Claims and Bad Faith Law Blog

SOMETIMES PARTIAL PAYMENT MAY NOT BE ENOUGH GOOD FAITH.

 

(Black Hole Image Courtesy of NASA)

Sometimes even partial payment may not be enough to establish good faith as a matter of law.  In Rutledge Inv's L L C v. Scottsdale Ins. Co., No. 2:21-CV-00364, 2022 WL 3704212 (W.D. La. Aug. 26, 2022), the Court denied the property carrier's "motion for partial summary judgment to dismiss" a "bad faith claim related to Hurricane Laura."

This despite the fact that the record shows that the carrier made an advance payment one week after the Hurricane struck and, further, that the carrier agreed to "issue payment on the undisputed claim" five weeks after that.  Rutledge, 2022 WL 3704212, at *1.

Proof of loss:  advances are the subject of § 2:10 by Dennis J. Wall, in JOHN K. DiMUGNO, STEVEN PLITT, and DENNIS J. WALL, CATASTROPHE CLAIMS / INSURANCE COVERAGE FOR DISASTERS (Thomson Reuters May 2022 Edition).

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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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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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Download IBF 06.18.19.

LENDER FORCE-PLACED INSURANCE BAD FAITH IN THE 21st CENTURY.

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."

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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.

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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.

"CLAIMS HANDLING PRACTICES ISSUES BY MORTGAGEES IN CATASTROPHE CLAIMS"

HAPPY THANKSGIVING!  GIVE THANKS THIS YEAR BY GIVING!

The following reprint from the book, Catastrophe Claims:  Insurance Coverage for Natural and Man-Made Disasters, is with the permission of Thomson Reuters West, the publisher, and Dennis J. Wall, the author.  This selection, Section 2:18 (2018, Thomson Reuters), is reprinted here with permission of Thomson Reuters.  Any further reproduction without the consent of the publisher is expressly prohibited.

Note:  Access to hyperlinked citations are restricted by Thomson Reuters West in this publication; subscription may be required by Thomson Reuters West to access the hyperlinked citations that appear below.

Cat Claims: Insurance Coverage for Natural and Man-Made Disasters § 2:18

Catastrophe Claims: Insurance Coverage for Natural and Man-Made Disasters

 | 

November 2018 Update

Chapter 2. Claim Handling Issues

by Dennis J. Wall, Esquire

• 2:18. Claims handling practices issues by mortgagees in catastrophe claims

There is a constant issue in the current handling of catastrophe claims: Whether the loss proceeds paid by a first-party insurance carrier can be deposited by the mortgagee for any reason it deems sufficient, or whether the loss proceeds should be applied to restoration or repair of the property? Resolving this issue depends on whether restoration or repair of the mortgaged property “is economically feasible and Lender's security is not lessened.”

    The standard language of the UNIFORM INSTRUMENT approved by Fannie Mae and Freddie Mac for Single-Family homes in Florida is representative of the same standard language found in mortgages across the United States. Paragraph 5 of the Florida uniform mortgage form addresses this issue. The language generally relied on by Lenders to support their right to hold the insurance proceeds for use as they deem appropriate, whether or not the property is restored or repaired, is as follows:

Unless Lender and Borrower otherwise agree in writing, any insurance proceeds, whether or not the underlying insurance was required by Lender, shall be applied to restoration or repair of the Property, if the restoration or repair is economically feasible and Lender's security is not lessened.¹

Exactly the same language was at issue in Alvarez-Mejia v. Bellissimo Properties, LLC, a 2016 2-to-1 decision by a panel of Florida's Third District Court of Appeal in an appeal from the entry of summary judgment for Bellissimo, a defendant and a mortgagee.²

    The legal issue was whether repair of Ms. Alvarez-Mejia's home was or was not “economically feasible” using the proceeds of her homeowner's policy after a loss from fire. The term, “economically feasible,” is not defined in the Uniform Mortgage Instrument, and of course it was not defined in the mortgage at bar, either. That was the key to the outcome.

    The plaintiff homeowner put on evidence through her affidavit “that it is economically feasible to repair the property because the value of the property with repairs will be significantly greater than the outstanding balance of the mortgage.”³ The mortgagee-movant Bellissimo did not put on any proof otherwise at or after it filed its motion for summary judgment. It “did not provide an estimate of the value of the property after repairs, and therefore did not meet its burden of proof that no genuine issue of material fact exists.”⁴

    On this record, where the plaintiff homeowner put on evidence but the defendant did not, it is open to 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.⁵

    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.”⁶ 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 2016.⁷ It has been cited by only one judge since then, and that is the dissenting judge in Alvarez-Mejia.⁸

    Both the dissenting state court judge and the federal judge were impressed with the fact that the borrowers before them were in default on their mortgage loans. The dissenting state court judge wrote that he “would find this alone is sufficient, as a matter of law, to make repair economically unfeasible in this case.”⁹ Although the federal judge observed for his part that being in default may standing alone be sufficient “as a matter of law, to make repair economically infeasible,”¹⁰ he ruled instead on the facts in his case. Those facts involved a flood loss “as a result of a recent hurricane” after the borrowers abandoned the Maryland property and moved to Texas, then moved back to Maryland “on the advice of a lawyer litigating class action claims against Citi,” leaving the property unsecured and so susceptible to vandals and squatters (apparently while they were in Texas, but the opinion is not entirely clear on this point), cancelling property insurance on the property, and telling Citimortgage that they were waiting to be foreclosed “so they could ‘sue the company'[.]”¹¹

    On the facts in Alvarez-Mejia, the dissenting judge would have held the homeowner's affidavit inadmissible as to the value of her home after repairs.¹² The dissenting judge did not address it, but there is long-standing case law in Florida that a homeowner's opinion as to the value of her property is admissible.¹³

    The question of whether the Lender's security is lessened, which is the second element if you will of the above-quoted Uniform Instrument paragraph 5, was not addressed by the majority but it was addressed by the dissent in Alvarez-Mejia. The dissenting judge was of the view that not only was it “economically infeasible” to restore or repair Ms. Alvarez-Mejia's home, but to repair it would also lessen Bellissimo's security. As the dissenting judge put it:

As to the second ground, we only need to acknowledge that the insurance proceeds, when granted by the insurer, become part of the security for the loan. Accordingly, an expenditure for restoration or repair of a property which ends with a property value less than the amount expended constitutes, a fortiori, a “lessening” of the lender's security.¹⁴

Assuming that it is legally correct that insurance proceeds become part of the security for the loan,¹⁵ the mortgage loan document itself provides what happens when the Lender's security is lessened and when repairs are not economically feasible.

    In another part of paragraph 5 of the Uniform Instrument which was quoted both by the majority and the dissent, but which was not addressed by either, the mortgage agreement expressly provides for what is supposed to happen to insurance proceeds after a loss, i.e., how insurance proceeds paid on account of a loss to the mortgage property are to be applied:

If the restoration or repair is not economically feasible or Lender's security would be lessened, the insurance proceeds shall be applied to the sums secured by this Security Instrument, whether or not then due, with the excess, if any, paid to Borrower.¹⁶

Under this language found later on in the same paragraph 5, after the previously quoted language from that paragraph that Lenders tend to rely on, whether it is the case that restoration or repair is not economically feasible or that the Lender's security would be lessened, then the insurance proceeds shall be applied to the sums secured by the mortgage, i.e., to the mortgagor's payment obligations under the mortgage. If there is any excess, then by the same express terms of the mortgage any excess is to be paid to the Borrower. This language is not hard to understand.

    But to say again, it was not addressed either by the majority or by the dissent in Alvarez-Mejia.

    In sum of both decisions, Alvarez-Mejia and Vongohren, there is one issue that divides the decisions in both cases. It is the question of whether restoration or repair that increases the value of a property after a loss, but increases the value to a point that is less than the amount of the repairs, can ever be restoration or repair that is “economically feasible.” In both cases, the courts viewed this as a matter open to summary judgment, as a question of material fact. The difference between the majority opinion in Alvarez-Mejia and the federal judge's opinion in Vongohren, may ultimately turn on whether they would allow juries to decide if it is “economically feasible” to restore or repair property when the costs of the repair exceed the resulting value of the property.

    The majority in the state court case was willing to allow the possibility that a jury could determine that repair of the property that increases “the value of the property with repairs will be significantly greater than the outstanding balance of the mortgage.”¹⁷

    The federal judge, on the other hand, equated the position of the property as the Lender's collateral, as “security” for the mortgage loan, with “Citi's security interest” in the property. Citi won the day because it commissioned a Broker's Price Opinion or “BPO” that “shows that the economic loss of repairs to Citi's collateral” was within a range of several thousand dollars, an estimate which the borrowers did not dispute. “Therefore, forcing Citi to repair the property would lessen the value of Citi's security interest in the property[.]”¹⁸

    So, there you have it. Is a home collateral to protect a lender's right to be repaid under the terms of the mortgage loan? Or is a home instead a springboard for the lender to be paid amounts that are not set forth in the mortgage contract, like the increase in value of a home after repairs rather than simply the balance remaining on the mortgage? The different answers to those two questions go a long way toward explaining the difference between the Alvarez-Mejia decision and the Vongorhen decision.

Westlaw. © 2018 Thomson Reuters. No Claim to Orig. U.S. Govt. Works.

Footnotes

1

Paragraph 5 of Fannie Mae/Freddie Mac Form 3010 01/01 FLORIDA--Single Family at page 7 (emphasis added).

2

Alvarez-Mejia v. Bellissimo Prop's, LLC, 208 So. 3d 797 (Fla. 3d DCA 2016). Paragraph 5 of Ms. Lily Alvarez-Mejia's mortgage is identical to paragraph 5 of the Uniform Mortgage Instrument quoted in the text. See Alvarez-Mejia, 208 So. 3d at 798.

    Belissimo also “withheld the insurance proceeds” pursuant to section 11 of the mortgage. The majority mentioned this once, as a fact, and then never mentioned it again, nor did they ever quote it. Alvarez-Mejia, 208 So. 3d at 798. The dissenting judge neither quoted nor mentioned paragraph 11 of the mortgage, at all.

    Paragraph 11 of the UNIFORM INSTRUMENT relates to “Assignment of Miscellaneous Proceeds; Forfeiture.” Paragraph 11 of Fannie Mae/Freddie Mac Form 3010 01/01 FLORIDA--Single Family at page 10 (boldface in original). Paragraph 5 of the UNIFORM INSTRUMENT, titled “Property Insurance,” was the provision which contained the language at issue in the case.

3

Alvarez-Mejia, 208 So. 3d at 799.

4

Alvarez-Mejia, 208 So. 3d at 799.

5

But in this case “a genuine issue of material fact exists as to the cost of repairs to the property.” Alvarez-Mejia,208 So. 3d at 799.

6

Alvarez-Mejia, 208 So. 3d at 800 (Shepherd, J., dissenting).

7

Vongohoren v. Citimortgage, Inc., No. JFM-14-3549, 2016 WL 739070 (D. Md. February 25, 2016).

8

Alvarez-Mejia, 208 So. 3d at 800 (Shepherd, J., dissenting).

9

Alvarez-Mejia, 208 So. 3d at 802 (Shepherd, J., dissenting).

10

Vongohoren v. Citimortgage, Inc., 2016 WL 739070, at *4.

11

Vongohoren v. Citimortgage, Inc., 2016 WL 739070, at *2, *5.

12

Alvarez-Mejia, 208 So. 3d at 801 (Shepherd, J., dissenting).

13

See 1 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 8:17, tiled “Experts in third-party insurance bad faith cases: Specific cases and general rules,” at page 289 of 2018 Supplement (Thomson Reuters 3d edition 2011, 2019 Supplement in progress).

14

Alvarez-Mejia, 208 So. 3d at 802 (Shepherd, J., dissenting).

15

There may be good authority for that proposition. The dissent, however, did not cite any and none has yet been found independently. On the contrary, a part of paragraph 5 of the UNIFORM INSTRUMENT and of Ms. Alvarez-Mejia's mortgage reflects clearly that insurance proceeds never become part of the Lender's “security” if it is not economically feasible to restore or repair the property and the Lender's security is not lessened:

If the restoration or repair is not economically feasible or Lender's security would be lessened, the insurance proceeds shall be applied to the sums secured by this Security Instrument, whether or not then due, with the excess, if any, paid to Borrower. Such insurance proceeds shall be applied in the order provided for in Section 2.

Paragraph 5 of Fannie Mae/Freddie Mac Form 3010 01/01 FLORIDA--Single Family at page 7 (emphasis added).

16

Paragraph 5 of Fannie Mae/Freddie Mac Form 3010 01/01 FLORIDA--Single Family at page 7 (emphasis added).

17

Alvarez-Mejia, 208 So. 3d at 799 (emphasis added).

18

Vongohren, 2016 WL 739070, at *5 (emphasis added).

The above reprint from the book, Catastrophe Claims:  Insurance Coverage for Natural and Man-Made Disasters, is with the permission of Thomson Reuters West, the publisher, and Dennis J. Wall, the author.  This selection, Section 2:18 (2018, Thomson Reuters), is reprinted here in its entirety with permission of Thomson Reuters.  Any further reproduction without the consent of the publisher is expressly prohibited.

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.

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

FOLLOW THE MONEY 2018.

This is what follow the money looks like in 2018.

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.

See, e.g., Isaac Stanley-Becker, "Trump Administration Diverted Nearly $10 Million From FEMA to ICE Detention Program, According to DHS Document" (Washington Post Online, posted on Wednesday, September 12, 2018).   "This is nothing to play with."  That is how the coming of Hurricane Florence was reportedly described by William "Brock" Long, the current FEMA Administrator, quoted in Reis Thebault, "'Nothing to Play With:'  FEMA Chief's Hurricane Florence Alarm Draws on Vivid Memories of Hugo" (Washington Post Online, posted on Tuesday, September 11, 2018).

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

BAD FAITH CATASTROPHIC HARMS TO HEALTH.

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

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

 

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

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

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

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

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

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

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

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

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

WAIVING A CIVIL REMEDY NOTICE OF BAD FAITH IN FLORIDA.

In Evergreen Lakes HOA, Inc. v. Lloyd's Underwriters at London, 230 So. 3d 1, No. 4D16–2657, 2017 WL 4679597 (Fla. 4th DCA October 18, 2017), the plaintiff homeowner's association incurred hurricane damages and sued for breach of the insurance contract.  It also served a civil remedy notice of bad faith as required under Florida's Bad Faith Statute.  However, the address to which it sent a copy may not have been the carrier's correct address. 

Parenthetically, the carrier argued that the claimant could not prove that the claimant had actually sent a copy of the CRN to the carrier.  It did not argue apparently that it had never received a copy, because eventually it did receive a copy.  The carrier actually received a copy long before the claimant sued.

Although the Florida statute requires the claimant to provide a copy of the CRN to the insurance carrier, that requirement can be waived.  That is what happened here, the Florida appellate court ruled.  The effect was to reverse a summary judgment that the trial court had granted in favor of the insurance carrier in this case on the ground that proper notice had not been given to it.

In other words, waiving the CRN that the claimant waved meant that at least one obstacle to trial of a bad faith claim is no longer an obstacle in this case.

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

HURRICANE IRMA.

Hurricane Irma has interrupted service.  I know that you will understand.  Thank you.

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

Flood Insurance and Hurricane Harvey Damage.

It is important to remember that insurance companies did not want to insure against hurricane damage, especially damage from flooding.  They got out of the market for flood insurance.

The federal government stepped in to the vacuum in 1968 with a program, the National Flood Insurance Program, that at first filled the empty space with flood insurance policies paid for by taxpayers (although the policies were still serviced by private insurance companies but without the risk).

Since then, the NFIP has been rightly criticized for failing "to account for the full extent of flood risk, encourag[ing] development in areas know to be flood-prone and is not realistically funded."  Editorial, "How Federal Flood Insurance Puts Homes at Risk" (New York Times online, posted on Thursday, August 31, 2017), also available at https://www.nytimes.com/2017/08/31/opinion/flood-insurance-program-.html.

"Congress is to blame for this."  True.

"Congress clearly cannot eliminate the threat that natural disasters pose to the country.  But it can do a much better job reducing the risk that storms like Harvey post to life and property."  Also true.

But the action likely to be taken by Congress is to pay damages claims from Harvey, not because the people affected by Harvey clearly need the help, but because the damages claims are coming only from States in which a majority of the voters voted for the party which is currently in charge of Congress.

Remember the votes and posturing of only a few years ago, especially by so-called "red" Members of Congress from the House and the Senate alike, before any claims arising out of Sandy were paid?  That should never be forgotten, I think.

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

DELAY DAMAGES REDUCED TO DETER FRIVOLOUS LITIGATION?

Texas HB 1774 has some renown after Hurricane Harvey.  It was originally introduced in order to address frivolous litigation.  During the unseen process of legislation that is the Texas Legislature, additions were made to the bill that have nothing to do with frivolous litigation.  Among the extraneous additions was a reduction in delay penalties for certain insurance claims, from 18% to what is now apparently 10%.  A new statute was added as Section 542.060(c) of the Texas Insurance Code.

It makes unfair and deceptive trade practices litigation which is also subject to "Chapter 542A" of the Texas Insurance Code subject to the reduction.  Convoluted?  You bet.

There is a dispute or debate over whether the provisions of HB 1774 apply to any claims to insurance coverage or lawsuits to enforce those claims arising out of Hurricane Harvey damage.  The debate includes whether certain parts of that law took effect on Friday, September 1, 2017.  See Stephanie K. Jones, "Law's Ambiguity a Source of Mixed Messages Over Texas Cat Claims Statute" (Insurance Journal online, posted on Wednesday, August 30, 2017), also available at http://www.insurancejournal.com/news/southcentral/2017/08/30/462820.htm.

By the terms of HB 1774, however, it specifically does not apply to, among other things, "coverage provided through the National Flood Insurance Program."  Id.

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

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

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

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

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

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

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

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

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

Related articles

When Sanctions Make Landfall: the New York Sandy Cases.

"JEANNE" A "HURRICANE?" WHO KNEW? "MATTHEW" A "HURRICANE?" Everyone KNOWS.

In State Farm Fla. Ins. Co. v. Moody, 180 So.3d 1165 (Fla. 4th DCA 2015), review denied, 2016 WL 1734957 (Fla. 2016), a couple of policyholders with  Hurricane Endorsements on their policies claimed coverage for damage to their condominiums during Hurricane Jeanne in 2004.  However, their only claim to additional coverage was argued after they were paid in full for their other claims under their policies; their common coverage claim was for additional living expense.  Their policies limited ALE to 10% of their policy limit if the damage was caused by a "hurricane."

The common basis of their ALE claim to get around the ten-percent-solution as it were, was an argument that the damage was caused by a "tornado," and not by "Hurricane Jeanne."  "They alleged their loss was caused by a tornado or microburst, not a hurricane."  State Farm Fla. Ins. Co. v. Moody, 180 So.3d 1165, 1167 (Fla. 4th DCA 2015), review denied, 2016 WL 1734957 (Fla. 2016).  Two trial courts in two separate lawsuits agreed with the policyholders' contentions.

The appellate court disagreed:

No one disputed that the National Hurricane Center declared the storm system Hurricane Jeanne; the hurricane hit the insureds' condominiums on September 26, which was a day the hurricane warning occurred; and the insureds incurred losses on that day.

* * *

    The Hurricane Coverage Endorsement defines hurricane as, “a storm system that has been declared to be a hurricane by the National Hurricane Center of the National Weather Service.” (Emphasis added). There is only one reasonable interpretation of this definition. If the National Hurricane Center names a storm system a hurricane, the entire named storm system, including the elements of the storm, constitutes the hurricane.

    Under the loss of use provision in the Hurricane Coverage Endorsement, “[w]hen a hurricane causes the covered dwelling to become uninhabitable, [the insurer] will cover the necessary increase in cost [the insureds] incur to maintain [their] standard of living for up to 12 months,” subject to the ten percent limitation. Here, the National Hurricane Center named the storm system “Hurricane Jeanne” and issued the policy-required hurricane warnings and watches. On September 26, Hurricane Jeanne passed over the insureds' condominiums and the storm system caused their condominiums to become uninhabitable. Therefore, the Hurricane Coverage Endorsement unambiguously applied.

State Farm Fla. Ins. Co. v. Moody, 180 So.3d 1165, 1167, 1169-70 (Fla. 4th DCA 2015), review denied, 2016 WL 1734957 (Fla. 2016) (emphasis by the Fourth District Court of Appeal).

Those who have ears to hear in the coming approach of Hurricane Matthew, let them hear.  And let them be safe.

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

EVEN SUPERSTORM SANDY CANNOT CAUSE STANDARD FLOOD BAD FAITH DAMAGE.

Image provided by NASA.

There is no such thing as "bad faith" claim handling under a Standard Flood Insurance Policy.  Even Superstorm Sandy could not cause the recovery of extracontractual damages whether prejudgment interest, post-judgment interest, consequential damages, penalties, punitive damages, or attorney's fees.  See McDowell v. USAA General Indem. Co., No. 14-4529 (JBS/AMD), 2016 WL 4249487, at ¶¶ 13-14 (page numbers not yet provided by Westlaw) (D.N.J. August 9, 2016).

In the same case, the Court noted that there is no such thing as an actionable "bad faith" claim arising from the procurement of a Standard Flood Insurance Policy, either.

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

SANDY MONEY IN NEW JERSEY: SO, WHERE IS IT GOING?

          We know that New Jersey has 60,000 State  employees (or thereabouts).

          We know that the State of New Jersey signed a $68 Million, 3-year contract with a Third Party Administrator to administer Federal Taxpayer relief funds intended for Sandy recovery efforts.

          We know that the TPA had 4 offices in Louisiana, 2 in Texas, 1 in Washington D.C., and None in New Jersey.

          We know that the State of New Jersey fired the TPA in December, 2013 because the governor's administration announced the firing on January 22, 2014.

          It is not generally known who if anyone took the TPA's place in administering Federal Taxpayer funds for Sandy relief in New Jersey.  Governor Christie said at a 'town hall' event last week only that there was a new administrator, but apparently he did not say who that is.  See Michael Barbaro, "For Christie, Awkward Return to a Setting He Once Ruled" (New York Times posted online on Thursday, February 20, 2014).

          In response to a questioner at the event why New Jersey did not make use of its 60,000 or so employees to distribute Sandy relief funds, Mr. Christie firmly said that New Jersey hired an outsourced contractor because, well, 60,000-plus people would not for some unstated reason be able to distribute the Federal Taxpayer money to the people Mr. Christie said should get the money.  Id.

          Mr. Christie was clear, however, in laying the blame for inadequate distribution of Federal Taxpayer funds at the feet of the Federal Government after New Jersey hired and fired its choice of  TPA to distribute those funds in New Jersey.  Id. 

          It should be noted as well that some of the people at the event said that they needed the relief money after Sandy.  Mr. Christie told those people that they didn't need the money.  Id.

          So, where is the Federal Taxpayer Sandy relief money going in New Jersey?

          Exactly?

 

The question of where Sandy relief money is going in New Jersey was asked in previously published articles on Insurance Claims and Issues Blog on February 19, 2014 and here on January 21, 2014.  Here by way of C-Span.org is a video excerpt of the town hall event in New Jersey last week.

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

 Please Read The Disclaimer.

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Christie's Biggest Sandy Contractor Fired

 

Fighting the flu and reporting from the Orlando Wind Conference.

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

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

 

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

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

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

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

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

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

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

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

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

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

 Please Read The Disclaimer.

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

Dude, the Name Alone Is Worth the Trip!

 

HUNDREDS OF HURRICANES! Two.

Failure is not an option, it is a way of life.

   Every year, a mysterious front organization in the Rocky Mountains issues predictions that every year there will be hundreds of hurricanes in Florida and the other Atlantic and Gulf Coast areas.  The first time that this mysterious group was awarded a contract paying your Federal Tax dollars for these predictions was during the George W. Bush era.  Their track record of wrong predictions gave rise to questions from early on.  See "Counting All Hurricanes!  Forecasters Fumble, Rockies Crumble, Florida Humble" (Insurance Claims and Issues Blog, November 9, 2011).  The Federal Taxpayer money contract to pay the Rocky Mountain group for their Hurricane predictions has continued every year ever since.

   This group's predictions for 2013 were false.  That is consistent with this group's record of successes and failures in predicting hurricanes.  They have not been good at it.

  Even for the Rocky Mountain Gang, their actual record of predictions for 2013 cannot be improved upon.  They predicted many hurricanes, as usual, and several "named hurricanes" too.  There were two hurricanes to hit anywhere in the United States in 2013.  The damage those two hurricanes  caused taken together did not make anyone's list of major damage caused by weather in 2013 in the U.S., including the Federal Government's list (see linked USA Today newspaper report, below). 

   The Rocky Mountain Gang was wrong about the number of named hurricanes in 2013, too, of course.  

   It is reported that weather-related damage -- i.e., damage from storms, floods, tornadoes and so on -- was overall actually less than predicted in the U.S. last year.  See Doyle Rice and Frank Pompa, "2013 a Calm Year in U.S. for Hurricanes, Tornadoes / U.S. Had a Warm, Wet Year in 2013 / Seven Separate Weather-Related Disasters Caused at Least $1 Billion in Damage" (USA Today Online, Thursday, January 16, 2014).

   It is a safe prediction, however, that these facts will not stand in the way of the Rocky Mountain Gang making hurricane predictions for Florida and other coastal areas in 2014.  It is interesting to note the fact reported in the linked report from USA Today, above, that the Federal National Oceanic and Atmospheric Administration has its own National Climatic Data Center in Asheville, North Carolina.  Why not use them for predictions about hurricanes?  Why not put our Federal Taxpayer money into their already-existing budget to predict hurricanes particularly since they often stand in the way of hurricanes, being located in North Carolina and all? It is something of a recurring mystery why Government resources, particularly those available through NOAA, are not respected for their demonstrated competence, let alone why they are not used more often.  See "Postscript to Not-a-Hurricane Sandy and Your Hurricane Deductible" (Insurance Claims and Issues Blog, November 19, 2012).

   Back to the Rocky Mountain Gang at Colorado State University and their hurricane predictions paid for by Federal Taxpayers.  Being wrong never has stopped them before, so why should their consistent record on successful predictions stand in their way now?

   Do you think they will give the money back?

 

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

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Hurricane Experts Meet In Colorado To Discuss 2014 Season

A tame year for extreme weather in U.S., but California really needs rain

 

The Appraisal and The Expert.

          The case of Biscayne Cove Condo. Ass'n v. QBE Insurance Corp., 2013 WL 2646828 (S.D. Fla. June 12, 2013), presented U.S. Magistrate Judge O'Sullivan with unique opportunities for ruling.  It is a declaratory judgment action filed by a condominium association requesting a declaration that it has a right to appraisal of its Hurricane Wilma damage claim.  The condominium association bases this claim on the appraisal provision of its property insurance policy issued by the defendant.  The defendant insurance company did not dispute coverage under the policy, only the value of the damaged property.  Biscayne Cove Condo. Ass'n v. QBE Insurance Corp., 2013 WL 2646828 *3 (S.D. Fla. June 12, 2013).

          One of the opportunities to rule was presented by the condominium association's motion in limine to prevent the insurance company from putting on expert testimony in the declaratory judgment action concerning valuation.  The insurance company raised an affirmative defense of fraud in that case, and contended that it should be allowed to put on expert testimony on the fraud issue.

          The Court agreed with both positions in ruling that expert testimony was admissible on the fraud issue, but not concerning valuation, in the declaratory judgment action as distinct from the appraisal proceeding if any:

             In the instant case, the defendant will be allowed to present evidence on causation and valuation as it relates to the affirmative defense of fraud. Evidence regarding valuation and causation is necessary to determine if the plaintiff made purposeful misrepresentations to QBE. Evidence regarding causation and valuation, however, is not relevant to the other issues of this action for declaratory judgment.

Biscayne Cove Condo. Ass'n v. QBE Insurance Corp., 2013 WL 2646828 *5 (S.D. Fla. June 12, 2013).

Please Read The Disclaimer.

 

AFTER SANDY, NORTHEAST IS THE NEW SOUTHEAST FOR CATASTROPHE RISK ...

... 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.

          In virtually the same language across the Internet, all sorts of sites are publishing the observation that after Sandy, underwriters and the makers of Catastrophe computer models all "will now treat the Northeast more like the Southeast when it comes to property pricing and the availability of flood insurance."  A representative sample comes from Amy O'Connor, "After Sandy, Underwriters, CAT Models View Northeast Like Southeast:  NAPCO" (Insurance Journal Online, posted May 6, 2013).

          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.

Please Read The Disclaimer.    

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

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

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

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

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

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

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

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

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

Have a good St. Patrick's Day today!

Please Read The Disclaimer.

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

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

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

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

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

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

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

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

Please Read The Disclaimer.

BAD FAITH CLAIMS ISSUES AFTER SANDY: AND SO IT BEGINS.

          Claims handling issues are surfacing after Sandy.  In particular, the new claims handling issues raise Bad Faith issues involving Flood Insurance Policies and the National Flood Insurance Program.

          It is another measure of the storm's devastating effects that the areas in which the largest number of Flood Insurance Claims come from, are also the areas which we can reasonably and unfortunately expect to present the largest number of Bad Faith Claims too.

          Claims handling questions are reported concerning low offers to compromise large Flood damage Claims.  Policyholders have been living with the damage that Sandy caused since Sandy made landfall in October of last year.  Besides low offers of compromise, Policyholders complain that Flood Insurance Adjusters are giving little time and short attention to evaluating the Policyholders' Claims.  See Tara Siegel Bernard, "Fighting the Insurer Over Hurricane Sandy Damage" p. B1, col. 1 (New York Times Nat'l ed., "Business Day" Section, Saturday, March 2, 2013).

          On the Insurance Coverage front, questions are being reported at the same time concerning the damaging effects of mold, and whether there is any Coverage for it.  See Sarah Maslin Nir, "Questions Emerge About the Mold That Hurricane Sandy Left Behind / Severity of Harm Remains Unclear" p. A14, col. 4 (New York Times Nat'l ed., Saturday, March 2, 2013).

          These unfortunate facts give rise to many questions which must be answered before Bad Faith Claims can arise.  Flood Insurance Policies are issued under and as part of the National Flood Insurance Program.  Are the Bad Faith Claims which follow Sandy claims handling preempted by this Federal law?

          Are the Flood Insurance Companies immunized under the National Flood Insurance Program?

          Who if anyone is subject to the applicable Unfair Claims Practices Act?  The answer to that question is important to the Flood Insurance Company, to FEMA which administers the National Flood Insurance Program, and to individual adjusters.

          Many Sandy Claims are understandably handled by Independent Adjusters hired by overwhelmed Carriers.  The Independent Adjusters also have an interest in finding out if they are potentially subject to individual liability for their Sandy claims handling.

          Some of these and similar questions have probably already been answered.  They need to be answered now, it seems, as Bad Faith allegedly follows in Sandy's wake.

 

Please Read The Disclaimer.

           

REFUSING TO PAY VALID SANDY CLAIMS IS JUST BAD FAITH.

    The numbers tell the story, really.

    On January 15, 2013, 241 Members of Congress (Representatives) successfully voted for disaster relief for Sandy victims.  One hundred-eighty of their colleagues cast their votes against providing disaster relief to Sandy victims.  Here is a roll call from the House of Representatives website.

    In a previous vote on Flood Insurance for Sandy Claims, on January 4, 2013, 67 Representatives voted against Flood Insurance for Sandy Claims.  They were outnumbered by the 354 Representatives who voted on that day in favor of Flood Insurance to pay Sandy Claims.  Here is a roll call from the House of Representatives' website.

    Parenthetically, one of the 67 changed his position and voted in favor of providing disaster relief on January 15th, Rep. Steven Palazzo of Mississippi.  In the time between his vote to deny Flood Insurance Claims on January 4th, and his vote to extend disaster relief on January 15th, Rep. Palazzo visited areas struck by Sandy.  He changed his position because he saw with his own eyes how Sandy made needy victims out of so many people and businesses.  See Press Release of Rep. Steven Palazzo, "The Northeast Needs Our Help Now," released January 14, 2013.

   In Sandy's wake, there are legitimate questions about national disaster relief programs for the future.  These questions include the questions previously asked here, such as whether the availability of Flood Insurance to underwrite continuing construction in areas which suffer from constant flooding is actually a good thing for the United States going forward.  See, e.g., the series beginning on Insurance Claims and Bad Faith Law Blog, www.insuranceclaimsbadfaith.typepad.com,  on December 6, 2012, continuing there on December 9, 2012, and continuing on Insurance Claims and Issues Blog, www.insuranceclaimsissues.typepad.com,  on December 10, 2012 and December 12, 2012.  See also the post on Insurance Claims and Bad Faith Law Blog on December 30, 2012.

    However, this is not the same thing as refusing to pay Flood Insurance Claims already incurred by people suffering from Sandy.

   The majority of the Representatives who voted against relief for Sandy victims appear to have so-called "safe seats" in States that were untouched by Sandy, meaning that they are unlikely to be damaged electorally by their votes against Flood Insurance for Sandy victims.

          As has been truly said before, let it be said once again, that these people may have a right to vote against paying valid insurance claims, if we let them.

          But they have no right to call their votes Good Faith.

Please Read The Disclaimer.

Related articles

After Sandy: Staying the Course Has Public, Insurance Policy Limits.

BAD FAITH VOTES AGAINST FLOOD INSURANCE FOR SANDY CLAIMS.

          Sixty-seven Members of Congress (Representatives) voted against Flood Insurance for Sandy Claims.  Here is a roll call from the House of Representatives' website.

          There is a real question whether the availability of Flood Insurance, among other factors, leads to desirable outcomes in the future, including whether continuing construction in areas prone to flooding is actually a good thing for the United States going forward.  See, e.g., the series begnning here on December 6, 2012, continuing here on December 9, 2012, and continuing on Insurance Claims and Issues Blog on December 10, 2012 and December 12, 2012.  See also the post here on December 30, 2012.

          However, this is not the same thing as taking a position against paying Flood Insurance Claims already incurred by people suffering from Sandy.

          Not one of the 67 Representatives who voted against Flood Insurance for Sandy Claims appears to be from areas devastated by Sandy.

          The majority of the 67 appear to have so-called "safe seats," meaning that they are unlikely to be damaged electorally by their vote against Flood Insurance for Sandy Claims, including one Paul Ryan.

          These people may have a right to vote against paying valid insurance claims, if we let them.

          But they have no right to call their votes Good Faith.

Please Read The Disclaimer.

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After Sandy: Staying the Course Has Public, Insurance Policy Limits.

Massachusetts Bad Faith Law, Federal Class Action, Force-placed Flood Insurance.

SANDY STORM SURGE CONTINUES: NEW LIMITS ON PUBLIC, INSURANCE POLICIES.

          This article follows up on a series recently posted here and on Insurance Claims and Issues Weblog.

          The turmoil wrought by Sandy did not stop after Sandy passed through.  Sandy's turmoil may have only begun then.  Sandy's turmoil continues now, affecting many areas of life which are now coming to the forefront.

          In addition to the effects swirling around new Insurance Premiums and Deductibles including the National Flood Insurance Plan, and new Construction Codes including building and rebuilding plans previously addressed in this series, current newspaper reports reveal the approach of even more turmoil for Insurance and Housing Markets.   See, e.g., "AFTER SANDY:  FACING LIMITS ON PUBLIC POLICY, INSURANCE POLICIES" posted here on December 9, 2012 in a series begun here on December 6, 2012 (see in particular the Categories for "Catastrophe Claims,"  "Flood Insurance," "Hurricanes," and "Premiums".)

          It is reported that:

• Housing prices have understandably fallen over a price cliff along the Coastal areas affected by Sandy.
• In addition, Mortgages are much harder to obtain, and when obtained, they are much more expensive for would-be home purchasers -- and for existing homeowners who want to repair and rebuild -- in those same Coastal areas.  Banks reportedly have become "unwilling to provide mortgages to people seeking to buy in an area at risk for another catastrophe, or even to refinance properties so homeowners can pay for their own repairs". 
• As a result, "a cut-price cash sale is sometimes the [existing homeowners'] only option."  Sarah Maslin Nir, "Along Coast, Hurricane Left Housing Market in Turmoil" p. A18, col. 1 (New York Times Nat'l ed., Friday, December 28, 2012).
• An additional factor which thereby directly affects the current Housing market is "the pending release of new flood maps," Sarah Maslin Nir, New York Times, supra, a development which of course also directly affects the issuance and underwriting of Flood Insurance.
• Further, the turmoil in Sandy's wake includes new reports of increased unemployment from businesses forced to close or cut down their operations as a result of losses caused by Sandy.  "Those most affected are the people who already have trouble finding jobs:  older workers, single parents with child-care concerns and immigrants who speak little English."  Julie Turkewitz, "Unemployment Deepens Loss From Hurricane as Businesses Remain Closed" p. A19, col. 1 (New York Times Nat'l ed., Friday, December 28, 2012).

As the New Year is about to begin, please join me in a prayer for our Country and for its people in 2013, a big part of which is our prayer for fair and just solutions to all of the issues addressed in this series, including in Housing and Employment and Business areas, and in the Insurance Issues which affect them all.

Please Read the Disclaimer.

Related articles

AFTER SANDY: FACING LIMITS ON PUBLIC POLICY, INSURANCE POLICIES Continued.

After Sandy: Staying the Course Has Public, Insurance Policy Limits.