Claims and Bad Faith Law Blog

STAND YOUR GROUND AGAINST ABUSES OF THE POOR.

Oklahoma has filed two applications to be relieved of many of its Medicaid obligations under federal law.  Oklahoma has applied -- two times -- for authority to provide its own version of ensuring health coverage to low-income people using federal taxpayer money in large part and as it sees fit.  It is fair to say that the Oklahoma applications are Dickensian at best.  On the other hand, Oklahoma's applications would not bring back either poorhouses or debtor's prisons.  Certainly not yet.

The deadline for leaving Comments is the close of business tomorrow, Saturday, June 27, 2020.  Bizarrely, Comments are not being accepted on regulations.gov like I had a reason to expect, but on the website for Medicaid.gov.  To get to the button for "Submit" Comments, I had to Google the name of the particular "demonstration" (i.e., application for a waiver of Medicaid laws) which I identify in my Comment, reproduced below.  Before I could "Submit," no less, I had to prove that "I am not a robot" about 6 times before I could "Validate" my Submission.  It takes a lot of determination to be heard sometimes and in some places depending on who is in charge, it seems.  Persevere.  I did.  

Here is my Comment on Oklahoma's first application for authority not to comply with Medicaid as it is presently written.  Feel free to use it or any part of it, or to paraphrase it in any way, but please leave your Comments.  Stand your ground against abuses of the poor.

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

 

COMMENTS TO OKLAHOMA SOONER CARE MEDICAID WAIVER APPLICATION.06.26.20.

Re:     Oklahoma Sooner Care - PCMH and ITU Amendment Demonstration.

Submitted on Medicaid.gov portal on website Friday, 06.26.20.

Before an "experimental, pilot, or demonstration" project can be approved for a Medicaid Act waiver, the agency must first identify the objectives of the Medicaid program.  Many of the program's significant objectives are identified, for example, in § 18D:2, The purpose of Medicaid, by Dennis J. Wall in Catastrophe Claims (Thomson Reuters West 2020).

The Medicaid program is authorized by Title XIX of the Social Security Act for the purpose of ensuring health coverage to low-income people. That is still its purpose today. See 42 U.S.C.A. § 1396-1, “Appropriations” (purpose of appropriations for Medicare program is to enable each State “to furnish [1] medical assistance on behalf of families with dependent children and of aged, blind, or disabled individuals, whose income and resources are insufficient to meet the costs of necessary medical services, and [2] rehabilitation and other services to help such families and individuals attain or retain capability for independence or self-care”) (emphasis added).

It was enacted into law in 1965 at the same time as Medicare.

Like many other social programs —Medicare, SSI, and the Children's Health Insurance Program—Medicaid was tacked on to the Social Security Act. The reason is fairly clear. All these programs were and continue to be viewed as social insurance programs and not privately offered insurance policies.

Within parameters established by the federal government, the States administer Medicaid.  This explains why there is a variation in Medicaid disbursements from state to state.

However, the Oklahoma SoonerCare "demonstration" is not a demonstration or a waiver of the Medicaid Act.  It is a request for approval to disobey the Medicaid Act.  The Act was established by Congress to provide funding to assist States to implement the purposes of Medicaid.  The Oklahoma SoonerCare application would substitute Congressionally required federal funding, as necessary, to meet medical needs with a block grant to Oklahoma and, once the block grant of federal funds ran out, then there would be no more funding of medical needs of Medicaid patients in Oklahoma.

To say again, this is not an authorized demonstration or waiver of the Medicaid Act requirements.  The Oklahoma SoonerCare request is instead a request to disregard those requirements completely by putting a cap on federal funding instead of meeting the purpose of the Medicaid Act to support State funding of medical services.

Further, consideration must be given to whether and to what extent the SoonerCare "demonstration" would help provide health coverage for Medicaid beneficiaries.  Consideration must also be given to describing how it would promote coverage.    Failure to do any of this voids any approval of the application as arbitrary and capricious.

Federal law and regulations are a kind of wrapper around the Medicaid program, holding it together in essential respects, while State laws and regulations are authorized to change some of the insides of the program, as it were, by changing various coverages of services, requirements for eligibility, and for reimbursement of Medicare vendors-providers.  See 42 U.S.C.A. §§ 1396, 1396a.  However, State laws and regulations are not authorized to change the program entirely, as the SoonerCare application would do if approved.

Thank you for your consideration.

Dennis Wall

www.dennisjwall.com   

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

ANOTHER TAKE: NO DUTY TO DEFEND ASSAULT AND BATTERY.

A panel of the Sixth Circuit Court of Appeals said in a 2-to-1 decision that it was not able to find any Kentucky State Court cases saying that an answer to the question of a duty to defend should include "known facts" outside the allegations appearing from the face of the underlying complaint against the insured.  The case involved an apparently standard liability policy with a standard assault and battery exclusion.

The same Sixth Circuit Court of Appeals panel observed that "several federal-court decisions applying Kentucky law do state a 'known facts' rule, and the proposition that an insurer has a duty to defend if known facts outside the complaint demonstrate the possibility of coverage enjoys support in many jurisdictions."  United Spec. Ins. Co. v. Cole's Place, Inc., 936 F.3d 386, 403 n.3 (6th Cir. 2019).

This observation did not affect the outcome however.  The trial court in this case entered a summary judgment of no coverage in favor of the carrier, and the two judges in the panel majority affirmed on appeal.

The dissenting judge would have reversed the summary judgment in favor of the carrier on coverage as a matter of law, and she would have also addressed a second issue in the case, namely, whether there was federal declaratory relief jurisdiction and she would have ruled that in this case, there was not.

The room for Coverage of a Claim Known But Not Pleaded and its consequences for Fulfillment or Enforcement of Good Faith Duties, are discussed based on the case law that decides them including the United Specialty Ins. Co. v. Cole's Place decision, in Section 3:54 in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (Thomson Reuters West, 3d Edition, forthcoming 2020 Supplement).

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

DECLARING A THING "CONFIDENTIAL" IS NOT ENOUGH.

It is getting a little harder to get judges to sign Stipulated Protective Orders in some courts. "Designation as 'Confidential' is not sufficient, as that is merely the parties' initial designation of confidentiality to establish coverage under the stipulated protective order." Ortiz v. City and County of San Francisco, No. 18-cv-07727-HSG, 2020 WL 2793615, at *9 (N.D. Cal. May 29, 2020).

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

DUTY TO DEFEND AN ARBITRATION?

A commercial general liability (CGL) carrier had a duty to defend its policyholder in an arbitration, the court held in Gemini Ins. Co. v. Constrx Ltd., 360 F. Supp. 3d 1055 (D. Haw. 2018).  As the Court read the liability policy at issue in that case, the policy provided that the policyholder could not be subjected to liability without a defense.  Under the policy provisions, as interpreted by the Court, the CGL carrier had to provide defense coverage for the arbitration.

The Requirements for a Duty to Defend and its consequences for Fulfillment or Enforcement of Good Faith Duties, are discussed based on the case law that decides them including the Gemini decision, in Section 3:51 in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (Thomson Reuters West, 3d Edition, forthcoming 2020 Supplement).

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

WHAT IS "INJURY IN FACT" IN A FEDERAL INSURANCE CASE?

A federal court decided in 2019 that "injury in fact" for standing purposes in federal court is effectively the same thing as the plausbility of stating a claim.

On a motion to dismiss, the federal court explained its ruling in the context of whether an "injury in fact" was alleged in an action involving a consumer protection statute in New York State, N.Y. General Business Law § 349. The Court wrote about the plausibility of stating a substantive claim under the New York statute with the same approach as it wrote about the plausibility of stating a claim of concrete and particularized injury for standing purposes, at least in a case of alleged "economic injury," namely, overpaying based on the defendant's alleged affirmative misrepresentations.  See Cummings v. FCA US LLC, 401 F. Supp. 3d 288, 304, 307 (N.D.N.Y. 2019).

The issue of Injury in Fact Standing in Federal Court in Insurance Bad Faith cases is discussed, along with the Cummings case, in two sections of LITIGATION AND PREVENTION OF INSURER BAD FAITH, one regarding Third-Party Bad Faith Cases and the other section addressing First-Party Bad Faith cases.  Third-Party situations are examined in Section 3:28.50 in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH, and First-Party cases are put under the legal standing microscope in Section 9:14.50 in volume 2, id.  (Thomson Reuters West, 3d Edition, forthcoming 2020 Supplement).

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

GREED HAS CONSEQUENCES: PHARMAS CHARGE MORE, YOU PAY HIGHER PREMIUMS.

Pharmas are charging up to $2,315.00 apiece to give patients coronavirus tests.
"But American patients will eventually bear the costs of these expensive tests in the form of higher insurance premiums."
The whole greedy story is reported in today's news. See Sarah Kliff, How the Charges For a Virus Test Soared to $2,315 / Prices Go Unregulated / Labs Taking Advantage When Congress Pays the Medical Bill, NEW YORK TIMES, Wed., June 17, 2020, at A1 (the New York Times has put this behind a pay wall).

Bad faith comes in many forms when insurance is part of the story.  It often does not come from insurance at all, but from the outside.

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

IS INSURANCE BAD FAITH TOO DIFFICULT FOR 21st CENTURY JOURNALISM?

Insurance bad faith may be too difficult for 21st Century Journalism.  Hear what I have to say and decide for yourself.

My example is taken from the Code of Federal Regulations.  I will not embarrass you by telling you the grade I got in Administrative Law in Law School.  (Actually, I will not embarrass myself and so I will not tell you the grade.)  It is enough for my present purpose to say that I have recently learned some things about how Federal Rules and Regulations are written, adopted, and issued.  This will be a broad, general overview so if you find yourself thinking of many exceptions, that will be natural.

Most rules are published in draft with a Comment Period.  The Comment Period can vary from proposed rule to proposed rule, but it is usually 30 or 60 days.  The Comment Period begins when a proposed rule is officially published for public comment.  The key concept here is that during that entire time it is only a proposed rule.  It is not yet the law.  The corporate media very often gets this wrong.  It's as if they cannot process the actual concept.

The current regime posted a draft rule on June 12.  It would purport to abolish LGBTQ rights under the Affordable Care Act by allowing discrimination.  The corporate media reported that the current regime changed the law that day.  The regime did not.  They did not have the power.  21st Century Journalism conferred that power on them, but they did not have it before that.

Further, what the current regime published on June 12 was a draft rule expressly slated for official publication on June 19, a week later, when the official Comment Period will begin.  So, the earliest that the proposed discriminatory rollback rule can take effect is 60 days (the end of the Comment Period for this particular proposed Rule) from Friday, June 19 (not from Friday, June 12), or what I calculate as the end of business on Tuesday, August 18, 2020.  (Courts will certainly have something to say about all this, as well.)

Accordingly, diary your calendars to leave your Comment on regulations.gov against the regime's proposed discrimination in healthcare against LGBTQ patients, by Tuesday, August 18, 2020.

But back to the point at hand before coming to the end of this article.  It is a simple point, in the end:  If the commercial media cannot get proposed rules right, do not expect that they will get anything about insurance bad faith right when they report on any of its developments.  Rather, take advantage of what 21st Century Journalism does well and use their reports of developments as the starting point for your own forensic investigation, i.e., your own research in this case.  As the respected journalist John Nichols has himself very recently observed, the media are very good at reporting on a fire but not so good at reporting on a movement.

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

 

 

 

WHAT IS A "GENERAL BUSINESS PRACTICE" ACTIONABLE UNDER INSURANCE STATUTES?

In 2019, the highest court in New York State held that at least one thing is not a recognized "general business practice": "On this appeal, we conclude that a general business practice of failing to promptly disclose coverage within the meaning of Insurance Law § 2601(a)(6) does not include violations of the timely liability disclaimer requirement of Insurance Law § 3420(d)(2)." Nadkos, Inc. v. Preferred Contractors Ins. Co. Risk Retention Grp. LLC, 34 N.Y.3d 1, 4, 132 N.E.3d 568, 569, 108 N.Y.S.3d 375, 376 (2019).

The issue of the Legal Bases of Statutory Liability in Settlement are discussed based on the decided case law including the Nadkos decision, in Section 3:28 in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (Thomson Reuters West, 3d Edition, forthcoming 2020 Supplement).

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

EXPERT TRIAL JUDGE HELD NOT EXPERT NEGOTIATING GOOD FAITH SETTLEMENTS.

A former trial judge's expert testimony was excluded on the issue of negotiating good faith settlements in Columbia Cas. Co. v. Ironshore Specialty Ins. Co., C.A. No. 15-197 WES, 2019 WL 2176306 (D.R.I. May 20, 2019).

    To be fair, the federal court's reasoning in this case would have excluded all expert testimony regarding a civil litigant's reasonable expectations, which is how the federal judge framed the issue. Testimony on that issue was "irrelevant," said the federal judge excluding the expert testimony, "because the average civil litigant is a party representing his own interests, not a fiduciary representing the interests of another." Columbia Casualty, 2019 WL 2176306, at *5 (emphasis in original).

    The excluding judge allowed, however, that if the expert judge's testimony had been proffered differently in that case, such as addressing the expert judge's own experience "with insurance contracts and settlement negotiations of insurance claims specifically, or presented 'standards of settlement practice' that were tailored to the unique fiduciary duties imposed upon insurance companies," then the expert's testimony might have been relevant and so admissible in the courtroom of the federal judge.  Columbia Casualty, 2019 WL 2176306, at *5.

The issue of the Insured's Right to Contribute as Distinct From Insurer Insistence That the Insured Contribute to Settlement, is discussed based on the decided case law including the Columbia Casualty decision, in Section 3:13 in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (Thomson Reuters West, 3d Edition, forthcoming 2020 Supplement).

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

APPOINTING INDEPENDENT COUNSEL IN ILLINOIS.

In 2019 an Illinois District Court of Appeal used an established test to decide whether an insured has a right to its own independent counsel at the expense of the liability carrier. The case is Xtreme Protection Services, LLC v. Steadfast Insurance Co., ___ N.E.3d ___, No. 1-18-1501, 2019 WL 1976482, 2019 IL App (1st) 181501 (Ill. 1st DCA, 6th Div., May 3, 2019) (stated Not Final), app. denied, 132 N.E.3d 357 (Ill. 2019).

    The test that the Illinois Court applied in the Xtreme case is in the mainstream of Illinois insurance law. The Court's concise question was "whether the insurer's interests would be furthered by providing a less-than-vigorous defense" to the allegations in the underlying case against the insured.

    That is the simple question that determines the outcome even in complicated cases in Illinois.  If and when the given case provides a "yes" answer to that question the carrier has the responsibility to pay for the insured's independent defense counsel in that case and loses the right to provide defense counsel of its own choosing.

    The trial court too applied that simple test and in a rare move, entered judgment on the pleadings in favor of the insured.

    The appellate court applied the same test and affirmed.

The Xtreme decision is one of many cases discussed at length in Section 3:7, Informing the Insured: Providing Independent, "Mutually Agreeable" Counsel to the Insured, in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (Thomson Reuters West, 3d Edition, forthcoming 2020 Supplement).

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

 

Insurance Coverage for Losses Caused by Looting?

Is looting covered by insurance?  An Insurance Coverage lawyer's answer:  It depends on what the policy says.  One insurance policy does not fit all.

For another view, see Sam Dean, Laurence Darmiento, and Ronald D. White, Business / Is Looting Covered by Insurance?  Depends on the Business, LOS ANGELES TIMES online, May 31, 2020.

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

Liability Carriers and Defense Costs Reimbursement by Policyholders.

To date, an apparent minority of courts has held that liability insurance carriers cannot recover defense fees and costs even when the policyholder agrees and there is a judicial determination that no possibility of coverage ever existed for the defended claims, summarized in detail in Attorneys Liability Protection Society, Inc. v. Ingaldson Fitzgerald, P.C., 370 P.3d 1101, 1112 (Alaska 2016) :

    The answer to both certified questions is “yes”: Alaska law prohibits enforcement of a policy provision entitling an insurer to reimbursement of fees and costs incurred by the insurer defending claims under a reservation of rights, where (1) the insurer explicitly reserved the right to seek such reimbursement in its offer to tender a defense provided by independent counsel, (2) the insured accepted the defense subject to the reservation of rights, and (3) the claims are later determined to be excluded from coverage under the policy; and, Alaska law also prohibits enforcement of a policy provision entitling an insurer to reimbursement of fees and costs incurred by the insurer defending claims under a reservation of rights, where (1) the insurer explicitly reserved the right to seek such reimbursement in its offer to tender a defense provided by independent counsel, (2) the insured accepted the defense subject to the reservation of rights, and (3) it is later determined that the duty to defend never arose under the policy because there was no possibility of coverage.

In this case, the Supreme Court of Alaska based its answer to certified questions on the wording of Alaska's independent counsel statute. It was interpreted to bar all such reimbursement claims, contrary to the interpretation of similar statutes in other States such as the interpretation of the California independent counsel statute in the California Courts including the California Supreme Court.  Attorneys, 370 P.3d at 1108-09.

    This decision has been rejected by name by a federal court applying Washington law in a case which was the subject of an earlier article on this blog, Massachusetts Bay Insurance Co. v. Walflor Industries, Inc., 383 F. Supp. 3d 1148, 1168-69 (W.D. Wash. 2019).

The issue of a liability carrier's right to reimbursement of defense expenses for defending noncovered claims, as well as the carrier's right to reimbursement of indemnity for noncovered claims, is discussed at length in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:6, Informing the Insured: Insurer Assertion of Rights to Reimbursement From the Insured of Clearly Noncovered Indemnity and Defense Expense (Thomson Reuters West 3d ed, 2020 Supplements in process). The Attorneys Liability Protection Society case and the Massachusetts Bay Insurance Co. cases are among the cases discussed there, both in print and online.

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

 

The Coming Wave of Underwater Homeowners and Distressed Lenders.

Homeowners are already in a bind.  The bind is tightening, both on homeowners and on lenders.  The current lockdown has stopped income because it has stopped all paid work except employment that is deemed essential.  While Congress continues to refuse to provide income supports for regular people, its monetary support of corporations will be useless to homeowners although in some cases it might help parties holding residential mortgages.

    Homeowners have not stopped paying mortgages in record numbers because they have suddenly been infected with fraud.  Homeowners have stopped paying mortgages in record numbers because they don't have the money.  See Kathy Orton, Homeowners Stopped Paying Mortgages in Record Numbers in April, WASHINGTON POST  online Friday, May 22, 2020.

    Parenthetically, landlords renting both residential and commercial properties report "that companies with offices or retail spaces" have skipped their rent payments in greater numbers than individual renters.  The landlords report that over 66% of all commercial tenants did not pay their rent either in April or in May.  That compares with less than 25% of residential tenants who skipped rent in April and in May.  The CEO of one major real estate company said this about the rent-skipping 'office and retail tenants with healthy finances':  "They think of this as some sort of field day.  I'm shocked, candidly."  See Matthew Haag, Commercial Rent Revenue is Sliding, and Landlords Predict a Catastrophe, NEW YORK TIMES, Friday, May 22, 2020, at A12.

    The Census Bureau itself has confirmed that homeowners have stopped paying their mortgages in record numbers because they simply do not have the money.  The Census Bureau released a report on the 2020 mortgage crisis last Wednesday, May 19, 2020.  47% of adults across the nation told the Census Bureau when asked that they or another adult in their household had lost income since March 13.  Loss of income has hit the poorest and low-income wage earners the hardest.  56% of the respondents who had not earned a high school diploma, and 51% who hold a high school diploma but did not go on to college, have lost work and so have lost income.  Only 38% of respondents with a college degree or higher, reported that they have lost income in the same period.

    The income forecast for the rest of the year is abysmal.  Most businesses responding to the Census Bureau's survey expect it will take at least 6 months to resume operations.  More than 20% of adult individuals who responded to the survey have little or no confidence in their ability to pay rent or mortgage that come due next month.  See Sarah D. Wire, One-Fifth of Americans Fear They Can't Pay June Rent or Mortgage, Federal Survey Finds, LOS ANGELES TIMES online Wednesday, May 20, 2020.

    Foreclosures have already begun in many cases, particularly for homeowners struggling to pay on so-called distressed mortgages, and  despite widespread publicity of possible forbearance options at this time.  See Matthew Goldstein, Goldman Forecloses on More Than 10,000 Homes, NEW YORK TIMES, Friday, May 22, 2020, at B6.  

    So when the tales of fraud come tripping in, as they will, the lived experience of landlords and lenders is that wealthy business tenants have stopped paying rent by more than 2.5 times the rate of residential tenants.   And for their part, homeowners in large numbers have stopped paying their monthly mortgage payments for a good reason that has nothing to do with maximizing profit:  Homeowners just don't have the money.

    Nonetheless the stories of fraud will  come.  They will be broadcast across the land.  What is true, however, is that evictions will rise, unauthorized add-ons such as insurance premiums placed by force will increase, and foreclosures will climb.  We have been here before.  We have seen this movie, as they say.  Here's hoping that this time it will be all right in the end, or it won't be the end.

Find out more about the Causes and Claims behind Lender Force-Placed Insurance Practices. See the Introduction by Dennis Wall to what's in the Loan Documents you sign when you or your clients buy a house, Section 2:1 in LENDER FORCE-PLACED INSURANCE PRACTICES published by American Bar Association Publishing, accessible at no charge to you and your clients at https://www.dennisjwall.com.

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

 

Add-On Mortgage Servicing Risks That Point to Foreclosure.

Homeowners Who Can't Make Mortgage Payments Get a New Deferral Option, by Andrew Khouri, LOS ANGELES TIMES (online link not available at time of this post); Business / Newsletter:  If You Can't Pay Your Mortgage, You Have Options, by Rachel Schnalzer, LOS ANGELES TIMES (online link also not available at time of this post).

    If you can't make your homeowner's insurance, you have add-on mortgage risks including servicing fees, surveys, etc. adding to foreclosure risk.

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

REIMBURSEMENT OF DEFENSE EXPENSES BY POLICY PROVISION.

In the case of National Surety Corp. v. Immunex Corp., 176 Wash. 2d 872, 297 P.3d 688 (2013), the Supreme Court of Washington rejected a carrier's claim to reimbursement of defense expenses for noncovered claims.

    More recently, a federal District Judge has distinguished Immunex in a case involving Washington State substantive law.  The federal court held that Washington State public policy did not invalidate a policy's defense cost reimbursement endorsement even though the endorsement compelled a result contrary to Immunex.  Massachusetts Bay Insurance Co. v. Walflor Industries, Inc., 383 F. Supp. 3d 1148, 1168-69 (W.D. Wash. 2019).

The issue of a liability carrier's right to reimbursement of defense expenses for defending noncovered claims, as well as the carrier's right to reimbursement of indemnity for noncovered claims, is discussed at length in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:6, Informing the Insured: Insurer Assertion of Rights to Reimbursement From the Insured of Clearly Noncovered Indemnity and Defense Expense (Thomson Reuters West 3d ed, 2020 Supplements in process). The Immunex case and the Massachusetts Bay Insurance Co. cases are among the cases discussed there, both in print and online.

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

Deceptive Mortgage Add-Ons Including Force-Placed Insurance Premiums: Claims & Causes.

Tenants and homeowners are at risk for evictions, foreclosures, and mortgage add-ons like force-placed insurance premiums. See Tony Romm, Millions of People Lost Their Jobs in Hard-Hit New England. Many Fear Their Homes Could be Next, WASHINGTON POST online Wed., May 20, 2020.

Find out more about the Causes and Claims behind Lender Force-Placed Insurance Practices. See the Introduction by Dennis Wall to what's in the Loan Documents you sign when you or your clients buy a house, Section 2:1 in LENDER FORCE-PLACED INSURANCE PRACTICES published by American Bar Association Publishing, accessible at no charge to you and your clients at https://www.dennisjwall.com.

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

Lender Force-Placed Insurance Practices: Claims and Defenses Are Coming.

Tenants and homeowners are at risk for evictions, foreclosures, and mortgage add-ons like force-placed insurance premiums. See Tony Romm, Millions of People Lost Their Jobs in Hard-Hit New England. Many Fear Their Homes Could be Next, WASHINGTON POST online Wed., May 20, 2020.

Find out more about the Causes and Claims behind Lender Force-Placed Insurance Practices. See the Introduction by Dennis Wall to what's in the Loan Documents you sign when you or your clients buy a house, Section 2:1 in LENDER FORCE-PLACED INSURANCE PRACTICES published by American Bar Association Publishing, accessible at no charge to you and your clients at https://www.dennisjwall.com.

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

Homeowner Insurance Premiums by Force: Claims and Causes.

Tenants and homeowners are at risk for evictions, foreclosures, and mortgage add-ons like force-placed insurance premiums.  See Tony Romm, Millions of People Lost Their Jobs in Hard-Hit New England.  Many Fear Their Homes Could be Next, WASHINGTON POST online Wed., May 20, 2020.

Find out more about the Causes and Claims behind Lender Force-Placed Insurance Practices.  See the Introduction by Dennis Wall to what's in the Loan Documents you sign when you or your clients buy a house, Section 2:1 in LENDER FORCE-PLACED INSURANCE PRACTICES published by American Bar Association Publishing, accessible at no charge to you and your clients at https://www.dennisjwall.com.

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

 

IMPOSING ATTORNEY SANCTIONS FOR BAD FAITH.

When an attorney acts in bad faith in a court proceeding, the standard of proof for imposing bad-faith sanctions may not make any difference.  That is what a U.S. Magistrate Judge held In Lanard Toys Ltd. v. Dolgencorp LLC, NO. 3:15-CV-849-J-34PDB, 2019 WL 1003134, at *2 n.3 (M.D. Fla. March 1, 2019) (Barksdale, USMJ).

    In that case, the Court ultimately denied a defendant's request either for dismissal of the case with prejudice or alternatively for sanctions regardless of what standard of proof applies to imposing attorney sanctions for "subjective bad faith."  The defendant's request in that case was bottomed on the Court's "inherent powers."  This did not persuade the Magistrate-Judge.

    The Court held in this case that it denied the defendant's motion for sanctions whether the Court applied a high standard of clear and convincing proof or a lower standard more or less based on the circumstances.  Lanard Toys Ltd. v. Dolgencorp LLC, NO. 3:15-CV-849-J-34PDB, 2019 WL 1003134, at *2 n. 3 (M.D. Fla. March 1, 2019) (Barksdale, USMJ).

These and many other issues of bad faith are discussed in Chapter 2, titled History and Contrasting Good Faith Requirements, in Volume 1 of Dennis J. Wall, LITIGATION AND PREVENTION OF INSURER BAD FAITH (West Third Edition, 2020 Supplements in process).

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

FORCE-PLACED INSURANCE CLAIMS NEVER DIED. THEY'RE NOT EVEN PAST.

Many recent cases present lender force-placed insurance [LFPI] claims based on recent alleged LFPI practices.

    To borrow a phrase from Mr. William Faulkner, the past of lender force-placed insurance practices is never dead. It isn't even past. See, e.g., Richard v. Finance of Am. Mortgage, LLC, No. 3:18-CV-559, 2019 WL 3756895, at *2 (M.D. Pa. July 23, 2019) (USMJ), approved by U.S. District Judge, Case No. 3:18-CV-559, 2019 WL 3753682 (M.D. Pa. August 8, 2019) (case involved force-placed insurance conduct from 2016 on); Alpert v. Nationstar Mortgage 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); Gray v. CIT Bank, N.A., No. 18-1520 (RMB/AMD), 2018 WL 6804273, at *1 (D.N.J. Dec. 27, 2018) (alleged LFPI practices from 2011 through 2017); Wieck v. CIT Group, Inc., 308 F. Supp. 3d 1093, 1101-03 (D. Haw. March 30, 2018) (case involves lender force-place insurance practices from November, 2016 as well as earlier dates).

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

"Who you gonna believe, me or your lyin' eyes?"

One federal trial judge and three federal appellate judges have debated the Affordable Care Act in the last two years, so far.  Three of them voted to strike it down.  All three are members of the Federalist Society.

    The fourth judge, who is not a member of the Federalist Society, dissented.

    See Ben Protess and Rebecca R. Ruiz, Senators Accuse Conservative Society of Undue Influence on Judges, NEW YORK TIMES, Wed., May 13, 2020, at A19.

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

"GOOD CAUSE" OR NO "GOOD CAUSE": THAT IS THE QUESTION.

This new article is drawn from research for the manuscript of the 2020 Supplement of LITIGATION AND PREVENTION OF INSURER BAD FAITH, which I have just completed:

The requirement of establishing "good cause" for secrecy was addressed by a recently written provision of a Stipulated Protective Order submitted for signature in a federal court case.  The parties and their lawyers offered the Court their own interpretation of what is and what is not "good cause."

    The so-called good-cause statement in this proposed order was written by an insurance carrier and the individual plaintiff suing it, in Zehtab v. Principal Life Insurance Co., No. 8:19-CV-01649-JLS-KES, 2020 WL 2079987, at *1 (C.D. Cal. April 30, 2020).  Their joint stipulation was clearly an attempt to base all future determinations of "good cause" for secrecy in that case exclusively or primarily on the good intentions of the parties and their lawyers in that case.  (Their proposal also reflects several attempts, one or two for each side in a negotiated agreement, as it were, to stretch the secrecy protection to things not ordinarily deemed worthy of protection under the Constitution and rules.)

    For ease of reference, I have highlighted the significant assertions in the "good cause" provision of this agreed secrecy order:

           B. GOOD CAUSE STATEMENT

The parties anticipate producing certain confidential documents or information in connection with discovery in this matter. Such confidential and proprietary materials and information consist of, among other things, confidential business information, information regarding confidential business practices, or other commercial information, information otherwise generally unavailable to the public, or which may be privileged or otherwise protected from disclosure under state or federal statutes, court rules, case decisions, or common law. Accordingly, to expedite the flow of information, to facilitate the prompt resolution of disputes over confidentiality of discovery materials, to adequately protect information the parties are entitled to keep confidential, to ensure that the parties are permitted reasonable necessary uses of such material in preparation for and in the conduct of trial, to address their handling at the end of the litigation, and serve the ends of justice, a protective order for such information is justified in this matter.  It is the intent of the parties that information will not be designated as confidential for tactical reasons and that nothing be so designated without a good faith belief that it has been maintained in a confidential, non-public manner, and there is good cause why it should not be part of the public record of this case.

Zehtab, 2020 WL 2079987, at *1 (emphasis added).

    Like many other stipulated protective orders, this one appears to have been entered by the Court without change from what the parties wrote.  For one thing, the Westlaw report ends with a California-required "Proof of Service" by one of the lawyers in the case.  Zehtab, 2020 WL 2079987, at *8.  For another, there is not even a signature line for the Judge, although the parties' proposed Stipulated Protective Order does recite that "FOR GOOD CAUSE SHOWN, IT IS SO ORDERED."  Zehtab, 2020 WL 2079987, at *7.

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

 

LENDER FORCE-PLACED INSURANCE: THE FLORIDA BAR NEWS LETTERS EDITION.

In the middle of writing the 2020 Supplements to my book, LITIGATION AND PREVENTION OF INSURER BAD FAITH (3d Edition published by Thomson Reuters West), I also wrote a Letter to the Editor of The Florida Bar News about the consequences of the last stimulus bill on insurance premiums force-placed on homeowners.  So proud that The Florida Bar News published my letter, accessible here (it's the second one down on this link).

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

This new article is drawn from research for the manuscript of the 2020 Supplement of LITIGATION AND PREVENTION OF INSURER BAD FAITH, which I am writing right now:

In 2019, the Reporters on the Restatement of the Law of Liability Insurance Reporters wrote that the majority view now rejects vicarious bad-faith liability of liability insurance companies for the professional malpractice of the defense counsel they provide to their insureds. See RESTATEMENT OF THE LAW OF LIABILITY INSURANCE § 12 & cmt. d (2019).

    The Tenth Circuit Court of Appeals echoed this view in 2020, based on the Reporters' Comment in 2019. The Tenth Circuit pointed out that Kansas law already follows this rule. The federal appellate court accordingly affirmed the trial court's summary judgment under Kansas law on a claim of vicarious bad-faith liability for the conduct of the insured's defense counsel in this case.

    The Tenth Circuit panel predicted that the Kansas Supreme Court will apply the following test which the appellate panel read in the Restatement, "[b]ecause of the soundness of the common rejection of an insurer's general vicarious liability for negligent representation by the insured's attorney":

An insurer is subject to liability for the harm caused by the negligent act or omission of counsel provided by the insurer to defend a legal action when the insurer directs the conduct of the counsel with respect to the negligent act or omission in a manner that overrides the duty of the counsel to exercise independent professional judgment.

Progressive Northwestern Ins. Co. v. Gant, ___ F.3d ___, No. 18-3226, 2020 WL 2078282, at *9 (10th Cir. April 30, 2020), quoting RESTATEMENT OF THE LAW OF LIABILITY INSURANCE § 12(2) (2019) (emphasis by the Tenth Circuit).

    In a shorter version of the appropriate test in Kansas, the Tenth Circuit panel wrote and applied the following test: "But the test for vicarious liability in this context is not the right to control, but the exercise of control." Gant, 2020 WL 2078282, at *10 (emphasis added).

    Query for the defense: How much of this is about vicarious liability?

See generally Dennis J. Wall, § 3:71, Requirements for fulfillment or enforcement of good faith duty: Conduct of defense--Negligence of trial counsel, in Volume 1 of LITIGATION AND PREVENTION OF INSURER BAD FAITH (Thomson Reuters West 3d ed., 2020 Supplements in process).

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

From the manuscript of the 2020 Supplement of LITIGATION AND PREVENTION OF INSURER BAD FAITH, which I am writing right now:

    In 2019, a federal court decided the question of whether an "injury in fact" was alleged in an action involving a consumer protection statute in New York State, N.Y. General Business Law § 349. The ruling came on a motion to dismiss. The Court equated plausibility of stating a substantive claim under the New York statute with plausibility of stating a claim of concrete and particularized injury for standing purposes, at least in a case of alleged "economic injury," namely, overpaying based on the defendant's affirmative misrepresentations.¹

¹ See Cummings v. FCA US LLC, 401 F. Supp. 3d 288, 304, 307 (N.D.N.Y. 2019).

 

The 2019 Supplement on "Injury in Fact:  What Happens to Bad Faith Statutes," is available courtesy of Thomson Reuters West and the author, at:

https://www.dennisjwall.com/attachments/dennis_j._wall__litigation_and_prevention_of_insurer_bad_faith

_section_3.28.50_(2019_supp.)_2.pdf

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

Conflicts and Separate, Independent Defense Counsel.

"After considering case law from New York to California and in between, and after considering statutes from California to Florida, it appears clear that lawyers' rules of ethics provide the bases for the conflict that requires liability carriers to provide their insureds with separate, independent defense counsel."

Dennis J. Wall, Conflicts Requiring Liability Carriers to Provide Independent Defense Counsel to Insureds, New Appleman on Insurance:  Current Critical Issues in Insurance Law 1 (Spring 2020).  PDF provided courtesy of copyright holder LexisNexis.

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

 

 

 

 

 

 

 

THE REAL ATTORNEY-CLIENT PRIVILEGE IN THE CLAIMS FILE.

In a bad-faith case arising out of denial of a life insurance claim, the Chief U.S. Magistrate Judge of a U.S. District Court took apart a claim of attorney-client privilege to bar discovery of a key memorandum from a claim file:

    The Court has considered the arguments by the parties and has reviewed the memorandum at issue. The memorandum is not written by an attorney and does not state that it conveys a confidential communication from Defendant’s counsel. Instead, the memorandum is written by Defendant’s Head of Claims and refers to business practices for contestable claims in states with a statute requiring that the condition that was misrepresented contributed to the loss.

Salopek v. Zurich Am. Life Ins. Co., CV No. 18-339 JAP/CG, 2019 WL 1746303, at *2 (D.N.M. April 18, 2019).

    The Court continued with regard to the attorney-client privilege claim:

Moreover, the substance of the memorandum merely advises claims handlers to refer contestable claims to a claim manager and for possible legal advice. For these reasons, the Court finds Defendant has not met its burden in proving the memorandum is privileged.

Salopek, 2019 WL 1746303, at *2.

But the Court was not finished. The Chief Magistrate Judge concluded that the memorandum in question is not only not privileged, but it is relevant:

    In addition, the Court finds the memorandum is relevant. Plaintiff’s claims involve a contestable claim and alleged misrepresentations on an insurance application. While the memorandum refers to statutes in states other than New Mexico, it also discusses Defendant’s business practices when presented with contestable claims and the effect of a misrepresentation. Therefore, is relevant to the claims and defenses in this case.

    IT IS THEREFORE ORDERED that Plaintiff’s Motion to Compel Zurich America Life Insurance Company to Produce an Unredacted Copy of a Memorandum, (Doc. 101), is GRANTED, and Defendant shall provide Plaintiff with an unredacted copy of Bates No. ZALICO_SAL0002235[.]

Salopek, 2019 WL 1746303, at *2-*3.

    So simply mentioning lawyers in a memorandum is not enough to keep the memorandum secret even in a bad-faith case. This is the universal or nearly universal rule and this decision exemplifies the rule.

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

 

A Poem of Memories Alive During the Pandemic.

For a special treat during social distancing and the pandemic, here is a poem by Diane Neff. For those who can relate and remember some of the scenes in the poem, it will be a boost. Others can read it too. And for lots of reasons, it should be a boost to them too.

Here now, enjoy.

Disco Fever
by
Diane Neff
©2020 Diane Neff.
When the dancing paused, last call was heard.
Intoxicated? No just buzzing bright
atop the disco floor, what happy sight!
My vision seems unfocused, doubled, blurred,
and yet it feels so right, the beat unslurred.
I blame it on the neon flashing lights.
Who thought to place them in the floor tonight?
Who turned the music up? Can’t hear a word.
The heat’s still rising, no one walks away.
We push ourselves. With artificial knees,
gray hair, bad hips, we’re old, we’re boomers, man.
It’s not the seventies, no more, you say?
But dancing has no “best by” date for me.
Just play the songs, I’ll dance the best I can.

Published here with permission of the poet.

FOLLOWING THE RULES OF PUBLIC ACCESS, REJECTING SECRECY BY DECREE.

In Regional Local U. Nos. 846 & 847 v. Mile High Rodbusters, Inc., No. 1:20-cv-00673-SKC, 2020 WL 1865168 (D. Colo. April 14, 2020) (Crews, USMJ), yet again a U.S. Magistrate Judge confronted yet another motion to seal. This case was brought to enforce a judgment in a previous case. The judgment had been entered in favor of the plaintiffs on their complaints that the defendant employers violated a collective bargaining agreement. The plaintiffs including unions filed a one-paragraph motion to seal their complaint.

    But the result in this case was to allow public access and to refuse the plaintiffs' motion to restrict access to their complaint in this case. The USMJ began by publishing the standards adopted by Local Rule in the U.S. District Court for the District of Colorado where this action was brought.

    This is a procedural rule approved by the district judges and magistrate judges themselves. It may be easier for all judges to begin by following rules which they themselves have written, particularly when it comes to the subject of restricting public access to public documents, i.e., sealing them.

   For whatever reason, the USMJ began by looking at the Local Rule on restricting access in this case:

    Pursuant to Local Rule 7.2, motions to restrict must address the following factors:

(1) identify the document or the proceeding for which restriction is sought;
(2) address the interest to be protected and why such interest outweighs the presumption of public access (stipulations between the parties or stipulated protective orders with regard to discovery, alone, are insufficient to justify restriction);
(3) identify a clearly defined and serious injury that would result if access is not restricted;
(4) explain why no alternative to restriction is practicable or why only restriction will adequately protect the interest in question (e.g., redaction, summarization, restricted access to exhibits or portions of exhibits); and
(5) identify the restriction level sought.

D.C. Colo. Local Civil Rule 7.2(c).

http://www.cod.uscourts.gov/Portals/0/

Documents/LocalRules/

2019_Final_Local_Rules.pdf

  [Local Civil Rule 7.2 is located on pages 18-19 of the hyperlinked pdf on the District of Colorado's website.]

Regional Local Union, 2020 WL 1865168, at *1. Here, the plaintiffs requested in one paragraph that their complaint be sealed from public view. They represented that "some allegations" in their complaint "derived from" documents in their earlier case which was apparently filed in 2013 and in which a protective order had been entered.

    This request just did not comply with Local Civil Rule 7.2 in the eyes of this United States Magistrate Judge. More than that, the USMJ compared this request to the Local Rule and concluded, concisely, that the plaintiffs did not even attempt to satisfy the requirements of the Local Rule.

    As to the Constitutional presumption of public access, the Court again held the plaintiffs to the prevailing standard in such a case as this. In order to seal pleadings and other documents the plaintiffs requesting the seal in this case have to demonstrate "'real and substantial interest'" in depriving the public of access to records "'that inform [the court’s] decision-making process'[.]" Regional Local Union, 2020 WL 1865168, at *2 (emphasis by the Court).

    "This is especially true where, as here, a party wants to restrict access to a document that is at 'the heart of the issues' in the litigation, i.e., the Complaint itself." Regional Local Union, 2020 WL 1865168, at *2.

    The Constitutionally required standard to restrict public access to public documents was not met here.

    To sum up, the procedural requirements for restricting public access were not met here, and more importantly, neither were the Constitutionally required standards met here. Result: Motion Denied.

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

WELLS FARGO WON THE PUNITIVE DAMAGES BATTLE, BUT LOST THE WAR.

In Dollen v. Wells Fargo Bank, N.A., ___ P.3d ___, No. A-1-CA-37194, 2020 WL 1699021 (N.M. Ct. App. April 6, 2020), the New Mexico Court of Appeals considered the standards for assessing punitive damages against Wells Fargo, a mortgage servicer in this case. The suit was also filed against an insurance carrier which had issued the deceased homeowner what the appellate court called a mortgage accidental death insurance policy, but the carrier was out of the suit by the time of this decision.

    The Court of Appeals set out the relevant factors, in pertinent part as follows:

    {19} The Due Process Clause of the Fourteenth Amendment entitles litigants to fair notice of conduct that may be punished by a state’s punitive damages system, and fair notice of severity of the penalty that a state may impose.

Dollen v. Wells Fargo, 2020 WL 1699021, ¶ 19, at *4.

    Accordingly, the Due Process Clause imposes certain constraints upon any assessment of punitive damages, according to the case law and to Standard Jury Instructions which are based on the case law:

    {20} One such constraint is the requirement of a reasonable relationship between the punitive damages award and the harm that was or could have been caused to the plaintiff(s). [Citations omitted.] Thus, New Mexico’s jury instructions with respect to punitive damages provide, in part, as follows:

Punitive damages are awarded for the limited purposes of punishment and to deter others from the commission of like offenses. The amount of punitive damages must be based on reason and justice taking into account all the circumstances, including the nature and enormity of the wrong and such aggravating and mitigating circumstances as may be shown. The property or wealth of the defendant is a legitimate factor for your consideration. The amount awarded, if any, must be reasonably related to the injury and to any damages given as compensation and not disproportionate to the circumstances.

UJI 13-1827 NMRA (emphasis added).

Dollen v. Wells Fargo, 2020 WL 1699021, ¶ 20, at *5.

    At that point, the punitive damages ball seemed to be rolling in Wells Fargo's direction in this case. And then it stopped. Wells argued too much by half, as it were, judging by the results. The New Mexico appellate court held that the punitive damages assessment against Wells should be remanded in spite of the evidence in the record that clearly established Wells' wrongdoing in servicing mortgages across the United States, according to the New Mexican judges in this case:

    {23} In arriving at its punitive damages figure, the district court in this case appears to have considered only avoiding an amount of punitive damages that might bankrupt Wells Fargo, rather than considering the amount that would accomplish but not exceed New Mexico’s goals of punishment and deterrence. [Citation omitted.] Because Wells Fargo raised no argument about its wealth, the district court assumed that “any amount it awards will not threaten Wells Fargo’s very existence.” This, coupled with the district court’s reference to findings that Wells Fargo services eight to nine million home loans in the United States, and systemically, remorselessly mishandles mortgage accounts for its own profit, indicates that the district court’s punitive damages award was aimed at deterring a national company with virtually unlimited assets from nationwide wrongdoing. This, again, violated Wells Fargo’s right to a process constrained by fair and permissible considerations, namely: punishment for harm to these Plaintiffs, and deterring only conduct in this state.

    {24} Accordingly, we reverse and remand the district court’s judgment on punitive damages, so that the court may reconsider its award within the constraints described hereinabove.

Dolan v. Wells Fargo, 2020 WL 1699021, ¶¶ 23-24, at *6 (italics in original; boldface added).

Constitutional, statutory, and common law standards for the assessment of Punitive Damages against insurance carriers in bad faith cases are analyzed at length in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 13:15 (3d ed. Thomson Reuters West, 2020 Supplements in process).

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