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Or is it 'California Wildfires in an Age of Climate Change?'
Perhaps ironically, California insurance officials approved homeowners insurance rate hikes in the Summer of 2024. See Brianna Sacks, As Wildfire Risks Intensify, California Insurance Rates Keep Rising, Washington Post (online Aug. 30, 2024), https://www.washingtonpost.com/climate-environment/2024/08/29/california-insurance-wildfires-allstate/. One carrier's authorized homeowners rate hike by an average of some 34% was reportedly set to take effect in California in November, 2024, or about two months before wildfires hit Los Angeles with an intensity previously unknown before the advent of climate change.
Climate change has had a huge effect, and continues to have a huge effect, on insurance coverage and rates. “I still believe insurance is the canary in the coal mine for the climate crisis. And the canary is just about dead.” Dave Jones, former California Insurance Commissioner, quoted in Ryan Fonseca, Why Your Insurance Costs May Go Up Even if Your Home Wasn’t Burned in L.A. Wildfires, Los Angeles Times (online Jan. 15, 2025), https://www.latimes.com/california/newsletter/2025-01-15/why-your-insurance-premiums-may-go-up-even-if-your-home-wasnt-burned-by-l-a-wildfires-essential-california.
In Espinoza v. State Farm Lloyds, Case No. 1:23-CV-751-DII, 2024 WL 4919587 (W.D. Tex. Sept. 16, 2024), an experienced United States District Judge in Texas, the Hon. Robert Pitman, granted the homeowner’s carrier’s motion for summary judgment on all claims.
The basis of all claims was damage allegedly caused by hail during the policy period. The plaintiff-policyholder put forward the report of an expert who may have found hail damage, but affirmatively found that there was no "storm event" on the date of loss alleged by the plaintiff. Espinoza, 2024 WL 4919587, at *5 (“While this statement may raise a fact issue as to whether there is hail damage to the Property, it does not raise any fact issue as to whether the damage occurred during the coverage period of the Policy, let alone the alleged date of loss.”).
Despite opportunities, the plaintiff declined to amend the allegation of the date when the alleged hail damage happened.
The Court fairly reviewed evidence presented by the carrier and evidence presented by the plaintiff. In a knowledgeable application of the law, the Court then granted the carrier’s motion for summary judgment after reviewing the evidence and comparing the evidence to all claims alleged by the policyholder in this case: Breach of contract; “Extra-Contractual Claims,” and claims raised under the Texas Prompt Payment of Claims Act.
All types of experts and other witnesses are presented in first-party claims, including claims under homeowner’s policies as in Espinoza. See an ”Overview of the Participants in the Claim Handling Process” by Dennis J. Wall, § 2:2 in 1 CATASTROPHE CLAIMS / INSURANCE COVERAGE FOR NATURAL AND MAN-MADE DISASTERS (Thomson Reuters Nov. 2024 Edition).
I recently uncovered a story of how corporations ask legislators to agree to keep quiet about giving the corporations tax breaks until the breaks become law.
The corporations are apparently concerned that if there is publicity before they get their tax breaks, then the legislators might become unreliable and pay more attention to the people they represent than to the corporations that want the tax breaks. So the corporations ask the legislators to agree not to speak about their proposed tax breaks until the law actually takes effect. They have the legislators sign what are called "nondisclosure agreements," meaning of course that the legislators as the ones signing these agreements will not disclose whatever the agreements are about.
I have not gotten very far, but what my reading and research tells me already is that this is an interesting story.
It has real-life implications. Here in Florida, it was the law for generations that if an insurance company wrongly forced people to sue it in order to get the benefits of their insurance policies, that those insurance companies would have to pay the attorney's fees of the people they forced to file the lawsuit. This was the rule, this is the way things were, until 2022.
On May 26, 2022, in the midst of a Florida homeowner's insurance crisis when some people could not get insurance and some people who had legitimate claims could not get their claims paid, the Florida Legislature wrote a statute that exempted the homeowner's insurance companies from this rule. By March 24, 2023, the Florida Legislature threw the rule out completely; now, every insurance company in Florida can deny claims under their policies even if in doing that, they force people to sue them to get their insurance benefits under their contracts – and the insurance companies will not have to pay the legal fees of the people they force into hiring lawyers to file these lawsuits -- and who win. I wrote about this in my books.[1]
It was not general knowledge at the time when the legislators were making these laws. The changes became known when they became law.
Were there "nondisclosure agreements" at work here? We do not know, or at least I certainly do not know, and I do not know of any way that anyone other than the insurance companies and the legislators would know one way or the other, as things stand right now.
But suppose instead of not knowing, we knew that there were no nondisclosure agreements and that our legislators here in Florida were representing their constituents rather than the corporations? Banning agreements by which legislators agree—with anyone -- not to tell their constituents what is going on with legislation would be a good first step.
[1] E.g., 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 13:14, Attorney's Fees—Prosecution of Actions Against the Insurer (Thomson Reuters West 3d Edition, 2024 Supplements in process).
Once again, a reported decision highlights the reach of holdings that demonstrable physical injury must be proven in order to trigger property insurance policy coverage under some policies. In Am. Fam. Mut. Ins. Co. v. Coyne, ___ F. Supp. 3d ___, No. 4:18-CV-139 RLW, 2022 WL 6990186, at *6 (E.D. Mo. Oct. 12, 2022), the relevant Homeowners Policy defined covered "property damage" to mean "'[p]hysical damage to or destruction of tangible property, including the loss of use of this property.'" The claims against the policyholder did not trigger coverage in this case under this policy.
In Coyne, the policyholder allegedly represented before selling her house that the house had an attached two-car garage, in pertinent part. The underlying plaintiffs-purchasers moved in after their purchase of the house. It was then that they "learned that they could not fit their two vehicles in the attached garage." Coyne, 2022 WL 6990186, at *1. Perhaps understandably, they sued.
Under the liability portion of the Homeowners Policy, the Court held that there was no duty to defend:
The Court holds that the Bockmans cannot demonstrate any physical injury to their garage or Property, which would be covered under the Homeowners Policy. The garage and Property are in the same condition as they was prior to their purchase. The only damage was to the Bockmans’ personal expectations.
Coyne, 2022 WL 6990186, at *6.
As there was no coverage in this case, so there was no viable bad faith claim in this case, either. The coverage claims were resolved by the Court when it entered summary judgment for the carrier and dismissed the purchasers' claims with prejudice. Coyne, 2022 WL 6990186, at *7.
In Smith v. State Farm Fire & Cas. Co., No. 21-cv-00866-CMA-NYW, 2021 WL 5195326 (D. Colo. Nov. 9, 2021) (Recommendation of U.S.M.J. Wang), a Magistrate Judge in the federal District of Colorado recommended that certain industry standards be stricken from the plaintiffs' bad faith amended complaint:
Defendant is specifically concerned with subparagraphs u, v, and w. See [Doc. 38 at 6]. Paragraph 4(u) alleges that "[i]nsurers should not in any manner tie any claim personnel's compensation with insurer profitability based on delay or denial of claims.” [Doc. 26 at ¶ 4(u)]. Paragraph 4(v) alleges that "[i]nsurers should not use their claims department as a profit center.” [Id. at ¶ 4(v)]. Paragraph 4(w) avers that “[i]nsurers may not violate the Unfair Claims Settlement Practices Act.” [Id. at ¶ 4(w)]. This court agrees that these statements are not factual allegations regarding standards generally accepted in the insurance industry as to how a first-party insurance claim should be adjusted. Rather, they are more akin to public policy statements that are not relevant to whether State Farm was reasonable in its conduct when adjusting the Smiths’ claim. In addition, Paragraph 4(w) is a type of statement regarding applicable law that generally is reserved to the trial court.
Smith v. State Farm, 2021 WL 5195326, at *5.
The Magistrate Judge also recommended that subparagraphs (a) through (d) of the same paragraph 4 be stricken as well. She did not recite their allegations in her opinion.
A review of paragraph 4 of the bad faith complaint on PACER (the portal of "Public Access to [Federal] Court Electronic Records") reveals that subparagraphs (a) - (d) are simply recitations of what laws have been invoked by the plaintiffs.
The Magistrate Judge's opinion does not disclose where all of these "industry standards" came from before they found their way into the allegations of plaintiffs' bad faith complaint. The operative or Amended Complaint recites that in pertinent part these allegations are statements taken from the Unfair Claims Settlement Practices Act as adopted by the Colorado Legislature. See Paragraph 4 of Download Smith v. State Farm Amended Complaint Doc. 26 filed April 16 2021 (D. Colo. Case No. 21-cv-00866).
Wherever the UCSPA set out lynchpins of liability, however, the Magistrate Judge recommended that the motion to strike them be denied. Instead, they will remain in the Amended Complaint and set the issues for fact discovery in this bad faith case.
(Gridview_imagefull / Florida Department of Agriculture and Consumer Services)
The Fourth District Court of Appeal affirmed dismissal with prejudice of a policyholder's bad faith claim against his homeowner's carrier in Julien v. United Prop. & Cas. Ins. Co., ___ So. 3d ___, No. 4D19-2763, 2021 WL 824438 (Fla. 4th DCA March 3, 2021).
On the facts, the appellate court pointed out that the carrier advanced payment to the policyholder while the carrier's investigation of his fire claim was pending. The carrier also put him up in a hotel during that time. Julien, 2021 WL 824438, at *1.
These facts did not determine the appellate court's holding in this case, however. Its holding that a bad faith claim was not available under Florida law in that case was based instead on the quality of the policyholder's Civil Remedy Notice:
Julien's civil remedy notice, it seems, listed every statutory provision and every policy provision available to him as the insured. For example, Julien included fourteen statutory provisions followed by twenty-one sections of the Florida Administrative Code. Furthermore, as the “specific policy language” relevant to the violation, Julien referenced the entire policy[.]
Julien, 2021 WL 824438, at *3.
This behavior ran afoul of the Florida statute that authorizes bad faith actions against first-party insurers like Mr. Julien's homeowner's carrier in this case. The Florida bad faith statute requires specificity of what was violated, in the Civil Remedy Notice that accuses the carrier of misconduct. In this case, the CRN was woefully inadequate in the eyes of both the appellate court and the trial judge:
Here, Julien did not substantially comply with the specificity standard and this was more than a mere technical defect. Julien listed nearly all policy sections and cited thirty-five statutory provisions. As a result, we conclude the circuit court correctly determined that Julien failed to satisfy the requirement that the insured identify the specific statute and specific policy provision relevant to Universal Property's alleged violation.
Julien, 2021 WL 824438, at *3. Although the Florida appellate panel in this case issued this substitute opinion in March 2021 to supersede and replace the opinion it released in September 2020, the result did not change. The panel affirmed the trial court's dismissal of Mr. Julien's statutory bad faith claim with prejudice, and denied his motion to certify a question of great public importance to the Florida Supreme Court for resolution.
As seen by the Florida appellate panel in this case, the answer to the question was already clear to Florida lawyers and judges, and to the Florida public.
In SFR Serv's, LLC v. Lexington Ins. Co., No: 2:19-cv-229-FtM-29NPM, 2021 WL 322367 (M.D. Fla. February 1, 2021), the Court addressed many motions in limine. The Court's rulings on one of them is addressed here: the insurance carrier's motion in limine to prevent evidence and argument on the issue of matching replacement roof tiles on damaged property.
The Court's opinion was written for the benefit of the lawyers and the parties in that particular case because so many details come clear only from reading the parties' filings on the electronic docket known as PACER or "Public Access to [Federal] Court Electronic Records," and not from reading the decision alone.
The plaintiff in this case is a roofing company. It contracted with a condominium association to repair roofs that were damaged during Hurricane Irma. The association gave the roofer an Assignment of Insurance Benefits.
The roofing company asked the carrier to pay for the cost of replacing roof tiles, in pertinent part. In pertinent part, the carrier refused to pay. The roofer sued the carrier. Its complaint was originally filed in Florida Circuit Court, and was then removed to U.S. District Court by the carrier.
The complaint may seem to be bare-bones upon review on PACER, but it was good enough to withstand the carrier's motion to dismiss in federal court. Obviously, the complaint in this case contained all the allegations for claims upon which relief can be granted. However, the controversy over replacement roof tiles is not alleged in the complaint. To understand that controversy, we need to turn to the Federal Judge's February 1, 2021 opinion.
The carrier "seeks to preclude," first, "any evidence, testimony and comment regarding the Florida 'matching' statute, Florida Statutes § 626.9744." SFR Services, 2021 WL 322367, at *1. Section 626.9744, as quoted by the Court in this case, provides in part pertinent to the Court's holding:
Unless otherwise provided by the policy, when a homeowner's insurance policy provides for the adjustment and settlement of first-party losses based on repair or replacement cost, the following requirements apply:
...
(2) When a loss requires replacement of items and the replaced items do not match in quality, color, or size, the insurer shall make reasonable repairs or replacement of items in adjoining areas. In determining the extent of the repairs or replacement of items in adjoining areas, the insurer may consider the cost of repairing or replacing the undamaged portions of the property, the degree of uniformity that can be achieved without such cost, the remaining useful life of the undamaged portion, and other relevant factors.
SFR Services, 2021 WL 322367, at *1. To summarize what has just been quoted, the features of the Florida statute that the Court saw as pertinent to this case by quoting this language from the statute, were:
The statute applies by its terms to "a homeowner's insurance policy."
The statute applies to the "adjustment and settlement of first-party losses based on repair or replacement cost."
When "the replaced items do not match" in important respects, then the carrier must take certain actions specified in the statute.
The Court quickly held that Section 626.9744 simply did not apply to the carrier in this case: "The Policy at issue is a commercial policy, not a homeowner's policy.... Therefore, this statute does not apply to Lexington in this case, and this portion of the motion in limine is GRANTED." SFR Services, 2021 WL 322367, at *1 (boldface by the Court).
The question of excluding "evidence or argument concerning an alleged requirement to 'match' under the insurance policy at issue" was a different story, however. The Court denied the carrier's motion and allowed the plaintiff "to present evidence and argument that the Policy requires 'like kind and quality,' which includes matching tiles." SFR Services, 2021 WL 322367, at *2.
The insurance policy at issue in the SFR Services case provided the carrier "with the option of repairing, rebuilding or replacing the damaged property 'with other property of like kind and quality....'" On the basis of this policy language, then, the carrier's motion to exclude all evidence and argument that the policy requires "matching tiles," was quite simply denied. "It is up to a jury to decide" whether the carrier's argument that the "non-matching tiles" it proposed to use to repair the condominium roofs damaged by Hurricane Irma constituted property "'of like kind and quality'." SFR Services, 2021 WL 322367, at *2.
There you have the twin rulings of the SFR Services Court. They do not match, but they addressed two different things. One was a statute. The other was an insurance policy. In this case, the insurance statute did not govern the insurance policy; it didn't even apply to it.
(Jose Carlos Fajardo / San Jose Mercury News, Associated Press)
In Jackquart v. State Auto Prop. & Cas. Ins. Co., No. 19-cv-2480-WJM-KMT, 2020 WL 7055500 (D. Colo. December 2, 2020), the Court was faced with a claim of losses from a wildfire.
The losses came from the destruction of a structure away from the "residence premises" identified in the homeowner's policy at issue. In fact, the evidence reflected that the uses made by the policyholders of this structure -- which was located 119 miles away from their covered home -- were not consistent with the use of a covered structure away from the residence premises "in connection with the residence premises," in pertinent part:
Apart from Plaintiffs’ ownership of both properties, Plaintiffs have not established that there is a credible link, relationship, or association between the Primary Residence and the La Veta Property. In addition to being located 119 miles away from the Primary Residence (see ECF No. 46-3), Plaintiffs’ use and enjoyment of the La Veta Property as a getaway was distinct from their use of the Primary Residence.
Jackquart, 2020 WL 7055500, at *5.
Further, Mr. Jackquart testified that the structure was "investment property that the Plaintiffs planned to sell at the time of the fire." Even further still, at the time of the fire they had a contract to sell it. Jackquart, 2020 WL 7055500, at *6.
On this record, the Court granted the homeowners carrier's motion for summary judgment that there was no insurance coverage under the policy at issue and so there was no breach of contract when the carrier denied coverage. Since there was no insurance coverage, it followed under Colorado law as under the law of the vast majority of jurisdictions in the United States, that there was no bad faith. Accordingly, the Court also granted the carrier's motion for summary judgment on the bad faith claim in that case.
The holdings of Courts across the United States that where there is no insurance coverage, there is no bad faith, are addressed in 1 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 3:28 (third-party cases) (Thomson Reuters West 3d ed. & 2020 Supps); and in id., Volume 2, §§ 9:1 & 9:14 (first-party cases).
And where there's no fire contamination, there's no physical injury under the policy at issue in Shirley v. Allstate Ins. Co., ___ F. App'x ___, No. 19-56066, 2020 WL 5991156 (9th Cir. Oct. 9, 2020) (case involves California substantive law).
While the policy at issue, apparently a homeowner's policy, covered fire contamination there was no evidence in the record of fire contamination.
In the trial court, there was evidence from four different inspections of the policyholders' home. Four inspectors from three different outfits examined the policyholders' home. They took samples. Not one of them found any evidence of fire contamination, "including soot and ash." Shirley, 2020 WL 5991156, at *1.
There was evidence in the record, however, of excluded coverage for loss caused by "vapors" or "fumes." Shirley, 2020 WL 5991156, at *1.
On this record, the appellate court affirmed the trial court's summary judgment of no coverage.
That holding resolved the policyholders' claim for insurance bad faith as well. The policyholders correctly argued, as the appellate court observed, that a covenant of good faith and fair dealing is implied under California law in every insurance contract. Shirley, 2020 WL 5991156, at *1.
However, both the trial court and the appellate court nonetheless followed California State law that where there is no insurance coverage, there is no insurance bad faith in such a case as this. Shirley, 2020 WL 5991156, at *1.
The implied covenant of good faith and fair dealing in every contract including insurance contracts is discussed in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 1.01 (Thomson Reuters West 3d ed. & 2020 Supps); holdings that where there is no insurance coverage, there is no insurance bad faith are addressed in id., Volume 1, § 3:28 (third-party cases), and in id., Volume 2, §§ 9:1 & 9:14 (first-party cases, such as the Shirley case).
Many cases present lender force-placed insurance (LFPI) claims based on alleged recent LFPI practices. In these cases, homeowners are successful in alleging at least some claims that their lenders and the lenders' servicers and force-placed insurance carriers add kickbacks and other unauthorized, unnecessary charges to the homeowners' monthly mortgage payments. See, e.g., Alpert v. Nationstar Mort. LLC, Case No. C15-1164 RAJ, 2019 WL 1200541, at *2 (W.D. Wash. March 14, 2019) (alleged LFPI policies from July 2012 through July 2016); Hibbs v. Wells Fargo Bank, N.A., No. 17-615-SDD-RLB, 2018 WL 3245050, at *2 (M.D. La. July 3, 2018) (lender force-placed flood insurance in 2016).
Some of these successful claims include alleged bad faith and unfair dealing. E.g., Gray v. CIT Bank, N.A., No. 18-1520 (RMB/AMD), 2018 WL 6804273, at *1-*2 (D.N.J. Dec. 27, 2018) (alleged LFPI practices from 2011 through 2017); cf. Wieck v. CIT Grp., Inc., 308 F. Supp. 3d 1093, 1120 n. 14 (D. Haw. 2018) (dismissing bad faith claims because there is no independent tort of "bad faith" in a "non-insurance" context under Hawaii law, but granting leave to amend breach-of-contract claim to include same allegations of bad faith and unfair dealing; case concerned allegedly unnecessary hurricane insurance placed in 2013 and backdated to 2011-2013).
The author is currently at work on an article about "'Quiet in the Courts!' Concealed Evidence and Secret Settlements: The Lender Force-Placed Insurance Model."
In Metropolitan Prop. & Cas. Ins. Co. v. Auto-Owners Mut. Ins. Co., ___ N.W.2d ___, No. 18-0129, 2019 WL 1086599 (Iowa March 8, 2019), two liability insurance carriers covered two at-least-nominally separate insureds.
One carrier issued what was described by the Court as a CGL policy to a limited liability company that owned a farmhouse.
The other carrier issued a homeowner's policy to at least one of the co-founders of the LLC. The co-founder was also apparently insured under the CGL policy as an officer of the LLC.
A loaded rifle was left at the farmhouse for several months. As loaded rifles will do, it accidentally discharged into a human being, killing him.
The Homeowner's carrier and the individual insured together "settled the death claim for $900,000 and sued the CGL insurer for reimbursement. The case proceeded to a bench trial, and the district court entered judgment against the CGL insurer for $450,000, rejecting various coverage defenses." Metropolitan Prop. & Cas. Ins. Co. v. Auto-Owners Mut. Ins. Co., ___ N.W.2d ___, No. 18-0129, 2019 WL 1086599, at *1 (Iowa March 8, 2019). On appeal to the Supreme Court of Iowa (bypassing the Iowa intermediate appellate court for some reason known only in Iowa perhaps), the Supreme Court of Iowa affirmed.
The Supreme Court looked at the coverage dispute this way:
The principal fighting issue is whether the LLC, as owner of the farmhouse, had potential liability under a premises liability theory for a dangerous condition (the loaded, unsecured rifle left on a bed for several months). On our review, we conclude the district court correctly interpreted the CGL insurance contract, and its factual findings on potential liability and the reasonableness of the settlement are supported by substantial evidence. For the reasons explained below, we affirm the district court judgment.
Metropolitan Prop. & Cas. Ins. Co. v. Auto-Owners Mut. Ins. Co., ___ N.W.2d ___, No. 18-0129, 2019 WL 1086599, at *1 (Iowa March 8, 2019). That view of things naturally disposed of the CGL carrier's appeal. Where as here liability coverage follows potential liability, the likely result is pretty clear.
In Citizens Prop. Ins. Corp. v. Salkey, 260 So.3d 371 (Fla. 2d DCA 2018) [PAGE NUMBERS NOT PROVIDED BY WESTLAW AT THE TIME THAT THIS ARTICLE IS POSTED HERE], a homeowners insurance policy imposed an "anti-concurrent cause" exclusion, and then took the ACCC away in an endorsement for sinkhole coverage. That made the issue of "concurrent cause" ripe for resolution by the jury in the underlying case, a Florida appeals court held:
Citizens argues that its policy contains language sufficient to avoid application of the concurrent-cause doctrine in two places. First, Citizens argues that the earth movement exclusion contained in the policy explicitly contains anti-concurrent cause language:
1. We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.
....
b. Earth Movement and Settlement, meaning:
....
(3) mine subsidence;
....
i. Loss caused by “sinkhole.”
However, the sinkhole endorsement purchased by the Salkeys expressly provides as follows:
The GENERAL EXCLUSIONS – Earth Movement and Settlement exclusion 1.b. does not apply with respect to coverage provided by this endorsement.
....
The GENERAL EXCLUSIONS – Loss caused by Sinkhole exclusion 1.i. does not apply with respect to coverage provided by this endorsement.
Accordingly, because the plain language of the sinkhole endorsement explicitly states that the anti-concurrent cause language found in section 1 of the policy does not apply to sinkhole claims, the anti-concurrent cause provision found in section 1 does not apply in the instant case so as to avoid application of the concurrent-cause doctrine.
The jury in that case found that there was at least one concurrent cause, and so it was proper to instruct the jury accordingly, the appellate court held:
Therefore, applying [Florida law established by the Florida Supreme Court in Sebo v. American Home Assur. Co., 208 So. 3d 694 (Fla. 2016)] to the instant case, we conclude that the trial court properly instructed the jury on the concurrent-cause doctrine, requiring it to determine if at least one of the concurrent causes was covered under the insurance policy.
Nonetheless, because the jury instructions in that case were confusing, the appellate court reversed the trial court's judgment entered on the jury's verdict for the policyholder, and remanded for a new trial.
... 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.
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.
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.
In Goldman v. United Services Automobile Association, 244 So. 3d 310 (Fla. 4th DCA 2018), review dismissed, No. SC18-1309, 2018 WL 3831364 (Fla., August 8, 2018), a Florida intermediate appellate court applied the Supreme Court of Florida's admonition that "bad faith" is simply not required to assess an insured's attorney's fees under the Florida Statutes.
In Goldman, the appellate court pointed out the crux of the matter in its view: The carrier in that case, a first-party carrier, acted appropriately and promptly but was deprived of even the opportunity to disclaim coverage.
The insurance policy at issue in the case was a homeowner's policy. The policyholders' damage claim to coverage under their homeowner's policy came out of a plumbing leak. The carrier investigated the claim, issued a check, and then "[w]ithout informing their insurer that they disputed the amount of the payment, the homeowners filed a lawsuit for breach of the insurance policy." Goldman v. United Services Automobile Association, 244 So. 3d 310, 311 (Fla. 4th DCA 2018), review dismissed, No. SC18-1309, 2018 WL 3831364 (Fla., August 8, 2018).
The carrier was served with the policyholders' suit papers. It filed a motion to compel an appraisal. The result of the appraisal was an award to the policyholders. The appellate court observed that the carrier "timely paid the appraisal award." For that reason as well, the trial court granted the carrier's motion for summary judgment against the homeowners'-policyholders' alleged claim that the carrier had breached the homeowner's policy in that case. Goldman v. United Services Automobile Association, 244 So. 3d 310, 311 (Fla. 4th DCA 2018), review dismissed, No. SC18-1309, 2018 WL 3831364 (Fla., August 8, 2018).
The appellate court affirmed:
Here, the insurer valued the loss and paid the claim based on that valuation. The homeowners did not object. Until the filing of the complaint, the insurer was unaware of a disagreement with the damage valuation. Once informed, the insurer demanded appraisal and paid the appraisal.
There was never a breakdown in the claims adjusting or communications process, nor was there a refusal to pay the claim. “It is only when the claims adjusting process breaks down and the parties are no longer working to resolve the claim within the contract, but are actually taking steps that breach the contract, that the insured may be entitled to an award of fees under section 627.428, Florida Statutes.”
Goldman v. United Services Automobile Association, 244 So. 3d 310, 311 (Fla. 4th DCA 2018), review dismissed, No. SC18-1309, 2018 WL 3831364 (Fla., August 8, 2018).
Following the Supreme Court's admonition that an award of attorney's fees does not mean bad faith in Florida, and of course because there was no bad faith shown on the record of the case before it, the appellate court followed the law that holds that "it is the incorrect denial of benefits that triggers an award of attorney's fees under section 627.428," at least against a first-party carrier like the homeowner's carrier in the Goldman case. Goldman v. United Services Automobile Association, 244 So. 3d 310, 312 (Fla. 4th DCA 2018), review dismissed, No. SC18-1309, 2018 WL 3831364 (Fla., August 8, 2018).
The moral of this story is a simple one, really: As a practice point in presenting the law, practitioners should be sensitive to how their presentation appears to their audience for attorney's fees, i.e., the trial judge, because judges naturally resist being led where they do not need or perhaps want to go. "[H]ere, the insured never gave the insurer the opportunity to incorrectly deny the benefits before filing a lawsuit." Goldman v. United Services Automobile Association, 244 So. 3d 310, 311 (Fla. 4th DCA 2018), review dismissed, No. SC18-1309, 2018 WL 3831364 (Fla., August 8, 2018).
To illustrate this practice point, the appellate court and the trial court were in complete agreement in this particular case that the homeowners'-policyholders' lawsuit "'was merely a preemptive lawsuit intended to obtain attorney's fees for the usual efforts in negotiating an insurance claim.'" Goldman v. United Services Automobile Association, 244 So. 3d 310, 311-12 (Fla. 4th DCA 2018), review dismissed, No. SC18-1309, 2018 WL 3831364 (Fla., August 8, 2018). "Here, the circuit court found that was the exact reason the lawsuit was filed. Thus, the court properly granted summary judgment in favor of the insurer." Goldman v. United Services Automobile Association, 244 So. 3d 310, 312 (Fla. 4th DCA 2018), review dismissed, No. SC18-1309, 2018 WL 3831364 (Fla., August 8, 2018).
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.
Hurricanes are coming to the United States from the East and from the West, from the Atlantic and from the Pacific. One of those storms, Florence, is about to strike the Carolinas and Virginia, the federal government is pretty certain. (Many other people are certain, too, but this is a tale of how the federal government spends our money in 2018.)
The coming of hurricanes means that the Federal Emergency Management Administration (FEMA), the United States Coast Guard, and other agencies will have a lot to do to save lives and protect property.
With hurricanes on the horizon, the federal government's Department of Homeland Security has secretly taken some $10 Million from FEMA.
They have surreptitiously taken $29 Million from the Coast Guard.
All told, without any public announcement they have reportedly taken $200 Million from other agencies to build prison camps for immigrant children and their families.
Saving lives and protecting property vs. prisons for children.
What sort of people would choose building prisons in the face of hurricanes?
Follow the money. The answer is at the end of the rainbow, where we always heard it would be.
This article picks up and carries forward the article posted here on Sunday, July 15, 2018.
On the record of the Alvarez-Mejia appeal, where the plaintiff homeowner put on evidence in the trial court but the defendant did not, it is almost an open question whether there would have been a different result if the plaintiff had been the one who filed the motion for summary judgment, all other things being equal.[1]
The Alvarez-Mejia case was seen in a significantly different way by the dissenting judge. He expressed his own opinion on whether it was "economically feasible" to restore or repair Ms. Alvarez-Mejia's home, which was that "I believe it is not 'economically reasonable' or 'practicable' to do so."[2] To say again, the legal issue was whether the restoration or repair was "economically feasible" under the quoted mortgage provision; the words, "economically reasonable" or "practicable" reflect the interpretation that the dissenting judge substituted for that term.
On the law of what is "economically feasible" as used in paragraph 5 of this standard mortgage, the dissenting judge honestly reported that "[e]lectronically assisted research of all federal and state case law discloses just one case where a court has attempted to define the phrase." That was the case of Vongohren v. Citimortgage, Inc., an unreported decision by a federal judge in Maryland, also decided in 2016.[3] It has been cited by only one judge since then, and that is the dissenting judge in Alvarez-Mejia.[4]
To be continued with further discussion and analysis of both decisions, Vongohren and Alvarez-Mejia.
In Auto-Owners Ins. Co. v. Bolden, as Personal Representative, etc., and Reverse Mortgage Solutions, Inc., d/b/a Vertical Lend ISAOA/ATIMA, No. 9:16-cv-2961-DCN, 2017 WL 3923356 (D.S.C. September 7, 2017), the Court addressed several issues.
Chief among the important facts for our purposes was that, among other things, a homeowner died in a fire at her home while her home was being foreclosed. The homeowner's estate made a claim for coverage. The homeowners carrier did not pay the policy proceeds to the policyholder's estate.
Instead, the homeowners carrier paid part of the claim to the estate, and then proffered a check for the balance of the claim naming both the estate and the mortgagee as joint payees. The estate refused the second check basically on the ground that the policyholder owned the property at the time of the fire loss and so her estate should be the sole payee now.
The homeowners carrier then filed a lawsuit claiming the right to an interpleader. The Estate filed counterclaims in the carrier's lawsuit, for breach of contract and bad faith. The homeowners carrier requested that the Estate's claims be dismissed partly because it, the carrier, had filed a motion for interpleader and also because, the carrier argued, the bad faith claims in essence died with the homeowner.
In this procedural posture, the Court allowed the Estate to pursue the homeowner's contract and bad faith claims, denied the carrier's motion to dismiss those claims, and refused interpleader in this case.
In Florida, unless there is a properly declared state of emergency, when a claim is made on residential property insurance coverage, by statute the carrier has fourteen days within which to provide the policyholder making that claim with a copy of the statutory Florida Policyholder's Bill of Rights. SeeFla. Stat. § 627.4172.
Where a homeowner's insurance company has a duty to investigate, this includes a duty in Georgia and most other States to assess the value that homeowners lose because of physical damage to their homes, even if their homes are repaired. Thompson v. State Farm Fire & Cas. Co., No. 5:14-CV-32 (MTT), 2016 WL 951537 (M.D. Ga. March 9, 2016).
NOT FOR CONTRACT CLAIM OR UNREASONABLE AND VEXATIOUS CONDUCT CLAIM UNDER ILLINOIS INSURANCE CODE.
A breach of a homeowner's insurance contract claim, even though the claim includes allegations of bad faith, is not subject to a "heightened fraud pleading requirement" under Federal Rule of Civil Procedure 9(b), the District Court held in Wheeler v. Assurant Specialty Prop., 125 F. Supp. 3d 834, 840 (N.D. Ill. 2015). There the breach of contract claim "exists independent of any allegations of fraud or deception contained in the complaint."
Further, a claim of unreasonable and vexatious insurer conduct is actionable under the Illinois Insurance Code, the same Court further held. Wheeler v. Assurant Specialty Prop., 125 F. Supp. 3d 834, 840-41 (N.D. Ill. 2015). The Court refused to "apply Rule 9(b)'s pleading requirements to conduct that does not necessarily sound in fraud" even if the alleged conduct sounds in bad faith. Wheeler v. Assurant Specialty Prop., 125 F. Supp. 3d 834, 841 (N.D. Ill. 2015).
Fewer Homeowner's Policies may mean fewer bad faith claims but the claims that are made may result in larger awards.
Beware of averages and the meaning of averages. "New-home sales tumbled 61.8 percent in the Northeast" and averaged 11.5% over the entire country. "Economists Unfazed as Sales of New Homes Slip 11.5%," p. B5, col. 1 (Reuters report, New York Times Nat'l ed., Tuesday, October 27, 2015).
Do fewer homeowner's policies -- in particular, disproportionately fewer homeowner's policies to be issued in coming weeks and months in the Northeast -- mean fewer homeowner's insurance bad faith claims? The numbers of these claims will undoubtedly decrease as well, but the awards on these bad faith claims may rise.
There are at least three reasons, all related to the economy. All three are going to be in the minds of homeowner's insurance companies and their defense counsel:
There are fewer homeowner's policies because there are fewer people who can afford to buy new homes. When these new homeowners make bad faith claims, it will be because they are looking for large awards to compensate them for financial distress in what is for them a bad economy.
Attorneys who represent these policyholders will have fewer bad faith claims available for representation and thus for awards and for their fees. Attorneys will have incentives to maximize the awards and their fees in the few homeowner's insurance bad faith claims available in this distressed economy.
To the degree that the future bad faith claims are decided by juries, the jury pool will necessarily include people who cannot themselves afford new homes and who do not even have the opportunity to purchase homeowner's insurance. To the extent that they may be inclined to blame anyone, as between the homeowners and the homeowners' insurance companies, they will not blame the homeowners.
Homeowners May Pay Bankers’ Future Bonuses, Courtesy of a New Regulation Proposed by the Consumer Financial Protection Bureau.
Under a proposal made by the U.S. Government, banks and other mortgage servicers would be empowered to decide whether homeowner’s insurance on mortgaged homes is “insufficient”. These same banks reportedly earn money by declaring that a homeowner’s insurance is “insufficient” and requires lender force-placed insurance. Further, the banks earn more money if the homeowner cannot afford the exorbitant higher premiums of lender force-placed insurance, and so the banks foreclose on the homeowner’s mortgage.
Under the pending proposal, written by the Consumer Financial Protection Bureau, the banks and other mortgage servicers would be immunized if they are wrong. Whether the homeowner had “sufficient” insurance coverage is at the heart of most lawsuits over lender force-placed insurance practices; if the banks are immunized for being wrong about that, they may be exposed to significantly less scrutiny by juries and judges in LFPI lawsuits. Certainly, that is what the banks at least will argue.
The official period for comments expires on Monday, March 16, 2015. As these words are written, there is time to register your own observations on the CFPB proposal. On Friday, March 13, 2015, the author filed his own comments and for your convenience, they are repeated here including the information necessary for the Government to process your comments including the CFPB Docket Number and the Regulatory Information Number (“RIN”) . Please take advantage of this unique opportunity, whether or not you agree with the following comments of this writer.
These Comments concern certain amendments or changes to regulations and related forms proposed by the CFPB. The Bureau’s proposed amendments are not authorized by Congress.
The Consumer Financial Protection Bureau can act only with authority delegated by Congress. Here, the Bureau’s cited Legal Authority does not authorize the CFPB to issue a regulation that in turn authorizes a mortgage servicer to demand “evidence that the borrower has hazard insurance that provides sufficient coverage”.
These Comments address in particular the Bureau’s proposed changes to 12 C.F.R. § 1024.37(c)(2)(v)(A) and (B). The CFPB’s proposed changes to the regulation also implicate changes proposed by the CFPB to Forms in Appendix MS-3 including (A) and (B).
The CFPB’s cited “Legal Authority” for these changes references certain sections of the Real Estate Settlement Procedures Act (RESPA):
These proposed amendments and clarifications to § 1024.37 implement sections 6(k)(1)(A), 6(k)(2), 6(l), and 6(m) of RESPA.
The proposed amendments addressed here do not implement the cited sections of RESPA. (The sections relied on by the CFPB are codified in 12 U.S.C. § 2605.)
Section 6(m), or subsection 2605(m), does not authorize anything like requiring evidence that the borrower has hazard insurance that provides “sufficient” coverage.
Sections 6(k)(1)(A) and (2), or subsections 2605(k)(1)(A) and (2), refer to “the loan contract’s requirements to maintainpropertyinsurance” [emphasis added]. In that way, these two subsections of the enabling statute, taken together, allow mortgage servicers to obtain force-placed hazard insurance only when there is a reasonable basis to believe that the borrower has failed to comply with the loan contract’s requirements to maintain property or other hazard insurance. There has been no change to the provisions of the enabling statute. There is no resulting authority for changing the regulation written to implement the statute’s provisions. The proposed amendment to Section 1024.37, referencing authority conferred upon mortgage servicers to require and accept evidence of “sufficient” property or other hazard coverage, is without authority. Unless and until determined to the contrary by a Court of competent jurisdiction, the proposed amendment would as a result be void at inception because it would be issued without the required authority which has not been extended by Congress to the Bureau.
There is no arguable basis for the proposed amendment to the regulation, under Section 6(l) or subsection 2605(l), either. This provision of the statute does not authorize a change to the regulation, it has not been changed itself, and issuing such a regulation as that proposed by the Bureau would not, in this instance, implement the statute in any conceivable way.
To the contrary, paragraph 6(l)(2) which is codified as paragraph (2) of subsection 2605(l), prohibits the proposed regulatory change by implication. It provides:
(2) Sufficiency of demonstration
A servicer of a federally related mortgage shall accept any reasonable form of written confirmation from a borrower of existing insurance coverage, which shall include the existing insurance policy number along with the identity of, and contact information for, the insurance company or agent, or as otherwise required by the Bureau of Consumer Financial Protection.
There is nothing in the statute about who makes the determination of what is or is not “sufficient” coverage. There is nothing in the statute about what qualifies as “sufficient” coverage. The statute simply does not address the concept of “sufficient” coverage at all.
The statutory scheme selected by Congress is reasonably clear: A servicer is required to accept all reasonable forms of evidence of “existing insurance coverage.” Thereafter, the borrower and the servicer can each determine for themselves whether a Court of competent jurisdiction would hold that the evidence provided of “existing” coverage is evidence of “sufficient” coverage required by the mortgage loan contract.
Otherwise, the mortgage servicer’s demand under the proposed amended regulation for evidence of “sufficient” coverage may be immunized under the Interpretations promulgated by the CFPB concerning compliance with all CFPB regulations. See 12 C.F.R. 1024, Supp. I, unnumbered “Introductory Paragraph.”
The genesis of the proposed amended regulation may lie in the Bureau’s regulation which addresses the sufficiency of Flood Insurance policy limits. See Dennis J. Wall, “Lender Force-Placed Insurance Practices,” a book forthcoming later this March, in which the Bureau’s regulatory activity in the arena of Flood Insurance is discussed along with many other issues arising from lender force-placed insurance practices.
However, the source of authority for the Flood Insurance regulation is the National Flood Insurance Act, as amended. RESPA does not convey any similar authority upon the Bureau.
CONCLUSION
The proposed regulatory changes which are the subject of these Comments are the Consumer Financial Protection Bureau’s proposed amendments to12 C.F.R. § 1024.37(c)(2)(v)(A) and (B). The CFPB’s proposed changes to the regulation also implicate changes proposed by the CFPB to Forms in Appendix MS-3 including (A) and (B).
In proposing the amendments addressed in these Comments, the Consumer Financial Protection Bureau relies on sections 6(k)(1)(A), 6(k)(2), 6(l), and 6(m) of RESPA [codified as 12 U.S.C. § 2605(k)(1)(A), (2), (l), and (m)]. The Bureau’s cited Legal Authority does not authorize the CFPB to make the subject changes which the Bureau proposes to make to the regulation. In particular, the enabling statute – RESPA – does not authorize the Bureau to issue regulations that in turn authorize a mortgage servicer to determine what may constitute “sufficient” insurance coverage and receive immunity for its decision, including immunity for a servicer’s demand for “evidence that the borrower has hazard insurance that provides sufficient coverage”.
Reportedly an oil company based in Texas is trying to use Pennsylvania "forced pooling law" to permit fracking or other oil drilling under the land of Pennsylvanians who refuse to sign the Texas company's oil and gas drilling lease. "Law May Force Drilling on Balking Landowners" p. A11, col. 1 (Associated Press Copyrighted story published in New York Times Nat'l ed., Monday March 31, 2014).
One of the publicly stated purposes of forced pooling laws is apparently to limit the number of "unsightly drilling rigs on the surface" by allowing oil companies to drill even where a landowner refuses the companies permission to drill. See id.
A question rises to the surface here: Is property damage if any which may be caused by the unwanted drilling, going to be covered under Homeowner's standard "all risks" policies?
Or will there be some sort of Exclusion for acts of government?
And, if it is true as the Texas-based oil company says, see id., that it has already obtained leases from 99% of the property owners in that Pennsylvania locale, then why in heaven's name does it need to drill under the land of the remaining 1%?
And, if one of the leasing landowners who reportedly owns a 200-acre golf course received half-a-million dollars "plus 18 percent royalties on future production," id., then instead of reportedly being upset with Pennsylvania landowners --"I don't understand how people that own four acres of ground can hold up such a big thing"-- try being upset instead either with the outside agitators that are going to put the oil derricks there --
or try living with a half-a-million dollars and 18% oil royalties on account of the oil rigs that the golfers will be looking at.
I have not seen any reports or studies on the purchase of property insurance by the investors that purchase these properties.
Moreover, since these investors do not carry mortgages, they do have no need to buy mortgage insurance.
Further, the number of homeowners is necessarily declining since fewer homes are being sold and purchased in 2013. It seems that as a consequence the number of homeowner's insurance policies must also decline. That will have clear results in falling homeowner's insurance sales and premiums. What effects will it have on the handling of homeowner's insurance claims in a tightening market?
There is potentially good news on the other hand for sellers of tenants and renters insurance policies. Investors are buying the foreclosed homes in order to rent them.
Simple math. That is one reason, at the least, why home ownership is in decline. There are fewer homeowners because there are fewer homes bought and sold; instead, homes in 2013 are increasingly bought and rented.
The Bureau of Consumer Financial Protection has issued regulations and a "Supplement to Part 1024--Official Bureau Interpretations". Popularly known as the Consumer Financial Protection Bureau or "CFPB," it has made homeowner's insurance fraud possible, and immunized it, too.
The CFPB Official Interpretations make substitute or force-placed "hazard insurance" synonymous with substitute "homeowners' insurance" or substitute "property insurance". Of course, force-placed insurance is not homeowner's insurance. Force-placed insurance provides coverage only against a small number of risks or "hazards" such as fire, and in almost every case it only protects lenders, not homeowners.
The truth is that force-placed insurance is collateral protection insurance. That is not the Bureau of Consumer Financial Protection's interpretation, however.
Congress enacted the Real Estate Settlement Procedures Act in part to require lenders and their agents, known as mortgage servicers, to send notices to homeowners-mortgagors with specific language before insurance can be placed by force upon the homeowner. The language these congressionally required notices are supposed to contain is codified in 12 U.S.C.A. § 2605(l)(1)(A), (B) and (C). The CFPB previously issued proposed forms mirroring the identical language in Appendix MS-3-Mortgage Servicing Model Forms and Clauses.
The statute and the Mortgage Servicing Model Forms and Clauses which are supposed to implement the statute, all refer specifically to forced placement of substitute "hazard" insurance. That is actually what is being placed by force, namely, substitute "hazard" insurance to protect lenders against damage to or loss of collateral protection.
Now, the CFPB interprets the notices which are required to be sent to borrowers to refer to substitute "homeowner's" insurance. To say again, the insurance that is thereby placed by force is substitute collateral protection insurance.
Worse than that, the same Official CFPB Interpretation would immunize "good faith compliance" with its "Interpretation" from liability. It is scheduled to take effect on January 10, 2014. The Comment period has expired. If the Bureau does not withdraw this "interpretation," it will apparently be up to Congress to nullify it.
The official cite for the Official CFPB Interpretations is 12 C.F.R. 1024, Supp. I, and the official site is somewhere on http://www.consumerfinance.gov/regulatons. When there, check out the "2013 Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) Mortgage Servicing Final Rules".
... UNDERWRITERS POINT TO THEIR COMPUTER MODELS TO TEE OFF ON SANDY DAMAGE.
Computer models. Underwriters are now using computer models to justify talk of higher Premiums to come in the Northeast after all the damage that Sandy caused, if property or flood insurance are going to be made available at all in the Northeast.
There is definitely something to it, in a sense. There is a recognition in that repeated observation that climate change is not only real right now, it is also so much the reality of our future that even the Northeast can expect previously unusually destructive weather and coming at previously unusual times of the year, as Sandy did.
However, the idea that opinions about what exactly the future will bring, fed by underwriters into computer programs which exist for the purpose of supporting premium rate increases which are going to be requested from State Insurance Commissioners, is suspect, notwithstanding.
This shameful exercise with computer programs force-fed by underwriters is not good faith nor fair dealing.