Claims and Bad Faith Law Blog

SHOULD AN INSURANCE CARRIER INITIATE SETTLEMENT NEGOTIATIONS? EVER? NEVER?

 

                                   (Exploration Image by NASA)
In at least one jurisdiction, Kansas, the question of a liability insurer initiating settlement negotiations is not a question of duty but a question of fact under all the circumstances:

    Under this hypothetical, both the insurer and insured know liability is clear and the claim filed by the insured exceeds policy limits, creating a conflict of interest that requires the insurer to exercise reasonable care and to act in good faith. [Citation omitted.]  They also know the claim can be settled within policy limits if they act quickly, even though the third party has not made formal demand. We cannot conclude, as a matter of law, that the insurer could never breach the duties of reasonable care and good faith by failing to explore settlement under these (or any other possible set of) circumstances simply because the third party has not yet made a formal demand. See, e.g., Keeton and Widiss, Insurance Law § 7.8(c), 889-90 (1988) (“In most circumstances the insurer, having reserved to itself the right to control the defense and the decision whether to agree to a settlement, should be obligated to explore the possibility of a settlement even in the absence of actions by the third-party or an express request by the insured.”).[1]

 

[1]Granados v. Wilson, ___ Kan. ___, 523 P.3d 501, 513 (2023) (emphasis added).

The Granados decision is explored along with other cutting-edge decisions which address a Duty to initiate settlement negotiations in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:16 (Thomson Reuters 3d Edition, 2023 Supplements in process).

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

 

SOMETIMES, IT'S WRITTEN FOR YOU.

(Photo by Dennis Wall)

Sometimes, it's written for you.  When you sit down to write, as I did for this article on bad faith, you expect to spend time researching, then crafting sentences and paragraphs to convey the meaning you draw from what you found.

Not this time.

There are instead times when it is written for you.  This was the case of the opening words of a decision by a federal judge in Indiana on St. Patrick's Day 2023.  The judge summarized the entire case in the opening words of the decision.  To be sure, the opinion went on for several pages in the Westlaw version, but the following words written in the judge's decision sum it up completely:

    In 2015, Tampa Bay Buccaneers kicker Lawrence Tynes sued the franchise for an off-the-field injury that ended his decorated career. The Buccaneers believed the franchise had insurance coverage based on representations in a proposal from one broker, American Specialty Insurance & Risk Services, Inc. American Specialty served as underwriter for AXIS Insurance Company. But AXIS called an audible and denied coverage. The Tynes suit never progressed to name American Specialty or AXIS.

    Instead, as the suit proceeded against the Buccaneers, rather than ask American Specialty to defend even a potential claim, AXIS directed American Specialty to stay out of it, and did so for eighteen months. AXIS maintained its position that it wasn't actually liable because the insurance  policy provided no coverage. At mediation, AXIS nevertheless chose to attend and contribute to a Buccaneers settlement in exchange for the franchise's promise not to sue AXIS. AXIS had invited American Specialty to consider a “market solution” at mediation too but never asked for a defense.

    American Specialty's silence [in response to Axis's proposed "market solution"] and lack of contribution at mediation [which American Specialty did not attend, seemingly in accordance with Axis's long-standing instructions not to be involved in any way in the Tynes case] kicked off AXIS's suit based on an indemnity clause in their Program Manager Agreement. This case presents the question whether AXIS paid a loss for which it was not liable or in a manner that rendered its settlement contribution voluntary such as to foreclose a request for indemnity. American Specialty requests summary judgment for this reason. The court grants summary judgment accordingly.

Axis Ins. Co. v. Am. Spec. Ins. & Risk Serv's, Inc., No. 1:19-CV-165 DRL, 2023 WL 2560833 (N.D. Ind. March 17, 2023).

The Court noted that Indiana law requires that the party from which indemnity is sought, must have been given notice and an opportunity to defend itself.  On this record, that did not happen for American Specialty.  Indiana law summarized by the Court equates conduct of this kind with bad faith when it is indulged in by a party which later seeks indemnity .  See Axis, 2023 WL 2560833 at *5.  On this record, then, the Court granted American Specialty's motion for summary judgment.

 The only wonder about this case is something the judge did not address, actually could not address:  Why was this lawsuit ever filed?

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved. 

SUNSHINE IN FLORIDA GOVERNMENT? OBSERVATIONS IN SUNSHINE WEEK 2023.

"We share a common mission to promote transparency in government."

American Oversight, in its numerous EMails to the Florida Department of Education, starting on May 4, 2022.

(The Florida Supreme Court / 920 Inside Florida)

American Oversight is a nonprofit group that made more than eight (8) requests for public access to non-exempt public records held by the Florida Department of Education.  They made more requests than that, but they sued the DOE for not complying with respect to those 8 under the Florida Constitution and Florida's Public Records Act.  Here is their complaint:  Download American Oversight v. Florida Dep't of Education Complaint to Enforce Public Records Act filed March 16 2023 (2d Jud. Cir. Leon County Fla.).

American Oversight's public records requests are attached as Exhibits to their Complaint and you can read them for yourself.

They got fed up, apparently, and complained about DOE's business model of "a demonstrated history of delayed responses to American Oversight's public records requests."  Id. at 6 n.7.  So they sued for better access, or in many cases access in the first place, to the public records they requested on May 4, 2022; January 12, 2023, and February 15, 2023.  They sent follow up EMails on their earlier requests on January 25, 2023 and got crickets, nothing, Nada, Radio Silence from the current Florida Department of Education.  Finally, they repeated their public records requests (and may have added some) when they sent their public records request on February 15, 2023.  "To date, DOE has failed to produce a single record that is responsive to any of the eight requests at issue in this Complaint."  Id. at 20, ¶ 5.

Regardless of how the American Oversight v. Fla. Dep't of Education lawsuit turns out, in a decision cited in the Complaint (id. at 20), the Florida Supreme Court previously held:

The only challenge permitted by the Act at the time a request for records is made is the assertion of a statutory exemption pursuant to section 119.07.  The only person with the power to raise such a challenge is the custodian. 

Tribune Co. v. Cannella, 458 So. 2d 1075, 1078-79 (Fla. 1984).  There is of course no statutory exemption pursuant to section 119.07 here, parenthetically, and of course there has been no challenge here, allegedly just delay and silence and incomplete responses.

Further, the law has been clear for nearly 40 years, at least until the 2023 Florida DOE came along, that it is up to the Florida Legislature to exempt records from public disclosure, not the DOE (or anyone else):

The legislature has placed the books on the table; only it has the power to alter that situation.

    We therefore hold that the legislative scheme of the Public Records Act has preempted the law relating to any delay in producing records for inspection. The only delay permitted by the Act is the limited reasonable time allowed the custodian to retrieve the record and delete those portions of the record the custodian asserts are exempt.

Tribune Co., 458 So. 2d at 1079 (emphasis added).

Again, regardless of how the American Oversight v. Fla. Dep't of Education case may be decided, there is a question for Florida's chief law enforcement officer, the Attorney General of the State of Florida:  Is the Florida Supreme Court's decision still the law of Florida?  Or in your judgment, General Ashley Moody, does the Florida DOE -- or anyone else -- now have the power to alter that situation?

On this last day of Sunshine Week, this article will be published both on Claims and Issues Blog and on Claims and Bad Faith Law Blog.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

SUNSHINE LAWS IN FLORIDA (NOT EXACTLY FULL TRANSPARENCY, BUT ...).

This is Sunshine Week!  It's a celebration of transparency laws across the United States.  Here are some of the Sunshine Laws in Florida:

• Florida's Open Meetings Laws, Fla. Stat. §§ 286.011, et seq.
• Florida's Sunshine Laws, Fla. Stat. §§ 119.01, et seq.

    This one is a little misleading if you are not familiar with how Sunshine Laws work, including Florida's.  The Florida statutes offer some 600 exemptions where records are not open to the Sunshine.  These exemptions include when the State acquires land, for example.  Land values are sealed until the State makes a conditional decision to buy the land.  When that happens, the exemption expires.  Then the public has 30 days to check out the transaction -- except of course that the values of the land estimated by the State and the sellers are not public until after the State has already agreed to make the purchase, putting the public in the position of putting the brakes on the land deal f they can do it within 30 days -- and of course less time if they don't know about it for awhile. 

• Florida's Sunshine in Litigation Act, Fla. Stat. § 69.081.

Most if not all States and jurisdictions in the U.S. have exemptions from transparency, not just Florida.  But Florida has as its current Attorney General a person who gratuitously vows whenever Sunshine Week rolls around, as it has again this year, to safeguard transparency under the Florida laws.  General Ashley Moody, what transparent public purpose is served in your evaluation when the State acquires land in the dark, the public is in the dark, and the records about the value of the land in that transaction are private until the land is "conditionally" purchased even though it is the public's money that is used for the purchase?   Thank you.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved. 

 

 

HUMP DAY IN SUNSHINE WEEK, ALL OVER AMERICA! FLORIDA TOO!

Wednesday of Sunshine Week is a bit of a potpourri.  This recognizes the fact that Sunshine Week is celebrated all over the United States.  For example, here is a YouTube production assembled by The National Archives about Freedom of Information Act requests: 

National Archives Sunshine Week Celebration: Making Access Happen: FOIA at the National Archives.

What could be more timely than the National Archives commenting during Sunshine Week which as I understand it is also celebrated in Mar-A-SomethingOrOther?

On Tuesday, our sister blog published an article about the Fox and Dominion Voting Systems case:  Tuesdays With More Sunshine Week!  And Ashley Moody!  Specifically, the article referenced a pleading filed in that case by Fox on Friday, March 10, 2023.  It is titled, Fox Defendants' Application for Continued Sealing of Summary Judgment Materials, and you can read it here:  Download Fox Defendants' Application for Continued Sealing of Summary Judgment Materials filed 03.10.23 in US Dominion Inc. v. Fox News Netwk. LLC (Del. Super. Ct. No. N21C-03-257 EMD .CONSOLIDATED).

See what you think.   This is the argument in a nutshell, and it goes to the heart of Dominion's defamation case against Fox:  "For a media company like Fox, proprietary newsgathering processes are the kind of competitive business information that justifies maintaining the seal."  This includes sealing "concrete details" of "how editorial decisions are made," "how reporters source their stories," and how Fox conducts its "fact-checks."  (Id., at 12.)  "Prematurely disclosing these other details on Fox's internal and proprietary journalistic processes may allow competitors to appropriate these processes for their own competitive advantage, to Fox's detriment, and may chill future newsgathering activity."  (Id., at 14.)

Convinced?  

Maybe this will change your mind, when you consider that Fox deserves "extra protection" from the Court "[i]n a high-profile case like this".  (Id., at 18.)

Speaking of Fox and yesterday's article, recall Ashley Moody.  If you do not watch Fox regularly, you might not know that Ms. Moody is the current Attorney General of the State of Florida.  You would not be likely to learn that fact from other TV outlets, because she rarely if ever appears anywhere except on Fox shows. She regularly issues a press release at this time of year that she "vows" to "safeguard" Sunshine Laws in Florida.

So, in the spirit of transparency in this Sunshine Week that Ms. Moody has "vowed" to "safeguard," after all, what does the Attorney General of the State of Florida get from Fox, and what does Fox get from the Attorney General of the State of Florida?

  

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

SUNSHINE WEEK CONTINUES! AND WE HAVEN'T FORGOTTEN YOU, MS. MOODY.

(Gridview_imagefull / FDAC)

In Wiens Capital Mgt., LLC v. Advocate Consulting Legal Grp., PLLC, No. 2:23-cv-81-SPC-KCD, 2023 WL 2435806 (M.D. Fla. Feb. 16, 2023) (USMJ), a U.S. Magistrate Judge faced a motion "to seal a portion of the disclosure statement required by Federal Rule 7.1 and Local Rule 3.03 that lists the identities of the individual members of Wiens Real Estate Ventures, LLC[.]"  Wiens Capital Management, 2023 WL 2435806, at *1.  Ventures was the sole member of Management, the plaintiff that filed this lawsuit.  Wiens Capital Management, 2023 WL 2435806, at *1.

The Magistrate Judge denied the motion.  The people who requested secrecy from public view failed to overcome the presumption of public access.  In short, the identities of these people are in the sunshine now.  What a positive ruling to report for Sunshine Week in Florida!

Ms. Ashley Moody, we have not forgotten your self-stated "vow to safeguard" Florida's Sunshine Laws.  Nice words, those.  You did not have to say them, in fact, you did not have to say them for years whenever Sunshine Week rolls around.  What say you now about people who do not comply, such as the Florida governor?  The people of Florida deserve more than crickets from you, Ms. Moody, especially since you said a vow (to safeguard, no less) that you offered up voluntarily.  See Sunday's article published on our sister blog, IT'S THE FIRST DAY OF SUNSHINE WEEK IN FLORIDA!

Make your vows over the years to safeguard Florida's Sunshine Laws more than press releases, Ms. Moody.  Make them real.  

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

"NO ATTORNEY'S FEES FOR YOU!" ONLY PROPERTY INSURERS NEED APPLY.

 

A Courtroom.  (Pacific Standard)

The risk of paying an insured's  attorney's fees in the event the insured  prevails in litigation with an insurer is one of the factors that insurers must take into account.  This is something that comes to an insurer's attention first at the stage when the carrier decides whether it will deny coverage.  At that stage, the calculus includes the insurer's best guess whether the fact, timing, or context of denying an insured's claim is likely to lead to litigation.

          Once in litigation, most if not all insurers will continue the calculus by estimating the likelihood that its insured  may prevail.  The threat of paying its insured's attorney's fees is a continuing factor in making the insurance carrier's decision whether to affirm or deny coverage, whether that decision is made before or after litigation with the insured has begun.  The threat of paying an insured's attorney's fees cannot be underestimated. 

          In 2022, the statute which previously authorized a prevailing insured to recover its  attorney's fees in litigation caused by its insurer, was changed exclusively for the sole benefit of property insurers. Since the change, policyholders that win their case cannot recover their attorney's fees from a property insurer even if their property insurer was the one that caused the fees to be incurred.   However,  other insurance companies remain subject to the risk.  See Fla. Stat. § 627.428.

          The property insurers were also protected by changes to the Surplus Lines Statute governing Attorney's Fees.  In a mirror image of Section 627.428 applicable to all insurers generally, before 2022 insureds prevailing in litigation caused by their surplus lines insurers could recover their attorney's fees incurred in defending or prosecuting the litigation.  That changed in 2022, as well, but once again  only with respect to property insurers.  Other surplus lines insurance companies remain subject to the risk.  See Fla. Stat. § 626.9373.

Thomson Reuters is publishing the author's forthcoming article, Consumers Had No Voice:  Changes to Property Insurers' Laws in Florida, in the next edition of Insurance Litigation Reporter.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

PROPERTY INSURERS PROTECTED FROM BAD FAITH CLAIMS IN FLORIDA.

 

(Matt Whitaker / New York Times)

The 2022 Florida Legislature enacted the property insurers' list of protections from bad faith claims in Florida.  Topping the list was Florida's Bad Faith Statute,  Subsection 624.155(1)(b).  That was the property insurers' greatest concern, and it has been the greatest concern of every insurer doing business in Florida since it was enacted.

More precisely, the greatest concern to any insurer is the provision of the Bad Faith Statute that makes an insurer's bad-faith settlement conduct actionable in Florida.   Fla. Stat. § 627.155(1)(b)1.  Dr. Johnson once wrote that there is nothing like a person's impending execution to focus the mind.  Well, in Florida, there is nothing like the prospect of being sued to focus the mind (including insurers).

In 2022, things changed for property insurers in Florida.  Section 624.1551 was enacted to make exceptions for property insurers.  Alone among insurance companies, property insurers were granted a return to the past as far as bad faith liability in Florida  is concerned.   It used to be that there was no such thing as bad faith exposure to any insurance companies issuing "first-party" policies or insurance contracts for coverage claims by  their policyholders, such as health insurance companies and fire insurance carriers.

 Section 624.1551 changed the focus but only for property insurers.  Now people asking for "extracontractual" damages first must prove that the property insurer is liable for a breach of contract.  Here's the thing:  Bad-faith settlement conduct in Florida was never a breach of the insurance contract.

You thought the calendar said 2023?  Not in Florida, at least not for property insurers.  Their focus is on the past, and welcome to it.  You can stay as long as you don't try to sue a property insurer for bad faith.

The author's article, Consumers Had No Voice:  Changes to Property Insurers' Laws in Florida, is scheduled for publication this week by Thomson Reuters' Insurance Litigation Reporter.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

FEDERAL COURTS APPARENTLY CONFUSED OVER FILED insurance RATE DOCTRINE.

 

Courtroom.  (Pacific Standard)

In a federal case decided in Washington State, a federal judge apparently applied the State Filed Insurance Rate Doctrine to grant motions to dismiss filed by a lender (Bank of America) and a force-placed insurance carrier (QBE).  Hong v. Bank of Am., N.A., No. C20-1667RSM, 2021 WL 3207684, at *3 (W.D. Wash. July 29, 2021) (describing Washington's Filed Rate Doctrine as recognizing "principle of nonjusticiability" barring courts from deciding reasonableness of rates that were both filed and approved by the relevant Washington State authority, here, the Washington Insurance Commissioner), aff'd with opinion, No. 21-35742, 2022 WL 2235469 (9th Cir. June 22, 2022) (stated in a footnote "not for publication and is not precedent" with exception if a particular Ninth Circuit Local Rule applies; not addressing "principle of nonjusticiability" or any other principle that some say underlie Filed Rate Doctrine).

However, the federal judge apparently felt constrained to nod in the direction of the competing Federal  Filed Rate Doctrine.  The federal court pointed out that "f]ederal courts recognize a further principle underlying the doctrine," namely, what the federal courts call the "principle of nondiscrimination").  Hong, 2021 WL 3207684, at *3.  This was dicta in the context of this court's ultimate holding, which was pretty clearly reached under Washington State law and not federal law.

Still, federal judges are fond of their Federal Filed Rate Doctrine and reluctant to give it up completely, it would appear, even when a State Filed Insurance Rate Doctrine is available to decide the case.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

STATUTORY BAD FAITH IN MINNESOTA.

(Gridview_Imagefull_FDACS)

"In 2008, the Minnesota Legislature created a private cause of action for bad faith in first-party insurance."  Friedberg v. Chubb & Son, Inc., 800 F. Supp. 2d 1020, 1025 (D. Minn. 2011) (Keyes, United States Magistrate Judge).  The Minnesota statute is Minn. Stat. § 604.18 (West; Westlaw current with legislation effective through February 22, 2023 from the 2023 Regular Session. Some statute sections may be more current, check credits under statute on Westlaw for details.).

The Eighth Circuit quickly and clearly summarized the statute in 2022:

    To make a bad faith claim, the insured must establish both that the insurer lacked a reasonable basis for denying the insurance benefits and that the insurer knew it lacked a reasonable basis for denying benefits or acted in reckless disregard of the lack of a reasonable basis.

Wobig v. Safeco Ins. Co. of Am., 40 F. 4th 843, 848 (8th Cir. 2022) (construing and applying Minn. Stat. § 604.18 subd. 2(a)).

Or, as the Minnesota Supreme Court put it in a slightly lengthier interpretation, reaching the same result: 

    Several things are clear from the plain text and structure of the statute. First, the burden rests with the insured to prove that the insurer violated the standard of conduct. Second, to prevail, the insured must establish two independent facts: (1) the insurer did not have a reasonable basis for denying the benefits of the insurance policy, and (2) the insurer either knew it lacked a reasonable basis for denying the benefits or it recklessly disregarded the fact that it lacked a reasonable basis for denying the benefits.

Peterson v. W. Nat'l Mut. Ins. Co., 946 N.W.2d 903, 910 (Minn. 2020).

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.