERE, JUDGE ASKS.

(C.D. Cal.)

 

On August 23, 2022 Judge Aileen Cannon entered the following paperless Order in Southern District of Florida Civil Case No. 22-cv-1894-AMC, which has been copied from the electronic docket on PACER:

08/23/2022

10

PAPERLESS ORDER: The Court is in receipt of 1 Plaintiff's Motion for Judicial Oversight and Additional Relief. To facilitate appropriate resolution, on or before August 26, 2022, Plaintiff shall file a supplement to the Motion further elaborating on the following: (1) the asserted basis for the exercise of this Court's jurisdiction, whether legal, equitable/anomalous, or both; (2) the framework applicable to the exercise of such jurisdiction; (3) the precise relief sought, including any request for injunctive relief pending resolution of the Motion; (4) the effect, if any, of the proceeding before Magistrate Judge Bruce E. Reinhart; and (5) the status of Plaintiff's efforts to perfect service on Defendant. Signed by Judge Aileen M. Cannon on 8/23/2022. (AMC) (Entered: 08/23/2022)

As we said in an article published yesterday, Judge Aileen M. Cannon was appointed by the alleged owner of the searched premises.

So it's on to Friday, August 26, 2022.

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

TFG v. USA CIVIL COVER SHEET: "NO RELATED CASE"?

There is a Civil Cover Sheet in the new civil case addressed yesterday, which I write here for algorithm purposes to protect the innocent as they used to say on Dragnet, as:  TFG v. USA, Southern District of Florida Case No. 22-cv-81294, .  Here is the Civil Cover Sheet:

As we said yesterday, the signature appears to come from Evan Corcoran, Esquire, one of the attorneys of record for the alleged owner of the searched premises.  

Lawyers will immediately recognize the standard question in this form, which is question numbered VI, RELATED/RE-FILED CASES, in particular the standard question in every federal Civil Cover Sheet in the country:

b) RELATED CASES

___ YES  ___ NO  DOCKET NUMBER:

Although this question was left blank in this case, the answer of course is that there is a related case, and its Docket Number is Southern District of Florida Criminal Case No. 22-mj-8332-BER.  That of course is the search warrant case involving the alleged owner's searched premises.

The question is simple.  Why do you think it was not answered?

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

CLAIMS BARRED AGAINST "PAY TO PLAY," BRIBED AND APPROVED RATES.

(Image of Jupiter / NASA & AP)

In South Branch LLC v. Commonwealth Edison Co., Nos. 21-2861, 21-2872 & 21-2873, 2022 WL 3581782 (7th Cir. Aug. 22, 2022), two judges on a Seventh Circuit panel led by Judge Diane Sykes reached for an immunity that the trial court did not touch to bar claims against ComEd:  the filed rate doctrine.

Judge Sykes has reached out to the filed rate doctrine to bar claims in other cases; in this case the trial court dismissed the plaintiffs' RICO claims against ComEd on other grounds entirely.

The record left no doubt but that the rates in question were approved by the regulatory agency as a result of favorable legislation for higher rates.  "To secure passage of favorable legislation, ComEd engaged in a yearslong 'pay to play' scheme[.]"  The scheme in short involved bribes paid to Illinois State Government officials in order to secure the legislation.  ComEd, 2022 WL 3581782, at *1.

Because of the filed rate doctrine, the plaintiffs could not sue.  The two judges on the panel held that they were not "injured" under RICO as a result.  ComEd, 2022 WL 3581782, at *3.

The remaining judge on the panel concurred but expressly stated that she would not rule on the basis of the filed rate doctrine in this case.  Instead, she based her vote on an 1810 decision that in her eyes prohibits judges from inquiring into the motives of legislators.   ComEd, 2022 WL 3581782, at *6

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

VIRGINIA UNFAIR CLAIM SETTLEMENT PRACTICES STATUTE NOT ACTIONABLE IN 2022.

(Bridge Collapse / USA TODAY)

Virginia's Unfair Claim Settlement Practices Act is codified in VA. CODE ANN. § 38.2-510.  It parallels the National Association of Insurance Commissioners' Model Unfair Claim Settlement Practices Act in pertinent part.  See generally 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH, § 3:28 (addressing statutory bases of bad faith in third-party claims) (3d Edition West Publishing Co., 2022 Supplements in process); 2 id., §§ 9:14 & 9: 15 (Express and Implied Causes of Action, respectively, under bad faith statutes in first-party cases).

The Virginia Unfair Claim Settlement Practices Act does not convey a cause of action, however.  Sustainable Sea Prod's Int'l, LLC v. Am. Emp. Surplus Lines Ins. Co., No. 3:21cv697, 2022 WL 3573247, at *4 (E.D. Va. Aug. 19, 2022).

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

"IT AIN'T OVER TILL IT'S OVER": Constitutional PRESUMPTION, PUBLIC ACCESS?

(Photo by NASA)

All that the defendant had to do to keep declarations and exhibits sealed that the plaintiff filed, was to settle in exchange (at least in part) for a stipulation to dismiss with prejudice.

That is the perhaps unintended effect of the otherwise well-reasoned decision in the case of Lohnn ex rel. Lohnn v. Int'l Bus. Mach's Corp., No. 21-cv-6379 (LJL),  2022 WL 3359737 (S.D.N.Y. Aug. 15, 2022) (Liman, J.).

The case involved an estate's action against IBM.  The case settled with a joint stipulation for dismissal with prejudice.

The case settled before the Court could rule on Plaintiff's motion for summary judgment.  The Plaintiff had previously  filed "declarations and exhibits" under seal in support of its motion for summary judgment.  The issue now was whether the declarations and exhibits filed in the Court file should be kept sealed, or whether they were publicly accessible with redactions.  Lohnn, 2022 WL 3359737, at *1.

The defendant, IBM. argued that the declarations and exhibits filed in the Court file were not "judicial documents" entitled to public access because of its settlement before the Court could rule on the Plaintiff's summary judgment motion.    Lohnn, 2022 WL 3359737, at *2.

The Court rejected this argument and held that the declarations and exhibits are indeed "judicial documents" entitled to a presumption of public access, even though the defendant settled before the Court could rule on the plaintiff's motion for summary judgment.  Lohnn, 2022 WL 3359737, at *3.

However, that did not end the story in this case.  It might even be said that the story only began at this point.

In ruling that the fact that although the defendant settled the case before the Court could rule on the motion for summary judgment, the settlement and the joint stipulation for dismissal with prejudice did not affect the "judicial documents" status of declarations and exhibits filed in the Court file such that they are  clothed with a common law presumption of public access nonetheless, was a ruling directly contrary to the opposite ruling in Giuffre v. Maxwell, No. 15 Civ. 7433 (LAP), 2020 WL 133570 (S.D.N.Y. Jan. 13, 2020).

The Court further ruled in this case that the common law presumption of public access did not end the matter.  Rather, the Court applied a balancing test and held that the presumption of public access to the judicial documents at issue was outbalanced by the defendant's interest in secrecy here.  Lohnn, 2022 WL 3359737, at *5-*6.

In so ruling, the Court carefully pointed out that it was ruling on the only presumption of public access argued in the decision at bar, which was the common law presumption of public access and not the First Amendment right of public access.  Moreover, the Court invited the Constitutional issue in the future:  "However, the Court's decision to keep these declarations and exhibits sealed is without prejudice to a motion by an intervenor to unseal the documents on First Amendment grounds."  Lohnn, 2022 WL 3359737, at *6 n.4.

More remains to be done on the issue of whether there is a constitutional presumption of public access to testimonial and documentary evidence filed in a Court file, even if a defendant settles the case in exchange for a joint stipulation for dismissal with prejudice before the Court can rule on the motion supported by the evidence filed in the Court file.

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

FIRST-FILED STAYS WHERE IT IS, OPIOID LAWSUITS OR NOT.

(Courthouse, Baltimore, Md./New York Public Library Digital Collections)

In an UNPUBLISHED opinion, with a caution on its face to CHECK COURT RULES BEFORE CITING, the Delaware Superior Court determined that a  coverage case with respect to Opioid Lawsuits against CVS will remain pending in Delaware, at least for now.  The decision is In Re:  CVS Opioid Ins. Litig., Consol. C.A. No. N22C-02-045, 2022 WL 3330427 (Del. Super. Ct. Aug. 12, 2022).

The Court was faced with two competing lawsuits and a motion to dismiss or stay based on forum non conveniens.  The first lawsuit was filed in Delaware by CVS's insurers for a declaration that the carriers do not provide insurance coverage for indemnity or defense of the Opioid Lawsuits against CVS.  The Opioid Lawsuits against CVS are pending in Multi-District Litigation centered in the Northern District of Ohio.  There are also some Opioid Lawsuits pending against CVS in State Courts.

The second lawsuit of concern was a lawsuit filed in Rhode Island by CVS against its insurers, after the insurers filed their lawsuit in Delaware.  CVS sued in Rhode Island for insurance coverage and also for alleged insurer bad faith.

The Delaware Court ruled that the Delaware case having been filed first, it is CVS's burden to establish forum non conveniens by showing that CVS faces an "overwhelming hardship" to litigate the Delaware case in Delaware.  In re:  CVS Opioid Insurance Litigation, 2022 WL 3330427, at *7.

The Court held that CVS did not meet its burden.  Under this decision, the Delaware lawsuit filed by CVS's carriers for declaratory relief relative to coverage for the Opioid Lawsuits against CVS, remains pending in Delaware accordingly.

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

LITIGATION AND PREVENTION OF INSURER BAD FAITH MARICOPA & PA. HYPERLINKS.

 

 

Dennis J. Wall, No Good Cause, No Dispute, No Protective Order, Maricopa County Lawyer 11 (Maricopa County Bar Ass'n Oct. 2021), Download Article Published Maricopa Lawyer. Oct 2021.

Dennis J. Wall, Access by Nonparties to Discovery, Despite Stipulated Protective Orders:  Just the Beginning?, 24 Civ. Litig. Update 7 (Pa. Bar Ass'n Civ. Litig. Section Fall 2021), Download CivilLitFall2021.

Both articles ©Dennis J. Wall.  All rights reserved.

FLORIDA, STATUTORY BAD FAITH, AND FORCE-PLACED INSURANCE

The Florida Legislature may have added a force-placed insurance, statutory bad faith cause of action when it enacted the following Unfair Method of Competition and Unfair or Deceptive Act or Practice effective June 16, 2021:

(1) Unfair methods of competition and unfair or deceptive acts.--The following are defined as unfair methods of competition and unfair or deceptive acts or practices:

* * *

(z) Sliding.--Sliding is the act or practice of any of the following:

* * *

4. Initiating, effectuating, binding, or otherwise issuing a policy of insurance without the prior informed consent of the owner of the property to be insured.[1]

At least arguably, every homeowner with a mortgage owns the property to be insured.  Force-placing an insurance policy is also at least arguably "initiating, effectuating, binding or otherwise issuing a policy of insurance" on "the property to be insured."  By definition, force-placed insurance policies are placed by force without the prior informed consent of the homeowner.

            The argument that the Florida Legislature has intentionally or otherwise enacted a statutory provision which makes lender force-placed insurance an actionable unfair method of competition or unfair or deceptive act or practice, may be undercut by the Florida Legislature's adoption of the following provision at the same time in the same legislation:

5. Mailing, transmitting, or otherwise submitting by any means an invoice for premium payment to a mortgagee or escrow agent, for the purpose of effectuating an insurance policy, without the prior informed consent of the owner of the property to be insured. However, this subparagraph does not apply in cases in which the mortgagee or escrow agent is renewing insurance or issuing collateral protection insurance, as defined in s. 624.6085, pursuant to the mortgage or other pertinent loan documents or communications regarding the property.[2]

These two subparagraphs which have just been quoted, subparagraphs 4 and 5, respectively, of paragraph (z), subsection (1) of Florida's Unfair Methods of Competition and Unfair or Deceptive Acts or Practices Act or UCDPA,[3] have apparently not yet been reconciled by a court of competent jurisdiction as these words are written.  Their reconciliation remains in the arguments yet to come from practitioners, and others.  However it is worth pointing out that the Florida Legislature could have made subparagraph 4 subject to the same exception as it wrote in subparagraph 5 but it did not do so.

[1] Fla. Stat. § 626.9541(1)(z)4.

[2] Fla. Stat. § 626.9541(1)(z)5 (emphasis supplied).

[3] Fla. Stat. § 626.9541(1)(z)4&5.

There are all kinds of questions about statutory bad faith, including express causes of action, implied causes of action, preemption, civil remedy notices, and damages.  Many of the questions are asked and answered in statutes and interpreted in third-party bad faith cases, see generally 1 DENNIS J. WALL, §§ 3:28-3:30, LITIGATION AND PREVENTION OF INSURER BAD FAITH (West Publishing Co. 3d Edition, 2022 Supplements in process), and in first-party cases too.  See generally 2 id. §§ 9:14-9:16.

Insurer bad faith ramifications of force-placed insurance are addressed in 2 id. §§ 9:33-9:35.  The whole field of force-placed insurance, also known as lender-placed insurance, and also known as lender force-placed insurance, is a book by itself.   There was no book on the subject so I wrote the first one that I know of.  Still very much in use today, it was published by American Bar Association Publishing in 2015, LENDER FORCE-PLACED INSURANCE PRACTICES.

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

LIABILITY CARRIER RESERVED RIGHTS INCLUDING REIMBURSEMENT, RECOVERS INDEMNITY AND DEFENSE EXPENSES.

In a recent opinion, a U.S. District Judge in Massachusetts held that with respect to an underlying action, a liability carrier had no duty to defend or indemnify either of the two parties which the carrier subsequently sued in the carrier's action for declaratory relief and for reimbursement.  The two defendants sued by the carrier are its policyholder and an additional insured, both of whom it defended and for whom it entered into the settlement of the underlying action.

Besides holding that the liability carrier had no duty to defend or indemnify, the Court in this case further held that the carrier is entitled to reimbursement from the defendants.  Berkley Nat'l Ins. Co. v. Granite Telecomm's LLC, ___ F. Supp. 3d ___, No. 21-10626-RGS, 2022 WL 3021107, at *4-*6 (D. Mass. July 29, 2022).

The recent opinion mentions that Berkley, the liability carrier, defended and settled only after being threatened with a  lawsuit under "[Mass. Gen. Laws ch.] 176D," but it does not appear to repeat the significance of the liability carrier's reservation of rights, as the Court did in an earlier Order in this case.

The Court in this case cited its earlier Order as a short-hand reference for the background behind the parties' dispute.  In that earlier Order,  the Court denied the policyholder's and the additional insured's motion for judgment on the pleadings, pointing out that the liability carrier in this case reserved the right to reimbursement from them:

Berkley capitulated, but reserved its right to subsequently deny coverage under the Policy’s bacteria and pollutant exclusion provisions and seek reimbursement.

Berkley Nat'l Ins. Co. v. Granite Telecomm's LLC, Doc. No. 78, Order Denying Motion for Judgment on the Pleadings at 3, filed March 28, 2022 (D. Mass. No. 21-10626-RGS), 2022 WL 899423, at *1.

That made all the difference.  See generally 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:6, Informing the Insured:  Insurer Assertion of Rights to Reimbursement From the Insured of Clearly Noncovered Indemnity and Defense Expense (3d Edition Thomson Reuters West, 2022 Supplements in process).

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

BURDENS OF PROOF OF BAD FAITH--WHO HAS THE BURDENS?

Burdens of proof -- Who Has The Burdens is the title of § 3:95 in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (West Publishing Co. 3d Edition, 2022 Supplements in process).  The burdens of proof in a bad-faith cause of action under Rhode Island law are recognized, although in apparent dicta, in Shannahan v. R.I. Interlocal Risk Mgmt. Trust, 269 A.3d 737, 740 (R.I. 2022).

In that case, the Supreme Court of Rhode Island emphasized that the plaintiff in a bad-faith action must demonstrate the absence of a reasonable basis for denying the claim, or an intentional, reckless failure to properly investigate the claim.   That particular case involved an otherwise unspecified claim "in which plaintiffs had asserted that defendant wrongfully and in bad faith denied plaintiffs' underlying third-party insurance claims[.]"

This apparently was dicta because the Supreme Court had already declared that the plaintiffs were not the defendant's "insureds" and that they were not assignees of any insureds, either, so that they had no standing to pursue a bad-faith cause of action against that carrier.

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

THE FILED RATE DOCTRINE: MORE LESSONS FROM THE FIELD.

For good or ill, the filed rate doctrine has been introduced into the field of insurance.   Learning the lessons from the field in which the FRD began, which is the field of utility regulation, is important.  That might seem obvious, but perhaps because the FRD is so new to insurance, few insurance practitioners incorporate learning the lessons from the field of utility regulation into their insurance practice. 

In Wabash Valley Power Ass'n v. Fed. Energy Reg. Comm'n, Nos. 20-1286 & 20-1348, 2022 WL 3036393 (D.C. Cir. Aug. 2, 2022), a utility lost its attempt to bar users from challenging its rate.  The utility-rate-setter declared that a rate could not be challenged  because the charge was "filed" in contracts written by the utility and submitted to the utility by the users who had to sign the contracts.  The contracts contained a provision that the user agreed that the rates it paid to the utility under the contract were fair and reasonable.

The administrative agency, in this case the Federal Energy Regulatory Commission (FERC), rejected the utility's position, and the Circuit Court of Appeals for the District of Columbia affirmed.

The Court's summary was succinct.  The Court's opinion went directly to the point:

    This case presents a question of how to determine the reasonableness of rates  for the sale of electricity from an energy cooperative to its individual member utilities. The rates are fixed by majority vote of the utilities. Contracts between the cooperative and certain members purport to impose a presumption that the rates are just and reasonable. In rejecting these contracts, the Federal Energy Regulatory Commission concluded that the rates are not entitled to a presumption of reasonableness under [Supreme Court decisions].

Wabash Valley Power Association, 2022 WL 3036393, at *1.

A rate can be challenged even if the party setting the rate makes the other parties sign contracts that declare the rate "just and reasonable."  Those in the insurance field who have ears to hear, let them hear, to borrow a Biblical phrase.

Please read the disclaimer.  ©2022 Dennis J. Wall.  all rights reserved.

PLAINTIFF COULD NOT ESTABLISH SUMMARY JUDGMENT, BUT BOTH MOTIONS DENIED.

In Ventrice v. Lexington Ins. Co., No. 16-660, 2022 WL 3013078 (D.N.J. July 28, 2022) (stated NOT FOR PUBLICATION),  the District Judge summarized New Jersey law on insurer bad faith:

To establish a claim for bad faith, a plaintiff must demonstrate that “(1) the insurer lacked a fairly debatable reason for denying coverage, and (2) insurer knew of or recklessly disregarded the lack of a reasonable basis for denying coverage.” Stiso v. State Farm Fire & Cas. Co., No. 13-5741, 2015 WL 7296081, at *9 (D.N.J. Nov. 18, 2015). “A claim is fairly debatable if a plaintiff cannot establish as a matter of law a right to summary judgment on the substantive claim, i.e., the underlying contract claim.” Laing, 2014 WL 4953250, at *3 [Laing v. Am. Strategic Ins. Corp., No. 14-1103, 2014 WL 4953250, at *2 (D.N.J. Oct. 1, 2014)]  (internal citation and quotation marks omitted).

Ventrice, 2022 WL 3013078 (page numbers not available from Westlaw at the time of publication).

In this case, differences in the facts made entering summary judgment for either side impossible in the eyes of the District Judge.  Accordingly, the Court denied both parties' motions for summary judgment on the bad faith counts.

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.