Claims and Bad Faith Law Blog

NO COVID COVERAGE, NO COVID CONTRACT BREACH.

(Imagefull / Florida Department of Consumer and Agricultural Services)

"Because it is not entitled to coverage under the Policy, Plaintiff cannot state a claim for breach of contract."  10E, LLC v. Travelers Indem. Co., No. 2:20-cv-04418-SVW-AS, 2020 WL 5359653, at *6 (C.D. Cal. Sept. 2, 2020).  In making this statement, a federal judge extended this rule of insurance law to COVID-19 coverage claims.

The federal judge further ruled in 10E, LLC that in the absence of coverage, the policyholder in this first-party insurance case could not state a viable claim under California's Unfair Competition Law, either.  10E, LLC, 2020 WL 5359653, at *6.

The reach and reasoning of holdings that where there is no insurance coverage, other claims are not available including claims for insurance 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).   

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

INSURANCE CARRIER INTRODUCES SETTLEMENT EVIDENCE, CAUSING REVERSAL AND NEW TRIAL.

In Moultrop v. GEICO General Insurance Co., ___ So. 3d ___,  Nos. 4D19-225 & 4D19-1580, 2020 WL 5372296 (Fla. 4th DCA Sept. 9, 2020) (STATED NOT FINAL), a UM insurance carrier introduced evidence of settlement negotiations in a bad faith trial.  As the saying goes, "It seemed like a good idea at the time."  The carrier got a bad faith judgment in its favor in the trial court.

    The results on appeal, however, were not a good idea at least for the carrier.  The judgment in the carrier's favor was reversed because the carrier introduced the settlement evidence in the bad faith trial.  The evidence was contained in the carrier's action log in its claim file and included demands and offers made at mediation.  Although the carrier argued that this wasn't really evidence of settlement negotiations or of privileged mediation communications, the appellate court did not buy the argument.

    The case was remanded for a new trial because of the same thing, namely, the carrier introduced evidence of settlement negotiations in the case in which it obtained a judgment in its favor.  That judgment is gone now.

    There are three reasons that the appellate court ruled the way it did.  First, the settlement evidence was irrelevant to the focus of a bad faith trial, the appellate court ruled:

     It is well established that “the focus in a bad faith case is not on the actions of the claimant, but rather on those of the insurer in fulfilling its obligations to the insured.”  [Citations omitted.]  The introduction of the plaintiffs’ offer had nothing to do with whether the UM carrier acted in bad faith when it failed to tender its policy limits until June 2, more than three months after the CRN expired.

    The UM carrier’s introduction of the plaintiffs’ settlement offer was solely to demonstrate that the plaintiffs, not the UM carrier, acted in bad faith.  Because the activity log note was irrelevant, the court erred in admitting it into evidence. § 90.401, Fla. Stat. (2019).

Moultrop v. GEICO General Ins. Co., 2020 WL 5372296, at *4. 

     The second reason that the judgment in favor of GEICO General was reversed on appeal is that when the insurance company introduced evidence of settlement negotiations in the trial court, it did something prohibited by Florida evidence rules embodied in a Florida Statute, Section 90.408:  It introduced evidence of settlement negotiations.  Moultrop v. GEICO General Ins. Co., 2020 WL 5372296, at *5. 

     Third and finally, the appellate court reversed the judgment and remanded for a new bad faith trial because the settlement evidence was also prohibited evidence of privileged communications made at a mediation, in violation of Sections 44.403 and 44.405 of the Florida Statutes.  Moultrop v. GEICO General Ins. Co., 2020 WL 5372296, at *5-*6. 

     Under the circumstances, the judgment of no bad faith did not last very long in this bad faith case. 

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

ABOUT THAT CIVIL REMEDY NOTICE, SPECIFICALLY ....

(Gridview imagefull / Florida Department of Consumer and Agricultural Services)

In the case of Julien v. United Prop. & Cas. Ins. Co., ___ So. 3d ___, No. 4D19-2763, 2020 WL 5652364 (Fla. 4th DCA Sept. 23, 2020) (STATED NOT YET RELEASED FOR PERMANENT LAW REPORTS), Junior Julien sued his homeowner's carrier on account of his fire loss.  Since he was suing in Florida, Julien had to send the carrier a Civil Remedy Notice of Insurer Violation to comply with a statutory condition precedent to his bad faith lawsuit.

    Florida, like many States, requires a Civil Remedy Notice or CRN in connection with a bad faith lawsuit; in Florida, unlike many States, first-party insurance bad faith is strictly a statutory cause of action, making compliance with the Florida statute all the more significant in Florida first-party bad faith actions.

    Parenthetically, this first-party case is not limited to first-party cases.  Its holding concerns the legal sufficiency of a CRN.  That includes the issue of legal sufficiency of CRN's in third-party cases too, of course.

    Mr. Julien's strategy might be analogized to "flooding the zone."  In his case, Julien opted to provide the carrier with a notice that listed most of the provisions in his insurance policy and all of the statutory provisions that the carrier might have violated in handling his claim.  "Julien's civil remedy notice, it seems, listed every statutory provision and every policy provision available to him as the insured."  Julien, 2020 WL 5642364, at *2.

    The Florida statute has required in the past, and continues to require, that a plaintiff in a first-party bad faith insurance case identify "with specificity" the statutory provision "which the authorized insurer allegedly violated" and refer to "specific policy language that is relevant to the violation, if any."  Fla. Stat. § 624.155(3)(b).   The trial court eventually dismissed Mr. Julien's complaint with prejudice because Julien's civil remedy notice, while citing "thirty-five statutory provisions and list[ing] nearly every provision in the insurance policy," did not meet the statutory requirement of specificity in a Civil Remedy Notice.  Julien, 2020 WL 5652364, at *1.

    The appellate court affirmed the trial court's ruling.  The appellate court held:  "We agree with the circuit court that the notice failed to specify the statutory and policy provisions at issue."   Julien, 2020 WL 5652364, at *1.  That is their succinct holding, although the Court's opinion went on for a couple of pages after that demonstrating the statute's specificity requirements and contrasting Julien's notice document.

    "Specify the statutory and policy provisions at issue."  That is the crux of the sufficiency of a Civil Remedy Notice of insurer bad faith under Florida's statute.

The various requirements for Civil Remedy Notices across the United States, including Florida, are examined in third-party cases in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:30, "Legal Bases of Liability in Settlement -- Statutory Requirement of Notice of Violation" (Thomson Reuters West 3d ed. & 2020 Supps), and in first-party cases in id., Volume 2, § 9:21, "Common Law and Statutory Regulation of Civil Remedy Notice to Act in Good Faith."

            Defenses raised by failure to comply with CRN requirements are also discussed in third-party insurance bad faith actions in id., Volume 1, § 5:57, and in first-party insurance bad faith actions in id., Volume 2, § 11:24.   

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

DISCOVERING CLAIMS FILE MATERIALS: FIRST OBTAIN DETERMINATION OF COVERAGE.

It is unclear whether Luis and Elisa Gonzalez alleged insurance bad faith when they filed their lawsuit against Safepoint Insurance Company, their homeowner's insurance company.  All we know about their complaint against Safepoint is that they alleged "that Safepoint breached their homeowner's insurance policy by failing to provide coverage for damage to their home."  Safepoint Ins. Co. v. Gonzalez, ___ So. 3d ___, No. 3D20-1050, 2020 WL 5932521, at *1 (Fla. 3d DCA October 7, 2020).

          However, we know all we need to know under Florida law about their discovery request for production of Safepoint's claim file materials.  They filed a motion to compel "[p]rior to any determination of coverage for the alleged loss[.]"  Safepoint, 2020 WL 5932521, at *1.

          That fact alone simultaneously gave the Florida appellate court certiorari jurisdiction and doomed the production requested by the Gonzalezes.  In Florida, an insurance carrier's claim files are work product and are protected from discovery before coverage has been determined "in a breach of contract case."  Safepoint, 2020 WL 5932521, at *1.  Parenthetically, if the Gonzalezes had alleged a claim for insurer bad faith in this particular case, it would rise and fall on whether there was coverage in the first place, so the rule would seem to be the same under Florida law:  Before a determination of coverage, an insurer's claim files are work product protected from discovery.

          The appellate court in this case accordingly granted Safepoint's petition for writ of certiorari and quashed the order in which the trial court granted the policyholders' motion to compel production from Safepoint's claim file.

Discovery in first-party insurance cases like Safepoint v. Gonzalez, is addressed with an eye to Claims Adjuster's Files in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 12:5 (Thomson Reuters West 3d ed. & 2020 Supps), and in 2 id., § 12:6, concerning Home Office Claims Files, while discovery in third-party insurance cases of Claims Adjuster's Files is addressed in 1 id., § 8:5, and discovery of Home Office Claims Files and Setting of Reserves is the focus of 1 id., § 8:6.

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

WHERE THERE'S SMOKE SMELL, BUT NO SOOT, THERE'S NO FIRE.

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). 

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

THE DUELING DISORDER OF ATTORNEY'S FEES: The Second Part.

This article completes the series begun here on October 6, 2020.

(InsideFlorida.org)

There was a mortgage contract at issue in the case of Madl v. Wells Fargo Bank, N.A.[1]  The fact that a mortgage contract was in dispute, was not itself in dispute.  There was obviously a dispute, but it was not about the central contract at issue, the plaintiffs' mortgage.  The case instead was about standing to bring the lawsuit to enforce that contract. 

    In a unanimous opinion in this case, Florida's Fifth District Court of Appeal applied the language of Section 57.105(7).  "Section 57.105(7) transforms a unilateral right into a reciprocal right so that all parties to the contract are entitled to recover attorney’s fees upon prevailing."[2]    The appellate panel awarded appellate attorney's fees to the homeowners who prevailed in this action to enforce the mortgage contract against them.

    As the Fifth District itself pointed out,[3] there is authority from the Fourth District which appears to stand to the contrary.

    It is not clear that the Fourth District in a proper case would outright refuse to apply the express wording of of Section 57.105(7) in mortgage cases.  What can safely be said is that some Fourth District cases seem to involve disputes about whether the parties before the court were all parties to the contract, or even whether the contracts at issue were proven to exist in the first place.  In Madl, there was no dispute but that the appellants and the appellees were parties to the mortgage contract that existed in that case.

    To the extent that there is a conflict among the district courts of appeal in Florida, it will likely be decided by the Supreme Court of Florida.

Attorney's fees are discussed in §§ 13:12 through 13:14 in 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith (3d ed. and 2020 Supps. Thomson Reuters West). 

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

 

 

[1] Madl v. Wells Fargo Bank, N.A., 244 So. 3d 1134 (Fla. 5th DCA 2017) & on rehearing (Fla. 5th DCA 2018), review dismissed, No. SC18-966, 2019 WL 5963521 (Fla. 2019).

[2] Madl, 244 So. 3d at 1138.

[3] Madl, 244 So. 3d at 1139.

THE DUELING DISORDER OF ATTORNEY'S FEES: Part One.

(InsideFlorida.org)

Fannie Mae and Freddie Mac wrote the Uniform Mortgage Instruments.  These contracts are used in the sale and purchase of almost every home in the United States with a mortgage.  These Uniform Mortgages provide that attorney's fees belong to the lenders.[1] 

    These provisions have two results.  The first is to protect banks and mortgage companies from incurring attorney's fees when they are sued on their mortgage loans.

    The second is to make homeowners liable to pay including the lender's attorney's fees when they sue on the mortgage loans they take.

    Some States have made attorney's fees availability a much more balanced remedy.  Some States make attorney's fees available whenever contracts of virtually any kind -- not just mortgages -- authorize attorney's fees for a large corporation.  The way they do this is to make attorney's fees available to other parties to a contract whenever one party has written its contract to allow itself to collect attorney's fees in a suit filed by other parties to that contract.[2]

    Parenthetically, in many or most such cases, it is the large corporate party that wrote the contract.

    Florida Statute Section 57.105(7) is an example of fee-availability-shifting laws.  On its face, the Florida statute applies to "contracts" which authorize attorney's fees for only one party to the contract:

(7) If a contract contains a provision allowing attorney’s fees to a party when he or she is required to take any action to enforce the contract, the court may also allow reasonable attorney’s fees to the other party when that party prevails in any action, whether as plaintiff or defendant, with respect to the contract. This subsection applies to any contract entered into on or after October 1, 1988.[3]

To be continued.  Attorney's fees are discussed in §§ 13:12 through 13:14 in 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith (3d ed. and 2020 Supps. Thomson Reuters West). 

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

 

[1] See, e.g., Dennis J. Wall, Lender Force-Placed Insurance Practices § 4.4, titled Attorneys and Lender Force-Placed Insurance Practices, at 134-37 (American Bar Ass'n Pub. 2015).

[2] I have proposed exactly this remedy as a solution to part of the lender force-placed insurance practices problem.  Wall, Lender Force-Placed Insurance Practices, supra, § 7.12, titled Workers Are Worth Their Wages:  Paying the Fees of Homeowners' Attorneys in the Great Recession, at 276-80.

[3] Fla. Stat. § 57.105(7).

A LESSON IN LONGEVITY.

(Image courtesy of LexisNexis)

Judging from the electronic docket of the case, the parties and their lawyers in the case of Travelers Indemnity Co. of Connecticut v. Old Dominion Insurance Co. (M.D. Fla. Case No. 8:19-cv-T-30AAS) obviously want to settle.

    The docket activity since this case was filed in 2019 has involved offers of judgment/settlement, mediation, case management scheduling deadlines, and an expert witness matter.  There has not been any dispositive motion filed.  In particular, there has been no motion to dismiss.

    On September 24, 2020, the U.S. Magistrate Judge assigned to the case entered a discovery order granting in part and denying in part TIC's motion to compel production from Old Dominion.  The Westlaw publication of this order does not show that it was entered by the Magistrate Judge, but I learned who entered it when I reviewed the electronic docket of the case on PACER.  See Travelers Indem. Co. of Conn. v. Old Dominion Ins. Co., Case No. 8:19-cv-T-30AAS, 2020 WL 5701816 (M.D. Fla. Sept. 24, 2020).

    TIC a/k/a Travelers sued Old Dominion "for equitable subjugation or, in the alternative, equitable contribution" for failure to indemnify a common insured.  Travelers, 2020 WL 5701816, at *1.  Later in the case, the Magistrate Judge who entered the September 24 order said that "Travelers sues Old Dominion for equitable subjugation and equitable indemnity[.]"  Travelers, 2020 WL 5701816, at *4.

    I am an Insurance Coverage lawyer and I have never heard of "equitable subjugation."  Have you?  This alleged claim would later determine the outcome, as we will see below.  (The opinion cited one case, which involved equitable subrogation, so despite the words used in the Travelers case, maybe that is what was meant in this case, namely, equitable subrogation.  Again, the alleged claim determined the outcome here, see below.)

    I am also not familiar with "equitable contribution" between liability insurance carriers under Florida law, at least by that name or in the context of this case.  Unless Florida law has changed substantially, there is no cause of action between insurers for "equitable indemnity," either.  I have heard of equitable subrogation, and I have heard of contribution, and I have even heard of indemnity, but not "equitable contribution" or "equitable indemnity," either, particularly as an alternative to something called "equitable subjugation."

    If only a motion to dismiss had been filed in the case.  Perhaps this could have been cleared up by now.  On the road to settlement, perhaps this has been overlooked but since the parties and their lawyers are continuing on the road to settlement, it seems, perhaps the USMJ's two rulings on September 24 will hasten that conclusion to this matter. 

    The first ruling was to declare that the defense lawyer ("Attorney Metzger"), Old Dominion, and the insured enjoyed a "tripartite relationship."  The insured executed an assignment to Travelers and so, the court ruled, Travelers became the insured's "successor in interest" to this tripartite relationship.  "Thus, Old Dominion's attorney-client privilege objections to the production of correspondence between Old Dominion and Attorney Metzger are overruled.  Old Dominion must produce those withheld documents."  Travelers, 2020 WL 5701816, at *2.

    Second, Travelers sought to compel production also of Old Dominion's claim files in the underlying case against the common insured.  The Magistrate Judge responded to Travelers' claim that it really was like a plaintiff in a bad faith case because it had alleged "equitable subjugation claims."  Travelers, 2020 WL 5701816, at *2. 

    Old Dominion raised the qualified immunity of work product and also argued that "this is not a bad faith claim."  The Magistrate Judge held in favor of Old Dominion on this issue.  The USMJ based this outcome on the claim or cause of action alleged in this case:  "But Travelers does not assert a bad faith claim against Old Dominion; rather, Travelers asserts a claim of equitable subjugation.  Thus, the work-product doctrine applies to Old Dominion's claim file."  Travelers, 2020 WL 5701816, at *3.

    So, in the end, the lesson of this case may be that bad faith by another name does not smell like bad faith.  Or, perhaps, at least it need not be an insurmountable obstacle to settlement.

P.S. from another Insurance Coverage lawyer:  "Equitable subjugation strikes me as the quintessential oxymoron.  It sounds like a theory slaveholders might have invoked to support the trope that Blacks are better off under slavery than free."

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

 

POSTJUDGMENT INTEREST ON THE ENTIRE JUDGMENT: THE INSURER'S OBLIGATION.

 

(Courthouse Image courtesy of New York Public Library)

The Maryland Court of Special Appeals held in 2020 that "the insurer must pay postjudgment interest on the entire amount of the judgment even if it is obligated to indemnify its insured for only part of the judgment."  Pennsylvania Nat'l Mut. Cas. Ins. Co. v. Jeffers, 244 Md. App. 471, 475, 223 A.3d 1146, 1148 (Md. Ct. Spec. App. 1, 2020), cert. denied, 468 Md. 549, 228 A.3d 166 (Md. 2020).

Postjudgment interest is the subject of § 13:11.50 in 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith (3d ed. and 2020 Supps. Thomson Reuters West). 

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

WILL THE AFFORDABLE CARE ACT SURVIVE THE S. CT?

(Judge Amy Coney Barrett / University of Notre Dame)

The continued existence of a federal health care system is in the hands of the unelected judges on the U.S. Supreme Court.  They have voted to defer oral arguments on the Affordable Care Act until after the election in November.

    Judge Amy Coney Barrett has been declared "the front runner" by the media to be nominated for the present U.S. Supreme Court vacancy.  That would make her the seventh self-identified "Catholic" on the Supreme Court by my count.

    Parenthetically, the media has also labelled several of these people "devout Catholic" and "faithful Catholic" based largely on their self-descriptions.

    In the particular case of Amy Coney Barrett, there is a question regarding the Affordable Care Act that arises from her self-identification with Catholicism.  Ordinarily (if that word still applies in 2020), a person's religion is not a proper subject for questions.   But this person is a judge who wants to be a Justice and because she advertises herself or allows herself to be advertised as a "conservative Catholic," she is also the declared "front runner," so in this case it is perfectly proper to ask what it means to her to say she is a Catholic.  It is not only proper, it is relevant.  It is material.

    Take it from the Executive Editor of THE NATIONAL CATHOLIC REPORTER in this interview broadcast on Wed., September 23, 2020:

And the Catholic Church in the United States has long supported the Affordable Care Act, especially after the accommodations were made for Catholic employers that didn’t want to provide contraceptive coverage. So, it will be interesting to see if she sides with church leaders on that one or not. 

"Interesting," certainly.  Determinative, possibly.

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

ARBITRATION OF AN INSURANCE COVERAGE DISPUTE IN TEXAS.

(Brennan Linsley Associated Press)

"This is an insurance coverage dispute."  5556 Gasmer Mgt LLC v. Underwriters at Lloyd's, London, ___ F.3d ___, No. 19-cv-00974, 2020 WL 2813599, at *1 (S.D. Tex. May 29, 2020).  The coverage dispute arose as to the coverage provided under a commercial property insurance policy.

    In that insurance coverage dispute, the federal court was confronted with motions to arbitrate filed by "Insurer Defendants" and by "Broker Defendants."

    The policy at issue contained a broad, express arbitration provision governing "[a]ll matters ... in relation to this insurance[.]"  "This Court agrees that all means just that -- all."  5556 Gasmer, 2020 WL 2813599, at *3 (emphasis by the Court).

    The carriers were signatories to the insurance policy which included this express provision.  The brokers were not signatories.

     Accordingly, the court in that case granted the insurance carriers' motion to arbitrate and denied the brokers' motion to arbitrate.  The court further stayed all proceedings "until the arbitral proceedings conclude in their entirety."  5556 Gasmer, 2020 WL 2813599, at *1.

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

DISCOVERING COVERAGE COUNSEL'S RESEARCH & ANALYSIS: COMMUNICATED, POST-SUIT, OR NOT.

(LexisNexis)

In a case in which insurance coverage was at issue, a federal court ordered production of certain documents generated by the insurance company's coverage counsel.   The documents included the lawyer's research and analysis of coverage, whether or not any of it was communicated to the carrier, and whether or not any of it was generated after the coverage lawsuit was filed.

    The case involved alleged damage to the interior of a house.  Dorn Homes, Inc. was the builder/developer but it subcontracted the actual work to others.  The carrier, United Specialty, declined coverage and the policyholder, Dorn, filed suit.  To be sure, there were stipulations and protestations concerning work product and even attorney-client privilege between the parties, but the policyholder never yielded in its assertion that it was entitled to the discovery under the Federal Rules of Civil Procedure.

    That teed up the issue for the federal judge's ruling granting Dorn's motion to compel from the carrier in United Spec. Ins. Co. v. Dorn Homes, Inc., 334 F.R.D. 542, 548 (D. Ariz. 2020) (boldface in the Court's order):

IT IS ORDERED that Defendant Dorn Homes, Inc.'s Motion to Compel Documents Withheld as Attorney Work Product (Doc. 123) is granted. Plaintiff United Specialty Insurance Company must produce, no later than January 31, 2019, all documents containing research and analysis on Desert Mountain [an Arizona State Court case relevant to the coverages claims at issue here concerning] preventative damages prepared by USIC's coverage counsel and that form the basis of USIC's advice of counsel defense, whether or not communicated by counsel to Plaintiff, and whether or not created post-lawsuit.

Discovery of "Insurance Counsel's Files" is the subject of § 12:8 in 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith (3d ed. and 2020 Supps. Thomson Reuters West). 

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

SECOND CIRCUIT PANEL SIDESTEPS FILED RATE DOCTRINE: 09.08.20 ARTICLE, UPDATED.

(Dennis J. Wall)

The District of Connecticut's decision in the case of Dane v. UtdHealthcare was the focus of an article published here on September 8, 2020, titled "FILED RATE DOCTRINE BELONGS TO STATES, NOT FEDS."  A panel of the Second Circuit Court of Appeals has updated that article.

           On appeal, a panel of the Second Circuit Court of Appeals affirmed.  Dane v. UtdHealthcare Ins. Co., ___ F.3d ___, No. 19-2330-cv, 2020 WL 5415301 (2d Cir. Sept. 10, 2020).  However, the appellate panel refused to address the Filed Rate Doctrine, writing that it did not need to address it to decide the case.

           As noted here on September 8th, the District Judge did find it necessary to address the Filed Rate Doctrine.  Finding no Connecticut case law on point, he applied the federal FRD and let it go at that.  The article noted that federal judges frequently default to the federal FRD instead of grappling with the consequences of a State FRD or lack thereof.

           The appellate panel reported, incorrectly, that nonetheless the District Judge applied a "Connecticut" Filed Rate Doctrine in this case which the District Judge found did not exist.  He didn't even try to invent it.  To their credit, the appellate judges did not try to invent it either.  But they were flat wrong in saying that the District Judge did.

           What the Second Circuit panel decided was interesting, though, to say the least.  The panel ruled that the plaintiffs' claims under what the panel termed "anti-rebating statutes" (the case involved allegations of insurance kickbacks) were the only way that the plaintiffs could state claims under Connecticut law, and that they hadn't adequately alleged facts to support "injury in fact" in order to bring such claims.

"'Injury in Fact':  What Happens to Bad Faith Statutes" is the subject of § 9:14.50 in 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith (3d ed. and 2020 Supps. Thomson Reuters West). 

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

FILED RATE DOCTRINE NOT AVAILABLE IF STATE SAYS IT'S NOT.

(Dennis Wall)

This was the case in Arizona in 2019.  The U.S. District Court for the District of Arizona held that the filed rate doctrine could not apply in that case under Arizona State Law.  The reason? 

Even if Arizona recognized the filed rate doctrine in any other circumstances, that case involved the plaintiffs' claims over the defendants' alleged bribes and the Arizona State Commission had disclaimed regulation of bribes even if they were included in rate filings.

That was the end of the filed rate doctrine defense in that case.

Castillo v. Johnson, No. CV-17-04688-PHX-DLR, 2019 WL 6827472, at *1-*2 (D. Ariz. December 13, 2019).  Parenthetically, the federal judge certified this case as a class action in a later order which was appealed and is pending in the Ninth Circuit Court of Appeals.  The order rejecting the filed rate doctrine in this case was apparently not appealed.

It is also written, by a Higher Court if you will, that "Those who have ears to hear, let them hear."

The dilemmas over Filed Insurance Rates in particular, and concerning the Filed Rate Doctrine generally, are discussed in a pair of articles published in LexisNexis New Appleman's Current Critical Issues in Insurance Law, copies of which are available on my website.  In addition, the Filed Rate Doctrine is discussed in the context of Insurance and Bad Faith Cases including the Castillo v. Johnson case, in 2 Dennis J. Wall, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:26 (3d Edition Thomson Reuters and 2020 Supplements).

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

FILED INSURANCE RATE DOCTRINE BELONGS TO STATES, NOT FEDS.

(Dennis Wall)

The federal court was confronted with a novel question of State Insurance Law in the case of Dane v. UnitedHealthcare Ins. Co., 401 F. Supp. 3d 231 (D. Conn. 2019).  The federal judge confessed in that case, like many federal judges have done in similar cases, that the Federal Court could not find a single State Court decision applying the filed rate doctrine "to bar a plaintiff's claim[.]"

    The federal court in Dane further shared a similar approach to the issue of whether there is a Filed Insurance Rate in the State in which they hold court, in that federal judges are not fazed by the discovery or, in another sense perhaps, not fazed by this non-discovery, that there are no State Court decisions applying a Filed Insurance Rate Doctrine.  Insurance is regulated by the States.

    The federal judge applied the federal filed rate doctrine citing only federal cases.  See Dane, 401 F. Supp. 3d at 236-39.  The federal judge then dismissed the plaintiff's insurance claims accordingly:  "Because he is seeking relief for an injury allegedly caused by the payment of a rate on file with a regulatory commission, Dane's claims are barred by the filed rate doctrine."  Dane, 401 F. Supp. 3d at 239.

The Filed Rate Doctrine is discussed particularly in the context of Insurance and Bad Faith Cases including the Dane v. United Healthcare Insurance Co. case, in 2 Dennis J. Wall, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:26 (3d Edition Thomson Reuters and 2020 Supplements).

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

Remedies in ABA Business Litigation Developments.

Honored to have my article on Remedies published in Business Litigation Developments by the American Bar Association. Access is easy. Find it on my website at

https://www.dennisjwall.com/_lender_force_placed_insurance

_practices___aba_publishing____peer_reviewed_by_the

_129983.htm

and you can also find the pdf here:  Download Dennis Wall Recent Developments in Business Litigation Remedies from TIPS_55-2 Business Lit final file (6-11-20).

"If you do not help in this effort, who will?"

(Dennis J. Wall)

The Consumer Financial Protection Bureau has proposed a new rule that would contradict what Congress wrote in the Dodd-Frank Act.  They don't have the votes in Congress.  So, they are trying to make law in proposed rules like this one.  Comments are due by September 28, 2020.

Injustices like this must be opposed.  The success is in the opposition, not always in the result.  Feel free to use, paraphrase, or rephrase my own Comments below.  I was inspired by a National Consumer Law Statement on this proposed new rule, myself.  The important point is that proposed new rules like this one must be opposed.  If using my language is inspiration, too, for you to leave your own Comments in opposition, that is all to the good.

To rephrase the writer and philosopher Albert Camus who wrote about actions during a Plague among other things, this may be a country now in which people suffer.  We may not be able to do anything about that at the moment.  But we can lessen the number of suffering people.  If you do not help in this effort, who will?

The CFPB's Notice of Proposed Rulemaking is on www.regulations.gov where you can leave your Comments.  The docket number is CFPB-2020-0028.  The RIN is 3170-AA98.  To say again, Comments are due by September 28, 2020.

Thank you.

This rule proposed by the CFPB would immunize lenders from legal liability for making mortgage loans without regard to borrowers’ ability to repay if the borrower remains current for the first three years of the loan and the loan meets other requirements. This proposed new rule and new immunity for lenders is contrary to the Dodd-Frank Act.

In the Dodd-Frank Act, Congress required that before booking a loan so to speak, that lenders must make a good faith determination of a borrower’s ability to repay it. Further, Congress expressly allowed borrowers to defend foreclosure by asserting a defense that the lender ignored the borrower’s lack of ability to repay in making the loan.

There are many reasons a homeowner can make payments even for years and even when their mortgage is unaffordable. Examples drawn from real-world experience have been reported including "payments from roommates who are not on the mortgage, borrowing money, or even going without essentials such utilities or medical care." The Congressional choice to enact protections to homeowners to save their homes in the Ability-to-Repay rule already contemplated this situation and allowed for it. That is a policy choice. It is the policy choice made by Congress in the statutes that make up Dodd-Frank. No mere administrative agency including the CFPB has authority to repeal statutes, and no mere agency including the CFPB has the power to enact this proposed rule.

Congress wrote the Ability-to-Repay rule to prevent market excesses that contributed to the Great Recession. Many communities, especially low-income neighborhoods and communities of color, still have not recovered from the Great Recession. It is never a good idea to induce a Second Great Recession, but it is particularly not a good idea during a Pandemic.

Thank you.

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

BAD FAITH CLAIM IN SAME LAWSUIT AS COVERAGE CLAIM?

(Inside Florida.org)

An alternative to trying both claims together may be to bifurcate the coverage claim from the bad-faith claim for trial.  Taking that approach would result in trial of the coverage claim first, and the bad faith claim would be tried only after the coverage claim was resolved.

              That is what the court did with an Underinsured Motorist Claim and a Bad Faith Claim in Tanner v. State Farm Mut. Auto. Ins. Co., No. 3:19-cv-00253-SLG, 2020 WL 406676 (D. Alaska January 24, 2020).  The Court in that case declined to stay bad-faith discovery.  Tanner, 2020 WL 406676, at *5.

Bifurcation, abatement, and dismissal in first-party insurance cases are discussed including the Tanner v. State Farm Mutual Automobile Insurance Co. case, along with many other defenses to bad faith that practitioners do not necessarily encounter every day, in 2 Dennis J. Wall, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:24 (3d Edition Thomson Reuters and 2020 Supplements).

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

FAIRLY OR REASONABLY DEBATABLE CLAIMS: THE BURDEN IS ON THE PLAINTIFF.

A federal court recognized in a first-party insurer bad faith case, that under Ohio law the burden of proof would be on the plaintiff to prove the absence of a fairly or reasonably debatable reason for denying insurance coverage. 

           According to the federal judge in this case, one of two types of insurer bad faith claims in Ohio involves a failure to determine whether there is a lawful basis to deny coverage.  “A bad faith claim based on failure to determine whether there was a lawful basis to deny coverage is not tied to the underlying merits of the decision to grant or deny coverage.”   Jordan v. Liberty Mut. Fire Ins. Co., NO. 4:19CV0093, 2019 WL 3082304, at *4 (N.D. Ohio July 15, 2019).

            The federal judge also recognized the other prong of Ohio insurer bad faith law which survives intervening decisions and "involves the merits of the contract claim.  Therefore, in this type of case, the success of the [bad faith] tort claim hinges upon the success of the contract claim."  Jordan, 2019 WL 3082304, at *4.

            In the eyes of this judge, the plaintiff's allegations met the requirements to plead both types of insurer bad faith claims under Ohio law.  The court denied the carrier's motion for judgment on the pleadings in favor of receiving evidence on these legally sufficient claims.

The Jordan v. Liberty Mutual Fire Insurance Company case is discussed along with many other first-party insurance cases addressing Fairly or Reasonably Debatable Claims, in 2 Dennis J. Wall, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:17 (3d Edition Thomson Reuters and 2020 Supplements).

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

FAIRLY OR REASONABLY DEBATABLE CLAIMS NOW.

(©2020 Dennis J. Wall.  All rights reserved.)

Insurance bad faith defenses are often defined by what they are not.

    For example, it has been held that a "reasonably debatable" defense to coverage does not arise because of an appeal which 'debates' a defense to coverage under certain circumstances.  One of those circumstances is when the record shows that it is reasonably clear that even without a court interpretation of it, the coverage defense is not reasonably debatable in the first place.

    Particularly when the record further shows that the supposed coverage defense  should not be used as a reason to deny coverage.  See Hayes v. Acuity, No. CIV. 17-5015-JLV, 2020 WL 1322269, at *3-*9 (D.S.D. March 10, 2020) (so holding; remanded for a determination of intent to commit bad faith under South Dakota law under a defense, if any, other than that the coverage provision at bar was reasonably debatable; case involved a worker's compensation carrier).

The Hayes v. Acuity case is discussed along with many other first-party insurance cases addressing Fairly or Reasonably Debatable Claims, in 2 Dennis J. Wall, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:17 (3d Edition Thomson Reuters and 2020 Supplements).

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

FORCE-PLACED PREMIUMS ARE NEVER DEAD. THEY AREN'T EVEN PAST: II.

CONTINUED FROM A PREVIOUS ARTICLE POSTED HERE.  You can read more about it in 2 Dennis J. Wall, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:35, titled "Force-Placed Insurance:  The Most Frequently Alleged Claims and Causes of Action, Including Alleged Bad Faith" (3d Edition Thomson Reuters 2020 Supplements).

(©2020 Dennis J. Wall.  All Rights Reserved)

In New Jersey,

[t]o show a breach of the covenant of good faith and fair dealing, a plaintiff must show “(1) the defendant act[ed] in bad faith or with a malicious motive, (2) to deny the plaintiff some benefit of the bargain originally intended by the parties, even if that benefit was not an express provision of the contract.”  [Citation omitted.]  Proof of a party’s “bad motive” or “intention” must support a claim of breach of contract grounded on an alleged breach of the implied covenant of good faith and fair dealing.[1]

    In this case, the federal judge held that the plaintiffs adequately alleged a breach of the good faith covenant that was implied in their loan agreement as to those unauthorized charges that were not excluded by the statute of limitations:

... Plaintiffs sufficiently allege bad faith because they state that the Defendant knowingly charged them for three fees outside the express terms of the contract. (Compl. at ¶¶ 21–22.) Defendant did so intentionally and therefore acted “in bad faith, dishonestly, or with improper motive” and “destroy[ed] or injure[d] the right of the [Plaintiffs] to receive the benefits or reasonable expectations of the contract.” (Id. at ¶ 129). Taking all inferences in the Plaintiffs’ favor, Plaintiffs were denied the benefit of their bargain because they contracted to pay for only those fees permitted by the agreement, not any others. (Id.)[2]

 

[1] Zirbser v. Wells Fargo Bank, N.A., No.:  19-cv-01099-RBK-KMW, 2019 WL 3244621, at *4 (D.N.J. July 19, 2019).

[2] Zirbser v. Wells Fargo Bank, 2019 WL 3244621, at *4.

 

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

FORCE-PLACED PREMIUMS ARE NEVER DEAD. THEY AREN'T EVEN PAST.

You are about to read the short story of Ms. Dolores Zirbser and Mr. Bruce Jon Spalla.  Maybe it's not so short a story here at that.  Their story will be continued in a concluding article that will be posted here on Thursday, August 20, 2020.

You can read more about them in 2 Dennis J. Wall, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:35, titled "Force-Placed Insurance:  The Most Frequently Alleged Claims and Causes of Action, Including Alleged Bad Faith" (3d Edition Thomson Reuters 2020 Supplements).

(©Dennis J. Wall.  All Rights Reserved.)

 

Ms. Zirbser and Mr. Spalia took out a home equity line of credit or HELOC.  They made their loan agreement when they took out their loan with Wachovia Bank.

    In the way of modern mortgages, Wachovia sold the loan to Wells Fargo.

    Zirbser and Spalla sued Wells Fargo for allegedly over billing them for allegedly "erroneous fees" and taking other payments that were not authorized by the loan contract.  In case anyone thinks that force-placed insurance premiums are a thing of the past, specifically a creature unique to the Great Recession in 2008-2009, their lawsuit was filed in December, 2018.

    Wells successfully argued for dismissal of five of the six counts of the complaint on the basis of the statute of limitations, i.e., that the allegedly "illegal charges" were time-barred because they took place too long ago to sue on now.

    Except for three charges that were within the time to sue on them.  The federal judge denied Wells's motion to dismiss the last remaining count for alleged breach of the implied covenant of good faith and fair dealing under New Jersey law.

TO BE CONTINUED ....

 

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

PROVING GOOD CAUSE TO DENY PUBLIC ACCESS TO COURT RECORDS.

A protective order does not automatically overcome the presumptions of public access to court records that federal courts recognize under the U.S. Constitution and at common law.

    If a party files a motion to keep documents a secret, or opposes a motion to disclose a certain document or testimony, that party must still show good cause to keep the public from having access so long as the documents or testimony are in the federal court files.

    Proving good cause to deny public access in such a case must be made by proffering witness testimony, whether in person or by declaration or affidavit, that an identifiable and identified particular harm would be the result of disclosing the document or testimony in question.

    Generalities are not proof.  See Theriot v. Northwestern Mutual Life Insurance Co., 382 F. Supp. 3d 1255, 1259 (M.D. Ala. 2019).

The Theriot v. Northwestern Mutual Life Insurance Co. case is discussed along with many other first-party insurance cases addressing Confidentiality (protected) or Concealment (void) of Settlements, in 2 Dennis J. Wall, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:28 (3d Edition Thomson Reuters and 2020 Supplements).

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

"Injury in Fact" Under the Pennsylvania Bad Faith Statute?

There may be a conflict brewing in the Eastern District of Pennsylvania.

           It is subtle.  It is quiet.  But it seems real.

           In one case, a federal district judge in the Eastern District of Pennsylvania held that a claim under the Pennsylvania bad faith statute survived a motion to dismiss, even though the statutory claim in that case was based on allegations that went far beyond the niche of alleged 'insurance claims handling' that the Pennsylvania statute seems to address:

    This insurance coverage dispute arises out of the “collapse of the housing market” in 2008. (Compl. ¶ 4.)

* * *

    In its 37-page Complaint, Nationstar alleges that Radian denied, rescinded and curtailed coverage and refused to reimburse overpayments for 5,246 mortgages under Radian's pool, bulk and flow policies.

* * *

    Nationstar contends that Radian acted in bad faith when it denied, rescinded, and curtailed coverage for valid claims and refused to reimburse Nationstar for premium overpayments. (Compl. ¶ 120.) Nationstar alleges that Radian knew and understood that if it wrongfully rescinded, denied and/or curtailed claims that third parties would seek to have Nationstar repurchase these loans. (Id. at ¶ 113). Moreover, Nationstar's Complaint is replete with allegations arguing that Radian lacked a reasonable basis for its coverage decisions. See (id. at ¶¶ 54, 65, 69, 72, 113, 114).

    Accepting the factual allegations as true, Nationstar has adequately plead both requirements to show bad faith under 42 Pa. Cons. Stat. § 8371.

Nationstar Mort. LLC v. Radian Guar. Inc., No. 18-03798, 2019 WL 1318541, at *1, *2, and *6 (E.D. Pa. March 22, 2019).

    In another case, decided nearly five months after Nationstar Mortgage, the Court quoted from the earlier case and cited to it in a footnote.   The claim in that case was also based on the Pennsylvania bad faith statute, 42 Pa. Cons. Stat. § 8371.

    In the later case, a different federal district judge in the Eastern District of Pennsylvania seems to have reached a different and succinct conclusion from the judge who ruled on the motion to dismiss the statutory bad faith claim in the Nationstar Mortgage case:  "We cannot recognize a bad faith claim for actions unrelated to the handling or denial of benefits."  Boring v. State Farm Fire & Cas. Co., No. 19-1833, 2019 WL 3774191, at *6 (E.D. Pa. August 9, 2019). 

    The separate holdings in these two cases seem to stand apart.  On the facts alleged in the two cases, the rulings appear to conflict on their face.  Whether the judges of the Eastern District are actually in conflict will be determined in Pennsylvania, if at all.

The Nationstar Mortgage and Boring cases are discussed along with many other first-party insurance cases addressing "Injury in Fact":  What Happens to Bad Faith Statutes?, in 2 Dennis J. Wall, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:14.50 (3d Edition Thomson Reuters and 2020 Supplements.  "Injury in Fact" issues affecting Bad Faith Statutes in third-party cases are discussed in 1 id., § 3:28.50, which is republished on the Works page at  https://www.dennisjwall.com.

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

WHO RUNS THE RISK OF LIABILITY FOR INSURER BAD FAITH?

This question was addressed in a federal case in the Southern District of Georgia in Simmons v. Harleysville Insurance Co., No. 4:18-cv-55, 2019 WL 1922048 (S.D. Ga. February 19, 2019).   Specifically, the Court in that case addressed a Georgia statute titled "Liability of Insurers for Damages and Attorney's Fees on Bad Faith Refusal to Pay Claims."   The statute is OCGA § 33-4-6.

    Because the statute applies on its face to "insurers," the Court held that the Georgia statute simply does not apply to a third-party administrator for an insurance company on surety bonds:

Taking these allegations as true—namely that Defendant was the third-party claims administrator which denied, in bad faith, Plaintiff's reasonable claim for the surety bond—Plaintiff fails to state an actionable bad faith claim under Georgia law.

    O.C.G.A. § 33-4-6 provides a cause of action against insurers when they refuse to pay a covered loss in bad faith.  Upon the bad faith “refusal of the insurer” to pay a timely demand, “the insurer shall be liable to pay [the policy] holder, in addition to the [covered] loss, not more than 50 percent of the liability of the insurer for the loss ... and all reasonable attorney's fees for the prosecution of the action against the insurer.” O.C.G.A. § 33-4-6(a) (emphasis added). “[B]y its express terms [this provision] applies only to insurers.”

Simmons, 2019 WL 1922048, at *4 (emphasis by the Court).

The Simmons v. Harleysville Insurance Co. case is discussed along with many other first-party insurance cases addressing Express Statutory Causes of Action, in 2 Dennis J. Wall, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:14 (3d Edition Thomson Reuters and 2020 Supplements).

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

UPDATE TO THE FEDS APPLY FILED-RATE DOCTRINE TO STATE-REGULATED INSURANCE.

This updates an article posted here on July 7, 2020.

The Leo case reported in an earlier article posted here, THE FEDS APPLY FILED-RATE DOCTRINE TO STATE-REGULATED INSURANCE, has now been reported at 964 F.3d 213.

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

IMPLAUSIBLY DENYING PAID CLAIMS.

The "plausibility" standard for stating a claim upon which relief can be granted in federal court has filed an appearance in an alleged breach of contract case based on denying covered insurance claims:

Here, Counterclaim Plaintiffs allege the existence of a scheme in which Counterclaim Defendants accepted claims submitted by Counterclaim Plaintiffs and others, reimbursed them, then later filed RICO actions like this one to recoup their payments and drive providers like Counterclaim Plaintiffs out of business. (See generally Countercl. ¶¶ 14, 20.) This far-fetched theory of the case fails to pass the laugh test. Moreover, neither of the two cases Counterclaim Plaintiffs cite in support of their plausibility argument is analogous to this case.  Notably, the plaintiffs in both of those cases sued their respective insurance companies for improperly denying their claims after inadequate review, despite promises to the contrary in standard-form contracts.  [Citations omitted.]  Of course, it would be plausible to infer that an insurer's practice of summarily denying insurance claims could result from an improper profit motive. However, to assume, as Counterclaim Plaintiffs urge, that Counterclaim Defendants summarily accepted and reimbursed their claims with the intention of engaging in costly and unpredictable future litigation for the purpose of gaining competitive advantage would place the Court far beyond the bounds of reason.  The Court refuses to accompany Counterclaim Plaintiffs on their flight of fancy.

Allstate Ins. Co. v. Avetisyan, 422 F. Supp. 3d 672, 676 (E.D.N.Y. 2019).

The Allstate Insurance Co. v. Avetisyan case is discussed along with many other first-party insurance cases addressing Breach of Contract, in 2 Dennis J. Wall, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:13 (3d Edition Thomson Reuters and 2020 Supplements).

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

THE QUESTION OF BAD FAITH: WHERE IS THE FAULT?

Courts have held that extracontractual liability (meaning in essence liability beyond the usual contract damages) can exist in first-party insurance cases even when an appraisal was timely paid, for example, but the claim itself was not timely paid.   The Texas Supreme Court announced that holding when it addressed the question of liability under the Texas Prompt Payment of Claims Act in the case of  Barbara Technologies Corp. v. State Farm Lloyds, 589 S.W. 3d 806, 816-19 (Tex. 2019).

The question of bad faith and how it depends on the presence or absence of fault is the subject of § 9:5, in 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith (3d Edition Thomson Reuters West and 2020 Supplements).   

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

NO COVERAGE, NO BAD FAITH.

To state it simply, it is almost universally held in the United States that where there is no insurance coverage, there is no bad faith.  See, e.g., Mounier v. RLI Corp., No. CV-19-01778-PHX-GMS, 2020 WL 263597, at *3 (D. Ariz. January 17, 2020).  This is the prevailing rule even in cases of alleged statutory bad faith under third-party or liability insurance policies, see in addition the hundreds of authorities discussed in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH, § 3:28 (Thomson Reuters West 3d Edition & 2020 Supplements); or at common law or under various statutory causes of action alleged in first-party insurance cases, 2 id., § 9:3, titled The Question of Bad Faith (where the Mounier case is among those discussed), and § 9:14, titled Express Statutory Causes of Action.

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

EXPERTS' INTERPRETATIONS EXCLUDED: THE REBUTTAL EXPERIENCE.

Proffered opinions of experts based on interpretation of insurance policies may fare better when they are offered in rebuttal to the opinions of the other side's experts.

    A recent case involved "putative class action" claims that an insurance carrier allegedly and "effectively required insureds to transfer the value of their total loss vehicle when settling a claim under Defendant’s comprehensive of collision insurance coverage."  Morgan v. Progressive Select Ins. Co., No. 0:18-cv-61844-WPD, 2020 WL 3950133, at *1 (S.D. Fla. June 3, 2020).

    This is the court's entire discussion in that case, omitting only citations: 

    Finally, Defendant claims that [the expert's] rebuttal report contains numerous legal conclusions related to Plaintiff’s insurance policy. In addition, Defendant takes issue with the facts that [the expert's] rebuttal relies on information provided by counsel for then-Plaintiff Lopez. Defendant claims that [the expert's] rebuttal report also fails as it is merely based on speculation and is not based on any record evidence.  In response, Plaintiff argues that rather than presenting legal theories, [the expert] relies on the legal theories of Plaintiff’s counsel and merely testifies that the conditions of salvage auctions result in a fair market value which Plaintiff contends legally equates to Plaintiff’s compensatory damages.

    In his reports, [the expert] states that he is relying on the legal theories and factual allegations of Plaintiff’s claim provided by Plaintiff’s counsel. “[A]n expert witness may voice an opinion based on facts concerning the events at issue in a particular case even if the expert lacks first-hand knowledge of those facts.” [Citation omitted.] The Court disagrees with Defendant’s characterization that [the expert's] rebuttal report is merely a regurgitation of the opinions of Plaintiff’s counsel. [The expert's] rebuttal report rather highlights the assumptions of both Defendant’s expert analysis and his own. See, e.g. [DE 106-3] ¶¶ 7, 10.

Morgan, 2020 WL 3950133, at *3 (emphasis added).

The admissibility of expert testimony in third-party insurance bad faith cases is discussed in § 8:17, in 1 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith (3d Edition Thomson Reuters West and 2020 Supplements).  The admissibility of expert testimony in first-party insurance bad faith cases is addressed in § 12:18, in Volume 2, id.

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