Claims and Bad Faith Law Blog

FIRST-PARTY INSURANCE COOPERATION IN COLORADO.

    A Failure-to-cooperate defense was enacted into Colorado first-party insurance law by statute in 2020.[1]  Colorado provided conditions on a carrier pleading or proving "a failure-to-cooperate defense in an action concerning an insurance policy providing first-party benefits or coverage," however, regardless of whether "the defense is asserted in a court of law or an arbitration[.]"[2]

    As a result of this statute, an underinsured motorist carrier accused of wrongful delay in paying first-party benefits and bad faith was granted summary judgment by the District Court for the insured's rather than the insurer's breach of contract.  The sort of record necessary to reach similar results is displayed in the case in which the UIM carrier obtained its summary judgment:  Aponte v. Allstate Fire & Cas. Ins. Co.,  No. 1:21-cv-01601-CNS-SKC, 2023  WL 129693, at *2 (D. Colo. Jan. 9, 2023).

 

[1] Colo. Rev. Stat. Ann. § 10-3-1118 (West; Westlaw current through legislation effective April 14, 2023 of the First Regular Session, 74th General Assembly [2023]).

[2] Colo. Rev. Stat. Ann. § 10-3-1118(1). 

 

Breach of the cooperation clause in first-party insurance policies, particularly in the context of bad faith claims, is analyzed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:7 (3d Edition West Publishing Company, 2023 Supplements in process).

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

 

WAIVER/NO WAIVER OF INSURER DEFENDANTS' COVERAGE OR POLICY DEFENSES.

Two recently decided cases illustrate the general rule that it is exceedingly difficult to prove an insurer's waiver of its defenses to insurance coverage.  E.g., Legend's Creek Homeowners Ass'n v. Travelers Indem. Co. of Am., 33 F.4th 932, 935, 937 (7th Cir. 2022) (Indiana substantive law; no waiver where there is no unquestioned duty to speak as to assertion of limitations period in an insurance policy, and no implicit waiver in this case, either); Grill House, LLC v. Berkshire Hathaway Homestate Ins. Co., No. 20-cv-2108-WJM-KLM, 2022 WL 1487575, at *4 (D. Colo. May 11, 2022) (no waiver of plaintiff's alleged failure to provide prompt notice).

Questions of waiver of, and of estoppel to assert policy and coverage defenses, are discussed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:2 (discussing in particular, context of first-party bad faith claims) (3d Edition West Publishing Company, 2023 Supplements in process).

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

WHEN A COVERAGE DEFENSE 'RESIDENCE' IS FAIRLY DEBATABLE.

The short answer is:  when it is a complicated endeavor.

(Image courtesy of NASA)

In Bloxham v. Allstate Ins. Co., No. 3:19-CV-004812020, WL 6710427 (M.D. Pa. Nov. 16, 2020) (Mehalchick, USMJ), a homeowner's insurance carrier denied coverage for a fire loss.  The carrier's coverage denial was premised on two related grounds:  that the claimant did not "reside" on the covered property and that there were "material misrepresentations" that he did.

The carrier's motion for summary judgment was denied including on a statutory claim of insurer bad faith.  The Court's announced reason after reviewing all the evidence on the question of the insured's "residence" in that particular case was this:  "Defining and determining the term 'reside' is a complicated endeavor."  Bloxham, 2020 WL 6710427, at *8.

The Court did not say so in this case but clearly it came to the conclusion after reviewing all the evidence that this coverage question was fairly or reasonably debatable.

That is the real reason that the carrier's motion for summary judgment based on that coverage question was denied.

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

"Oh, Bedvidere! Come here boy!" Foghorn Leghorn goes silent with SPO.

A Stipulated Protective Order was signed in the insurance case of Bedivere Ins. Co. v. Blue Cross & Blue Shield of Kansas, Inc. & Allied World Specialty Ins. Co., Nos. 18-cv-02371 & 18-cv-02515, 2020 WL 1140394 (D. Kan. March 9, 2020) (O'Hara, USMJ). It was written by the parties, all of them insurance companies, and their lawyers of course. The lawyers of record came from Miami and Chicago and California, as well as local counsel from Kansas. They came bearing a proposed stipulated protective order.

    The Clerk wrote this on the Docket Entry for the proposed order, which Westlaw did not pick up in its report: "AGREED PROTECTIVE ORDER. The court finds good cause to enter the order submitted by the parties. Signed by Magistrate Judge James P. O'Hara on 3/9/2020." Bedvidere Ins. Co. v. Blue Cross & Blue Shield of Kansas, Inc., Case Nos. 18-cv-02371-DDC & 18-cv-02515-DDC, DE #88, proposed "Agreed Protective Order," filed March 9, 2020.

    The ones who wrote the proposed order said that their "Agreed Protective Order is based on the District of Kansas Model Protective Order." Bedvidere, 2020 WL 1140394, at *1. Except that it isn't.

    The lawyers included three categories of protection for "confidentiality" that the lawyers select in the first place. Interestingly, the lawyers wrote categories of confidentiality based on lawyers and not on their clients seeing the materials: "In particular, the parties have included three levels of confidentiality -- Confidential, Confidential -- Attorneys' Eyes Only, and Confidential -- Outside Counsel Only[.]" Bedvidere, 2020 WL 1140394, at *1. The District of Kansas Model Protective Order does not include such categories of secrecy, and neither do the District of Kansas Guidelines for the Model Protective Order.

    And what was so important that it has to be kept secret and available only in these two consolidated lawsuits and no others? This is an insurance coverage case. It involves competing coverages under Directors' and Officers' and Errors and Omissions insurance policies. See Download Bedvidere Ins. Co. v. Blue Cross & Blue Shield of Kansas Inc. No. 18-cv-02371-DDC DE #55 Amended Complaint filed 10.14.19 (D. Kan.).

    Very hush-hush indeed.

    Seriously, though: If you can get a stipulated protective order signed to keep your insurance coverage secrets, then what if anything must be disclosed?

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

 

COURAGE, INSURANCE COVERAGE, AND STIPULATED SETTLEMENTS IN MASSACHUSETTS.

The Supreme Judicial Court of Massachusetts has rendered a decision that has many features, all of them interesting and some of them moving.

The complicated background of the decision in this case is thoroughly explored by Nina E. Kallen, Esquire in her blog article posted in Insurance Coverage Law in Massachusetts on Wednesday, October 16, 2019. I will also write another article this week about some of the other rulings in this important decision that I do not address here today.

In my judgment, one of the more important features of this decision is not readily apparent, however. I am going to ask Ms. Kallen for her comments on it by sending her a copy of this article with an email today. If we miss anything unique to this decision and Massachusetts law here, she is the right person to ask.

The decision came on October 1, 2019 in the case of Commerce Ins. Co. v. Szafarowicz, 131 N.E.3d 782 (Mass. 2019). It involves a couple of stipulated settlement agreements in a Wrongful Death Action. Commerce was defending its insured under a reservation of rights at the time, and Commerce was simultaneously pursuing a separate Declaratory Judgment Action of no coverage. Massachusetts, like most jurisdictions, permits the filing of a DJA while defending an insured under a reservation of rights to deny all coverage.

The insureds stipulated to settlement in the Wrongful Death Action before there was a determination in the Declaratory Judgment Action. The judge in the Wrongful Death Action (we are not told her or his name in the opinion) "ordered that judgment enter in favor of the [deceased claimant's] estate" far in excess of the policy limits. The policy limits were at most $500,000.00 and the original judgment was entered in the Wrongful Death Action in the amount of $5,617,510.00 (later increased to $7,669,254.41). Commerce, 131 N.E.3d at 789.
We do not know the date of the stipulated settlements because the Massachusetts Court does not tell us, but we know that "the judge ordered that judgment enter in favor of the estate" on December 28, 2016. Commerce, 131 N.E.3d at 789.

"[A]nother Superior Court judge resolved the declaratory judgment action" on February 21, 2019. The Declaratory Judgment judge (again, we are not told her or his name, only that this was a different judge from the Wrongful Death judge) held that there was no coverage for the policy's "optional bodily injury coverage of its automobile policy" because, the DJA judge found, the injuries in question "'did not arise out of an accident under the policy.'" Commerce, 131 N.E.3d at 790-91. Accordingly, said the Supreme Judicial Court in Commerce, "Commerce has no obligation to pay any amount of the $7.7 million judgment in the wrongful death action beyond the $20,000 it already paid under its compulsory bodily injury coverage." Commerce, 131 N.E.3d at 791 (emphasis by the Court).

So, to recap what happened on the facts here, the insureds stipulated to a settlement with the claimant's estate in the Wrongful Death Action for what became a judgment of $7.7 Million. That was years before the Declaratory Judgment was concluded. This means, of course, that everyone involved including Commerce, Commerce's lawyers, and the DJA judge knew that the estate was pursuing a damages determination of some 15 times what might be called the "full" policy limits of $20,000 for compulsory bodily injury coverage and $480,000 for optional bodily injury coverage.

To say again, because it bears repetition here, at the time that the DJA judge ruled in the liability insurance company's favor the insureds had already stipulated to damages far exceeding the potential policy limits. (The insureds also stipulated that their driver's negligence caused the accident which resulted in the claimant's death, a stipulation which would have triggered insurance coverage if that particular stipulation was determinative, which clearly it was not).

Nevertheless, Commerce persisted. That is clearly one way to put it. On a human level, of course the deceased claimant's loved ones are the first to command our empathy. Yet on a human level we cannot overlook the behavior of Commerce and its lawyers who for many years must have confronted the risk of losing many times, and for a lot of money, before they obtained a final Declaratory Judgment of no coverage.

That is likely to be the overlooked story of this case that I want to feature in this article today. Right or wrong, the people at the insurance company involved in this case and the lawyers who represented the insurance company in the DJA deserve to have their courage recognized, too.

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

COVERAGE LAWSUIT AFTER LIMITATIONS PERIOD, AND NO PROMPT NOTICE EITHER ...

... add up to summary judgment for a homeowner's carrier.  But actually either of the policyholder's violations of the insurance contract would have sufficed in this Connecticut case.

In Discuillo v. Allstate Ins. Co., NO. 3:17-CV-234 (KAD), 2019 WL 499255 (D. Conn. February 8, 2019), a Connecticut homeowner sustained her alleged loss in February 2015.

She advised her homeowner's insurance carrier of the loss fourteen months later, in April 2016.

She filed suit after the 18 months limitations period provided in her homeowner's policy, in January 2017.

The Federal Judge took the easy question first and entered summary judgment for the carrier because the contractual limitations period had clearly been violated in this case.  Discuillo v. Allstate Ins. Co., NO. 3:17-CV-234 (KAD), 2019 WL 499255, at *2 (D. Conn. February 8, 2019). 

Then the Federal Judge addressed the lack of "prompt notice" issue.  This was a little more difficult to deal with because after all, what is "prompt notice" of a loss under a homeowner's policy can be subject to interpretation.  In this case, notice was clearly delayed for 14 months.  The undisputed lack of "prompt notice" clearly prejudiced the carrier in this case because it was also undisputed that it was deprived of an adequate  opportunity to inspect the property so as to determine the cause of the loss by the time notice was given.  The Federal Judge entered summary judgment against the policyholder on this additional ground as well.  Discuillo v. Allstate Ins. Co., NO. 3:17-CV-234 (KAD), 2019 WL 499255, at *3-*4 (D. Conn. February 8, 2019).

Suit limitations provisions tend to be applied more often in the decided case law than "prompt notice" policy provisions.  But in some cases either provision will suffice to adjudicate a coverage claim without needing to reach the substance of the claim.

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"DUDE, YOU OVERDID IT."

It is settled Florida law that "implications of bad faith should not form a basis to determine liability in a first party insurance coverage action."  Homeowners Choice Prop. & Cas. Ins. Co. v. Kuwas, 251 So. 3d 181, 184 (Fla. 4th DCA 2018).  The appellate court granted the carrier's motion for new trial "grounded on [the policyholder's attorney's] improper arguments and questioning of HCI's litigation manager[.]"  Homeowners Choice Prop. & Cas. Ins. Co. v. Kuwas, 251 So. 3d 181, 183 (Fla. 4th DCA 2018).

          The appellate court summarized the implications and arguments in general terms as follows:

    HCI argues that a new trial is warranted because Kuwas presented his theory of the case in such a way as to improperly imply HCI's bad faith in the handling of the claims in this case and other cases in general. In particular, HCI points to [the policyholder's attorney's] remarks that HCI was “playing the odds” in deciding to deny a claim “in the hope that the party who is seeking to be paid under a policy will not sue them.” HCI argues that [the policyholder's attorney] improperly used this phrase in his opening statement, closing argument, and his examination of HCI's litigation case manager.

Homeowners Choice Prop. & Cas. Ins. Co. v. Kuwas, 251 So. 3d 181, 184 (Fla. 4th DCA 2018).   The appellate court gave a few details about these questions and implications, but not very many.  Not until they reached the policyholder's attorney's closing argument.

          Then the appellate court quoted the following apparently verbatim:

“Everything that one needed to know was stuff that they knew from day one. And what they did was, they decided to play the odds. Right? We'll talk a little bit about that. They decided, we're going to play the odds. And we're just going to disregard responsibilities that they have, personal responsibility.”

Homeowners Choice Prop. & Cas. Ins. Co. v. Kuwas, 251 So. 3d 181, 184 (Fla. 4th DCA 2018) (emphasis added by the Fourth District Court of Appeal).

          And so, on the basis of all these implications, arguments, questions, and statements, the appellate court granted the carrier a new trial in this first-party insurance coverage case because the remarks implied bad faith as a basis for the jury to determine the carrier's liability on an insurance coverage claim.

          But the appellate court was not done, because the arguments, questions and statements were not done in the trial court.  The carrier initially alleged an affirmative defense based on "the sewer backup exclusion" in its policy, but withdrew it sometime before this case was tried.  See Homeowners Choice Prop. & Cas. Ins. Co. v. Kuwas, 251 So. 3d 181, 186-87 (Fla. 4th DCA 2018).  At the trial, the policyholder's counsel closing included the following additional commentary, all in addition to the remarks previously quoted:

And you know, this case was filed last year. And we're litigating for—it's an early case, the number 500 case last year probably is 14 months old. We're litigating for 14 or 15 months. And we're fighting like the dickens over whether or not a sewer backup is excluded. And then we come to court after all this litigation, after all of this depositions, and motions, and whatnot—... Right? After depositions and whatnot, and [HCI] comes in and says oh, by the way, we just were kidding about that one. We're just kidding about that. That one doesn't apply. You know the plaintiff's right, that doesn't apply, okay, but let's try something else, right?

Homeowners Choice Prop. & Cas. Ins. Co. v. Kuwas, 251 So. 3d 181, 186 (Fla. 4th DCA 2018) (again, emphasis added by the Fourth District Court of Appeal).

          The appellate court agreed with the carrier's argument that it was deprived of a fair trial by these remarks in this insurance coverage case, because, it asserted, "this comment denigrated its defense and implored the jury to punish it for exercising its rights to conduct discovery and litigate motions in connection with the case[.]"    Homeowners Choice Prop. & Cas. Ins. Co. v. Kuwas, 251 So. 3d 181, 187 (Fla. 4th DCA 2018).  The appellate court agreed.  It reversed and remanded the case for a new trial on the strength of these additional remarks, as well:

We agree that a new trial is warranted because the comments made by [the policyholder's counsel] in closing argument improperly denigrated HCI's defenses and were so highly prejudicial and inflammatory such that it was denied its right to a fair trial.

Homeowners Choice Prop. & Cas. Ins. Co. v. Kuwas, 251 So. 3d 181, 188 (Fla. 4th DCA 2018).

          The moral of the story is not so much to keep your mouth shut, for what else is a lawyer hired to do, except represent her or his client?  Rather, the moral of the story is summed up in the title of this article:  Dude, you overdid it.

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

DELAWARE INSURANCE JUDGE REJECTS ANOTHER DELAWARE JUDGE'S "INTENTIONAL AND BAD FAITH" FRAUD RULING.

In an insurance case, a Delaware judge reportedly ruled on March 1, 2018 that Delaware law should apply to an insurance case.  The Delaware judge in the insurance case reportedly ruled that "'[a]lthough it may strain public policy to allow a director to collect insurance on a fraud, it does not appear to be explicitly prohibited by Delaware statutory law.'"

Don't strain yourself judge.  Another Delaware judge already determined that the fraud involved was "intentional and in bad faith."

The insurance case in Delaware grew out of an earlier fraud case in Delaware.  The fraud case involved the same individuals who are apparently claiming Directors and Officers Coverage in the insurance case.  Their fraud was actually proven in a trial in the Delaware fraud case.  The fraud was that the individuals gave the board of directors of Dole Food Co. false estimates of "how much money the company could save" from accepting a buyout offer from one of the individuals.  James Rufus Koren, "A Court Found That an L.A. Billionaire Duped Dole Investors.  Now He Wants to Stick Insurers With The Bill" (Los Angeles Times Online, Friday, March 9, 2018).

After the trial of the Delaware fraud case concluded, the Delaware judge presiding wrote that the defendants' "'actions were not innocent or inadvertent, but rather intentional and in bad faith.'"  James Rufus Koren, supra, quoting the 2015 opinion of Delaware Chancery Court Chancellor J. Travis Laster.

Stop and reflect with me for a moment.  Has an insurance coverage trial lawyer ever been born who would not be really happy with Judge Laster's quoted ruling, if you had to prove intentional and bad faith conduct that barred all coverage for it?  Now back to the rest of the story so to speak.

Judge Laster held in the Delaware fraud case that the two individuals who would later claim coverage as directors' and officers' policy "insureds" should accordingly pay $148 million.  Apparently before judgment was entered in that amount, the individuals settled -- for that amount together with interest. 

The Directors and Officers Carriers Raise the Fraud Ruling as a Defense to Coverage.

 The Directors and Officers Carriers filed an action in Delaware to declare that their insurance policies did not cover the "intentional and bad faith" fraud.  They argued in particular that their position was a "slam dunk" under California law, but the judge in the Delaware insurance case declined to bar the coverage claim under any State's law.  As noted, the Delaware judge in the insurance case reportedly ruled that Delaware law should apply, and anyway, "'[a]lthough it may strain public policy to allow a director to collect insurance on a fraud, it does not appear to be explicitly prohibited by Delaware statutory law.'"

So there you have it.  Where are the "fortuity" ideologues when they might do some good?  The fortuity ideologues are people who claim, at least when they have a dog in the fight and it is to their advantage, that insurance does not apply unless the covered risk was fortuitous and, moreover, that the party claiming coverage has a burden to prove that the risk involved was fortuitous.  There can be no judicial declaration of coverage, the fortuitous ideologues continue, unless the risk is fortuitous.

A trial in the insurance case in Delaware is reportedly currently scheduled for July, 2018.

Stay tuned.

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

"WRONGFUL EVICTION" AS A CGL PERSONAL INJURY OFFENSE.

In order to qualify as covered "Personal Injury" under a Comprehensive General (or Commercial General) Liability policy (CGL), "wrongful eviction" requires a possessory interest or there is no Personal Injury Coverage and so no duty to defend or duty to indemnify either, the District Court held under West Virginia law in Grand China Buffett & Grill, Inc. v. State Auto Prop. & Cas. Co., 260 F. Supp. 3d 616, No.  1:16CV159, 2017 WL 2129307 (N.D. W. Va. May 16, 2017), appeal dismissed upon stipulated motion to dismiss, 2017 WL 6345716 (4th Cir. September 25, 2017).

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

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California's "Genuine Dispute," "Genuine Issue" Rule Continued.

I wrote a previous article this week about a helpful opinion from a California DCA concerning California's "genuine dispute" or "genuine issue" rule:   Zubillaga v. Allstate Indem. Co., 12 Cal. App. 5th 1017, 219 Cal. Rptr. 3d 620 (Cal. 4th DCA, Div. 3, 2017).  The opinion reads like a law review article on the topic.

The genuine dispute rule applies in bad faith cases.  It depends on good faith.  "'A genuine dispute exists only where the insurer's position is maintained in good faith and on reasonable grounds.'"  Zubillaga v. Allstate Indem. Co., 12 Cal. App. 5th 1017, 1027, 219 Cal. Rptr. 3d 620, 628 (Cal. 4th DCA, Div. 3, 2017) (citation omitted; emphasis in original).

Perfection is not required from the insurance carrier, even in California.  If the dispute is genuine, it does not seem to matter if the insurance company was wrong in disputing coverage or liability.  The essence of the determination required by the rule in whether "'a reasonable and legitimate dispute actually existed[.]'"   Zubillaga v. Allstate Indem. Co., 12 Cal. App. 5th 1017, 1028, 219 Cal. Rptr. 3d 620, 628 (Cal. 4th DCA, Div. 3, 2017) (citation omitted).

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

CALIFORNIA'S "GENUINE DISPUTE" OR "GENUINE ISSUE" RULE: NOT JUST COVERAGE ANYMORE.

PART ONE.

In a helpful opinion, a California District Court of Appeal laid out the origins and described the recent extensions of California's "genuine dispute" or "genuine issue" rule:

    As noted, an insurer's denial of or delay in paying benefits gives rise to tort damages only if the insured shows the denial or delay was unreasonable. “[A]n insurer denying or delaying the payment of policy benefits due to the existence of a genuine dispute with its insured as to the existence of coverage liability or the amount of the insured's coverage claim is not liable in bad faith even though it might be liable for breach of contract.” (Chateau Chamberay Homeowners Assn. v. Associated Internat. Ins. Co.(2001) 90 Cal.App.4th 335, 347, 108 Cal.Rptr.2d 776 (Chateau Chamberay ).  [Subscription required to access this hyperlink.]  “This ‘genuine dispute’ or ‘genuine issue’ rule was originally invoked in cases involving disputes over policy interpretation, but in recent years courts have applied it to factual disputes as well. [Citations.]” (Wilson, supra, 42 Cal.4th at p. 723, 68 Cal.Rptr.3d 746, 171 P.3d 1082.)

Zubillaga v. Allstate Indem. Co., 12 Cal. App. 5th 1017, 1027, 219 Cal. Rptr. 3d 620, 628 (Cal. 4th DCA, Div. 3, 2017) (emphasis added).

Part Two follows.  To be continued ....

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

Coblentz AGREEMENTS IN FLORIDA EXPLAINED AND APPLIED.

Image via Shepard's/McGraw-Hill.

"Coblentz agreements" are named after Coblentz v. American Surety Co., 416 F.2d 1059 (5th Cir. 1969).  In many other jurisdictions they have other names, including generic titles such as consent judgments, but particularly in South Florida they are called Coblentz agreements, and they are special.  They are valid only after a liability carrier has denied all coverage.

Moreover, in order to prevail under one of these agreements for a recovery in excess of liability policy limits, the crucial issue in the resulting "bad faith" case is whether the carrier's denial of coverage was wrongful.

An explanation and application of Coblentz agreements were offered by an appellate panel of the Federal Eleventh Circuit Court of Appeals in a case involving Florida substantive law:

Coblentz agreements permit an insured to “enter into a reasonable settlement agreement with the [plaintiff] and consent to an adverse judgment for the policy limits that is collectable only against the insurer.”  Perera v. United States Fid. & Guar. Co., 35 So. 3d 893, 900 (Fla. 2010).  If a plaintiff wishes to recover in excess of the policy limits, the plaintiff must establish that the insurer acted in bad faith in wrongfully denying coverage.

Garcia v. GEICO General Ins. Co., 807 F.3d 1228, 1230 n. 1 (11th Cir. 2015).

 Since the crucial issue in the case was whether the carrier's denial of liability insurance coverage was wrongful, the panel held that the carrier was entitled to put on evidence that its coverage decisions were reasonable, and to put on evidence, specifically, of coverage decisions by the Florida Courts that supported the carrier's coverage decisions at the time the carrier made those decisions.

Please Read The Disclaimer.  ©2015 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with 2015 Supplements).  The Garcia case is a good illustration of the rule predicted in § 5.26 that a defense of "Fairly or reasonably debatable claim" for an allegedly wrongful denial of coverage should be permitted by the Courts on the overall issue of "wrongful" denial of coverage, i.e., on the issue of "bad faith" in a Coblentz context.   As the appellate panel decided in Garcia, evidence should be admitted on the central issue of whether the liability insurer's resolution of an uncertain legal conflict over policy interpretation was reasonable at the time the coverage decision was made, even though the liability carrier's resolution of that issue is judicially determined later to be the wrong answer to the question.  All rights reserved.

INSURANCE FOR "BAD FAITH" BREACHING CONTRACTS TO END PENALTY DISCRIMINATION?

"The legal system doesn't have any magic cure."

Alex Karakatsanis, Esquire, founder of Equal Justice Under Law, quoted by http://nyti.ms/1Kz5rJK Shaila Dewan, "Fighting Court by Court to End Judicial Policies That Fall Heavily on Poor" p. 16, col. 1 (New York Times Nat'l ed., Sunday, October 25, 2015).

 

In response to charges and to lawsuits over the use of fines and penalties by cities and counties in States as diverse as Alabama, Mississippi, Ohio and Pennsylvania, allegedly to raise money without regard to the defendant's ability to pay, many cities and counties settle.  Later, some end up breaching their pre-suit and litigation settlement contracts.  "Time and again, governments large and small have failed to follow through on their agreements, leading in some cases to renewed legal battles."  Shaila Dewan, "Fighting Court by Court to End Judicial Policies That Fall Heavily on Poor" p. 16, col. 1 (New York Times Nat'l ed., Sunday, October 25, 2015).

Seems like these "bad faith" breaches might be an appropriate time and place for carriers to invoke and, if necessary, for Courts to litigate uniform exclusions of liability coverage for breach of contract.  Exclusions of liability for breach of contract are found for example in virtually every commercial general liability policy as well as in many other types of insurance policies under which the allegedly breaching munis might make a coverage claim.

Please Read The Disclaimer.  ©2015 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with 2015 Supplements).  All rights reserved.

 

When The "No Settlement Without Consent" Provision is NOT Waived.

          It has been held that a liability insurer does not waive its “no settlement without consent” provision just by permitting the policyholder to offer a settlement with an amount of money which was less than the amount for which the policyholder ultimately settled the underlying case.   Piedmont Office Realty Trust, Inc. v. XL Specialty Ins. Co., ___ Ga. ___, 771 S.E.2d 864, 866 (Ga. 2015):

   In this case, . . . the plain language of the insurance policy does not allow the insured to settle a claim without the insurer's written consent. It also provides that the insurer shall only be liable for a loss which the insured is “legally obligated to pay.” Finally, the policy contains a “no action” clause which stipulates that the insurer may not be sued unless, as a condition precedent, the insured complies with all of the terms of the policy and the amount of the insured's obligation to pay is determined by a judgment against the insured after a trial or a written agreement between the claimant, the insured, and the insurer. In light of these unambiguous policy provisions, we hold that Piedmont is precluded from pursuing this action [an alleged breach of an excess insurance contract and a statutory claim of bad faith failure to settle] against XL because XL did not consent to the settlement and Piedmont failed to fulfill the contractually agreed upon condition precedent.

 

Reprinted with the permission of Thomson Reuters from the manuscript of the author's 2015 Supplement chapters, and in particular Section 5:15, in “Litigation and Prevention of Insurer Bad Faith, 3d” ©2015 by Thomson Reuters.

 

INDEMNITY FOR THE UNIVERSITY OF MIAMI'S ADDITIONAL INSURED DEFENSE EXPENSES: NEW FLORIDA LAW? Continued.

This is the conclusion of an article that began with the post here on Sunday, February 24, 2013.

           The dissenting Judge on this 3-Judge Panel emphasized for a good reason that there was no conflict over Insurance Coverage in this case.  In Florida, by Statute only, independent Counsel is required to be provided to an Insured under a Liability Insurance Policy only when the Liability Carrier asserts a statutory "coverage defense," meaning that the Carrier is required to provide mutually agreeable, independent counsel under the Florida Statute only when the Carrier asserts a defense to Coverage that otherwise exists.  See Fla. Stat. § 627.426.  Parenthetically, even when the Florida Statute is not complied with, the statutory sanction is that the Liability Carrier will not be permitted to raise the statutory "coverage defense" in question.

          Or, as the dissenting Judge put it in the University of Miami v. Great American case:  "Similarly in the case before us, the University of Miami has not alleged (or shown) how the disparity in potential liability between it and Magicamp affected in any way the joint defense provided it under the Great American policy."  University of Miami v. Great American Insurance Co., 2013 WL 616156 *7 (Fla. 3d DCA February 20, 2013)(Shepherd, J., dissenting).

          The Majority's holding in this case therefore appears to be based on one of two reasons.  Either the holding represents the making of new law in Florida, or it represents a determination that the Liability Carrier in the case acted in "Bad Faith".  The latter determination could not, in this case, include a failure to settle or a poorly provided defense, certainly, or either event would have been mentioned in the Majority Opinion and in the Dissent, but there is no mention of them by either the Majority or by the Dissent.  If there is a determination of "Bad Faith" inherent in the holding in this case, it therefore has to be the equivalent of a holding that the Liability Carrier in this case wrongfully refused to defend the Additional Insured-University of Miami.

          If the holding in this case represents new law in Florida,  nothing more needs to be said here.

          If the holding in this case is based on a wrongful refusal to defend, Attorney's Fees and Costs are ordinarily recoverable in such a case in Florida and in many other jurisdictions.  2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 13:13, "Attorney's Fees--Settlement or Defense of Third Party's Claim" (THIRD EDITION WEST PUBLISHING CO., 2013 SUPPLEMENT IN PROCESS).

          In neither case does it mean that either the two Judges in the Majority were correct in their holding, or that the one dissenting Judge was correct in his dissent.  It means only that the holding was based either on making new Florida law, or on a determination that in this case the Additional Insured, the University of Miami, was wrongfully denied a defense by the Named Insured's Liability Carrier when the Carrier refused to provide the University with separate, independent defense counsel given potentially conflicting legal positions of the two Insureds, if  presented in defense to individual active negligence claims against the Named Insured and against the Additional Insured.

Please Read The Disclaimer.

YOU DECIDE: TWO CASES WITH SIMILAR RESULTS, BUT DIFFERENT RATIONALES.

The first case:  Arnett v. Mid-Continent Cas. Co., 2010 WL 2821981 *3 (M.D. Fla. July 16, 2010), holding that "not a known loss" was part of the Insured's Burden of Proof to prove Coverage in the first place, and the Insured did not prove it, under this policy language:

 

The Federal Court called the following provision in this case a “known loss clause”:

 1. Insuring Agreement

[…]

b. This insurance applies to “bodily injury” and “property damage” only if:

[…]

(3) Prior to the policy period, no insured listed under Paragraph 1. of Section II-Who Is An Insured and no “employee” authorized by you to give or retrieve notice of an “occurrence” or claim, knew that the “bodily injury” or “property damage” had occurred, in whole or in part. If such a listed insured or authorized “employee” knew, prior to the policy period, that the “bodily injury” or “property damage” occurred, then any continuation, change or resumption of such “bodily injury” or “property damage” during or after the policy period will be deemed to have been known prior to the policy period.

 

The second case:  Westport Ins. Co. v. Law Offices of Gerald J. Lindor, P.A., 2009 WL 722254 *3-*4 (S.D. Fla. March 18, 2009), holding that the following language was an Exclusion and the Insurer bore the Burden of Proof that it applied, a burden which the Court held that the Insurance Company met in this case:

 any claim based upon, arising out of, attributable to, or directly or indirectly resulting from … any wrongful act occurring prior to the effective date of [the Insurance policy] … if the Insured at the effective [sic] of [the Insurance policy] knew or could have reasonably foreseen that such wrongful act might be expected to be the basis of a claim ....

 

Please Read The Disclaimer.

Related articles

Bad Faith in Florida: Southern District "subsumes" and "Dictas" Too.

First-Party Policies: EXAMINATION UNDER OATH AND PRODUCTION OF DOCUMENTS.

  One standard policy provision among several purports to require the following behavior from First-Party Insureds in all claims:

Your Duties After Loss.

In case of a loss to covered property, you must see that the following are done:

…

 

f. as often as we reasonably require:

(1). show the damaged property;

(2). provide us with records and documents we request and permit us to make copies; and

(3). submit to examination under oath, while not in the presence of any other insured, and sign the same.

 

However, majority views in the case law include the following bullet points:

•      E/U/O NOT a deposition;
•      NOT Rules of Civil Procedure;
•      NOT Rules of Evidence;
•      Provisions of the Insurance Contract.

   A recent Supreme Court of  Washington en banc decision added the holding, which may or may not represent the coming majority view, that if an Examination Under Oath is not material to the claim, it is no defense to the Insurance Carrier if the Insured does not provide an EUO.  "Given the quasi-fiduciary nature of the insurance relationship, we hold that if an EUO is not material to the investigation or handling of a claim, an insurer cannot demand it."  Staples v. Allstate Insurance Co., 2013 WL 258877  ¶ 26 *5 (Wash. January 24, 2013).

Please Read The Disclaimer.

EXPERTS APPOINTED BY THE COURT, PARTIES PAY ... WHO SELECTS?

          Judges are saying recently that in particular kinds of cases, Experts are helpful to them in resolving those cases.  Since these recent judicial observations were apparently not recorded and there was no expectation of attribution of particular views to particular Judges, their remarks will be reported anonymously in this article.

          The kinds of cases in which Experts are helpful to Judges in resolving the issues are cases involving backgrounds which most Judges simply do not have, such as in cases which involve scientific and other technical issues.  To these cases may be added many Insurance Coverage and Insurance Bad Faith cases which also often present technical, complex issues.

          One Judge observes that a case has often gone down the road for a long ways before a Judge appreciates the technical advice that an Expert can bring to bear.  Many Judges admit that it is a signal of when a Judge may need the help:  When the Experts already retained by the parties have a legitimate dispute among themselves and there is difficulty in understanding their Opinions and how they reached them.

          Most Judges, perhaps all Judges, would treat the Court-appointed Expert like they treat the relationships they have with their own Law Clerks.

          The parties play a huge role.  They can suggest to the Trial Judge that an Expert appointed by the Court -- selected or at least suggested by the parties -- may assist the Court in addressing the issues and resolving the case.  The parties will pay the Court-appointed Expert's fees.  That procedure is usually far less expensive to the client than being forced to appeal an unfavorable outcome which could (and should) have been avoided by the Trial Court's reliance on the advice of an Expert.

          In short, as one Judge observed, if the issue is complicated, uncomplicate it.   If you cannot uncomplicate it, the Judge probably needs the technical advice of the Court-appointed Expert.

          In Federal Courts, Federal Rule of Evidence 706 provides the tool:

Rule 706. Court-Appointed Expert Witnesses

(a) Appointment Process. On a party’s motion or on its own, the court may order the parties to show cause why expert witnesses should not be appointed and may ask the parties to submit nominations. The court may appoint any expert that the parties agree on and any of its own choosing. But the court may only appoint someone who consents to act.

(b) Expert’s Role. The court must inform the expert of the expert’s duties. The court may do so in writing and have a copy filed with the clerk or may do so orally at a conference in which the parties have an opportunity to participate. The expert:

(1) must advise the parties of any findings the expert makes;

(2) may be deposed by any party;

(3) may be called to testify by the court or any party; and

(4) may be cross-examined by any party, including the party that called the expert.

(c) Compensation. The expert is entitled to a reasonable compensation, as set by the court. The compensation is payable as follows:

(1) in a criminal case or in a civil case involving just compensation under the Fifth Amendment, from any funds that are provided by law; and

(2) in any other civil case, by the parties in the proportion and at the time that the court directs — and the compensation is then charged like other costs.

(d) Disclosing the Appointment to the Jury. The court may authorize disclosure to the jury that the court appointed the expert.

(e) Parties’ Choice of Their Own Experts. This rule does not limit a party in calling its own experts.

           Note that under FRE 706, the Court-appointed Expert Witness can be deposed by any party and can be called by any party or the Court to testify at Trial.  Ordinarily in human experience across the United States, most Insurance Bad Faith cases settle after Expert Witnesses are deposed.  It will be interesting to see if that holds true after Court-appointed Expert Witnesses are deposed.

 Please Read The Disclaimer.

Also check out the outstanding Cavalcade of Risk at http://www.workerscompinsider.com/2013/01/cavalcade-of-ri-94.html, hosted by Julie Ferguson.

INADEQUATE DEFENSE OF INSURED CLAIMED BAD FAITH: TAKEOVER NOT JUSTIFIED.

            A U.S. Magistrate Judge confronted several "hot topic" issues of Bad Faith in the Third-Party Bad Faith case of Doe v. Onebeacon America Insurance Co., 2012 WL 5876566 (N.D. Fla. November 21, 2012)(Jones, USMJ).  The background of the case is significant.

            The Court faced competing Motions for a Protective Order, and to Compel, in a discovery dispute in a Third-Party Bad Faith case.  One of the Defendants in the underlying liability case was the Diocese of Savannah.  The Liability Insurance Carrier defended the Diocese under a Reservation of Rights.  However, apparently without communicating the fact beforehand to its Liability Insurance Carrier, the Diocese settled with the Injured Claimant (referred to in the style of the Bad Faith case and in the opinion as, "Doe"), without the Carrier's consent.  The Diocese also gave the Injured Claimant an assignment of certain rights.  Exactly which rights were assigned was unclear to the Court, but the assignment certainly included the Bad Faith rights of the Diocese against the Liability Carrier.    Doe v. Onebeacon America Insurance Co., 2012 WL 5876566 *1  (N.D. Fla. November 21, 2012).

            The biggest "hot topic" issue addressed by the Magistrate Judge concerned the Plaintiff Doe's argument that "Defendant's failure to provide an adequate defense justified the insured acting independently to settle the case."  Doe v. Onebeacon America Insurance Co., 2012 WL 5876566 *1 (N.D. Fla. November 21, 2012)(Jones, USMJ).  This is a "hot topic" issue in the case law.   See generally Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" § 3:50 ("Settlement by or Judgment Against Insured") (Third Edition West Publishing Co., 2012 Supplement).

        Under Florida law, the Court disagreed with the contention that an Insured can accept a defense under a Reservation of Rights and then settle without the consent of the  Liability Insurance Carrier and without any material change in the terms under which the Carrier provided the defense.  The Court acknowledged that Florida law does not permit the Insured to reject a defense which it has already accepted under a Reservation of Rights, simply because the defense is inadequately conducted:

    If the insured, as here, does accept a defense under a reservation of rights, the insured must cooperate with the insurer throughout the course of the litigation. The insurer may not take advantage of the insurer-provided defense, then later reject that defense and attempt to control the litigation itself. This is so even if the defense provided by the insurer is less than adequate.  [Citations omitted.]    The only narrow exception to this principle is where the insurer has provided a defense which the insured accepts, but the insurer then changes the terms of the defense in a material way. In that instance, the insured may then be justified in rejecting the defense.

Doe v. Onebeacon America Insurance Co., 2012 WL 5876566 *5 (N.D. Fla. November 21, 2012).  The Plaintiff in this case did not claim that there was any material change in the terms of the defense which the Diocese accepted in the underlying case.  Accordingly, the Magistrate Judge denied discovery from and after the time that the Diocese rejected the defense, apparently by entering into the settlement and assignment, "even with regard to the issue of coverage."  Doe v. Onebeacon America Insurance Co., 2012 WL 5876566 *6 (N.D. Fla. November 21, 2012)(Jones, USMJ).  The moral:  In Florida and in other jurisdictions following the Florida view, the consequences of an Insured first accepting a defense under a Reservation of Rights and then being provided an allegedly inadequate defense, may go beyond even the entry of an Excess Judgment against the Insured.

            On another "hot topic" issue, the Court noted that the Defendant alleged Affirmative Defenses in this case, which is of course to be expected in any case.  In this case, the Plaintiff propounded a Request for Production directed to documents containing any supporting fact information for any of the Affirmative Defenses alleged by the Defendant in this case:

All documents, whether in paper form, computer data format or any other medium, which relate in any way to the facts that form the basis for the affirmative defenses in the Defendant's Answer.

The Defendant Liability Carrier in this case seems to have objected only on the ground that this Request is "overbroad."  The Court overruled this objection and granted Plaintiff's Motion to Compel as to this Request for Production, holding that "Defendant may not assert an affirmative defense and then decline to produce documents that would support those defenses.  The Court finds that all documents that will support a factual basis for any affirmative defense must be produced."   Doe v. Onebeacon America Insurance Co., 2012 WL 5876566 *7 (N.D. Fla. November 21, 2012).  [Emphasis added.]   The moral:  Defendants don't let your words grow up to be Affirmative Defenses unless you are prepared to provide fact discovery about them.

            In two further rulings, the Court in this case also equated the personal attorney of the Insured with the retained defense counsel in terms of the Carrier's standing to legitimately assert the Attorney-Client Privilege against discovery from the Insured's personal lawyer, where among other things the Insured's personal attorney was also paid by the Liability Carrier to defend the underlying case.   Doe v. Onebeacon America Insurance Co., 2012 WL 5876566 *3 (N.D. Fla. November 21, 2012)(Jones, USMJ).

            In addition, the Magistrate Judge's opinion seemed to equate discovery into Insurance Coverage issues with discovery in First-Party Bad Faith cases, see Doe v. Onebeacon America Insurance Co., 2012 WL 5876566 *4 (N.D. Fla. November 21, 2012)(Jones, USMJ), although this analogy does not seem to have been necessary to the Court's ruling that discovery into "communications between counsel and the insurer" was premature at this stage of the litigation.

The American Conference Institute's 23rd National Advanced Forum on Bad Faith Litigation begins with a workshop today, Tuesday, November 27, 2012 at the Hyatt Regency Grand Cypress Hotel at Disney World in Orlando, Florida, and continues over the next two days.  I will be speaking on both of the following days.  On Wednesday, November 28, 2012 I will be part of a panel addressing the handling and litigation of a typical Bad Faith Claim.  I will address in particular the permissible proffers and uses of Expert Witnesses before and at Trial of the Bad Faith Case.  On Thursday, November 29, 2012 I will be a co-presenter of an afternoon-long Florida Workshop.  Please plan on attending.  I would prefer to present these issues with you in the audience!

Please Read The Disclaimer.   

When Policyholder Settles and Assigns Claim to Injured Claimants, Arbitrate?

     There could not be many more interesting decisions in August, 2012 than the officially unpublished opinion by a panel of the Ninth Circuit in Allied Professionals Insurance Co. v. Kong, 2012 WL 3525353 (9th Cir. Opinion Filed August 16, 2012), Download Allied Professionals Insurance Co. v. Kong (9th Cir. No. 10.56968, Opinion Filed August 16, 2012) UNPUBLISHED.

    Apparently the case involved a denial of all Coverage by Allied Professionals Insurance Company when its Policyholder, anonymous in the panel's opinion, was sued by Ms. Joanne Kong.  Kong settled with the Policyholder "purportedly awarding Kong $1,115,000 compensatory damages and assigning Kong the right to enforce the award against Allied."  Allied Professionals Insurance Co. v. Kong, 2012 WL 3525353 *1 (9th Cir. Opinion Filed August 16, 2012).

    The panel's opinion is also silent on whether this sum was within Allied's Policy Limit.

    Suit was filed first in Florida State Court.  It was removed to the United States District Court for the Middle District of Florida, representing a second suit, and in which the Florida Federal Judge denied Ms. Kong's Motion to Remand and granted Allied's Motion to Compel Arbitration in Orange County, California.  Allied Professionals Insurance Co. v. Kong, 2012 WL 3525353 *1 (9th Cir. Opinion Filed August 16, 2012).  The Ninth Circuit panel refused to review this Florida District Court decision.

    A third lawsuit was apparently then filed in California after an Arbitration was held in California, and after the Arbitrators ruled in favor of Allied.  (It is of interest that in Florida, Insurance Coverage is not an issue for Arbitration, but for a Court.)   The California Federal Judge entered an Order affirming the Arbitration Award in favor of Allied.  Allied Professionals Insurance Co. v. Kong, 2012 WL 3525353 *1(9th Cir. Opinion Filed August 16, 2012).

    The Ninth Circuit panel affirmed.  The Appellate panel held that "Kong has failed to demonstrate that the arbitration award constitutes manifest disregard of the law."  Allied Professionals Insurance Co. v. Kong, 2012 WL 3525353 *2 (9th Cir. Opinion Filed August 16, 2012).  This necessarily means, it would appear, that Allied won the Coverage Issue or Issues "because the subject of the arbitration was whether the Allied policy at issue covered an injury Kong suffered and the enforceability of an agreement between Kong and Allied's insured purportedly awarding Kong $1,115,000 compensatory damages and assigning Kong the right to enforce the award against Allied."  Allied Professionals Insurance Co. v. Kong, 2012 WL 3525353 *1 (9th Cir. Opinion Filed August 16, 2012).  [Emphasis added.]

    When all Coverage is denied, if the Liability Insurance Company believes strongly enough in its Coverage position then the result of decisions in cases like Kong will inevitably be that further cases will be reported (both those officially published and those officially unpublished alike) involving Liability Insurance Companies' demands for Arbitration of resulting Settlement Agreements between Policyholders and Injured Claimants for which the Carriers contend there is no Coverage in the first place.

Please Read The Disclaimer.

Personal Knowledge Requirement for Affidavits Not Met, No Summary Judgment.

   It is just so totally straight-forward that the Rules of Procedure and of Evidence require that Affidavits be made on personal knowledge.  Without personal knowledge, an Affidavit is not worth the internet link used to upload it to the Electronic Court File.

   Recently, a Federal Court provided practitioners with a reminder of this.  In that Federal Case, a Plaintiff who represented herself in a lawsuit against Liberty Mutual Group defeated the Defendant's Motion for Summary Judgment for exactly this reason.  Ms. Martha Akers was issued a Homeowner's Insurance Policy by Liberty.  Her property suffered a fire loss.  She made a claim under the Homeowner's Policy.  Liberty denied her claim.

   In its Denial Letter, Liberty told Ms. Akers that she had failed to comply with two Conditions in her Insurance Contract.  Liberty wrote that (1) Ms. Akers had failed to fulfill her duties after loss and (2) she affirmatively engaged "'in concealment, fraud, material misrepresentation, false statements, and non-cooperation' thereby rendering the policy void."  Akers v. Liberty Mutual Group, Download Akers v. Liberty Mutual Group (D.D.C. Case No. 08.1525, Memorandum Opinion Filed September 28, 2010) PUBLIC ACCESS, also published as 2010 WL 3832051 *1 (D.D.C. September 28, 2010)(authorized password required to access Westlaw).

   Ms. Akers filed a Lawsuit against Liberty alleging "breach of contract and demanding specific performance."  Akers v. Liberty Mutual Group, 2010 WL 3832051 at *1.  Liberty filed a Motion for Summary Judgment.  In support of its motion, Liberty filed an Affidavit of one Gould, who worked in Liberty's "SIU" or Special Investigative Unit.  Id. at *2.

   In her Affidavit, Gould attempted to testify to what other people told her about Akers and Akers' claim.  Liberty suggested to the Federal Court that Gould's testimony was based upon her own personal knowledge, as it was required to be.  The Federal Judge did not agree.

   "Gould's affidavit is replete with statements made by and information learned from third parties other than Gould....  The court presumes, as the defendant has not argued otherwise, that these statements are being offered by the defendant for their truth....  The defendant does not argue that these hearsay statements would be otherwise admissible because they fall under a hearsay exception."  Accordingly, the Federal Court ruled that the statements of and information obtained by Gould from third persons, all related by Gould in her Affidavit, "cannot be considered for their truth."  Id. at *4.

   There being no record evidence tending to display that there were no genuine issues of material fact surrounding the Plaintiff's allegations in the Lawsuit, Liberty's Motion for Summary Judgment was, summarily, denied (but without prejudice to properly support the Motion).  Id. at *5.

Please Read The Disclaimer.   

No "Bad Faith," Still Florida Attorney's Fees Awarded to Policyholder.

   In a recent holding in a case previously commented on here in several posts, and in which the Defendant Insurance Company prevailed on an alleged  First-Party Statutory Bad Faith Claim, the Insurance Company was still responsible for the Plaintiff's-Insured's Attorney's Fees under 2 Florida Statutes:  Kearney v. Auto-Owners Insurance Co., Download Kearney v. Auto-Owners Insurance Co. (M.D. Fla. Case No. 8.06cv00595, Order Awarding Attorney's Fees Filed August 4, 2010) PUBLIC ACCESS also published as  2010 WL 3119380 (M.D. Fla. August 4, 2010)(Westlaw subscription required to access Westlaw).

   The Insurance Coverage Claim involved Uninsured Motorist Coverage in that case under primary Policies issued by Zurich and by Auto-Owners, and under an Umbrella Policy issued by Auto-Owners, to the Plaintiff's father and to the father's business.  Auto-Owners prevailed on the Statutory Bad Faith Claim.  The Plaintiff, Mr. Clayton Kearney, then filed a Motion for Attorney's Fees under two Florida Statutes, Fla. Stat. § 627.428, which applies generally to actions between Insurers and Insureds in which the Insured prevails on even one claim or count against the Insurance Company, and Fla. Stat. § 627.727, which specifically provides in its subsection (8) that Section 627.428 does not apply in an action against a UM Insurer "unless there is a dispute over whether the policy provides coverage for an uninsured motorist proven to be liable for the accident."  Kearney v. Auto-Owners Insurance Co., 2010 WL 3119380 at 4 & n. 29.  [Emphasis by the Court.]  The holdings by the Federal Court in this case concerning the two Florida Statutes are both instructive and predictable.

   First, "[b]ecause § 627.727 does not define the term 'coverage,' the Court must give the word its ordinary meaning."  In that case, the underlying claim to Uninsured Motorist Coverage provided by  Auto-Owners Policies depended in turn on the extent of stacking allowed under a separate Policy issued by Zurich.  The Court in this case defined the undefined Statutory term, "coverage," and applied its new, ordinary-meaning definition to this particular case:

Coverage disputes, therefore, are disputes about risk -- and what kind of risk an insurance company took on in exchange for a premium....  Hence, the dispute over the stacking clause in the Zurich primary policy was, in essence, a dispute over how much risk Auto-Owners had assumed.

Id. at *5.  The "stacking dispute" which Mr. Kearney had with Zurich in this case in turn determined Auto-Owners' UM Coverage position under its own Policy.  "Both disputes involve how much risk the insurer agreed to take on."  Id.

   The Federal Judge apparently did not think much of Auto-Owners' argument that it was arguing about "set offs" against its UM Coverage, if any, rather than contesting its UM "Coverage":

But simply calling a legal dispute by a different name does not change the underlying nature of the dispute.  A McDonald's hamburger is still a McDonald's hamburger even if you call it a sirloin sandwich.

Id. at*5.

   Second, an award of an Insured's Attorney's Fees under Section 627.428 is not governed by the same standard as First-Party Statutory Bad Faith in Florida.  Florida Courts "have made clear that the standard for awarding attorney's fees under § 627.428 is not tantamount to a bad faith standard."  Id. at *7.  [Emphasis by the Court.]  "Therefore, the jury's determination that Auto-Owners did not commit bad faith does not prevent this Court from awarding Kearney attorney's fees."  Id.

   In awarding Kearney attorney's fees, the Court was guided by the twin purposes behind the enactment and application of Section 627.428 to Insurance Cases.  Those purposes are not limited to the one purpose of punishing Insurance Companies for wrongful conduct.  There is another purpose served by Section 627.428, which is "to compensate insurance customers who go to court to get a claim paid.  Therefore, even if the degree of an insurance company's wrongful conduct is modest, the need to compensate an insurer [sic] may tip the balance in favor of an attorney's fees award.  Considering both these factors adheres both to the statute's purpose and to the mandatory language of the state, which says that a trial court shall award attorney's fees."  Id. [Emphasis by the Court.]

To be continued ...............

Attorney's Fees Awards in Cases filed by Insureds against Insurance Companies are addressed in Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" §§ 13.12 - 13.14 (Shepard's/McGraw-Hill First Edition/West Publishing Co. Second Edition and 2010 Supplement).

Please Read The Disclaimer.

 

Waiver of First-Party Policy Conditions, And No "Do Over"!

**Author's Note:  If you have reached this blog through a list that carries advertising, your computer may or may not be put at risk either through the list or through the advertising.  I do not accept or authorize any commercial advertising of any kind on any list or post.  Placing commercial advertisements with or near any of my web log posts is prohibited.  Further, I do not recommend any products or services advertised with or near any of my posts or any list of my posts.**   

   A Proof of Loss requirement in a First-Party Insurance Policy is a condition precedent to successfully pursuing Coverage under that Policy.  A Proof of Loss requirement can also be waived. 

   Waiver has been addressed by the Florida Courts for many decades.  For example, waiver can occur, say the Florida Courts, by the payment of any amount of the potentially covered Loss, or by admitting liability for any part of the potentially covered Loss, if the First-Party Insurer makes the payment or other admission of liability on the Policy before receiving the Proof of Loss:

   The law is well established that when an insurer admits liability in an unagreed amount, formal proof of loss is thereby waived .... 

Llerena v. Lumbermens Mutual Casualty Co., 379 So. 2d 166, 167 (Fla. 3d DCA 1980)(subscription required to access Westlaw or Southern Second), not available on the Florida Third District Court of Appeal's web site where archived Online Opinions at this time only go back to July 18, 2001.

   Further, once the waiver has been established, the Florida Courts have held that it is irrevocable.  "Once the insurer waives the giving of proof of loss, such waiver is irrevocable."  American Bankers Insurance Co. v. Terry, 277 So. 2d 563, 564 (Fla. 3d DCA 1973).

   Attention must be paid to Proof of Loss requirements, both by Counsel for the Policyholders and Insureds, and by Counsel for the Insurer.

There is a post on Insurance Claims and Issues Web Log, on April 1, 2010, about a case in which Proof of Loss provisions were construed earlier this year.

Please Read The Disclaimer.

Jury Pools in the Wake of Katrina in Mississippi.

    Bad Faith Cases receive careful attention.  Part of the focus in every Bad Faith Case is the potential Jury Pool, or the Venire.  They are the people deciding issues of fact and who they are is clearly important.

    Before Katrina struck Mississippi, most Mississippians were like most residents of the rest of the Gulf Coast.  Few people carried Flood Insurance.  However, the focus on Insurance Coverage for Katrina Damages Claims can divert attention from the fact that many people did not have Property Insurance Coverage or  Homeowner's Insurance  either.

     They are the people who make up the Venire for Mississippi Bad Faith Cases like the recent case reported in newspaper articles and in a post here on January 15, 2007.

    Briefly, the recent case in Mississippi involved First-Party Bad Faith Claims including Punitive Damages Claims.  A Federal Judge directed a verdict for the full Policy Limits available under a Homeowner's Policy.  The case went to the Jury on the question of Punitive Damages under Mississippi law, which is fully discussed in the January 15, 2007 post.  Without repeating all of that post here, in general terms Mississippi law allows the assessment of Punitive Damages for Bad Faith Breach of Contract and it can be Bad Faith not to pay any part of Damages which are covered.

    It is reported that the Homeowner's Insurance Company in that case never made an offer.

    The Jury assessed $2,500,000.00 in Punitive Damages.

     See the detailed discussion of the situation in which these potential Jury members live today, Peter Whoriskey, "As Aid Lags, Volunteers Shoulder Rebuilding on Gulf Coast/Local Gratitude Mixes With Frustration Over Government's Failures" (Washington Post, Sunday, January 28, 2007, p. A03), and the discussion generally of Venires available for Katrina Cases across the Gulf Coast, in Insurance Claims and Issues.

                                                        Please Read The Disclaimer.

Where "regardless of cause" Means "REGARDLESS OF CAUSE" ....

        And an Undefined "Flood" in an Insurance Policy Does Not Mean
        Water Washout Allegedly Caused by Negligence  of Human
        Beings.

    A Federal Judge in Louisiana is faced with a special set of claims.  The Consolidated Case of all of these claims would be special by reason of the claims alone.  There is another reason the Consolidated Federal Case is special.  The Federal Judge just issued an 85-page Opinion ordering the Coverages of almost as many Insurance Companies.  Here is a link to this Order which is now "attached" to this post:  In re:  Katrina Canal Breaches Consolidated Litigation Pertains to Insurance (E.D. La. Case No. 05-4182 et al., Opinion Filed Mon., Nov. 27, 2006).

    Each of the Claimants in that Consolidated Insurance Coverage Case has sued her and his own Insurance Company for Insurance Coverage for Damages after Hurricane Katrina in the City of New Orleans.  However, the claims they allege are not alleged for Damages caused by the Hurricane .  The claims are for Damages allegedly caused by the alleged negligence of People, i.e., the members of the Board of Commissioners for the Orleans Levee District.   Parenthetically, the Federal Judge kept all the Insurance Coverage Claims for disposition in Federal Court, but remanded all Damages claims against the Orleans Levee District to Louisiana State Court.

    "This case began the stream of complaints that have been filed as a result of damages arising out of all levee breaches which occurred in the aftermath of Hurricane Katrina."  So begins the very recent Order on various motions by  the U.S. District Judge in In Re:  Katrina Canal Breaches Consolidated Litigation/Pertains to Insurance" (Eastern District of Louisiana).

    This is a summary of the 85-page Order of the Federal Court.  It is a summary of some of the significant Insurance Coverage Issues addressed by the Federal Judge. 

    1.  All of the Policies involved in this Consolidated Federal Case were Homeowners Policies and they all provided "all-risks" Coverage, said the Federal Court.  That means that, in the face of many Federal Rule 12(b) Motions to Dismiss in particular, said the Federal Judge, "under Louisiana law, unless there is a specific exclusion for the type of water damage that an insured has incurred, coverage is presumed under these policies.  The focus of a court's inquiry then is on the relevant exclusions to coverage."  (The Federal Judge, it should be pointed out, also confronted and resolved Motions for Judgment on the Pleadings and Motions for Summary Judgment, although most of the Motions were Rule 12(b) Motions to Dismiss.)  The quoted ruling is found on page 9.  The Homeowners Policies are quoted in pertinent part in the opinion.   "ISO Policies" are quoted by the Court on page 15; State Farm Policy language is published on page 16, and Hartford Policy language is found on pages 16-18.

    2.    The State Farm and Hartford Policies are held to Exclude Coverage for "flooding" regardless of cause, in this Federal Order under Louisiana law.   After consulting and analyzing numerous authorities, the Federal Judge ruled that a disaster caused by the alleged negligence of Human Beings regarding levee breaches and ensuing water damage is not an otherwise undefined "flood" in the first place.  Hurricane Katrina may have caused a "flood", but the Claimants in this case did not sue for alleged Katrina Damages -- they sued for Damages that resulted after Katrina was all or almost totally gone.

    The State Farm and Hartford Exclusions for damage by flooding "regardless of cause", however, are held to mean exactly what they express in the attached ruling which of course applies to all of these consolidated cases.  (Pages 50 and 73 regarding State Farm; Pages 53-54 regarding Hartford).  [Emphasis added.]

    3.    ISO Flood Exclusions, which the Federal Judge referred to as "Water Damage Exclusions," were held to be ambiguous in this particular Consolidated Coverage Case.  Under Louisiana law, an ambiguous Insurance Policy provision is strictly construed against the Insurance Company since, said the Federal Judge, the Policy provisions are prepared by the Insurance Company and in Louisiana an Insurance Policy is commonly referred to as an adhesion contract.  (Page 10.)  "ISO Policies" subject to this ruling and strict construction were issued by many Insurance Companies which are Defendants in this Consolidated Insurance Case.  (See, for example, the Federal Judge's rulings regarding all these types of Policies on pages 15, 39, 44-45, 58, 65-66, 68-69, 74, 74-75, and 77-78.)

    The Federal Judge in part analyzed case law from other Gulf Coast States in the course of reaching the ruling of ambiguity, such as case law from Alabama and from Florida, as well as from North Carolina, an Atlantic Coast State which has had some experience too with Hurricanes (page 13).  Of particular interest to Florida Attorneys, the Federal Judge's attached Opinion focuses at one point on a decision of the Supreme Court of Florida (pages 35-36).

    Further, those familiar with rulings previously issued by the Federal Court in the Southern District of Mississippi will find them analyzed in the attached Opinion, too.  The guts of those rulings were attached to "anti-concurrent cause" Exclusions, which did not yet apply in the Federal Consolidated Coverage Case in Louisiana, Order attached; the Federal Judge in the Eastern District of Louisiana distinguished those rulings because there were no allegations presented in the challenged complaints in Louisiana Federal Court that involved any more than one cause.  (Pages 49 and 71.)  The Federal Court noted in the attached Order that the actual evidence may reflect more than one cause, and the Court would in that case revisit the anti-concurrent cause Exclusions relied on by the Insurance Companies, at that time.  (See for example Pages 33, 69, and 78.)

    4.    The Federal Court in the attached Eastern District of Louisiana Consolidated Insurance Coverage case concluded its rulings by candidly holding that there is a substantial ground for differences of opinion as to the governing Insurance Law Questions, such that the Court ordered that an immediate appeal may be taken from these orders.  (Page 85.)

    A Notice of such Appeal is expected on or before Thursday, December 7, 2006.  Further known developments, if any, in this Consolidated Insurance Coverage Case will be posted here.

REMINDER: THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP. ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE, THE JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.
   

Late Notice: Not good ground to support Total Denial of Coverage.

    Late notice is a coverage defense that ordinarily involves prejudice to the insurance company.  In some jurisdictions, the liability carrier must prove prejudice.  In other jurisdictions, late notice raises a rebuttable presumption of prejudice.  In cases involving a reubuttable presumption, legally there is a presumption of prejudice which the policyholder is free to rebut with evidence (and of course the insurance company is free to support with evidence).  Florida follows a presumption of prejudice following late notice, but that did not help the Commercial General Liability (CGL) carrier in Donovan Construction, Inc. v. Vacker, Essex Insurance Co., & Ocampo & Assoc's, Inc., 31 Florida Law Weekly D2440 (Fla. 4th DCA Case No. 4D05-4105 Opinion Filed September 27, 2006)(subscription required), free access available through the Fourth District Court of Appeal public web site  (click on opinions released September 27, 2006 and then follow the above case number).

    Donovan Construction and its president, Mr. Thomas Donovan, obtained a CGL policy from Essex.  Allegedly, a construction project on which Donovan was working incurred a modern problem:  Mold.

    The standard liability insurance policy generally requires two types of notice to the insurance company, although the opinion in the Donovan case does not discuss them.  First comes notice of occurrence likely to result in a claim that will involve the liability policy, in basic terms.  Without discussing whether the Essex policy required this type of notice in the Donovan case, the Fourth District wrote:  "On May 3, 2004, Thomas Donovan, directed his insurance agent, Associated Underwriters of Florida, to notify Essex of Vacker's 'possible' claims.  At no time did Essex contact Donovan regarding the potential claim nor, to DCI's [Donovan Construction, Inc.'s] knowledge, take any actions as a result thereof."

    The other type of notice required under the standard liability insurance policy involves notice of a claim in suit.  In other words, the other type of notice involves notice that an insured has been brought into a lawsuit.  On January 7, 2005 DCI was served with a complaint in a lawsuit filed as a result of the alleged mold.  Notice was again given, apparently:  "On January 25, 2005, AXA Corporate Solutions, DCI's other insurer [this is the only time AXA is mentioned in the appellate opinion], wrote to Essex advising them ....  Also on this date, Essex notified DCA of its denial of said claims.  DCI tendered the defense of this matter to Essex and requested that they be indemnified.  Essex refused to defend and indemnify" for many reasons including alleged late notice.

    The trial judge entered a summary judgment for Essex on the ground of no coverage due to late notice.  The Fourth District Court of Appeal reversed, holding that on the above and similar facts,  "there is a genuine issue of material fact concerning when DCI knew of the mold problems and whether it failed to timely notify Essex."

    Late notice is just not a particularly good ground to support Total Denial of All Coverage, as this new case reflects.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.