Claims and Bad Faith Law Blog

GOT COMPLAINTS? YOU CAN KEEP THEM SECRET FROM THE PUBLIC.

 

In two cases filed within the space of a week, the Federal Trade Commission has kept the public from seeing complaints that have been filed on behalf of the American public.  Only the Courts, the defendants, and the FTC can see the public's complaints, so far. 

The first case is Federal Trade Commission v. U.S. Anesthesia Ptrs., Inc. (S.D. Tex. No. 4:23-cv-03560).  Download Federal Trade Commission v. U.S. Anesthesia Ptrs. Inc. Complaint DE 1 filed Sept. 21 2023 (S.D. Tex. No. 4.23.cv.03560).  In its 106-page complaint in that case, which the FTC filed on September 21, 2023, the FTC brought an antitrust lawsuit against a private equity firm for the first time.

The claims alleged in the complaint all come back to a central allegation that the private equity firm and its associated entities hiked the cost of reimbursement rates for anesthesia services in Texas through a conspiracy based on the acquisition of competitors.  However, the allegation is repeatedly blacked out, i.e., redacted.  See, e.g., id. at ¶ 91, p. 30; ¶ 107, p. 34; ¶ 111, p. 35; ¶ 115, p. 36; ¶ 118, p. 37; ¶ 128, p. 40; ¶ 133, p. 41; ¶ 140, p. 43; ¶ 148, p. 45; and many more.

We do not know why.  I researched the Local Rules of the United States District Court for the Southern District of Texas where this case was filed, but I could find nothing to explain this.  

I would show you the FTC's motion to seal portions of the complaint but I cannot.  It's not available to the public, meaning you and me.  It is available to the people's representatives, of course, meaning the FTC – the very party that sealed it from public view.

The FTC filed its motion to seal portions of the complaint "temporarily" but we cannot read the FTC's reasons for sealing any part of the complaint, or know what the FTC considers a "temporary" seal in that case.  Incredibly, the FTC filed its motion to seal under seal.

I am going to send an E-Mail to the FTC attorney who signed the complaint, Kara Monahan, Esquire, one of eleven FTC attorneys listed on the complaint. I will let you know if I get a meaningful Reply.

In the meantime, we can perhaps find some enlightenment from another case that the FTC filed in September, this one against Amazon.  (Or perhaps, not, as we shall see.)

In Federal Trade Commission v. Amazon.com, Inc. (W.D. Wash. No. 2:23-cv-01495-JHC), Download Federal Trade Commission v. Amazon.com Inc. Complaint DE 1 filed Sept. 26 2023 (W.D. Wash. No. 2.23-cv-01495) , the FTC alleged in a 172-page complaint it filed on September 26, 2023 that Amazon violated antitrust laws by favoring its own sales and putting up obstacles to competitors' sales on the Amazon website, in essence.  Amazon runs what it calls a "marketplace," also known as a "fulfillment center," which includes products offered for sale by third parties.

The FTC alleged in pertinent part that Amazon violated antitrust laws by the use of a "Project Nessie," which Amazon describes on its website apparently as a monitoring system.  However, once again we in the public do not know why "Nessie" allegedly offended antitrust laws.  All or nearly all of the allegations of Amazon's antitrust liability based on Nessie are blacked out. Id., ¶ 417, p. 123 of 172, through ¶ 463, p. 132 of 172. 

Even the amount of money that the FTC alleged that "Amazon's Project Nessie has already extracted ... from American households" is blacked out from public viewing.  The likely first example of this blackout is in id., ¶ 4, pp. 5-6 of 172.

The FTC blames Amazon for its redactions.  Plaintiff's Motion for Leave to Temporarily Seal Portions of the Complaint, DE 2 at 2, 3-4, filed Sept. 26, 2023 (W.D. Wash. No. 2:23-cv-01495-JHC).  Download Federal Trade Commission v. Amazon.com Inc. Motion for Leave to Temporarily Seal Portions of the Complaint DE 2 filed Sept. 26 2023 (W.D. Wash. No. 2.23-cv-01495).

The FTC helpfully highlighted the hidden complaint with the allegations Amazon contended before suit would be "confidential," id. at 4,  but we cannot see it.  The hidden complaint is, well, hidden.

The FTC helpfully also filed a public version of its complaint which, as we have already seen, is heavily redacted.  "Plaintiffs have filed a public version of the Complaint that redacts all information designated as confidential by the producing parties."  Id. at 4.

That raises the issue of why the FTC filed its request to seal parts of the complaint at all.  The FTC said this:  "The FTC makes this request to comply with its regulations governing treatment of confidential information submitted to the FTC during its pre-complaint investigation and to give affected parties an opportunity to ask the Court to seal portions of the Complaint on a permanent basis.  The FTC is not claiming confidentiality with respect to any information that is the subject of this Motion."  Id. at 1-2.  [Emphasis added.]  The FTC also wrote that its request to seal was based on a "federal statute and FTC rules."  Id. at 3-4.  [Emphasis added.]

In sum, the FTC motion to seal is expressly filed "pursuant to" regulations, a federal statute, and rules.  The FTC motion did not identify which regulations, statutes, or rules that the FTC had in mind when it filed this motion.

I am going to E-Mail the FTC lawyer, once again, in this case the FTC lawyer that signed this motion, Susan A. Musser, Esquire.  She is one of seventeen FTC lawyers on the complaint, in addition to dozens of lawyers representing multiple States.  Once again, I will let you know if I get a meaningful Reply.

Parenthetically, the FTC asked once again for a "temporary" seal, in this case, for "14 days."  The FTC is supposed to represent the people, but in this case the FTC is keeping secrets from the public including how much Amazon allegedly bilked them. That amount is something that the FTC is going to have to put in evidence anyway.

For its part, Amazon's general counsel, David Zapolsky, Esquire, said in a statement that the FTC complaint is wrong on the facts and on the law.  That may be, or maybe not.  We simply cannot evaluate such comments if we the public cannot even read the complaint.

The Local Rules of the Western District of Washington are clear, however.  Here is a link to the Local Civil Rules from the Court's website so that you can read the Rules yourself.  Local Civil Rule 5(g) begins with this sentence:  "There is a strong presumption of public access to the court's files."  There are "only two circumstances" when a party may file a document under seal in a lawsuit in the Western District of Washington:  one is if "a statute, rule, or prior court order expressly authorizes" it, and the other is by filing a motion in compliance with LCR 5(g)(2)(B) & LCR 5(g)(3).

We have already looked together, you and I, for a regulation, statute, or rule that expressly authorizes filing a partly-blacked-out FTC complaint, but we have not found any.  (As of this writing, no court orders authorizing secrecy have been entered in either case.)

As for FTC's motion to seal, you have the opportunity to do what the Court in Washington and perhaps Amazon is going to have to do, and that is compare the motion to the Local Civil Rules to see how closely the FTC motion followed the Rules.

"Only in rare circumstances should a party file a motion, opposition, or reply under seal."  LCR 5(g)(5).  Apparently, the amount and at least one of the methods by which Amazon allegedly gouged its customers and third-party vendors alike is one of those rare circumstances in the eyes of the Federal Trade Commission.

As I said earlier, if I receive meaningful Replies to my E-Mails I will let you know.  These and similar blackouts of all or parts of a complaint's allegations have ramifications for insurer bad faith cases.  TO BE ADDRESSED IN AN ARTICLE TO FOLLOW ....

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

BAD FAITH EXPOSURE EVEN THOUGH NO DEMAND WITHIN LIMITS.

After citing Illinois, South Dakota, and Tennessee cases, the Court in Sacred Heart Health Serv's v. MMIC Ins., Inc., ___ F. Supp. 3d ___, 2023 WL 3742544, at *26 (D.S.D. May 31, 2023). held that "an insurer may be liable for bad faith even if it did not receive a demand to settle within policy limits." 

Decisions involving the duty to initiate settlement negotiations in third-party cases like Sacred Heart, including the decisions relied on in that case, are discussed at length in § 3:16 in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (3d Edition West Publishing Company, with 2023 Supplements).

FLORIDA APPRAISAL DID NOT DETERMINE CARRIER'S LIABILITY OR INSURED'S DAMAGES.

Under the Florida Bad Faith Statute in first-party cases -- which is the only source of a bad-faith claim or cause of action in a first-party case in Florida -- there must first be a determination of the carrier's liability and of the insured's damages, among other things.  An appraisal award of the difference between Replacement Value and Actual Cash Value did not determine the carrier's liability, so it was held to be a legally insufficient springboard for the statutory first-party bad faith claim in Ricol Holdings, LLC v. Westchester Surplus Lines Ins. Co., ___ F. Supp. 3d ___, No. 3:23cv12248-TKW-ZCB, 2023 WL 4948005, at *3-*4 (N.D. Fla. July 26, 2023).

 

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.  Express statutory causes of action in first-party bad faith cases, including under Florida law, are discussed at length in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:14 (3d Edition West Publishing Co., 2023 Supplements).  Far from being overlooked or forgotten, third-party cases are discussed in multiple sections in Volume 1, id., including Statutory Bases of Liability for Bad Faith in claims involving Settlement, § 3:28, in claims involving Refusal to Defend, § 3:63, and in claims involving the Conduct of the Defense, § 3:92.

WHEN WILL FEDERAL COURTS SHUT DOWN IF GOVERNMENT SHUTS DOWN?

Reuters reports that if there is a government shutdown because there is no agreement in the U.S. Congress to continue funding the federal government past September 30th, then the federal Courts will shut down two weeks after that.  See Nate Raymond, US Judiciary Can Keep Operating For 2 Weeks if Government Shuts Down, REUTERS online September 19, 2023.

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

INSURER BAD FAITH, FLORIDA CONFIDENTIAL, TRADE SECRETS, CERTIORARI, ALL!

In Progressive Select Ins. Co. v. Lloyd's of Shelton Auto Glass, LLC, 367 So. 3d 586 (Fla. 2d DCA 2023), an insured's assignee sued for insurer bad faith and to compel production of the insurance company's alleged secret pricing agreement with a windshield replacement company.  

    The trial court directed the release of the carrier's Provider Agreement, subject to a confidentiality agreement that the insured had entered into with the carrier.  Progressive, 367 So. 3d at 587.

    The carrier filed this appeal seeking certiorari review because, it contended, release of the Provider Agreement would reveal "trade secrets."

    The appellate court declined to review the order.  Progressive, 367 So. 3d at 587-88.

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

Certiorari review of discovery orders concerning Claims Adjuster's Files in particular in first-party bad faith litigation is discussed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 12:5 (3d Edition West Publishing Company, 2023 Supplements in process).

 

 

 

TRIAL COURT DO-OVER FOR SEALED DOCUMENTS IN INSURANCE BAD FAITH CASE ....

AND DISCRETION REGARDING REFUSAL TO COMPEL DISCLOSURE OF DISCOVERY TO STRANGERS TO THE LITIGATION.

In Good v. Farmers Ins. Co., ___ P.3d ___, 2023 WL 5951464 (Okla. Ct. Civ. App., Div. 3, Decided Feb. 15, 2023 & Mandate Issued Sept. 13, 2023), the issue was public access to materials in a closed insurance bad faith lawsuit.

    The underlying, closed bad faith lawsuit arose out of the defendant carrier's denial of a homeowner's insurance claim for damage allegedly due to an earthquake.  As a part of that claim in litigation, the homeowners-plaintiffs alleged that the carrier "wrongfully engaged in a pattern and practice of denying earthquake damage claims."  Good, 2023 WL 5951464, ¶ 2, at *1.

    There were two kinds of materials at issue.  One kind consisted of "three hundred and fifty-two filings in the [underlying] case up to the date of the filing of the dismissal with prejudice."  Good, 2023 WL 5951464, ¶ 4, at *2.  The other set of publicly undisclosed materials consisted of more than "ten million pages of documents and multiple depositions of [the insurance carrier's] officers and executives[.]"  Good, 2023 WL 5951464, ¶ 5 n.5, at *2 n.5.

    The plaintiffs in the second lawsuit, Cole and Teri Newby, were also homeowners with an earthquake claim for coverage under a policy issued by the same carrier.  They filed a motion to intervene in the underlying case for the purpose of accessing both the sealed documents in the court file and the voluminous materials produced by the carrier in the underlying case.  Their motion was denied.

    On appeal, the Oklahoma Court of Civil Appeals first held in this case that the trial court had erred regarding its denial of access to the Newbys regarding the sealed documents in the court file of the underlying case.  The Oklahoma appellate court ruled that the nonparty Newbys had standing to intervene for the purpose of asserting the right of public access to all these documents and materials, the documents undisclosed and sealed, and the undisclosed discovery materials as well.  Good, 2023 WL 5951464, ¶ 8, at *3.

    This ruling that nonparties to an insurance bad faith lawsuit have standing to assert public access to materials involved in that lawsuit is potentially important to other insurance bad faith lawsuits in other jurisdictions in which trial courts have entered protective orders barring disclosure of such materials in similar cases.

    Further, as the Newbys contended, the Oklahoma appellate court ruled that the trial court failed to follow Oklahoma law when the trial court entered its Protective Order allowing documents in the court file to be sealed.  Good, 2023 WL 5951464, ¶¶ 9-12, at *4-*5.    However, the trial court's failure to follow Oklahoma law favoring public access did not necessarily mean that the trial court's failure made the documents subject to public access.

    Rather, or so the appellate court ruled in this case, although the trial court's Protective Order necessarily had to be reversed, still the matter would be remanded to the trial court to review the merits of the Newbys' request that the documents be made publicly accessible.  See Good, 2023 WL 5951464, ¶12, at *5.

    As to the materials made available by the carrier during discovery in the underlying case, the Oklahoma appellate court ruled that the Oklahoma trial court had the discretion to enter a Protective Order making them publicly accessible, or not accessible at all.  Good, 2023 WL 5951464, ¶¶ 13-14, at *5-*6.  In the precise context of this specific case, "the trial court did not abuse its discretion when it denied the Newbys' request for production of all unfiled discovery documents."  Good, 2023 WL 5951464, ¶ 17, at *7.

    Like the Newbys, nonparties to bad faith litigation in other jurisdictions may win the battle but lose the war of public access, so to speak -- but the potential exists for public access to documents filed in public court files in every case,  and so it existed here.  Most importantly for other litigation, nonparties have standing to sue to require public access in insurance bad faith litigation if this decision is followed elsewhere in that regard.

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

Confidentiality and concealment of materials in first-party bad faith insurance cases like Good are discussed throughout §§ 9:28-9:28.100 in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (3d Edition West Publishing Company, 2023 Supplements in process).  The same issues in the context of third-party bad faith cases are discussed in 1 id., §§ 3:107-3:107.100.

THE OPPOSING VIEW: APPLY THE FRD (EVEN WITHOUT EVIDENCE).

In another case in the Western District of Washington, a different federal judge distinguished the Harvey v. Centene Management case we discussed here yesterday.

    In Epstein v. USAA Gen. Indem. Co., 636 F. Supp. 3d 1260 (W.D. Wash. 2022), an insurance case, the claimant alleged "that Defendants have violated the Washington Law Against Discrimination (WLAD) and the Washington Consumer Protection Act (CPA) by forcing lower-ranking servicemembers to pay more for auto insurance than higher-ranking servicemembers. Defendants move to dismiss all of the claims and to strike the request for equitable relief."  Epstein, 636 F. Supp. 3d at 1261.

    The Court applied the FRD in Epstein and distinguished the Harvey decision.  Here, in the eyes of the Court, the plaintiff's claims implicated the FRD.  Epstein, 636 F. Supp. 3d at 1266.  The Court was convinced that the FRD applied because it thought that the relevant administrative agency had approved the rates in question.

    If it was ever a proven fact that the relevant authority approved the rates in question in the Epstein case, I have not been able to find it in the opinion.  For all that appears, it was enough that the Judge thought that the relevant authority had previously approved the rates at issue in that case.  Or perhaps, as happens so often in the case law, the Judge thought it was a fact merely because the insurance companies said so.  Either way, insurance practitioners would do well to pay attention to how the Filed Rate Doctrine is decided in the case law.

Please read the disclaimer.  The filed rate doctrine is discussed particularly in the context of insurance cases in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH §§ 11:26-11:26.50 (3d Edition West Publishing Co., 2023 Supplements in process).  This blog article ©2023 Dennis J. Wall.  All rights reserved.

APPLYING THE FILED RATE DOCTRINE AFFIRMATIVE DEFENSE.

The filed rate doctrine is an affirmative defense.  Counsel should argue it as such.  Judges should treat it accordingly and require a fully developed record before they rule.  In Harvey v. Centene Mgt. Co., 357 F. Supp. 3d 1073 (E.D. Wash. 2018), that is exactly what the judge did.

   Even if a court is not completely convinced, one way or another whether the filed rate doctrine applies or not, the Court in Harvey v. Centene Management Company, LLC[1] rested its decision not to apply a filed rate doctrine at the pleadings stage on procedural grounds as well as substantive grounds at that stage.  The Harvey Court's decision was based on a motion to dismiss and "the better practice" in any case, the Court stated, is to address the filed rate doctrine either on a motion or motions for summary judgment, or at trial.[2]

 

[1] Harvey v. Centene Mgmt. Co. LLC, 357 F. Supp. 3d 1073 (E.D. Wash. 2018).

[2] Harvey, 357 F. Supp. 3d at 1084.

Please read the disclaimer.  The filed rate doctrine is discussed particularly in the context of insurance cases in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH §§ 11:26 - 11:26.50 (3d Edition West Publishing Co., 2023 Supplements in process).  This blog article ©2023 Dennis J. Wall.  All rights reserved.

COVERAGE FOR NATURAL DISASTERS: INSURANCE POLICIES AND CATASTROPHE BONDS.

It is an easy thing to overlook the broader trends of coverage when you focus on how individual claims and cases are decided.  

    It can also be more comfortable.  In Florida, where I live, home insurance companies are excluding coastal areas from any coverage at all, even as the carriers are no longer covering many of the insurable risks in the rest of the State.  Unfortunately, Florida is the tip of the spear as they say.  These trends are happening throughout the United States, not just in Florida.  See, e.g., Jacob Bogage, Home Insurers Cut Natural Disasters From Policies As Climate Risks Grow, WASHINGTON POST, online Sunday, Sept. 3, 2023.

    Also, it's not just insurance companies in the coverage market any more.  Some corporations are issuing their own catastrophe or cat bonds.  The total cat bond market reportedly is North of $41 Billion.  As one capital management director told The Washington Post, "I'm not renting out a room at the local Ramada and pitching a mass audience.  It's still an investment for sophisticated investors.  Our job is to answer the phone."  See David J. Lynch, As Cost of Climate Disasters Grows, Some Profit With Catastrophe Bonds, WASHINGTON POST, online Tuesday, August 29, 2023.

    The "sophisticated investors" who invest in catastrophe bonds include insurance companies eager to offload a risk.  Other investors appear to be venture capital funds and private equity companies, although as the quotation above reveals, these outfits may also sometimes be middlemen between the issuers of the cat bonds and the investors in the bonds.

    The role of private equity may not be precisely clear, but what is clear is that cat bonds are "all or nothing" investments with huge risk and huge returns.  They are issued regarding particular risks, "a particular risk or 'peril' affecting a specific geography, such as a named storm in Massachusetts or an earthquake in Japan."  Id.

Claims Handling Practices in Recent Catastrophes in Australia, Greece, Louisiana, Mississippi, Texas, California, Puerto Rico, Denver, New York, and Miami are explored in Volume 1 of CATASTROPHE CLAIMS / INSURANCE COVERAGE FOR NATURAL AND MAN-MADE DISASTERS § 2:13 by Dennis J. Wall (Thomson Reuters June 2023 Edition).

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

SETTLEMENT DEMAND, 3 1/2 YEARS OF MEDICAL BILLS, INADEQUATE FOR REMOVAL.

COVID ICU patient in Sarasota, Florida hospital.  (Shannon Stapleton / Reuters)

  A settlement demand for policy limits in a first-party case may not be enough to establish the amount in controversy in the face of other evidence in the record.  This was the state of the record in one such case, even though a settlement demand had been accompanied by three and a half years of past medical bills totaling $34,668.00[1]

 

[1] Gillespie v. Auto-Owners Ins. Co., No. 8:23-cv-296-CEH-AAS, 2023 WL 2755115, at *4 (M.D. Fla. April 3, 2023) ("Without any such support [from the record evidence], Plaintiff's demand of the $100,000 policy limit, or her statement that her damages exceed it, appears to be posturing rather than a reasoned evaluation of her claim.").

The Gillespie decision and other significant cases of alleged first-party insurance bad faith are discussed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:23, Removal and Remand (3d Edition, West Publishing Company; 2023 Supplements in process).  Please read the disclaimer.  This blog article ©2023 Dennis J. Wall.  All rights reserved.

WAIVER OF A DEFECT IN A CIVIL REMEDY NOTICE.

(Gridview_Imagefull/Florida DACS)

It has been held in a case under Florida law that defects in a Civil Remedy Notice of alleged first-party bad faith can be waived.  In that case, waiver existed when the carrier responded to the CRN without raising any objections to it.  Neal v. GEICO Gen. Ins. Co., 358 So. 3d 749, 752 (Fla. 4th DCA 2023).

Please read the disclaimer.  This blog article ©2023 Dennis J. Wall.  All rights reserved.  Waiver in the first-party insurance bad faith case law is examined in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:14 (3d Edition, West Publishing Company; 2023 Supplements in process).

FRAUD CAN DECEIVE A PERSON. BUT NOT EVERYONE, NOT ALWAYS.

In Discovery Land Co., LLC v. Berkley Ins. Co., NO. CV-20-01541-PHX-ROS, 2023 WL 2503634 (D. Ariz. March 14, 2023), the insureds bought a castle in Scotland, claimed that they were defrauded by their lawyers, added insureds to their policies after a known loss, and then apparently made claims to coverage.

    The two insurance carriers in the case "both filed counterclaims seeking rescission of the change endorsements, arguing Plaintiffs fraudulently added entities as joint insureds after they discovered the losses."  Discovery Land Co., 2023 WL 2503634, at *5.

    The Court entered a summary judgment of no coverage for both carriers.

Please read the disclaimer.  This blog article ©2023 Dennis J. Wall.  All rights reserved.  Fraud allegations in the context of first-party cases such as Discovery Land Company are discussed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:12 (3d Edition West Publishing Co., 2023 Supplements in process).