Claims and Bad Faith Law Blog

NO EXCEPTION FOR FLORIDA THIRD-PARTY BAD FAITH.

There is no exception for third-party bad faith actions in Florida.  Just like first-party bad faith actions in Florida, TPBF actions in Florida require a showing of damages – and liability, and coverage --- or the TPBF count in a complaint will be dismissed for failure to state a claim upon which relief can be granted.  See Lewis v. Allied World Spec. Ins. Co., No. 20-cv-20677-ALTMAN/Reid,  2023 WL 2770538 (S.D. Fla. April 4, 2023).

It's really as simple as that.

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WHEN DAMAGES FOR DISTRESS ARE AVAILABLE IN "BAD FAITH" LAWSUITS.

In  Lindfors v. State Farm Mut. Auto. Ins. Co., No. 3:20-cv-00178-SLG, 2021 WL 6125771, at*2 (D. Alaska December 28, 2021), a federal district court granted a carrier's motion for partial summary judgment that the policyholder-plaintiff could not recover damages for emotional distress she incurred because of the litigation itself.  The Court was particularly persuaded by the fact that the Supreme Court of the forum state had not definitively ruled on the issue.

          On the other hand, damages are available in the policyholder's bad-faith lawsuit for stress resulting from delay of sums allegedly due to her under the policy at issue, including delay during the time of the bad-faith litigation.  Lindfors, 2021 WL 6125771, at *3.

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WHEN DISCOVERY WAS PREMATURE IN THE MIDDLE DISTRICT OF FLORIDA.

"The Court finds that the entry of summary judgment on damages is premature when the parties have not yet completed discovery that could have a bearing on the issue."   Grey Oaks Country Club, Inc. v. Zurich Am. Ins. Co., No.:  2:18-cv-639-FtM-99NPM, 2019 WL 5802513, at *4 (M.D. Fla. November 7, 2019).

The Grey Oaks Country Club case is discussed along with many other cases addressing Discovery From Insurers Concerning Their Handling of Third-Party Claims, which is Chapter 8 in 1 Dennis J. Wall, LITIGATION AND PREVENTION OF INSURER BAD FAITH (3d Edition Thomson Reuters and 2020 forthcoming Supplements).  In particular, the case will be discussed in § 8:2, Suits for Bad Faith, Excess Liability.

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PAYMENT OF APPRAISAL AWARD NO DEFENSE TO BAD FAITH CLAIM.

Damages under the Florida Bad Faith Statute have been held to be separate and distinct from damages settled in Mediation after an Appraisal.  The holding came in a case with some unique features which may blur the broad outlines of this message, but upon closer review this message becomes clear:  Paying an appraisal award is not a defense to liability for alleged bad faith conduct.

  See Almeria Park Condo. Ass'n v. Empire Indem. Ins. Co., No. 19-21834-CIV-ALTONAGA/Goodman, 2019 WL 7344827, at *4 (S.D. Fla. Oct. 23, 2019):

As the underlying Breach of Contract action is distinct from this bad faith action, Defendant’s payment of the appraisal award does not preclude liability for the alleged bad faith conduct, and Defendant is not entitled to summary judgment on this issue.

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UIM COVERAGE, BAD FAITH DAMAGES, LOST INCOME AND CONSORTIUM.

Damages in an insurance bad faith action can be different from damages under Underinsured Motorist Coverage.

In Palmer v. Owners Ins. Co., No. 18-cv-01953-JLK, 2019 WL 7370372, at *3  (D. Colo. Nov. 6, 2019), the plaintiffs-policyholders of UIM Coverage, claimed damages in their bad faith suit that were in addition to damages available for breach of the UIM Coverage in their policy:

    Ultimately, the Palmers brought suit against Owners for breach of contract and both statutory and common law bad faith breach of an insurance contract. Their damages include Mr. Palmer’s past medical bills, his future medical bills, past and future income loss, Mrs. Palmer’s loss of consortium, and any other non-economic and physical impairment damages they can prove at trial. Owners attacks the Palmers’ allegations regarding Mr. Palmer’s lost future income and Mrs. Palmer’s loss of consortium.

The Court held that the policyholders could recover damages both for lost future income and for Mrs. Palmer's loss of consortium under their bad faith claims, and the Court accordingly denied the carrier's motion for summary judgment.

Image courtesy of the Florida Department of Agriculture and Consumer Services.

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"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.

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"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."

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SOMETHINGS FISHY, DECIDED IN THE SOUTHERN DISTRICT OF FLORIDA.

In the case of Somethings Fishy Enter's, Inc. v. Atlantic Cas. Ins. Co., Case No. 18-23990-CIV-GOODMAN {CONSENT CASE], ___ F. Supp. 3d ___, 2019 WL 5866823 (S.D. Fla. Nov. 8, 2019) (Goodman, USMJ), a business insured made claims for Hurricane Irma damages under its commercial property insurance coverage and under its loss of business income coverage under a single policy with Atlantic Casualty.

The policy had a Windstorm Exclusion.  An independent adjuster hired by Atlantic Casualty "determined that all of the damage at the Property was the result of winds from Hurricane Irma and flooding."  Somethings Fishy, 2019 WL 5866823, at *1.  Atlantic Casualty denied all coverage on the basis of the IA's inspection and evaluation.

The Court determined two things at least.  The first thing the Court determined is that if the claimed damage was caused by Hurricane Irma, then the damage was not caused by a Covered Cause.  The policy expressly provided that coverage was provided for direct physical loss unless the claimed loss is excluded or limited.   Somethings Fishy, 2019 WL 5866823, at *4.  

Second, the policy's Windstorm Exclusion applied to exclude the claimed loss from Hurricane Irma.   Simply put, the Windstorm Exclusion barred coverage for loss or damage "'[c]aused directly or indirectly by Windstorm or Hail, regardless'" of any other concurring cause of loss. The policy's Windstorm Exclusion also provided that "hurricane loss is 'therefore not a Covered Cause of Loss.'" Somethings Fishy, 2019 WL 5866823, at *4 (emphasis in original material quoted by the Court).

The Court accordingly granted Atlantic Casualty's motion for a summary judgment of no coverage.  Although the Court did not delve into any other policy exclusions in its opinion, the Court still found space to declare them after the Court said that it did not have to declare them:

The Court need not consider if any additional exclusions apply under the Policy because the Windstorm Exclusion bars coverage as a whole. However, the Court finds that the following exclusions also apply: the Utility Services Exclusion, which bars any loss resulting from a power outage; the Water Exclusion, which bars coverage for loss caused by flooding; and the Limitation for loss of animals unless caused by a specified cause of loss (which does not include power outage or hurricane).

Somethings Fishy, 2019 WL 5866823, at *5.

Magistrate Jonathan Goodman decided this case.  A little "inside baseball":  He is almost a U.S. District Judge already.  The lawyers who practice regularly in the Southern District of Florida hold him in high regard, and for the most part they enjoy his cultural references to the lyrics of pop songs and such.  Keep an eye out for his continuing rise.

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'INDEPENDENTLY REPLACING SHINGLES DID NOT MEAN CARRIER SHOULD PAY.'

In Villas at Winding Ridge v. State Farm Fire & Cas. Co., No. 19-1731, 2019 WL 5853547 (7th Cir. Nov. 8, 2019) (case involved Indiana substantive law), a condominium association in Indiana sued for breach of contract and bad faith after an appraisal awarded 20% of the cost of hail damages on 13 buildings out of 33 at issue, and Winding Ridge's property carrier under a "Residential Community Association Policy," State Farm, paid that amount.

While the condominium's bad faith lawsuit was pending, it went ahead and paid $1.5 Million to have the roofs of all 33 buildings at issue repaired.  One of the condominium's arguments was that State Farm was in bad faith for not paying that amount. 

Not this time. "The fact that Winding Ridge independently replaced the shingles on all 33 buildings for $1.5 million while its claim was pending does not obligate State Farm under the policy or mean State Farm breached the policy."  Villas at Winding Ridge, 2019 WL 5853547, at *5.

Parenthetically, Winding Ridge also contended in this litigation that State Farm's appraisal provision was void for ambiguity, i.e., that State Farm's appraisal provision was ambiguous and unenforceable.  Winding Ridge was the one that demanded the appraisal in the first place, it will be recalled.  You might say that they were for it until after the appraisal award was rendered, when they apparently turned against it.  The Court held in this case that State Farm's appraisal provision was unambiguous and enforceable.

"Be sure you're right, then go ahead."  Baby boomers will recall with fondness, perhaps, that that was the motto of Davey Crockett.  Even after all these years, it is still a good motto to follow.

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RECOVERING POLICY LIMITS WITHOUT COVERAGE.

There are many things to say about the rulings in the Szafarowicz case.  Commerce Ins. Co. v. Szafarowicz, 131 N.E.3d 782 (Mass. October 1, 2019).  A special feature of the case was discussed in an article posted here on October 22, 2019, and the background of the case has been discussed with unique insight into Insurance Coverage Law in Massachusetts by Nina Kallen, Esquire in her blog of that name, most recently on October 23, 2019.

I have struggled with ways to organize my own remaining thoughts about the reported decision in this case.   Here is how I settled, for now, on organizing some of them.

1.  Recovery under a stipulated settlement or "Consent Judgment" in this case was limited to policy limits because that's what the insureds and the claimant agreed.

The insureds and the deceased claimant's estate stipulated to settlement of the estate's Wrongful Death Action against the insureds.  Although it appears not to be relevant to the stipulation, the fact that the settlement happened at all has everything to do with a couple of further facts by way of background here.  The insureds were being defended by Commerce at the time under a reservation of rights to deny all coverage.  Commerce also separately pursued a Declaratory Judgment Action before the underlying settlement was stipulated.  (Commerce objected to the settlement.)

As a part of their stipulated settlement, the insureds and the estate in the Wrongful Death Action stipulated that the estate's recovery if any would be limited to the insureds' Commerce policy limits and that they, the defendants-insureds, would not face any other risk of damages other than the Commerce policy limits.  Szafarowicz, 131 N.E.3d at 789.  Not only did the estate stipulate to limiting recovery to policy limits.  "The estate agreed that it would not seek to collect or enforce any judgment against the [insureds] beyond the amount payable under their insurance policy[.]" Szafarowicz, 131 N.E.3d at 789.  

That is why the estate's potential recovery against Commerce was limited to the policy limits by the Supreme Judicial Court of Massachusetts:  Anything else they could say would be dicta in the face of these facts.  The facts of this case determined the outcome.

2.    Recovery of policy limits was possible in this case even though there is no insurance coverage.

The Massachusetts Supreme Judicial Court allowed injured claimants, broadly speaking, to recover from defendants' liability insurance carriers so long as certain conditions were met.  Those conditions are discussed below.

However, in the Szafarowicz case, by the time the Supreme Judicial Court ruled there had already been a judicial determination that Commerce had no coverage under the "optional" bodily injury liability coverage under its policy. Szafarowicz, 131 N.E.3d at 790-91.

To recover policy limits, which the Szafarowicz Court said it would allow theoretically, means that the injured claimant would recover under the policy.  Yet in this case, there was already a determination that there was no coverage under the policy.  Still the Massachusetts HIgh Court remanded for a determination in the lower courts under its theoretical framework for recovery of Consent Judgments, as discussed below.

That framework simply does not include proving insurance coverage for the loss.  If it did, the Szafarowicz Court would not have remanded for a determination of anything in this case, where to say again there was already a judicial determination of no insurance coverage for the loss.

3.    "How many angels can dance on the head of a pin?"  Theoretically.  The elements of recovery under a Consent Judgment in Massachusetts today.

Well, there was still the matter of whether Commerce would be liable for post-judgment interest on any part of the underlying Consent Judgment.  So, the Massachusetts Supreme Judicial Court said that it was fashioning a rule to address that situation.  But that is not what they actually did.

In Szafarowicz, the Court fashioned a rule for recovery under Consent Judgments generally:

    Balancing these risks and benefits, we conclude that an insurer who defends a claim under a reservation of rights is bound by the amount of a judgment arising from a prejudgment settlement/assignment agreement where (1) the insurer is given notice of the settlement/assignment agreement and an opportunity to be heard by the court before judgment enters; (2) the insurer contests the judgment; and (3) the insured, after hearing, meets his or her burden of showing that the settlement is reasonable in amount.

Szafarowicz, 131 N.E.3d at 797.

The Court said, theoretically, that "the probability of a finding that the plaintiff's injuries were caused by an accident rather than intentional conduct ... may also be considered in determining the amount of a reasonable settlement." Szafarowicz, 131 N.E.3d at 798.

They said this despite the fact that, in this case, they previously said that on remand Commerce will not be bound here "to pay the damages determined at the assessment hearing, because it obtained a declaratory judgment that it was not obligated to pay these damages." Szafarowicz, 131 N.E.3d at 796.

In the final analysis, the Szafarowicz Court was against exposing carriers to recovery beyond policy limits even when Consent Judgments are successfully enforced against the carriers, at least in a case like this where the insureds and the injured claimant stipulated to that result.  Except that liability carriers can be exposed to paying Consent Judgments even when they have no coverage under their policies for the loss at issue unless they previously obtained a judicial declaration of no coverage for the loss at issue, as in this unique case.

Whew.  Complicated, isn't it?  Maybe it became more complicated in Szafarowicz than it had to be.  Who am I to judge?

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BREACHING CONTRACT BY IMPROPERLY DELAYING LOSS ADJUSTMENT: FLORIDA CONSEQUENTIAL DAMAGES.

In a case that “involves the snail-paced resolution of insurance claims for property damage caused by a hurricane in 2004,” a Florida appellate panel unanimously held that the policyholder could sue Citizens Property Insurance Corporation for consequential damages but not for bad faith. Manor House, LLC v. Citizens Prop. Ins. Corp., No. 5D17-2841, 2019 WL 2306107, at *1 (Fla. 5th DCA May 31, 2019) (Edwards, J., for a unanimous Court; opinion stated not final until released for publication in the permanent law reports).

In reaching this decision, the Florida appellate court acted with significance beyond its borders and even beyond Florida itself. Citizens is immune from “bad faith” in Florida. However, Citizens is not immune, this Court held, from consequential damages for breach of contract that require neither allegations nor proof of bad faith.

The policyholder owned apartment buildings that were damaged during Hurricane Frances in 2004. Citizens allegedly improperly adjusted the claim including unnecessary delay in processing it. The policyholder alleged that as a consequence of the property insurance carrier’s delay (i.e., by Citizens), the policyholder lost rental income that it would have received had its property insurance claim been adjusted properly and without unnecessary delays.

The trial judge held that Citizens is not liable for such consequential damages and entered partial summary judgment in favor of Citizens on that claim.

On appeal, the Fifth District panel reversed this holding. The appellate panel established the law of Florida beyond bad faith extracontractual damages. The panel unanimously held that when an insurance carrier breaches the insurance contract it must face exposure to extracontractual damages in this sense: The contract breach allegedly caused the consequential damages. No inquiry into bad faith or good faith is necessary in such a case.

As the appellate panel held in a well-reasoned opinion by Judge Edwards in this case:

    In granting summary judgment, the trial court denied Manor House the opportunity to prove whether the parties contemplated that Manor House, an apartment complex, would suffer consequential damages in the form of lost rental income if Citizens breached its contractual duties to timely adjust and pay covered damages, which in this case allegedly resulted in a significant delay in completing repairs so that units could once again be rented. We hold that the trial court erred in so ruling, and we reverse that partial summary judgment so that the parties may litigate all issues related to Manor House's claim of lost rent. It is undisputed that Citizens, a creature of statute, is immune from bad faith claims. See § 627.351(6)(s) 1, Fla. Stat. (2017). However, the consequential damages Manor House seeks are based squarely on breach of contract claims requiring no allegation or proof that Citizens acted in bad faith.

Manor House, LLC v. Citizens Prop. Ins. Corp., No. 5D17-2841, 2019 WL 2306107, at *2 (Fla. 5th DCA May 31, 2019).

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FORECLOSURE DAMAGES FOR BAD FAITH.

In Shawnee Tabernacle Church v. Guideone Ins., No. 16-5728, 2019 WL 1779829, at *1 (E.D. Pa. April 23, 2019), the Court was confronted with a water loss and claims of breach of contract and insurer bad faith.  The questions addressed in this particular decision were two:  (1) Are damages for foreclosure recoverable here, and (2) What is the proper measure of those damages?

The Court's answers in this case were, first, that damages resulting from foreclosure are a form of consequential damages and are recoverable in such a case.

Second, the proper measure of damages here is the diminution in fair market value of the property as a result of the foreclosure.

To rephrase Mr. William Faulkner's famous phrase about the past, 'Foreclosure isn't dead.  It isn't even past.'

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EQUITABLE CONTRIBUTION BETWEEN INSURERS IN FLORIDA: DEFENSE? "NO," INDEMNITY? "YES."

Or at least one Federal Judge just said so in Lawrence v. ACE Am. Ins. Co., No. 8:18-cv-738-T-24, 2018 WL 6192190, at *8-*9 (M.D. Fla. November 28, 2018):

    ACE moves to dismiss this claim, arguing that Florida does not recognize a cause of action for equitable contribution between co-insurers. The flaw in this argument, however, is that Florida does not recognize a cause of action for equitable contribution by co-insurers in order to recover defense costs. [Federal citation omitted.]  USAA is not seeking to recover its defense costs in the underlying litigation, and as such, this argument for dismissal has no merit.

     Florida does recognize a cause of action for equitable contribution by co-insurers for the amounts the insurer paid to indemnify the insured. 

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INSURANCE BAD FAITH STATUTES:

ARE UNFAIR AND DECEPTIVE ACTS AND PRACTICES ENOUGH ANY MORE?

Did you ever wonder what will become of Insurance Bad Faith Statutes if people asserting claims under those statutes would be required to plead and prove "actual injury" because of the alleged statutory violations?

That's one lawyer's way of asking whether there is anything left of Insurance Bad Faith Statutes in an age that requires a judge to agree that there is "actual injury" in every claim.

I have wondered about this, and I wrote about it in a new Section of my 2018 Supplements, Section 3:28.50, titled "Injury in Fact":  What Happens to Bad Faith Statutes? 2018 Supplement, Volume 1, of Litigation and Prevention of Insurer Bad Faith (Thomson Reuters Third Edition).

I am making it available to you on my website for you to reprint, at no cost to you, with the permission of the publisher.  Republished there with the permission of the author and Thomson Reuters.  No further republication or reproduction of this material may be made without the express written permission of the publisher.

Enjoy the research and expand on it!  Let me know what you find, if you can.  I am going to expand on the research on this subject myself in my 2019 Supplements! 

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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.

WIND 2019: THE 20th ANNUAL CONFERENCE CONTINUES THE CONVERSATION.

Photograph by Dennis J. Wall

WIND, which stands in for Windstorm Insurance Network, blew into Walt Disney World for its 20th Annual Conference recently.  WIND has grown from an initial membership of some 350 people into a roll call of about 1,300.  They come from 36 States, and from other countries including Singapore, France, and Germany. 

About 1,200 people attended the Annual Conference in 2019.  WIND members and the people who tend to attend the Annual Conference as well, are all professionals representing policyholder and insurance company sides of property insurance disputes, in basic and simple terms.

The sessions I attended this year generally proved the WIND format, which is not unique to WIND but works everywhere it is used to present insurance issues as far as I can see:  A panel of four presenters, for example, would have one policyholder lawyer, one policyholder public adjuster, one insurance company representative or independent adjuster, and one defense attorney to present points of view.

The panel presenting Commercial Policies and Claims followed this model.  Like every other session I attended, the panel that presented this topic emphasized the long-standing truth that the insurance policy is the starting point for the answer to every insurance coverage question.

Whether presenters said that "the insurance policy is king," or compared purchasing a policy to going to the store where what you come out with depends on what you get, the central idea behind every issue is always what the policy says.

Besides expressing eternal truths, as it were, the panelists at WIND raised cutting-edge questions in property insurance for all participants to consider.  An example of current questions is whether there is coverage under property insurance policies for experts' assistance to policyholders in adjusting or presenting claims under their policies?  The suggestion was raised that perhaps good arguments in favor of coverage for that assistance would be available under coverage for Adjustment Expenses, whatever the coverage might be called in a given policy.

Another suggestion was that perhaps there is such coverage available under Extra Expense coverage.  Whatever the source of coverage there might be for that particular expense, the idea is new and current and will come as no surprise to the attendees of this year's 20th Anniversary WIND Annual Conference.

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

SEXUAL HARASSMENT SHOULD CARRY A HEAVY PRICE, IF PERMITTED. PERIOD.

I left the following comment on www.regulations.gov earlier today concerning the proposal of the Department of Education to enable sexual harassment in education without fear of the Department asking for damages to enforce the law.  You can leave your own comment at any time between now and the end of the deadline on Monday, January 28, 2019.  If you speak up and leave a comment, then by law even the current Federal administrative state is required to hear you.  I urge you to make your voice heard!

January 27, 2019

Department of Education

www.regulations.gov

RE:    Comment to Docket ID ED-2018-OCR-0064

          RIN 1870-AA14

To the Department of Education:

This concerns your proposed changes to Title IX regulations that were published in the Federal Register at 83 F.R. 61462-61499.  You claim the authority to make these proposals as "20 U.S.C. 1681 et seq., unless otherwise noted."  83 F.R. at page 61495.  In particular, this comment addresses your proposed changes to Section 106.3 of the regulations, titled Available Remedies, also published in 83 F.R. at page 61495.

Your proposed changes to Section 106.3 of the regulations are not sustainable as a matter of law and as a matter of law applied to fact. 

First, your proposed changes to Section 106.3 would prohibit the "Assistant Secretary" of the Department of Education (i.e., "the Department") from seeking damages in any proceeding to enforce Title IX.  The purpose for which Congress enacted this statute is clear on its face. 

Section 1681, the beginning section of Title 20, sets the standard for discrimination in education on the basis of sex.  Subsection (a) of 20 U.S.C.A. § could not be more clear:  "No person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance[.]"

There is nothing in the language chosen by Congress to effectuate its purpose that leads to the conclusions you propose as law in your changed Section 106.3, including taking away one of the powers of the Federal Government agencies, which is to seek damages in an appropriate case in order to compel enforcement of the Congressional mandate.  For this reason, your proposed changes to Section 106.3 are not supported either by law or by the law applied to any facts, and they should not be enacted.

Second, as you are aware the Federal Courts are currently instructed to defer to the interpretation given by Federal agencies to the statutes they are called upon to administer.  Your recently suggested interpretation, that Title IX does not allow your Department to seek damages in any proceeding to enforce Title IX, is contrary to the interpretation taken by the Federal Government since Title IX was first enacted nearly 50 years ago.  The existing interpretation is like the statute itself:  If Congress has not affirmatively spoken, one way or the other, about the recovery of damages as a tool in the administrative process of enforcing the mandate of Title IX, then the Department should remain silent itself and not interfere with Congress's own interpretation.  In other words, it is a job for Congress and the Courts, not the Department of Education.

If anything, 50 years of existing interpretation should be given judicial deference over your opportunistically recent one.  For this reason, your proposals to change Section 106.3 of the regulations should be rejected.

Third, your proposals in all of these proposed regulation changes which you published in 83 F.R. from page 61462 through 61499 inclusive, are internally inconsistent.  Your proposed changes would change the standard of liability to "actual knowledge" coupled with "deliberate indifference" in any administrative action brought to enforce the law.   However at the same time you would purport to take away the Department's ability to seek damages.  This is internally inconsistent.  It is also inconsistent with and contrary to the purpose of Title IX, which is quoted above from the statute itself in 20 U.S.C.A. § 1681(a).  For this reason, your proposed changes, including your proposals to change Section 106.3 of the regulations should be rejected as contrary to law and as contrary to law applied to the facts.

For all of these reasons, whether taken separately or together, your proposed changes to Title IX and its existing attendant regulations should not be enacted.  They should each and all be withdrawn or, if not withdrawn, then they should each and all be rejected as contrary to the law and contrary to the law applied to facts.

Thank you for your consideration.

Sincerely Yours,

Dennis J. Wall

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CARRIER CHALLENGE FAILS CONTENDING EXPERT REQUIRED TO SUPPORT INSURED'S SETTLEMENT.

In Sykes v. Singh, ___ P.3d ___, No. 76009-2-I, 2018 WL 5146747 (Wash. Ct. App., Div. 1, filed August 13, 2018, publication ordered October 16, 2018), a liability carrier refused to defend its insured, the insured settled rather than face an underlying trial and verdict, and the carrier challenged the reasonableness of the insured's settlement.  Standard stuff in refusal-to-defend cases these days.

    In this particular case, the insured's settlement included what the appellate court called "general damages."  What the court meant by this phrase is explained in more detail in the quotation below.  The interesting thing about this case is the carrier's argument.

    The carrier argued in this case that the insured's settlement was not reasonable because no expert testimony was provided to support the reasonableness of the insured's settlement particularly his pain and suffering and emotional distress, and loss of consortium.

    In other words, instead of contending that experts are "hired guns" or the like when they testify about personal injury damages, in this case the carrier contended that experts are indispensable to proving personal injury damages.

    The appellate court was having none of it:

    ¶ 26 Zurich also challenges the general damages. The settlement allocated approximately $150,000 in general damages for Sykes and $30,000 for the loss of consortium by his family members. Sykes attributed his general damages to pain and suffering and the emotional trauma of the accident. Zurich objects to the absence of expert testimony but fails to show that expert testimony is needed to support an award of general damages. Support for the general damages was provided by Sykes’ own testimony along with declarations from friends and family that after the accident, Sykes became depressed and withdrawn. Zurich argues that the allocation to the Sykes children for loss of consortium was error in view of Sykes’ testimony that he spent more time with them and had greater appreciation for them as the result of the accident. But in view of the evidence that Sykes suffered from ongoing depression, it was reasonable to include loss of consortium damages in the settlement.

Sykes v. Singh, ___ P.3d ___, No. 76009-2-I, 2018 WL 5146747, at p. *5, ¶ 26 (Wash. Ct. App., Div. 1, filed August 13, 2018, publication ordered October 16, 2018).

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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.

 

HURRICANE FLORENCE CLAIMS IN 2018: ARE ESTIMATES BETTER THAN INVENTORIES?

A catastrophe claims modeler, AIR Worldwide, estimates the damage caused by Hurricane Florence.  Even before all the damage is reported, examined, and written up.

So, AIR's premature estimate is understandably in a very wide range:

Catastrophe risk modeling firm AIR Worldwide estimates that industry insured losses resulting from Hurricane Florence’s winds and storm surge will range from USD 1.7 billion to USD 4.6 billion. Note that these estimates do not include the impact of the ongoing flooding from Hurricane Florence’s unprecedented precipitation.

(AIR Worldwide Press Release, AIR Worldwide Estimates Insured Wind and Storm Surge Losses for Hurricane Florence, Tuesday, September 18, 2018, also accessible at http://www.air-worldwide.com/Press-Releases/AIR-Worldwide-Estimates-Insured-Wind-and-Storm-Surge-Losses-for-Hurricane-Florence/.)

Why is this useful?  Why do we have guesses now?  Why can't we just wait for the actual returns to come in?

Why, indeed.

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WHAT THE JURY DID NOT SEE: THE FORD PINTO CASES.

It was long ago now.  In 1972, a Ford Pinto exploded on a low-level impact with a bigger car.  When the consolidated cases went to trial on damages, the jury awarded over $3 Million in damages to compensate the driver's estate and the horribly burned teenaged passenger.  After the judge reduced the jury's punitive damage assessment to $3.5 Million, the judge denied Ford's motion for new trial and entered judgment for the $3+ Million in compensatory damages and $3.5 Million in punitive damages.

The trial judge refused to admit a table prepared by Ford into evidence.  Ford submitted the table to the National Highway Traffic Safety Administration (NHTSA) in opposition to a proposed NHTSA regulation related to rollovers.  The Ford Pinto gas tank explosion did not involve a rollover, but the table Ford prepared was explosive.

The judge refused to admit the table into evidence.

The jury did not see it.

Here is a version of Ford's table which the jury did not see.  The following version was prepared by FEMA for use in a course on handling burn injuries:

Source:  Slide 8 of FEMA Burn Crisis and Continuity Management Powerpoint, Class Session 17, accessible online at https://training.fema.gov/hiedu/docs/bccm/bccm%20-%20session%2017%20-%20power%20point.ppt.

"$11 Cost vs. A Burn Death

Benefits and costs relating to fuel leakage associated with the static rollover test portion of FMVSS 208

Benefits

Savings: 180 burn deaths, 180 serious burn injuries, 2,100 burned vehicles.

Unit Cost:  $200,000 per death, $67,000 per injury, $700 per vehicle.

Total Benefit:  180 X ($200,000) + 180 X ($67,000) + 2,100 X ($700) = $49.5 Million.

Costs

Sales:  11 Million cars and 1.5 Million light trucks.

Unit Cost :  $11 per car and $11 per light truck.

Total Cost : 12.5 Million X ($11) = $137 Million.

Ford Motor Company Internal Memorandum - 'Fatalities Associated with Crash-Induced Fuel Leakage and Fires'[.]"

It was a long time ago, now.  The jury trial that is.

There was no need for a blanket secrecy order.  The jury did not see this table.

Ford was not prejudiced by this evidence.  It was not admitted into evidence.

The judge refused to allow this table into evidence.

The jury system worked.

That should have actually inspired confidence in the justice system in the years since then.

But that is not the point.  Not really.  Blanket secrecy orders, umbrella protective orders, are really about concealing the evidence, not about the integrity of the justice system. 

But maybe, in the final analysis, it is all about the integrity of the justice system.  You cannot trust judges and juries to protect you from public awareness of huge problems.  Besides, judges and juries are likely to do the right things in the long run  -- and often in the short run as well.

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

IT'S NOT THE INSURED'S UNPAID PIP CLAIM. IT'S YOURS, PROVIDER.

In Spine Care Delaware, LLC v. State Farm Mut. Auto. Ins. Co., No. 17-1816, 2018 WL 810112 (D. Del. February 9, 2018), the United States District Court for Delaware applied Delaware law, naturally enough, to a provider's unpaid Personal Injury Protection benefits (PIP) claim.  Delaware law is just like every other jurisdiction's PIP law in requiring PIP benefits of the kind that this provider conferred upon the policyholder.  So, also naturally enough, the unpaid PIP provider sued the PIP carrier to get paid for conferring the PIP benefits covered by the PIP coverage at issue.

The thing is, the PIP provider in effect sued in the name of the policyholder, akin to asserting a bad faith claim against the carrier as an assignee of the policyholder.  The provider's reasoning apparently went something like this:  PIP benefits are required in an insurance policy by statute; we, the provider, provided the PIP benefits to the policyholder; therefore, we, the provider, are entitled to be paid for providing the PIP benefits.  So far, so good, except ....

A provider's claim for unpaid PIP benefits belongs to the provider, not to the policyholder.  So, the provider's claim in this case was temporarily dismissed.   Undoubtedly the newly enlightened provider will amend its complaint or refile to assert its own injury so that the unpaid PIP claim can proceed.

The District Court in Delaware put the matter concisely at the beginning of its very well-reasoned opinion:

    A medical provider challenging an insurer's handling of a patient’s medical claims must plead why it can recover an insured's claim. It is not the insured whose insurance claim is delayed or denied. We cannot simply assume the medical provider suffered injury caused by the insurer's conduct. As the medical provider presently fails to plead an identified injury through the insurer's treatment of at least one identified insured's claim, we grant the insurer's motion to dismiss without prejudice for the medical provider to amend its claim.

Spine Care Delaware, LLC v. State Farm Mut. Auto. Ins. Co., No. 17-1816, 2018 WL 810112, at *1 (D. Del. February 9, 2018).

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BAD FAITH, ERISA, AND PREJUDGMENT INTEREST.

Prejudgment Interest was awarded on an ERISA claim in Hart v. Unum Life Ins. Co. of Am., No. C 15-05392 WHA, 2017 WL 4418680 (N.D. Cal. October 4, 2017), in large part because the evidence supported a finding that the insurance company acted in bad faith. 

A previous District Judge had held in the same case that the plaintiff, Nancy Hart, was entitled to benefits.  The carrier defended against the "'notion'" that it acted with bad faith or ill will because the original judge, who was of course charged with the question of determining Hart's entitlement to benefits, did not even discuss bad faith let alone find it in the conduct of the carrier in the case at bar.

By the time the prejudgment-interest issue was decided, the original judge had retired.  The successor District Judge rejected the carrier's purported defense:  "The rebuttal inheres in Unum's argument.   Judge Henderson had no reason to make explicit findings as to bad faith, ill will, culpability, and the like because his order decided only the question of whether Hart was entitled to benefits.  His initial silence did not constitute absolution."  [Emphasis added.]

The Court awarded prejudgment interest.

-----------------------------------------------------------------------------------------------------------------

HEALTH CARE COVERAGE.

If you or your clients do not have health insurance coverage, check out and sign up at www.healthcare.gov.

You may not have heard the word that health care coverage is available -- right now, today, even as you read these words.  It's your right.  It's the law of the land!

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

ORLANDO, FLORIDA: THE ABA PROPERTY INSURANCE LAW COMMITTEE MEETING.

One of the advantages of attending committee meetings is learning bits and pieces of law that may come in handy someday.  At the recent meeting here in Orlando of the ABA Property Insurance Law Committee, one of the presenters mentioned that reopened claims must ordinarily be paid within 90 days or they will start to bear interest by statute in Florida.  (The rate of interest fluctuates.  It is calculated with a formula set out in a separate statute, Fla. Stat. § 55.03.)  The failure to pay will be only one fact in any bad faith lawsuit, however, because Florida is a State that decides bad faith questions based on the totality of the circumstances.  See Fla. Stat. § 627.70131(5)(a).

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

Related articles

FLORIDA STANDARD BAD FAITH JURY INSTRUCTIONS TRUMP SPECIAL REQUEST.

RESPA TECHNICAL VIOLATION: "THE LIGHTS WERE ON THE WHOLE TIME."

RESPA, the Real Estate Settlement Procedures Act, requires lenders and servicers to provide information in response to borrowers' letters or other "Qualified Written Requests."  12 U.S.C. § 2605(e).  However, the statutory duty to respond does not include a duty to respond to every inquiry.

There are actually only two types of written requests that trigger a statutory response:

Rather, the statute covers only written requests alleging an account error or seeking information relating to loan servicing....  So a qualified written request can't be used to collect information about, or allege an error in, the underlying mortgage loan.

Perron ex rel. Jackson v. J.P. Morgan Chase Bank, N.A., No. 15-2206, 2017 WL 104466, at *4 (7th Cir. January 11, 2017).

Mr. Perron and Ms. Jackson sent several written requests to Chase for information about their mortgage.  Chase serviced the Perron-Jackson note and mortgage.  As noted above, "RESPA requires mortgage servicers to correct account errors and disclose account information when a borrower sends a written request for information."   Perron ex rel. Jackson v. J.P. Morgan Chase Bank, N.A., No. 15-2206, 2017 WL 104466, at *1 (7th Cir. January 11, 2017).

Even in those two instances, RESPA does not require a reply when the borrowers already have the information.  In this case, Mr. Perron and Ms. Jackson already had the information in Chase's past replies to their past written requests for information.  There came a time when Chase did not provide all the information it had already provided, when Chase was faced with responding to the most recent Perron-Jackson written request.

Perron and Jackson sued Chase for damages for failure to comply with RESPA, in pertinent part, including alleged damages for wrecking their marriage.  The District Court granted Chase's motion for summary judgment.  On appeal, the Seventh Circuit Court of Appeals affirmed because none of the damages they alleged -- including their divorce -- was caused by Chase's noncompliance with RESPA in this instance, and the damages simply were not substantiated with record evidence sufficient to raise a genuine issue of material fact:

    But of course Perron and Jackson already knew that information; the bank had supplied it in earlier correspondence. So even if Chase's response fell slightly short of full compliance as a technical matter, the couple cannot show that they suffered any actual damages “as a result of” any failure to comply with RESPA response duties. § 2605(f)(1)(A).

* * *

Simply put, Perron and Jackson weren't harmed by being in the dark because the lights were on the whole time.

Perron ex rel. Jackson v. J.P. Morgan Chase Bank, N.A., No. 15-2206, 2017 WL 104466, at *4 (7th Cir. January 11, 2017).

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Related articles

Bank's Alleged Bad Faith Withholding New Jersey Fire Insurance Proceeds.

LIABILITY CARRIERS BE SURE BEFORE YOU RESERVE ON COVERAGE.

OTHERWISE YOU MAY PAY FOR IT.

Two trial judges and an appellate court in Massachusetts summarized a risk of extracontractual, "bad faith" exposure embedded in many cases across the United States whenever a liability carrier reserves its rights to deny all coverage, let alone when the liability carrier denies all coverage:

Quoting from another decision of the Superior Court, the judge sensibly observed that “an insurer cannot reserve its rights and thereby surrender control of the defense, and still reasonably expect that it will pay the same amount of legal fees that it would have paid had it accepted coverage and retained control of the defense. Through its reservation of rights, the insurer's duty to defend is transformed into a duty to reimburse its insured for reasonable attorney's fees incurred by the insured's chosen counsel.”

Rass Corp. v. Travelers Cos., No. 15-P­-­358, 2016 WL 6636281, at *9 n.16 (Mass. App. Ct. November 10, 2016).  This statement of the risks involved is direct and to the point, but it states the prevailing law very well depending on the nature of the coverage defense which the carrier reserves.  See generally 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 13.13, "Attorney's fees--Settlement or defense of third party's claim" (3d ed. Thomson Reuters West; 2016 Supplements).

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

NO POLICY LIMITS ON LIABILITY INSURER'S EXPOSURE FOR WRONGFULLY DENYING DEFENSE.

The opinion in Andrew v. Century Sur. Co., 134 F. Supp. 3d 1249 (D. Nev. 2015) is long.  That is probably because it is largely a reconsideration of an earlier ruling.

The Federal District Judge reconsidered the consequences to a liability carrier of wrongfully denying its insured a defense.

Even where there is no sordid or other "bad faith" conduct, the Court concluded that the liability carrier's exposure for wrongfully denying a defense is governed by an old rule:  Breach of a contractual duty can give rise to consequential damages.

As the Court put it in this case:

    In Nevada, the amount expected to be paid under a contract is not the only measure of damages for a breach. Nevada also allows recovery of consequential losses. Thus, if the default judgment was a reasonably foreseeable consequence of Century's breach, then Century is liable for the entire amount of the default judgment as consequential damages resulting from the breach of its duty to defend, regardless of the policy limits.

Andrew v. Century Sur. Co., 134 F. Supp. 3d 1249, 1257-58 (D. Nev. 2015).

Or, as the Court succinctly summarized its new holding, giving voice to the majority view on this issue as it did so:  "There is no special rule for insurers that caps their liability at the policy limits for a breach of the duty to defend."  Andrew v. Century Sur. Co., 134 F. Supp. 3d 1249, 1259 (D. Nev. 2015).

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

IN FLORIDA, INADEQUATE DEFENSE IS A BREACH OF CONTRACT.

In Florida, an inadequate defense provided by a liability insurer is actionable as a breach of contract and contract damages are recoverable upon proper proof:

Florida law requires an insurer to provide an adequate defense of a claim against its insured that is covered by a policy. If the defense is not adequate and it is reasonable for an insured to retain its own counsel, then an insured may recoup attorney's fees from an insurer because it has, in effect, forced the insured to retain its own counsel.

Maronda Homes, Inc. v. Progressive Exp. Ins. Co., 118 F. Supp. 3d 1332, 1335 (M.D. Fla. 2015) (Presnell, J.), appeal docketed, No. 15-13998 (11th Cir. Sept. 8, 2015).

 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).  The consequences of providing an inadequate defense are considered in Volume 1, § 3:90.  All rights reserved.

DEFEND ONE COUNT, DEFEND ALL -- OR PAY LAWYER POLICYHOLDER RETAINED.

Image Copyright Dennis J. Wall.  All rights reserved.

A lender-mortgagee foreclosed on property and sold it at a foreclosure sale.  The buyer on foreclosure was Andromeda Real Estate Partners, LLC.  Andromeda was sued immediately by a prior owner of the property who alleged claims in four (4) counts.  At bottom, in each count the underlying plaintiff alleged that Andromeda's deed was invalid.

Andromeda held a title insurance policy issued by Commonwealth Land Title Insurance Co.  Andromeda submitted the claim to Commonwealth and demanded a defense of all four counts against it in the underlying case.  Commonwealth offered to defend only one count.  Commonwealth contended that it had no coverage whatsoever for the other three counts in the underlying complaint against Andromeda.

Andromeda sued Commonwealth in Federal court for coverage.

The Court applied the simple rule that when there is a duty to defend one count in an underlying complaint against a policyholder, there is a duty to defend all counts in the underlying complaint against the policyholder.

"The Court finds that the entire complaint relates to an alleged defective foreclosure sale and a defect in the deed. All four counts are intimately intertwined with whether Andromeda received good title, a covered occurrence under the policy."  Andromeda Real Estate Partners, LLC v. Commonwealth Land Title Ins. Co., C.A. No. 15-224-M-LDA, 2016 WL 715777, at *2 (D.R.I. February 19, 2016).

Next, after holding that Commonwealth wrongly denied a defense to Andromeda, the Court held that as a consequence of its wrongful denial Commonwealth will have to pay the attorney's fees of counsel which Andromeda, not Commonwealth, retained to defend Andromeda in the underlying case.

The Court announced the essential basis for its decision at the beginning of its opinion.  The Court held the way it did "[b]ecause this Court finds that the allegations in the underlying lawsuit taken as a whole are a covered risk under the title insurance policy, and that the insured landowner was entitled to conflict-free representation …."  Andromeda Real Estate Partners, LLC v. Commonwealth Land Title Ins. Co., C.A. No. 15-224-M-LDA, 2016 WL 715777, at *1 (D.R.I. February 19, 2016).

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).  The "defend one count, defend all counts" rule is set out in Volume 1, § 3:53:  "Where several claims are put forward in a single case, the duty to defend is activated regarding all claims whenever coverage potentially exists even for one."  All rights reserved.

SUBROGATION, BUT YOU CAN'T CALL IT EQUITABLE … BECAUSE IT ISN'T.

In the case of Allstate Ins. Co. v. Theodotou, 171 So. 3d 163 (Fla. 5th DCA 2015), a panel of Florida's Fifth District Court of Appeal dismantled equitable subrogation.  Equitable subrogation was administered by Courts of Equity for centuries following settled principles, until this case was decided on July 24, 2015.

Equitable subrogation always required that the injured or damaged parties must be fully compensated for their injuries or damages as an element of another party seeking to stand in their shoes and sue somebody else for a part of the injuries or damages.  Parenthetically, the victim has traditionally been identified as the "creditor" in equitable subrogation, whereas in recent cases, judges often refer to the injured or damaged party by the made-up word, "subrogor."

In the case of Allstate Insurance Co. v. Theodotou, the Fifth District panel expressed confusion over this requirement.  The panel opinion even describes this requirement in terms that make it seem like something of a Florida Supreme Court innovation in 1999.  Allstate Ins. Co. v. Theodotou, 171 So. 3d 163, 166-67 (Fla. 5th DCA 2015).  Far from an innovation of the Florida Supreme Court in 1999, the requirement that the injured person must be fully compensated for the loss before anyone else can sue to recoup their payment to the injured party, this has been a requirement of equity at least until July 24, 2015.

The Florida appellate panel seemed to recognize the need for this requirement in equity when they wrote that "[s]urely, the injured victim deserves to be made whole."  Allstate Ins. Co. v. Theodotou, 171 So. 3d 163, 168 (Fla. 5th DCA 2015).  So much for that, however.  Right after making that statement, the panel shifted its attention to the party which paid the money and no longer even expressed concern about the victim. In shifting its attention away from the victim which claimed compensation for injuries, the panel shifted its attention to the party which claimed the right to recover money it had paid under an obligation to the victim.  In short, the panel shifted its attention from redressing injuries to recouping money.  And then they called this "equity."

It must be recalled that the case presented a claim for equitable subrogation, meaning that the subrogation plaintiff claimed the rights of the victim against another party.  It was not a case where the subrogation plaintiff claimed compensation for its own injuries; it was a case in which the subrogation plaintiff claimed the right to be compensated for the victim's injuries.

The panel's holding resulted from this skewed viewpoint.  It permitted the insurance company to sue medical providers who allegedly caused a part of the victim's injuries compensated by the insurance company.  The panel went further, however, and in Its opinion wrote that "equity" requires that the party which paid money to the injured victim -- here, an insurance company which paid its policy limits, which were not enough to fully compensate the victim -- should still be subrogated to the rights of the victim to sue "the Medical Providers" which allegedly increased the victim's injuries.

The panel did not explore an alternative, which would have included allowing the subrogation plaintiff to sue subsequent tortfeasors or joint tortfeasors subject to a requirement that the victim must be paid first out of any recovery.

Apparently in doubt of discarding the full compensation requirement of equity, the panel certified the following question to the Supreme Court of Florida to answer:

Is a party that has had judgment entered against it entitled to seek equitable subrogation from a subsequent tortfeasor when the judgment has not been fully satisfied?

Allstate Ins. Co. v. Theodotou, 171 So. 3d 163, 168 (Fla. 5th DCA 2015).  One judge on the three-judge panel in this case joined in certifying the question, but dissented on eliminating the full compensation requirement for equitable subrogation.

Two judges, or more, can invent this rule of recoupment, if they want to.  But they have no right to call their rule "equitable" subrogation.

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), including Section 7:9, Actions by Excess Carriers--Subrogation.  All rights reserved.