Claims and Bad Faith Law Blog

TWO BITES AT THE "BAD FAITH" APPLE IN NEVADA?

In Nevada, violation of an unfair claims settlement practices statute is apparently separately actionable from the implied duty of good faith and fair dealing.[1] 

 

[1] See Rosas v. GEICO Cas. Co., 365 F. Supp. 3d 1123, 1126-27 (D. Nev. 2019).

Express Statutory Causes of Action in first-party cases in the United States are discussed in Section 9:14 of 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (West Publishing Company 3d Edition, 2023 Supplements in process).

This blog article ©2023 Dennis J. Wall.  All rights reserved.

DOMINATING THE DATA: BIG HEALTHCARE COMPANIES WANT TO BUY SECRETS.

The U.S. Department of Justice, joined by the States of Minnesota and New York, have together raised the prospect of a UnitedHealth Group subsidiary buying a health tech company for the purpose or with the effect of buying its secrets.  See Download USA State of Minnesota and New York State v. UnitedHealth Group Inc. Complaint Doc. 1 filed Feb. 24 2022 (D.C.D.C. No. 1.22.cv.00481).

In discovery confidentiality litigation, large companies are consistent in fighting to keep their secrets including whether they have been sued and how many times for bad faith, for example.

In this case, UnitedHealth is accused of buying secrets:

1. The Complaint against Optum, the UnitedHealth Group subsidiary set to acquire Chicago Healthcare, "a company that offers technology services to insurers," David McCabe, Justice Dept. Sues to Block Deal By UnitedHealth Worth $13 Billion, NEW YORK TIMES, Friday, February 25, 2022, at B6, expresses the governments' concern that when Chicago Healthcare gathers data during the course of helping to "process insurance claims," UnitedHealth as its owner will be able to see the procedures used in processing claims by competing insurance carriers who pay Chicago Healthcare for its claims data services.

This is significant and real, not unimportant or theoretical.  "The lawsuit claims that, according to a UnitedHealth estimate, more than half of American medical insurance claims 'pass through (or touch)' Chicago Healthcare's systems."  David McCabe, NEW YORK TIMES, supra (emphasis added).

2. The Complaint further alleges the governments' concern that UnitedHealth could steer Chicago Healthcare's systems away from UnitedHealth's competitors, or even bar the competing insurance companies from buying those systems, if UnitedHealth is allowed to buy Chicago Healthcare.  This has the clear potential to become a significant competitive advantage in the healthcare insurance industry, especially during a pandemic.
3. The Complaint also alleges that UnitedHealth could end up with a monopoly if this acquisition is allowed to proceed. The resulting monopoly would be over Chicago Healthcare's "type of service that was used to screen insurance claims for errors and speed up processing."  David McCabe, NEW YORK TIMES, supra,

The case has been assigned to Judge Carl Nichols.  A former clerk of Supreme Court Justice Clarence Thomas, he was appointed to the federal bench in 2019.  Since then he has also been assigned to oversee the contempt citation case against Steve Bannon, which has been set for trial in July, 2022.

In the last sentence of the judge's standing order in civil cases, he says:  'The parties shall not file a discovery motion without leave of Court."  Download J. Carl Nichols D.C.D.C. Standing Order.  Putting aside the question of whether this kind of blanket ruling is even valid, it is hard to imagine an antitrust case like this one without lots of discovery.  There are likely to be lots of requests for "leave of Court" to file discovery motions concerning the discovery disputes that will pile up in the future.

Here's hoping they are resolved faster than the contempt citation against Steve Bannon.

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

RECONSIDERATION, EXPERTS, MOTIONS IN LIMINE, IN ONE BAD-FAITH CASE.

In an unusual development, the Federal District Judge in Rap Indy, LLC v. Zurich Am. Ins. Co., No. 1:19-cv-04657-JRS-MJD, 2021 WL 5029520 (S.D. Ind. September 15, 2021) reversed himself when he reconsidered several of his prior rulings in the case.

          Taken together, the District Judge's prior rulings excluded all expert testimony on claims handling whether proffered by the plaintiffs or by the defendant.  It was unusual for a federal judge to reverse earlier rulings he himself had made in the case, but to this judge's credit, he did.

          When the judge entered his new rulings in this first-party bad-faith case, they were not unusual.  In fact, the new rulings represent the prevailing views across the nation on the subject of admitting the opinion testimony of expert witnesses in bad-faith cases:

    Upon reconsideration, the Court finds that expert testimony as to industry standards for property claims handling practices will assist the jury to understand the evidence in this case particularly with respect to the bad-faith claim. [Citations omitted.]  The Court will not allow expert testimony as to the law governing this action, nor will the Court allow testimony as to legal duties or any opinions that a party violated (or did not violate) those legal duties; however, the Court will allow expert testimony as to customs, practices, and standards in insurance claims handling and as to how Zurich did or did [not] meet such customs, practices, and standards.

Rap Indy, 2021 WL 5029520, at *1.

            The Court was not done, however.  The Court clearly explained the purpose and function of a motion in limine in federal practice:

    Finally, the granting of a motion in limine is not a final ruling on admissibility of the evidence. An order granting a motion in limine precludes any party from eliciting testimony or otherwise mentioning an issue in the presence of the jury without first seeking leave of Court outside the jury's presence.

 Rap Indy, 2021 WL 5029520, at *2.  Candidly, that is the clearest explanation of motions in limine and orders granting them that I have read or heard in 43 years of practice.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

DISCLOSING YOUR HORSE BARN REQUIRED NONDISCLOSURE AGREEMENTS, NO CONFIDENTIAL BREACH.

(Photo via Wikipedia)

In an unpublished opinion in Barron v. Great Am. Assur. Co., 2020 IL App (1st) 182353-U, Nos. 1-18-23531-19-0656 cons., 2020 WL  7121448 (Ill. 4th DCA December 4, 2020), an Illinois appellate court upheld a trial court's orders dismissing the plaintiff's case and refusing to reconsider the ruling.

The plaintiff sued Great American over the conduct of the carrier's employees relative to the plaintiff's equine insurance policy.  Ms. Barron boarded a horse, and received other equine services, at a stable.  While the horse was at the stable, it suffered from multiple fractures of one of its legs and the horse was euthanized.

For some reason which does not specifically appear in the appellate opinion, and is perhaps vague in plaintiff's complaint, she allegedly gave the carrier confidential information.

The confidential information in question allegedly included her disclosure of the fact that the stable required nondisclosure agreements from its employees.  Barron, 2020 WL 7121448, at *2, ¶ 10.

The plaintiff apparently gave the carrier this information before she sued the stable and the stable's owner.  After that suit, she sued the carrier alleging breach of contract, bad faith due to improper claims handling prohibited by various Illinois statutes, breach of the implied covenant of good faith and fair dealing, and breach of an Illinois statute by virtue of the carrier's alleged disclosure of alleged confidential and privileged information, among other alleged causes of action.

As noted the appellate court affirmed the trial court's dismissal of these claims and also affirmed the trial court's refusal to reconsider.  In a somewhat lengthy opinion that covers some 11 pages of the Westlaw report, the appellate court pointed out in basic and simple terms that the plaintiff's allegations and claims were not specific enough to withstand the carrier's motion to dismiss.

Specifically with regard to the claim alleged for breach of confidential and privileged information in violation of an Illinois statute, the appellate court point out that the statute in question does not apply to equine insurance which, again as noted, was the type of insurance involved in this case.

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.

 

WIND 2020, EXTRACONTRACTUAL CLAIMS AND "THE BIBLE OF BAD FAITH."

Attorneys and adjusters representing policyholders outnumbered the show of hands from attorneys and adjusters representing insurance companies at the WIND Conference 2020 yesterday.

 

Copyright 2020 Dennis J. Wall.

At a class on Extracontractual issues, many issues were discussed.  For openers, the two main reasons for insurance bad faith claims were identified as Delay and Undervalued.  Insurance bad faith claims tend to be made in the greatest numbers, by far, when claims are delayed and when they are undervalued.

In Florida terms, a "CRN" or "Civil Remedy Notice" under Florida's Bad Faith Statute, Section 624.155, was discussed a lot.  Good advice for those writing CRN's:  Provide enough information in this statutory condition precedent to a bad faith claim to allow the carrier the opportunity to resolve the damages claim under the policy, and so resolve the alleged bad faith behavior beforehand.  That is clearly the statutory purpose of the 60-day period under the Florida Statute.

"Peer review" may be the next shorthand reference in claims handling.  This is admittedly anecdotal evidence, but anecdotal evidence in this context may simply be evidence that has not yet found its way into a court file.  Hopefully it never will.  The term has been used so far by a property insurance carrier in Pennsylvania to deny loss mitigation claims on the ground that after a "peer review" the policyholder essentially did not follow the prevailing standard of care by paying for a certain way to clean up the mess after a property loss such as a fire or flood.  "Peer review" can be extended of course to many other things such as asserted lack of cooperation or claimed failure to protect the property after loss.  "Peer review" may go down in the annals of claims handling along with such phrases as "round tabling," which was established long ago to identify a process in which many people go around a table to express their views about whether a claim is covered in essence.  Time will tell.

Returning to Florida Insurance Bad Faith Law, the Florida Bad Faith Statute incorporates other statutes that in turn were written based on a Uniform Claim Settlement Procedures Act.  Neither the Florida statutes nor the Uniform Act clearly identify or define what is a "General Business Practice."  In Florida, proof of a GBP is a required element of a punitive damages claim.  It was not mentioned yesterday but apparently the people that wrote the Uniform Act had case law and statutes in other areas of the law in mind, particularly Labor Law where it is a defined term, when they wrote about a "General Business Practice" in the context of Insurance Bad Faith.

All told, a very knowledgeable group attended the Extracontractual class at WIND 2020 yesterday.  There was universal agreement with the spoken recognition of LITIGATION AND PREVENTION OF INSURER BAD FAITH as "The Bible of Bad Faith."  As far as I am concerned, these were clearly people of good taste!

Copyright 2020 Dennis J. Wall.

Dennis Wall is the author of LITIGATION AND PREVENTION OF INSURER BAD FAITH, now in Two Volumes in its Third Edition with 2020 Supplements in process published by Thomson Reuters West.

Please Read The Disclaimer. ©2020 Dennis J. Wall.  All Rights Reserved.

"THOSE WHO HAVE EARS TO HEAR, LET THEM HEAR."

In answer to two certified questions, the Supreme Court of Washington has unanimously given us enough material to fill books. This will be the second of two posted articles addressing these answers. The first article was posted here on Tuesday, December 3, 2019.

    In Peoples v. Utd. Serv's Auto. Ass'n, ___ Wash. 2d ___, ___ P.3d ___, No. 96931-1, 2019 WL 6336407 (Wash. Nov. 27, 2019), the Supreme Court of Washington was confronted with two questions. Both were certified by a U.S. District Court for answers under Washington State law.

    The two questions arose out of the claims of two of the plaintiffs in the District Court, one Krista Peoples and one Joel Stedman. Both of them were physically injured in a motor vehicle accident. Both claimed Personal Injury Protection or PIP benefits to pay for the bills of their medical providers. Both of them were denied PIP benefits.

    Besides this common core of facts, their claims presented the same broad question of whether the plaintiffs were injured in their business or property so that they could claim standing to sue under Washington State's Consumer Protection Act.

    That is where the questions posed by their separate claims diverged.  The first question, the one posed by the claims of Krista Peoples' class, were discussed here on Tuesday, December 3, 2019.

    Joel Stedman presented the second question.  He alleged that his insurance carrier, Progressive, impermissibly interjected a condition into the statutorily required availability of Personal Injury Protection (PIP) benefits.  This issue has reverberations beyond the boundaries of the State of Washington.

    In Washington State, as in most States, PIP benefits are required to be provided in policies like Stedman's.  The condition challenged in Stedman's action was Progressive's termination of required benefits whenever a claimant reached "Maximum Medical Improvement," or MMI, which it determined.  MMI is not a limitation authorized by the PIP Statute on the receipt or payment of PIP benefits.

    In Stedman's case, filed as a class action, Stedman alleged "that by terminating benefits on the basis of 'Maximum Medical Improvement,' Progressive routinely fails to pay all reasonable medical expenses for treating an insured’s injuries arising from a covered event, in violation of" Washington State Statutes.  Peoples, 2019 WL 6336407, at *1, ¶ 4.

    The Federal judge certified the question whether Progressive's reliance on MMI to terminate PIP benefits satisfied the Consumer Protection Act requirement of an injury to business or property, where an insured like Mr. Stedman was physically injured in a motor vehicle accident and whose PIP benefits were terminated.

    The Washington Supreme Court's short answer is "yes," such claims satisfy the requirement of an injury to business or property.  The Court's reasoning was applied both to the Joel Stedman class claims and to the Krista Peoples class claims discussed in this space on Tuesday, December 3, 2019:

[T]he plaintiffs here do not allege the defendants caused their personal injuries. Their CPA suits do not seek to vindicate their right to be free of bodily harm but, rather, their property interest in the benefits they bargained for in their insurance contracts. When parties enter an insurance contract, the insured obtains a legal right to benefits upon the happening of a particular event. [Citation omitted.]  An insurance contract also gives rise to a quasi-fiduciary relationship between the parties, which requires them to deal in good faith. [Citation omitted.]  An insured, therefore, has a legally protected property interest in benefits due under the contract and a related right to insurance dealings free from bad faith. Claims mishandling and wrongful denial of benefits invade this property interest, regardless of the type of event that triggers coverage.

Peoples, 2019 WL 6336407, at *4, ¶ 12.

    After placing its reasoning in a place where causation of the alleged Consumer Protection Act damages is not a part of the equation at hand, i.e., "regardless of the type of event that triggers coverage," the Court turned its attention to the question of recoverable damages for the alleged injury in fact.

    Stedman and his class sought "to recover excess premiums paid for the PIP coverage," together with "the costs of investigating the unfair acts, and/or the time lost complying with the insurer's unauthorized demands[.]"  Peoples, 2019 WL 6336407, at *2, ¶ 5.  The Washington Supreme Court unanimously spent very little time on the issue of damages recoverable by the Stedman class.

    To begin with, the Supreme Court declined to reach "the portion of the question that asks about excess premiums."  The Court devoted a footnote to Peoples' -- not Stedman's -- use of the phrase as "an alternative way of characterizing unpaid benefits."  Accordingly, in the Court's view, "it is unnecessary to address Peoples' alternative theory about 'excess premiums.'"  Peoples, 2019 WL 6336407, at *4, n.2.  What was good for the Peoples was good for Stedman, too, as the Court declined to address the issue of recovery of any "excess premiums" for unpaid PIP coverage.

    With respect to Stedman's remaining alleged damages, "the costs of investigating the unfair acts" and "the time lost complying with the insurer's unauthorized demands," the Supreme Court answered succinctly that "when a CPA claim is predicated on an insurer’s mishandling of a PIP claim, ordinary CPA principles govern whether investigation costs or time lost are injuries to business or property."   Peoples, 2019 WL 6336407, at *4, ¶ 14.  In answering the questions certified by the Federal court, the Washington State Supreme Court felt no compulsion to hold further whether the actual damages alleged by the Stedman class would if proven be recoverable under the Consumer Protection Act, but it did offer guidance from Washington State case law.

    The Court pointed to its own precedents to note that "we have we have continued to recognize that expenses incurred to investigate a deceptive act or practice are cognizable injuries and damages under the CPA."  Peoples, 2019 WL 6336407, at *4, ¶ 14.

    The Court then turned to precedent from the Washington lower courts concerning the allegation of lost time as a recoverable item of damage under the CPA.  "The Court of Appeals has also held that taking time away from business to respond to unfair practices may satisfy the injury requirement." Peoples, 2019 WL 6336407, at *4, ¶ 14.

    The Court was satisfied that this was all the guidance that litigants would need in cases like the present one:  "The principles articulated in these cases apply when a CPA claim is predicated on an insurer’s mishandling of a PIP claim." Peoples, 2019 WL 6336407, at *4, ¶ 14.

    To summarize what was summarized before, the key issue in the Peoples case was standing to sue.  The key to resolving the standing issue, in turn, was that the alleged 'injury to business or property' in both the Peoples' claims and the Stedman claims was "the deprivation of contracted-for insurance benefits." That was their injury. That conferred their standing to sue.

Please Read The Disclaimer. ©2019 Dennis J. Wall.  All Rights Reserved.

"THOSE WHO HAVE EYES TO SEE, LET THEM SEE."

In answer to two certified questions, the Supreme Court of Washington has unanimously given us enough material to fill books.  This will be the first of two posted articles addressing these answers.  The second article will be posted here later.

    In Peoples v. Utd. Serv's Auto. Ass'n, ___ Wash. 2d ___, ___ P.3d ___, No. 96931-1, 2019 WL 6336407 (Wash. Nov. 27, 2019), the Supreme Court of Washington was confronted with two questions.  Both were certified by a U.S. District Court for answers under Washington State law.

    The two questions arose out of the claims of two of the plaintiffs in the District Court, one Krista Peoples and one Joel Stedman.  Both of them were physically injured in a motor vehicle accident.   Both claimed Personal Injury Protection or PIP benefits to pay for the bills of their medical providers.  Both of them were denied PIP benefits.

    Besides this common core of facts, their claims presented the same broad question of whether the plaintiffs were injured in their business or property so that they could claim standing to sue under Washington State's Consumer Protection Act.

    That is where the questions posed by their separate claims diverged.

    Krista Peoples presented the first question.  She alleged that USAA routinely denied PIP claims based on a "practice of algorithmic review[.]"  Peoples, 2019 WL 6336407, at *1, ¶ 3:

    Specifically, Peoples alleges that USAA refuses, without any individualized assessment, to pay medical provider bills whenever a computerized review process determines that the bill exceeds a predetermined limit. According to Peoples, USAA’s failure to investigate or make an individualized determination regarding the reasonableness or necessity of a provider’s charges before denying payment[.]

Peoples's claim was alleged as a class action.  But that was not important to the outcome of her question.  She and the class prayed for "actual damages, including unpaid medical bills and expenses incurred to investigate USAA's wrongful conduct." Peoples, 2019 WL 6336407, at *1, ¶ 3.

    But Peoples and the class emphatically did not sue for their personal injuries incurred in the accident.  Nor did they sue simply because the benefits for which they contracted related to payment of treatment for their personal injuries.

    Rather, they sued because they were deprived of contract benefits, the benefits of statutorily required PIP coverage.  That was their alleged injury to property or business, and that is what conferred standing upon them to sue under the Washington State Consumer Protection Act.

    Stripped to its simplest elements, their question was whether "the wrongful denial of PIP benefits is an injury to 'business or property' under" the CPA.  It bears repeating that "they seek to hold their insurance companies liable for benefits owed under contract. We conclude that the deprivation of contracted-for insurance benefits is an injury to 'business or property'” and that the type of contracted-for insurance benefits does not matter.  Peoples, 2019 WL 6336407, at *3, ¶ 9.

    Beyond contracted-for insurance benefits, the Court answered that policyholders also have "a related right to insurance dealings free from bad faith," that this "protected property interest" is invaded by "[c]laims handling and wrongful denial of benefits, ... regardless of the type of event that triggers coverage." Peoples, 2019 WL 6336407, at *4, ¶ 12.

    In other words, the "algorithmic review" challenged by Krista Peoples and her class may have been the alleged cause of contract benefits being denied here, but it was the wrongful denial of benefits that was important to the outcome.  What was important to the Supreme Court in this decision was the result and not the cause. 

    For all these reasons, the Washington Supreme Court's answer to the Krista Peoples's certified question was in the affirmative:

Therefore, to the extent proved, the plaintiffs may recover actual damages, including out-of-pocket medical expenses that should have been covered, and can seek injunctive relief to compel the payment of benefits to medical providers.

Peoples, 2019 WL 6336407, at *4, ¶ 13.

    To summarize, the key to alleged 'injury to business or property' in the Peoples' class claims was "the deprivation of contracted-for insurance benefits."  That was their injury.  That conferred their standing to sue.

In the next article arising from the Peoples case, the second certified question will be addressed along with the question of whether "injuries to business or property" can ever include "investigative costs or time lost."

Please Read The Disclaimer.   ©2019 Dennis J. Wall.  All Rights Reserved.

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.

Please Read The Disclaimer. ©2019 Dennis J. Wall. All Rights Reserved.

WIND 2019: THE 20th ANNUAL CONFERENCE ENRICHES THE DISCUSSION.

Photograph by Dennis J. Wall.

The Annual Conference of the Windstorm Insurance Network, or WIND, turned 20 this year.  The 20th Anniversary WIND Annual Conference was held at Walt Disney World.  Some 1,200 people attended.  The Annual Conference attendees, like the members of WIND, are professionals in the property insurance claim process.  At the WIND Annual Conference they present the policyholder sides and the insurance company sides of major property insurance issues.

WIND picks its speakers and its session topics through the work of its Speakers Committee.  This group of about ten people has the charge of staying on top of speakers and current issues for the Annual Conference and, from what I saw myself this year, they do their job well.

For example, one current issue or "hot topic" of discussion in property insurance circles is clearly what explains the handling of catastrophe claims resulting from the 2017 Hurricanes and other catastrophes then and since.  As one presenter explained, first of all we had not had a catastrophe for a number of years.

Taking Hurricanes in Florida as an example, the last major Hurricanes to hit Florida came in 2004 and 2005, named Charlie, Frances, Ivan and Jeanne in 2004, and named Katrina and Wilma in 2005.  So it had been awhile before Hurricanes Harvey, Irma and Maria struck Texas, Florida, and Puerto Rico the hardest, in 2017.

All panelists were in agreement on the central ingredient for success in handling catastrophe claims (as well as other kinds of claims):  Communication.  If you say that you are going to call the policyholder every Friday to update her on the status of her claim, for example, then make the telephone call that you said that you would make, even if all you have to tell her that week is that there is nothing new but that you will call again when there's been a development.

Notice is a big issue in recent Catastrophe Claims handling.  Panelists conjectured about the reasons for the increase in such issues in recent years.  One suggestion was that higher deductibles may be contributing to late notice to insurance companies, because policyholders with the higher deductibles may conclude that the claim could not reasonably exceed the amounts of their deductibles, but of course the amounts of the claims resulting from catastrophes usually present a second catastrophe, the first being the loss itself, and the second being the amount of indemnity that is required as a result of the loss.

Tying into the idea of high deductibles generally being a cause of late notice, other presenters suggested that late notice of claims after recent catastrophes may have been caused at least in part by the implementation of high Hurricane deductibles.  Many of the high Hurricane deductibles, they pointed out, took effect just before Hurricane Harvey in 2017.

Another suggestion came out of the nature of the catastrophes such as Hurricane Irma, in which the catastrophe claims were apparently largely based on wind-driven rain which causes damage that does not show up until later.

Countering these suggestions was the basic and simple notion that it doesn't cost anything to report a claim (not even the cost of a stamp, I might add, since the advent of Fax and email, although keeping a paper copy of a letter put in the mail is still probably a very sure way of incontestably giving notice).

Another current issue is the evidentiary effect, if any, of insurance companies' pre-catastrophe inspection reports.

Managed repair was a popular topic.  Once coverage is accepted by an insurance company for even a part of the loss -- such as coverage for repair of the damaged property -- then, according to the discussion at another panel, the policyholder would have the right to an appraisal, even in a repair situation.

Whatever the state of coverage that might exist in that situation, once again the idea is current and under discussion by those involved in property insurance claims and will come as no surprise to the attendees of this year's 20th Anniversary WIND Annual Conference.

Photograph by Dennis J. Wall.

Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

PRACTITIONER, KNOW THY AUDIENCE. NOT EVERY JURY ARGUMENT SWAYS JUDGES.

In Goldman v. United Services Automobile Association, 244 So. 3d 310 (Fla. 4th DCA 2018), review dismissed, No. SC18-1309, 2018 WL 3831364 (Fla., August 8, 2018), a Florida intermediate appellate court applied the Supreme Court of Florida's admonition that "bad faith" is simply not required to assess an insured's attorney's fees under the Florida Statutes.

    In Goldman, the appellate court pointed out the crux of the matter in its view:  The carrier in that case, a first-party carrier, acted appropriately and promptly but was deprived of even the opportunity to disclaim coverage.

    The insurance policy at issue in the case was a homeowner's policy.  The policyholders' damage claim to coverage under their homeowner's policy came out of a plumbing leak.  The carrier investigated the claim, issued a check, and then "[w]ithout informing their insurer that they disputed the amount of the payment, the homeowners filed a lawsuit for breach of the insurance policy."  Goldman v. United Services Automobile Association, 244 So. 3d 310, 311 (Fla. 4th DCA 2018), review dismissed, No. SC18-1309, 2018 WL 3831364 (Fla., August 8, 2018).

    The carrier was served with the policyholders' suit papers.  It filed a motion to compel an appraisal.  The result of the appraisal was an award to the policyholders.  The appellate court observed that the carrier "timely paid the appraisal award."  For that reason as well, the trial court granted the carrier's motion for summary judgment against the homeowners'-policyholders' alleged claim that the carrier had breached the homeowner's policy in that case.  Goldman v. United Services Automobile Association, 244 So. 3d 310, 311 (Fla. 4th DCA 2018), review dismissed, No. SC18-1309, 2018 WL 3831364 (Fla., August 8, 2018).

          The appellate court affirmed:

Here, the insurer valued the loss and paid the claim based on that valuation. The homeowners did not object. Until the filing of the complaint, the insurer was unaware of a disagreement with the damage valuation. Once informed, the insurer demanded appraisal and paid the appraisal.

There was never a breakdown in the claims adjusting or communications process, nor was there a refusal to pay the claim. “It is only when the claims adjusting process breaks down and the parties are no longer working to resolve the claim within the contract, but are actually taking steps that breach the contract, that the insured may be entitled to an award of fees under section 627.428, Florida Statutes.”

Goldman v. United Services Automobile Association, 244 So. 3d 310, 311 (Fla. 4th DCA 2018), review dismissed, No. SC18-1309, 2018 WL 3831364 (Fla., August 8, 2018).

    Following the Supreme Court's admonition that an award of attorney's fees does not mean bad faith in Florida, and of course because there was no bad faith shown on the record of the case before it, the appellate court followed the law that holds that "it is the incorrect denial of benefits that triggers an award of attorney's fees under section 627.428," at least against a first-party carrier like the homeowner's carrier in the Goldman case.  Goldman v. United Services Automobile Association, 244 So. 3d 310, 312 (Fla. 4th DCA 2018), review dismissed, No. SC18-1309, 2018 WL 3831364 (Fla., August 8, 2018).

    The moral of this story is a simple one, really:   As a practice point in presenting the law, practitioners should be sensitive to how their presentation appears to their audience for attorney's fees, i.e., the trial judge, because judges naturally resist being led where they do not need or perhaps want to go.  "[H]ere, the insured never gave the insurer the opportunity to incorrectly deny the benefits before filing a lawsuit." Goldman v. United Services Automobile Association, 244 So. 3d 310, 311 (Fla. 4th DCA 2018), review dismissed, No. SC18-1309, 2018 WL 3831364 (Fla., August 8, 2018).

    To illustrate this practice point, the appellate court and the trial court were in complete agreement in this particular case that the homeowners'-policyholders' lawsuit "'was merely a preemptive lawsuit intended to obtain attorney's fees for the usual efforts in negotiating an insurance claim.'"  Goldman v. United Services Automobile Association, 244 So. 3d 310, 311-12 (Fla. 4th DCA 2018), review dismissed, No. SC18-1309, 2018 WL 3831364 (Fla., August 8, 2018).  "Here, the circuit court found that was the exact reason the lawsuit was filed.  Thus, the court properly granted summary judgment in favor of the insurer."  Goldman v. United Services Automobile Association, 244 So. 3d 310, 312 (Fla. 4th DCA 2018), review dismissed, No. SC18-1309, 2018 WL 3831364 (Fla., August 8, 2018).

Please Read The Disclaimer.  ©2018 Dennis J. Wall.  All Rights Reserved.

COURT HOLDS CLAIMS ADJUSTMENT CAN INFLICT EMOTIONAL DISTRESS.

The Connecticut Superior Court denied the insurance carrier's motion for summary judgment in O'Connor v. QBE Insurance Corp., No. CV126032396, 2018 WL 4838937 (Conn. Super. Ct. Sept. 19, 2018).

     The Connecticut court held that the adjustment of claims can also be the negligent infliction of emotional distress.  The carrier argued against the negligent infliction of emotional distress on many grounds.

    The Connecticut court rejected each and every one of the grounds for summary judgment that the carrier raised in that case, including this one,  that the carrier never dealt directly with the plaintiffs.  The carrier's policy was issued to a condominium association, and while the plaintiffs were owners of units in the condominium, they were not the policyholders and the carrier did not deal directly with them on their claims for damages to their unit.

    The court rejected this as a good reason for the carrier's summary judgment motion in that case:

    The defendants' various claims are in conflict with both the law and the evidentiary record, and the plaintiffs' objections are well taken. Accordingly, the defendants have not shown that they are entitled to summary judgment on the plaintiffs' negligent infliction of emotional distress claims. As relates to the defendants' claim that their lack of direct contact with the plaintiffs precludes the plaintiffs' recovery on a negligent infliction of emotional distress claim, they have cited no law in support of that proposition. In fact, there is no such requirement; rather, the plaintiffs are correct that the relevant inquiry focuses on a defendant's conduct, the foreseeability of that conduct causing a plaintiff emotional distress, and whether the plaintiff's distress actually is attributable to the defendant's conduct rather than some other circumstance.

O'Connor v. QBE Insurance Corp., No. CV126032396, 2018 WL 4838937, at *4 (Conn. Super. Ct. Sept. 19, 2018) (emphasis added).

    The court also rejected the carrier's proffered reasons for entering summary judgment in its favor on the plaintiffs' remaining claims under the Connecticut Unfair Trade Practices Act and the Connecticut Unfair Insurance Practices Act.  O'Connor v. QBE Insurance Corp., No. CV126032396, 2018 WL 4838937, at *7-*8 (Conn. Super. Ct. Sept. 19, 2018).

    So, the way things look now, all of these claims are going to trial in this case.

Please Read The Disclaimer.  ©2018 Dennis J. Wall.  All Rights Reserved.

The saga origin story of Senator Joe Manchin, and the theatrical career of Senator Susan Collins, are explored in articles posted on Claims and Insurance Blog in the last 2 days.

 

QUIET IN THE COURTS! GOOD FAITH CLAIMS FILES.

There are many insurance bad-faith claims.

Most of them settle.

Virtually all insurance bad-faith cases in litigation include fights over production of claims files.  If you are the claims representative for the insurance company who handled the underlying case against the policyholder, or who handled the claim of the policyholder for coverage, then it is your file that supposedly show your company's risk of bad-faith exposure.

Some cases are likely to lead to large verdicts against your company for bad faith.  Most, probably not.  Consider an alternative.

Your claims handling shows your good faith.  Your claims file is good faith on display.

Consider an alternative to concealing evidence and making secret settlements.

When you have handled this claim like so many other claims in good faith, your claims file shows your good faith. 

Maybe not all fights over production of your claims file are necessary.

Maybe not all bad-faith claims need to be settled either.

Consider putting good faith on display.

Please Read The Disclaimer.  ©2018 Dennis J. Wall.  All Rights Reserved.

BAD FAITH CATASTROPHIC HARMS TO HEALTH.

Some of the worst effects of catastrophes like the major hurricanes inflicting our country in recent years are man-made.  The failure to deliver needed care to victims of these disasters is a policy of bad faith.  It is a fact, for example, that as the New England Journal of Medicine has reported:

Health care disruption is now a growing contributor to both morbidity and mortality in natural disasters.  In the United States, this phenomenon has been observed in the aftermaths of Hurricane Katrina, Superstorm Sandy, and more recently Hurricanes Harvey and Irma, in which nursing home residents and those dependent on life-sustaining equipment were disproportionately affected.[1]

 

[1] Nishant Kishore and 15 other authors (et al.), "Special Article / Mortality in Puerto Rico After Hurricane Maria" text on unnumbered pages between endnotes 37 and 40 (New England Journal of Medicine May 29, 2018), online at https://www.nejm.org/doi/full/10.1056/NEJMsa1803972 (last accessed on Friday, July 13, 2018).

Please Read The Disclaimer.  ©2018 Dennis J. Wall.  All Rights Reserved.

"HOW TO" PRESERVE NEW YORK THEFT CLAIMS EVIDENCE AFTER HURRICANE SANDY.

A U.S. Magistrate Judge writes a seemingly complete "how to" guide to seeking, obtaining, and writing "preservation orders" in Toussie v. Allstate Ins. Co., No. 15 CV 5235 (ARR) (CLP), 2018 WL 2766140 (E.D.N.Y. June 8, 2018) (Pollak, USMJ).

The nature of the litigation is probably best described in the magistrate judge's own words:

    This action was commenced on September 10, 2015 by plaintiffs Robert and Laura Toussie, alleging that defendant Allstate Insurance Company (“Allstate”) had improperly adjusted and mishandled plaintiffs’ claims for property theft incurred in the days following Hurricane Sandy (the “theft case”). A companion case brought by Mr. Toussie seeking coverage for damage to his home under a flood insurance policy issued by Allstate is currently pending as well.

Toussie v. Allstate Ins. Co., No. 15 CV 5235 (ARR) (CLP), 2018 WL 2766140, at *1 (E.D.N.Y. June 8, 2018).

So much judicial time, usefully spent for those interested in obtaining orders to preserve evidence of an insurance claim.

Please Read The Disclaimer.  ©2018 Dennis J. Wall.  All Rights Reserved. 

MAYDAY, MAYDAY! INSURANCE ADJUSTERS LIABLE UNDER WASHINGTON CONSUMER PROTECTION ACT!

In Washington State, a motorist was injured in an accident.  The injured motorist brought an action against the adjuster for the at-fault motorcyclist's automobile insurance company.  The injured motorist sued for bad faith and for alleged violation of the Washington Consumer Protection Act.

The Superior Court, King County, Washington, Case No. 15-2-18663-9, John P. Erlick, J., dismissed the injured motorist's action but certified the case for discretionary review, which was granted.

On appeal, the Washington Court of Appeals held that:

1. the duty of good faith imposed by Washington statutes on “all persons” involved in insurance applies equally to individuals and corporations acting as insurance adjusters, and
2. individual insurance adjusters can be liable for a violation of the Washington Consumer Protection Act.

"Thus, we hold that an individual insurance adjuster may be liable for bad faith and CPA violations."  Holding of the appellate court:  Reversed and remanded.

The case in the appellate court is published at Keodalah v. Allstate Ins. Co., 413 P.3d 1059 (Wash. Ct. App., Div. 1, 2018).

Please Read The Disclaimer.  © 2018 Dennis J. Wall.  All Rights Reserved.

NEW JERSEY AND AMERICA SAY APPEALS "YES," PERFECTION "NOT REQUIRED."

A case in New Jersey illustrates three things about the application of generally accepted rules of law in the United States:

1. When a liability carrier is deciding whether or not the insured will be better off if the carrier pays for an appeal, there has already been an excess judgment. For that reason alone, applying the test of "good faith" is "'more exacting at the appeal stage of the proceedings than before or during trial.'"
2. On the facts of a given case, including this New Jersey case, the carrier can act in good faith by making a reasonable settlement offer -- in this case, a policy limits offer -- after an excess verdict even if its decision to appeal was not the best.
3. Perfection is not required. Or, as the New Jersey courts and most U.S. courts put it, a mistake is not bad faith.

The case is Palmer ex rel. Kovacs v. New Jersey Mfrs. Ins. Co., No. A-0854-15T3, 2017 WL 6398789 (N.J. Super. Ct. App. Div. December 14, 2017).

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.

MAKING BAD FAITH LAW DISAPPEAR IN CALIFORNIA: A TRUE STORY.

This is the story of a case which did not contain a demand to settle for policy limits, and still the liability carrier was found to have acted in bad faith in settlement.  This case is scheduled for much greater treatment later this year in a major insurance journal, but it can be said here that this was a case of a request by an injured claimant for disclosure of policy limits and the injured claimant clearly stated that he was interested in exploring settlement within the liability carrier's policy limits before suit was filed against the liability carrier's insureds.  But his was not a demand for settlement, it was a demand for disclosure of policy limits.

Our story here begins not at the beginning, but in the middle.  After a Consent Judgment of $5 Million was entered without collusion in the underlying case, a liability insurance carrier, Metropolitan, filed an action for declaratory relief in the U.S. District Court for the Eastern District of California.

Met asked the Federal Court to declare whether it acted in good faith and dealt fairly with its insureds.

Before he filed the underlying case against Met's insureds, an injured claimant sent a letter to Met.  He did not make a settlement demand at that time.  Instead, he asked Met to disclose its policy limits within 15 days of the letter because he wanted to know his options of settlement vs. a lawsuit.

In addition, in the letter he asked Met to respond to his sister at her separate address rather than to his home address, partly because he incurred brain injury among other injuries in the underlying accident and he wanted his sister to explain Met's response to him.  Also, he must have been concerned about something Met also knew, which is that he had already spent a lot of time being treated in the hospital. 

Met's applicable policy limit was $250,000.00 per injury, but Met did not tell him that.  Faced with a brain-injured claimant who was representing himself, people at Met sent him a form letter that it used to communicate with injured claimants represented by an attorney.

After the 15-day deadline to state its policy limits, Met sent its letter -- a month after the claimant's letter.

Met sent its letter to the injured claimant's home address and not to the sister's address, which the injured claimant gave to Met in his letter to Met in the first place.

In a bench trial, the Federal District Court declared that Met acted unreasonably in response to a reasonable letter that requested disclosure of policy limits with a reasonable time deadline.  This finding led automatically to the legal conclusion that Met acted in bad faith in this case and so Met was required to indemnify its insured who was liable for the full amount of the stipulated $5 Million underlying judgment, without regard to its policy limits of $250,000.00.

It must be said again, that this was never a case with a demand to settle for policy limits.  This was a case which featured only a request by an injured claimant for disclosure of policy limits where the injured claimant clearly stated that he was interested in exploring settlement within the liability carrier's policy limits before suit was filed against the liability carrier's insureds.  But his was not a demand for settlement, it was a demand for disclosure of policy limits.

As noted earlier, this case is scheduled for future in-depth treatment in a major insurance publication.  It can be said here as to the applicable law, that the Federal Judge followed case law decided in Federal Courts and in California State Courts holding that a jury could nonetheless find a liability carrier in bad faith under California law where the injured claimant gave the liability carrier a reasonable opportunity to settle the claim within policy limits.  In such cases, when settlement opportunities are believed to exist, the liability carrier must act to make settlement happen if it can, on behalf of its insureds.

So, this is where the first part of the story ends here.  Met was against paying the $5 Million Judgment, until it was for it.  When the underlying judgment was satisfied, part of the deal was to make the Federal Judge's decision go away.  The case is Metropolitan Property & Casualty Insurance Co. v. Hedlund, 218 F. Supp. 3d 1075 (E.D. Cal. 2016), appeal voluntarily dismissed by order approving stipulation for dismissal, No. 16-17102 (9th Cir. April 6, 2017), order granting "Unopposed" motion to vacate the court's judgment and findings of fact and conclusions of law, 2017 WL 2609602, at *1 (E.D. Cal. "Dated:  April 28, 2017 Filed 05/01/2017 DATE:  May 18, 2017").  The emphasis is in Met's original Motion to Vacate, but the meaning of the three dates when the Order granted Met's motion is unknown at this time.

Next:  Can You Make a True Claim Handling Story Go Away?  Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.

NEW RULE! EXCESS CARRIER REPUDIATES SETTLEMENT & DEFENSE, THEREBY WAIVES POLICY.

In Teleflex Med. Inc. v. National U. Fire Ins. Co., No. 14-56366, 2017 WL 1055586 (9th Cir. March 31, 2017), a policyholder sued its excess liability insurer for breach of contract and bad faith.  The action was based on allegations that the excess carrier refused either to contribute to a reasonable settlement of the underlying case against the insured, or to take over the insured's defense in the underlying action.

The excess carrier did not have much luck defending the bad faith suit by raising the "no action" clause in its policy forbidding any action against the carrier until the insured's underlying liability was determined by judgment or by a settlement in which the carrier participated, basically.

In the bad faith suit, the U.S. District Court for the Southern District of California denied the carrier's motion for summary judgment, then the case went to verdict against the carrier, and then the District Court entered judgment on the verdict against the carrier.

Things did not get any better for the carrier on appeal to the Ninth Circuit.  The appellate court affirmed the judgment against the carrier.

It is of interest that the appellate panel called its decision a "rule," as in a "rule" that where a liability carrier as here refuses either to contribute to a reasonable settlement of the underlying action against the insured, or to defend the underlying action, then the liability carrier (including the excess carrier in this case) cannot rely on its policy's "no action" clause as a defense to a bad faith action.

Be careful not to let judges and opposing counsel invoke this "rule" without saying what the supposed rule stands for, in other words, without saying what they say the law is.

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.   

PREEMPTION RUN AMOK: FLOOD INSURANCE BAD FAITH CLAIM HANDLING IMMUNITY.

After his property insurance claims for Superstorm Sandy damage were denied in part, a property owner sued his flood insurance carrier, insurance adjusters and investigators, and others for alleged bad faith in handling the property owner's claims.  The property owner sued in part under the Racketeer Influenced Corrupt Organizations Act.

The defendants defended with a motion to dismiss based at least in part on a contention that they didn't do it, but if they did, they are immune anyway.  Unfortunately for the property owner, as it turns out, the National Flood Insurance Program apparently immunized every other cause of action for bad faith claim handling.  His lawsuit was addressed by the Eastern District of New York.  Melanson v. U.S. Forensic, LLC, 183 F.Supp.3d 376 (E.D.N.Y. 2016).

The District Court held that this was a case of first impression.  That means that the answer to the question of immunity was open to the Judge.  To be clear, the question of immunity from RICO liability here was whether there is immunity under the National Flood Insurance Program or not, for bad faith handling of claims which may otherwise be actionable under federal flood insurance policies.

A related question following from that one is whether any such immunity extends beyond the flood insurance carrier to investigators and adjusters and the other parties that the property owner alleged were parties to the alleged bad faith handling of his property claim.

The District Court's answer was "immunity."  For all.  The Court essentially ruled that the NFIP immunizes every other cause of action for bad faith claim handling, so it must immunize RICO causes of action too.  Melanson v. U.S. Forensic, LLC, 183 F.Supp.3d 376, 390-93, 395 (E.D.N.Y. 2016).

Assuming that this decision stands, it raises further questions.  This question is among the rest raised by this decision:  Will every federal statute which addresses insurance confer immunity for insurance bad faith claim handling?  And another question like it:  Will this mean immunity in every case regardless of the facts of any case?

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.

Related articles

When Sanctions Make Landfall: the New York Sandy Cases.

DISCOVERY ISSUES IN BAD FAITH CASE RE: CLAIM FILE IN WASHINGTON.

Carolyn Barge sued State Farm for uninsured/underinsured (U.M./U.I.M.) benefits.  She also alleged claims for bad faith, breach of contract, statutory bad faith violations of the Washington Insurance Fair Conduct Act (IFCA), bad faith violations of the Washington Administrative Code claims handling regulations, violations of the Washington Consumer Protection Act, and negligence.  During discovery she served State Farm with a request to produce its claims file.  State Farm responded to the request by producing a "redacted" (lawyers' made-up word for "blacked out") claim file.

Ms. Barge filed a motion to compel production of "six sets of documents that State Farm withheld entirely or redacted in part on the basis of attorney-client privilege or the work product doctrine."  Barge v. State Farm Mut. Auto. Ins. Co., No. C16-0249JLR, 2016 WL 6601643, at *1 (W.D. Wash. November 8, 2016).  The District Judge granted the motion in part, denied it in part, and withheld ruling on the rest of it requiring an in camera inspection of certain withheld documents on the Judge's own motion.

This article addresses the issue of public knowledge of the contents of an insurance company's claim file during discovery, as exemplified in this case by the Judge's ruling on in camera inspection.

The documents as to which the Judge denied production and compelled production all concern reserves evaluations.  In Washington, reserves evaluations are treated as work product for the most part and so they are generally privileged from discovery.

There were three sets of documents which look like they total nine (9) pages collectively, which the District Judge ordered State Farm to provide for in camera inspection.  At no place in the opinion does this Judge say that State Farm requested an in camera inspection.  Apparently what State Farm did was withhold and redact some documents, and oppose the plaintiff's motion to compel them.  The in camera inspection was clearly the Judge's own idea.

The Judge required in camera inspection of certain documents because "the court has no way to determine at this time if the documents constitute work product and were created in anticipation of litigation," unless the Court could look at the documents.  State Farm's privilege log and materials opposing the motion to compel including a declaration containing testimony about the documents did not, said the Court, disclose what was in the documents aside from saying that one "'is a comprehensive summary of State Farm's claims personnel's analysis'" of liability and damages, and another "contains 'pages from State Farm's "Injury Evaluation format'[.]"  Barge v. State Farm Mut. Auto. Ins. Co., No. C16-0249JLR, 2016 WL 6601643, at *7 (W.D. Wash. November 8, 2016).

The Court recognized that "[t]he party claiming work product protection bears the burden of establishing that the work product doctrine applies."  Barge v. State Farm Mut. Auto. Ins. Co., No. C16-0249JLR, 2016 WL 6601643, at *5 (W.D. Wash. November 8, 2016).

Clearly, State Farm did not meet its burden of establishing that the work product doctrine applies to the documents which the Court ordered State Farm to produce for in camera inspection.  The only reason the Court made the in camera inspection ruling, and on its own motion to say again, is because the Court could not tell from State Farm's pleadings and proofs whether the documents were protected work product.  The Court followed settled law (which it apparently did not need to cite in this regard) that disclosure during discovery is based on a document-by-document review, but that applies first of all to the parties who claim immunity from discovery, so that the law requires that the parties present their claim to a court as to each document they withhold or redact.  At this point, the Court could have simply ruled that State Farm did not meet its burden of nondisclosure.

But of course the Court did not rule that the documents should be disclosed when State Farm did not meet its burden of proving work product after it withheld or redacted the documents.  Instead the Court in this case required in camera inspection of the documents, with the Court apparently intending to inspect them each, one by one.  A way to look at the Court's in camera inspection ruling is that State Farm caught a break, that the Court was bending over backward to give State Farm the benefit of doubt here.

Perhaps.  But that would not explain the reasoning behind this ruling which seemed to indulge a presumption that the documents were protected from disclosure because a party said so, and that this presumption of nondisclosure is so strong that when it occurs as it did in this case, that the Court in this case would have to see the documents for itself to withhold them, or to disclose them.

But there is another way to look at the same ruling.  In this case, the Court obviously gave no weight to, and did not even mention, any interest of the public including of other policyholders in having documents disclosed that might evidence statutory or common law or other bad faith conduct.  What interest is that?

One answer might be found in the interest reflected in the Federal Rules and applicable law including the requirement that a party claiming immunity from discovery by raising work product as the reason has the burden to actually prove that work product applies.

More than one view is available of this ruling, perhaps.

Please Read The Disclaimer.  ©2016 by Dennis J. Wall.  All Rights Reserved.

Related articles

Insurer Put Attorney-client Privilege at Issue, No Work Product Immunity.

NOT A Powell CASE, AFTER ALL. PLUS APPARENT OVERREACH …

UNDER LAW AND FACTS ON REQUESTED JURY INSTRUCTION.

In this final iteration of Stalley v. Allstate Ins. Co., No: 6:14-cv-1074-Orl-28DAB, 2016 WL 3282371 (M.D. Fla. June 10, 2016), appeal docketed, No. 16-14816 (11th Cir. July 11, 2016), Stalley was apparently not a Powell case after all, and a crucial plaintiff's requested jury instruction was apparently supported neither by the law nor the evidence in the record at the conclusion of the case:

IV.  Conclusion

The authorities cited by Plaintiff do not establish the existence of a “presumption” under Florida law in a jury trial setting regarding the possible outcome of settlement efforts. This Court does not read Powell as creating any such presumption; instead, as noted earlier, this Court construes the statement in Powell that “[a]ny question about the possible outcome of a settlement effort should be resolved in favor of the insured” as an accurate, well-established statement of the movant's burden on a motion for directed verdict—the context in which that statement was made. Plaintiff has identified no Florida state court decision discussing or approving a jury instruction informing the jury that it should resolve “any question about the possible outcome of a settlement effort” in favor of the insured. No binding Eleventh Circuit precedent to this effect has been brought to the Court's attention either. Furthermore, Plaintiff's proposal of language requiring “conclusive proof” by an insurance company to overcome the supposed “Powell presumption” is wholly lacking in support. Thus, this Court concludes that the portion of Plaintiff's proposed Special Instruction 3 quoted earlier in this order is not an accurate statement of Florida law in the context of jury instructions, and accordingly this Court concluded that it was not appropriate to include that proposed language in the jury instructions in this case.

Stalley v. Allstate Ins. Co., No: 6:14-cv-1074-Orl-28DAB, 2016 WL 3282371, at *6  (M.D. Fla. June 10, 2016), appeal docketed, No. 16-14816 (11th Cir. July 11, 2016).

In an earlier appearance of Stalley, on an earlier record, the same District Judge ruled that the record at that time potentially supported Powell and accordingly denied Allstate's motion for summary judgment at that time.  The Court's stated rationale included the Powell rule.  See Stalley v. Allstate Ins. Co., No. 6:14-cv-1074-Orl-28DAB, 2016 WL 1752764, at *8 (M.D. Fla. April 29, 2016), quoting Powell v. Prudential Property & Casualty Insurance Co., 584 So. 2d 12, 14 (Fla. 3d DCA 1991), review  denied, 598 So. 2d 77 (Fla. 1992).

The Powell rule of initiating settlement negotiations when the likely damages in the underlying case are greater than available policy limits ("when damages are great") and when the insured's underlying liability is probable ("when liability is probable"), is not a hard-and-fast legally constructed duty despite being called a "rule."  Instead, it varies with the facts, as the rulings in Stalley so clearly display.

Please Read The Disclaimer.  ©by Dennis J. Wall.  All Rights Reserved.

"DO NOT COMMINGLE COVERAGE AND DEFENSE FILES" URBAN MYTH.

Policyholders and other insureds sued by their liability carrier for a declaration of no coverage contended "that Cornhusker [their liability carrier, which sued them for the declaration of no coverage for underlying claims] committed bad faith by commingling its defense and coverage files related to SQI's claim and by failing to produce its claims filed during discovery in this case. (See Def. Mot. at 2–3, 23–25.) Defendants provide no authority showing that either of these types of conduct constitutes bad faith, and the court has located none."  Berkshire Hathaway Homestate Ins. Co. v. SQI, Inc., 132 F.Supp.3d 1275, 1293 (W.D. Wash. 2015).

In that case, the Federal District Court granted the carrier's motion for summary judgment, denied the insureds' motion for summary judgment, entered a declaratory judgment of no coverage, and dismissed the insureds' "extra-contractual" counterclaims including for alleged insurer bad faith.

Berkshire Hathaway has filed an appeal.

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with Supplements).  You are invited to visit the author's website here.  All rights reserved.

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No Coverage, No Bad Faith Under Pennsylvania Law.

BAD FAITH STANDARD OF LIABILITY APPLIED IN FLORIDA: PREFERRING INTERESTS.

          In a bad faith case arising in the Northern District of Florida, the Federal Court applied Florida law and granted a liability insurance company's motion for summary judgment.  The bad faith case was based on allegations of bad-faith-failure-to-settle.

          The Court applied the national standard of extracontractual liability which prevails in most bad-faith-failure-to-settle cases.  "Here, there is a complete absence of evidence that State Farm acted solely on the basis of its own interests as to Coulter's claim."  Coulter v. State Farm Mut. Auto. Ins. Co., 2014 WL 197693 *6 (N.D. Fla. January 16, 2014).

 

© 2014 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

Please Read The Disclaimer.

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Florida Supreme Court: First-Party Bad Faith Claims Only By Statute.

 

Fighting the flu and reporting from the Orlando Wind Conference.

I plan on attending the Orlando Windstorm Conference this afternoon. The sessions I would like to attend are about preparation for deposition testimony and the use of expert witnesses in windstorm claims. More to come.

7:30 P.M.:  There is more to come on the site of Insurance Claims and Issues Weblog.  Journey over there and enjoy the breaking news out of the 15th Annual Windstorm Conference in Orlando in 2014!

 

WINDSTORM CONFERENCE BREAKING NEWS: DAVE BARRY, BAD FAITH, AND WIND.

           A touch of the flu prevented me from getting to the Windstorm Insurance Conference today as early as planned, but it did not completely prevent me from attending today.

          DAVE BARRY was the keynote speaker at the General Session.  Mr. Barry is a resident of Miami and he is very familiar with the constant predictions of hurricanes which never come.  "There might be a hurricane here."

          Mr. Barry said that he bought a generator after the last hurricanes hit Florida "that could power Cincinnati."  However, despite those continuing predictions he mentioned, no hurricanes have hit Florida for years now.  He thinks that the reason is that he bought that honkin' generator.

          "BAD FAITH LAW" was the breakout session that set the tone for the day of presentations today.  The Wind Conference has a policy of no mechanical recordings, and as far as identifying individual speakers making specific comments:  "What goes on here, stays here."

          It is instructive to contemplate that out of all the First-Party Bad Faith Cases filed in Florida, a review of Florida cases (or claims?) of Bad Faith done by or for one of the presenters yielded half a dozen verdicts.  The rest were settlements, proving once again what we knew before:  Bad Faith cases do not generally go to Trial, they are settled.

          "SEPARATING WIND AND WATER DAMAGE / CONCURRENT CAUSATION ANALYSIS" was a breakout session too.  During this outstanding presentation, each of the three presenters emphasized the necessity of experience and knowledge in adjusting today's catastrophic claims, for example slab claims.

          The presenters pointed out that we are in a new age of complex catastrophe claims.  The heart of those claims is determining cause and origin, they said.  That is whey in their judgment there are separate insurance policies for wind and for flood.  (Or, actually, wind vs. water.)  See generally John K. DiMugno, Stephen Plitt, and Dennis J. Wall, "Catastrophe Claims:  Insurance Coverage for Natural and Man-Made Disasters" (Thomson Reuters West, 2014 Supplements in process), and see in particular Dennis J. Wall, , "Overview of the Participants in the Claims Handling Process," "ACCC or 'Lead-In Language'" and "Water and Flood".  Id., §§ 2:1, 7:5 and 7:6.

          "PROVING YOUR CASE AT TRIAL" was a great topper for the day of presentations.  It provides the concluding note for this article:  Consider what one of the presenters voiced as his own experience in trying cases.  He said that Jurors most often decide cases, including insurance cases presumably, based on answering these questions:  "How will the answer to this question be good for me?  How will the answer to this question protect me and my family?"

© 2014 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.  The author wants to thank the people running the Windstorm Insurance Conference in Orlando this year for all their kind help.  In particular, the author thanks Ms. Susan J. Coone.  She has been a great help, and she clearly has worked very hard along with the rest of the Wind Conference to make this year's Conference a success.  She has done it all with grace.

 Please Read The Disclaimer.

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Florida Supreme Court: First-Party Bad Faith Claims Only By Statute.

Dude, the Name Alone Is Worth the Trip!

 

SETTLEMENT WITHOUT PROPERLY INVESTIGATING: HOW MUCH INVESTIGATION IS ENOUGH?

          There is a tension between properly investigating a claim against a Policyholder, on the one hand, and actively engaging in negotiations to settle that claim.

          Without taking "a reasonable amount of time to properly investigate a claim before engaging in settlement negotiations," a Liability Carrier may be acting in Bad Faith.  See Merrett v. Liberty Mutual Insurance Co., 2013 WL 1245860 *3 (M.D. Fla. March 27, 2013).

          "However, it is also true" that where damages are great and liability is probable in the case against the Policyholder, in some jurisdictions at least the Liability Carrier has an affirmative duty to initiate settlement negotiations.  Merrett v. Liberty Mutual Insurance Co., 2013 WL 1245860 *3 (M.D. Fla. March 27, 2013).

          This article will offer a resolution whenever a Judge or Jury in a Bad Faith Case is likely to view Damages as great and Liability as probable.  The situation described here means that it is more likely than not that the underlying Damages will be held by the Court or found by the Jury in the Bad Faith Case to be great, and that the Court will hold or the Jury in the Bad Faith Case will find that Liability in the underlying case was probable.

          When these described outcomes in the Bad Faith Case occur in a particular Bad Faith case, it also means that the Court and Jury view the underlying Damages and Liability exposure as so clear without further investigation that the Good Faith duty of settlement initiation will probably be held or found to have been triggered in that case.

          In that event, in jurisdictions recognizing the duty of settlement initiation, initiation quite simply trumps investigation -- or a Court is likely to hold and a Jury to find that initiation trumps investigation in the particular case.

          Here, it is submitted, is a resolution of the tensions between the Liability Carrier's Good Faith duties of investigation and initiation:    When Damages are reasonably known to be great, and Liability is reasonably known to be probable, the Liability Carrier's prudent course is to initiate and not to insist that instead there is a need to investigate in that situation. 

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EVIDENCE OF GOOD FAITH WILL DETERMINE BREACH OF INSURANCE CONTRACT.

           In Lumpuy v. Scottsdale Insurance Co., 2013 WL 1365765 (M.D. Fla. April 4, 2013), a Federal Judge considered a Defendant's Motion to Reconsider its Order Denying Defendant's Motion for Summary Judgment.  The Federal Judge denied the motion for reconsideration.  In doing so, the Court expounded on its previous holding that evidence of Good Faith or Bad Faith will be admissible to prove Breach of the Insurance Contract in that case, in which the alleged Claim was Breach of Contract because the Insurance Company apparently denied Coverage.   (It seems to be the case, but the opinion on rehearing is understandably not prolonged in its discussion of the case history.)

          In any case, it seems that the Plaintiff-Policyholder has not alleged a claim for Bad Faith in this case, only a claim for Breach of Contract.  See Lumpuy v. Scottsdale Insurance Co., 2013 WL 1365765 *2 (M.D. Fla. April 4, 2013).

           The Court's further explanation assists greatly in understanding the Court's resolution of the issues in this case.  In denying the Insurance Company's motion for reconsideration, the Court's original holding at first seems on its face to be outside the majority view, which has it that an actionable Breach of Contract cannot properly be determined by evidence of the breaching party's motive.

          In this case, the Plaintiff is the owner of Commercial Property.  The Defendant issued an Insurance Policy of an undescribed nature to the Plaintiff which contained "sinkhole coverage."  The Policyholder received a repair recommendation from an engineering concern, one FTE.  In reliance on FTE's recommendation, the Policyholder entered into a contingent contract with one Champion to repair its property; the contingency was that the Defendant would approve the contract.

          The Defendant did not approve the Champion contract.  Rather than accepting FTE's repair recommendation, the Defendant chose a competing recommendation by one Miller.  Whether the Defendant acted in Good Faith or not with regard to its choices, would have to be determined in order for the jury to reach the ultimate issue of whether the Defendant Breached its Insurance Contract in this case, according to the District Judge:

    In the instant case, Plaintiff asserts a breach of contract claim based on two things: (1) Defendant's failure to tender the policy limits, even after the neutral evaluator estimated the repair costs to exceed the $150,000 policy limit; and (2) Defendant's failure to approve the Champion contract. Plaintiff does not assert a claim for breach of the implied warranty of good faith and fair dealing, and as such, the OBE decision [QBE Insurance Corp. v. Chalfonte Condominium Ass'n, 94 So. 3d 541 (Fla. 2012)] does not control this issue.

    Furthermore, in order to determine whether Defendant breached the insurance policy, the jury will have to determine: (1) whether FTE's repair recommendation was superior to Miller's repair recommendation; (2) whether Defendant acted in good faith, or whether it acted unreasonably, when it failed to approve of FTE as the engineer; and (3) whether Defendant acted in good faith, or whether it acted unreasonably, when it failed to approve the Champion contract based on FTE's repair recommendation. If the jury concludes that (1) FTE's repair recommendation was superior to Miller's repair recommendation; (2) Defendant acted unreasonably when it failed to approve of FTE as the engineer; and (3) Defendant acted unreasonably when it failed to approve the Champion contract based on FTE's repair recommendation, then the jury could find that Defendant breached the insurance policy by failing to tender the remaining policy limit for Plaintiff's sinkhole claim.

Lumpuy v. Scottsdale Insurance Co., 2013 WL 1365765 *2 (M.D. Fla. April 4, 2013).

          Nor, the Court wrote parenthetically, was there any need to interpret Policy provisions in this case:

    In the instant case, there is no need to construe a policy provision. Instead, the jury will be asked to determine whether there was a basis for Defendant to deny payment of Plaintiff's claim, and as such, whether Defendant's denial amount to a breach of the insurance policy.

Lumpuy v. Scottsdale Insurance Co., 2013 WL 1365765 *3 (M.D. Fla. April 4, 2013).

          Well there you have it.  Sometimes Courts will not only allow evidence of Good Faith or Bad Faith even when no Bad Faith Claim is alleged, but sometimes as in this case they will hold that such evidence is determinative of the outcome of a Breach of Contract Claim.

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Related articles

Force Placed Insurance and the Duty of Good Faith.

Order Allowing Discovery From Property Insurance Company Claim File Quashed.

Gist of the Action "Doctrine" Bars Pennsylvania Bad Faith Claim.

RETURNING CALLS: GOOD CLAIMS HANDLING AFTER CATASTROPHES, ANY LOSSES.

This is an update to articles concerning Claims Handling After Sandy, which were posted here on Sunday, March 3, 2013 and on Thursday, March 7, 2013.

           As previously reported, many Policyholders are unsatisfied with what they consider to be insufficient offers from their Homeowners and other Property Insurance Carriers toward paying Sandy Damage Claims.  See, for example, the Comments printed in "Bucks / Troubles With Flood Insurance" p. B4, col. 1 (New York Times Nat'l ed., "Business" Section, Saturday, March 9, 2013), and published online following the post by Tara Siegel Bernard, "How Does Your Hurricane Sandy Claim Stand" ("Bucks" Blog at New York Times Online, Friday, March 1, 2013).  

          In particular, a commonly reported complaint of many Policyholders is that Adjusters are not returning their calls.

          One of the major goals of modern adjustment of Claims is or should be to avoid or prevent Bad Faith Claims, so far as possible.  Many seminars are held frequently in which presenters speak at length about how in their judgment Adjusters can do their best to avoid Bad Faith lawsuits.  Yet, one of the ways to avoid Bad Faith lawsuits is simply human.

          People do not like to be ignored, whether they are Policyholders or Adjusters.  Telephone calls should be returned.  This is not only simple courtesy, but it is a very good way to avoid angering somebody.  People do a lot of things when they are angry, that they might not think about doing, at least right away, when they are not angry.

          No-one is likely to sue you because you returned their calls.

          Further, they called you because they want to talk with you, not necessarily because they want to sue you or your Company.

          Hurricane and Other Catastrophe Claims Handling, and Avoiding Bad Faith While Handling Catastrophe Claims, are some of the articles featuring these tips in Claims Magazine, for example, and you can read them online or print them, free, from the Publications Page of my website.

Have a good St. Patrick's Day today!

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Sandy and Bad Faith Claims: And So It Begins MORE.

This is an update added to the article posted here on Sunday, March 3, 2013.

  "A disaster just happened and they're making money off of us.  That's just not right." Nicholas Dorman, New York City Firefighter with large Damage Claims from Sandy and small payment since, quoted by Sophia Hollander, "Sandy Stirs Legal Mess" (Wall Street Journal Online accessible without subscription, posted Monday, March 4, 2013).

    Another catastrophe continues to be reported after Sandy.  Policyholders say their Sandy Claims are not being paid in nearly the amounts they thought their Coverage would bring.  Insurance Carriers say their Policyholders have often not read their Policies.  These are events which fall under the old saying, "Everything is changing, nothing is new."

    What seems new about Sandy Claims is that somehow banks are reported to be holding up Insurance money until they are convinced by Property Owners that the money will be put to the banks' idea of good use.  It would be worthwhile knowing exactly what these payments involve.  Presumably they involve "Flood and other Hazard Insurance" paid for by Mortgagors-Homeowners to protect the banks' security interest in the mortgaged property.  In any case it would be good to know how unnamed, unidentified banks got such power.

    Another new Sandy Claims development surrounds how the Federal Taxpayer money is spent that was intended to help victims of the damage caused by Sandy.   Reportedly, fewer Sandy victims are receiving allocated FEMA payments for Flood Damage than received the same type of payments for Hurricane Katrina damage, for example.

    Finally, and as one person quoted in the following article observed, it seems "ironic" but Sandy left a need for even more lawyers.  See Sophia Hollander, "Sandy Stirs Legal Mess" (Wall Street Journal Online accessible without subscription, posted Monday, March 4, 2013).

    A catastrophe which leaves people at the mercy of banks and in need of lawyers to receive full compensation for their Damage Claims, is a catastrophe twice over, the first due to the weather, and again a second time after the storm passes by.

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