Claims and Bad Faith Law Blog

WIND 2020, EXTRACONTRACTUAL CLAIMS AND "THE BIBLE OF BAD FAITH."

Attorneys and adjusters representing policyholders outnumbered the show of hands from attorneys and adjusters representing insurance companies at the WIND Conference 2020 yesterday.

 

Copyright 2020 Dennis J. Wall.

At a class on Extracontractual issues, many issues were discussed.  For openers, the two main reasons for insurance bad faith claims were identified as Delay and Undervalued.  Insurance bad faith claims tend to be made in the greatest numbers, by far, when claims are delayed and when they are undervalued.

In Florida terms, a "CRN" or "Civil Remedy Notice" under Florida's Bad Faith Statute, Section 624.155, was discussed a lot.  Good advice for those writing CRN's:  Provide enough information in this statutory condition precedent to a bad faith claim to allow the carrier the opportunity to resolve the damages claim under the policy, and so resolve the alleged bad faith behavior beforehand.  That is clearly the statutory purpose of the 60-day period under the Florida Statute.

"Peer review" may be the next shorthand reference in claims handling.  This is admittedly anecdotal evidence, but anecdotal evidence in this context may simply be evidence that has not yet found its way into a court file.  Hopefully it never will.  The term has been used so far by a property insurance carrier in Pennsylvania to deny loss mitigation claims on the ground that after a "peer review" the policyholder essentially did not follow the prevailing standard of care by paying for a certain way to clean up the mess after a property loss such as a fire or flood.  "Peer review" can be extended of course to many other things such as asserted lack of cooperation or claimed failure to protect the property after loss.  "Peer review" may go down in the annals of claims handling along with such phrases as "round tabling," which was established long ago to identify a process in which many people go around a table to express their views about whether a claim is covered in essence.  Time will tell.

Returning to Florida Insurance Bad Faith Law, the Florida Bad Faith Statute incorporates other statutes that in turn were written based on a Uniform Claim Settlement Procedures Act.  Neither the Florida statutes nor the Uniform Act clearly identify or define what is a "General Business Practice."  In Florida, proof of a GBP is a required element of a punitive damages claim.  It was not mentioned yesterday but apparently the people that wrote the Uniform Act had case law and statutes in other areas of the law in mind, particularly Labor Law where it is a defined term, when they wrote about a "General Business Practice" in the context of Insurance Bad Faith.

All told, a very knowledgeable group attended the Extracontractual class at WIND 2020 yesterday.  There was universal agreement with the spoken recognition of LITIGATION AND PREVENTION OF INSURER BAD FAITH as "The Bible of Bad Faith."  As far as I am concerned, these were clearly people of good taste!

Copyright 2020 Dennis J. Wall.

Dennis Wall is the author of LITIGATION AND PREVENTION OF INSURER BAD FAITH, now in Two Volumes in its Third Edition with 2020 Supplements in process published by Thomson Reuters West.

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PAYMENT OF APPRAISAL AWARD NO DEFENSE TO BAD FAITH CLAIM.

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

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

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

Image provided by Dennis J. Wall. ©Dennis J. Wall.

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SOMETHINGS FISHY, DECIDED IN THE SOUTHERN DISTRICT OF FLORIDA.

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

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

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

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

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

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

Somethings Fishy, 2019 WL 5866823, at *5.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Many cases present lender force-placed insurance (LFPI) claims based on alleged recent LFPI practices.  In these cases, homeowners are successful in alleging at least some claims that their lenders and the lenders' servicers and force-placed insurance carriers add kickbacks and other unauthorized, unnecessary charges to the homeowners' monthly mortgage payments.  See, e.g., Alpert v. Nationstar Mort. LLC, Case No. C15-1164 RAJ, 2019 WL 1200541, at *2 (W.D. Wash. March 14, 2019) (alleged LFPI policies from July 2012 through July 2016); Hibbs v. Wells Fargo Bank, N.A., No. 17-615-SDD-RLB, 2018 WL 3245050, at *2 (M.D. La. July 3, 2018) (lender force-placed flood insurance in 2016).

Some of these successful claims include alleged bad faith and unfair dealing.  E.g., Gray v. CIT Bank, N.A., No. 18-1520 (RMB/AMD), 2018 WL 6804273, at *1-*2 (D.N.J. Dec. 27, 2018) (alleged LFPI practices from 2011 through 2017); cf. Wieck v. CIT Grp., Inc., 308 F. Supp. 3d 1093, 1120 n. 14 (D. Haw. 2018) (dismissing bad faith claims because there is no independent tort of "bad faith" in a "non-insurance" context under Hawaii law, but granting leave to amend breach-of-contract claim to include same allegations of bad faith and unfair dealing; case concerned allegedly unnecessary hurricane insurance placed in 2013 and backdated to 2011-2013).

The author is currently at work on an article about "'Quiet in the Courts!' Concealed Evidence and Secret Settlements:  The Lender Force-Placed Insurance Model."

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

WIND 2019: THE 20th ANNUAL CONFERENCE ENRICHES THE DISCUSSION.

Photograph by Dennis J. Wall.

The Annual Conference of the Windstorm Insurance Network, or WIND, turned 20 this year.  The 20th Anniversary WIND Annual Conference was held at Walt Disney World.  Some 1,200 people attended.  The Annual Conference attendees, like the members of WIND, are professionals in the property insurance claim process.  At the WIND Annual Conference they present the policyholder sides and the insurance company sides of major property insurance issues.

WIND picks its speakers and its session topics through the work of its Speakers Committee.  This group of about ten people has the charge of staying on top of speakers and current issues for the Annual Conference and, from what I saw myself this year, they do their job well.

For example, one current issue or "hot topic" of discussion in property insurance circles is clearly what explains the handling of catastrophe claims resulting from the 2017 Hurricanes and other catastrophes then and since.  As one presenter explained, first of all we had not had a catastrophe for a number of years.

Taking Hurricanes in Florida as an example, the last major Hurricanes to hit Florida came in 2004 and 2005, named Charlie, Frances, Ivan and Jeanne in 2004, and named Katrina and Wilma in 2005.  So it had been awhile before Hurricanes Harvey, Irma and Maria struck Texas, Florida, and Puerto Rico the hardest, in 2017.

All panelists were in agreement on the central ingredient for success in handling catastrophe claims (as well as other kinds of claims):  Communication.  If you say that you are going to call the policyholder every Friday to update her on the status of her claim, for example, then make the telephone call that you said that you would make, even if all you have to tell her that week is that there is nothing new but that you will call again when there's been a development.

Notice is a big issue in recent Catastrophe Claims handling.  Panelists conjectured about the reasons for the increase in such issues in recent years.  One suggestion was that higher deductibles may be contributing to late notice to insurance companies, because policyholders with the higher deductibles may conclude that the claim could not reasonably exceed the amounts of their deductibles, but of course the amounts of the claims resulting from catastrophes usually present a second catastrophe, the first being the loss itself, and the second being the amount of indemnity that is required as a result of the loss.

Tying into the idea of high deductibles generally being a cause of late notice, other presenters suggested that late notice of claims after recent catastrophes may have been caused at least in part by the implementation of high Hurricane deductibles.  Many of the high Hurricane deductibles, they pointed out, took effect just before Hurricane Harvey in 2017.

Another suggestion came out of the nature of the catastrophes such as Hurricane Irma, in which the catastrophe claims were apparently largely based on wind-driven rain which causes damage that does not show up until later.

Countering these suggestions was the basic and simple notion that it doesn't cost anything to report a claim (not even the cost of a stamp, I might add, since the advent of Fax and email, although keeping a paper copy of a letter put in the mail is still probably a very sure way of incontestably giving notice).

Another current issue is the evidentiary effect, if any, of insurance companies' pre-catastrophe inspection reports.

Managed repair was a popular topic.  Once coverage is accepted by an insurance company for even a part of the loss -- such as coverage for repair of the damaged property -- then, according to the discussion at another panel, the policyholder would have the right to an appraisal, even in a repair situation.

Whatever the state of coverage that might exist in that situation, once again the idea is current and under discussion by those involved in property insurance claims and will come as no surprise to the attendees of this year's 20th Anniversary WIND Annual Conference.

Photograph by Dennis J. Wall.

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

Photograph by Dennis J. Wall

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

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

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

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

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

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

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

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

FOLLOW THE MONEY 2018.

This is what follow the money looks like in 2018.

Hurricanes are coming to the United States from the East and from the West, from the Atlantic and from the Pacific.  One of those storms, Florence, is about to strike the Carolinas and Virginia, the federal government is pretty certain.  (Many other people are certain, too, but this is a tale of how the federal government spends our money in 2018.)

The coming of hurricanes means that the Federal Emergency Management Administration (FEMA), the United States Coast Guard, and other agencies will have a lot to do to save lives and protect property.

With hurricanes on the horizon, the federal government's Department of Homeland Security has secretly taken some $10 Million from FEMA.

They have surreptitiously taken $29 Million from the Coast Guard.

All told, without any public announcement they have reportedly taken $200 Million from other agencies to build prison camps for immigrant children and their families.

Saving lives and protecting property vs. prisons for children.

What sort of people would choose building prisons in the face of hurricanes?

Follow the money.  The answer is at the end of the rainbow, where we always heard it would be.

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

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

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

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

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

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

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

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

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MORE FROM THE PROPERTY INSURANCE LAW COMMITTEE MEETING IN ORLANDO.

In Florida, unless there is a properly declared state of emergency, when a claim is made on residential property insurance coverage, by statute the carrier has fourteen days within which to provide the policyholder making that claim with a copy of the statutory Florida Policyholder's Bill of Rights.  See Fla. Stat. § 627.4172.

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

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

MISSISSIPPI PROPERTY POLICY CANCELLATION VOID, $1,693,035 "REPAIR OR REPLACE" DAMAGES, ...

AND AFTER OTHER INSURANCE WAS FORCE-PLACED BY THE LENDER. 

In what might be termed a 'comedy of damages' except for the great harm that was done, Mount Carmel Ministries purchased a property policy from GuideOne to cover a school which Mount Carmel ran.  After a time, GuideOne attempted to cancel the policy, but a district court in Mississippi later held that the cancellation was void and that the policy was in place at the time of a tornado loss.

The district court awarded "$1,693,035 in damages, representing what would have been the cost to repair or replace the property roughly six weeks after the tornado, less depreciation."  GuideOne Elite Ins. Co. v. Mount Carmel Ministries, ___ F. App'x ___, No. 15-60915, 2017 WL 344278, at * (5th Cir. January 23, 2017) (precedential value in at least some federal courts apparently limited by Fed. R. App. P. 32.1 and 5th Cir. Rules 28.7 and 47.5).

Parenthetically, Mount Carmel's lender, Seaway, placed insurance premiums on Mount Carmel by force for a replacement policy after Seaway learned of GuideOne's supposed "cancellation."  In what we are definitely not going to call a 'comedy of damages' here, Seaway apparently forgot to keep the force-placed insurance policy in place.

That left the issue squarely presented of whether GuideOne had an arguable basis for denying coverage due to the assumed cancellation here; if it did not have an arguable basis for denying coverage in this case, then under Mississippi law, it would face the assessment of punitive damages for "bad faith" conduct.  The district court held that GuideOne did not have to face a punitive damages assessment in this case, because here the district court found an arguable reason for GuideOne's coverage denial.

A three-judge panel of the Fifth Circuit affirmed the district court's holding that cancellation did not comply with the GuideOne policy requirements, and the district court's holding that GuideOne had an arguable basis for denying all coverage based on cancellation even though the cancellation was void.

Judge Owen concurred in affirming both invalid cancellation under the policy, and no punitive damages, but would have also reached the district court's holding that cancellation was invalid under a Mississippi statute as well as under the policy.

Coverage denied under a property policy that was not legally cancelled.  Bad faith, punitive damages bullet dodged.  Twin takeaways from this case.

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

 

PENNSYLVANIA BAD FAITH LAW BARS CLAIM, FEDERAL PROCEDURE ALLOWS CONTRACT.

In Davis v. Wells Fargo, No. 15-2658, 2016 WL 3033938, at *2 (3d Cir. May 27, 2016), the Third Circuit Court of Appeals dealt with claims alleged under Pennsylvania law against "Assurant." The complaint contained allegations that Assurant was a force-placed property insurance carrier. In fact, the complaint contained allegations that Assurant "paid Wells Fargo kickbacks in exchange for the bank making Assurant the exclusive provider of force-placed insurance for bank-related properties" like Mr. Davis's.
One of the claims Mr. Davis alleged against Assurant was that it breached a contract which it had with him. Assurant's contract-breaching conduct was that it allegedly failed "to 'adequately investigate and pay the roof leak claim … which led to and caused the back wall of [Davis's] property to deteriorate and collapse.'" Davis attached the insurance company's letter disclaiming coverage to his complaint. The letterhead contained the names of both American Security Insurance Company ("ASIC") and also Assurant's name. "Thus, Assurant's name appeared, in bolded font, at the top of the letter denying Davis's insurance claim." Davis v. Wells Fargo, No. 15-2658, 2016 WL 3033938, at *12 (3d Cir. May 27, 2016).
As a result, said the Third Circuit, Mr. Davis's breach of contract allegations stated a plausible claim upon which relief could be granted under Pennsylvania substantive law. However, Mr. Davis's alleged bad faith claim failed under Pennsylvania law for the same reason. "Because Davis cannot maintain an independent cause of action for breach of the covenant of good faith and fair dealing under Pennsylvania law, that claim should be dismissed …." Davis v. Wells Fargo, No. 15-2658, 2016 WL 3033938, at *13 (3d Cir. May 27, 2016).
Assurant filed a declaration containing testimony that ASIC, and not it, Assurant, was really the force-placed property insurance carrier in this matter. However, Assurant filed a Rule 12(b)(6) motion to dismiss for failure to state a claim which meant, as a matter of Federal Procedure, that the Federal Courts could not properly consider the declaration which contradicted the plaintiff's allegations -- and to say again, as the appellate court did, there was the matter of that disclaimer letter sent to Davis and attached to the complaint with Assurant on the letterhead denying coverage. Davis v. Wells Fargo, No. 15-2658, 2016 WL 3033938, at *12 (3d Cir. May 27, 2016).
Obviously the breach of contract claim would have withstood a motion to dismiss in this case if ASIC or whoever was the actual force-placed property insurer had filed the motion. The actual policy does not appear to have been made a part of the public record in this appeal.
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PENNSYLVANIA DELAY OVER UNCERTAIN VALUE, NECESSARY INVESTIGATION, NOT BAD FAITH.

In a case decided under Pennsylvania law, it was held that there was no First-Party Bad Faith under a commercial property insurance policy.  The carrier's delay in paying the claim was attributable to the claim's uncertain value, and a need to investigate further.  The case involved Pennsylvania's bad faith statute, 42 Pa. Cons. Stat. § 8371.  Great Lakes Reins. (UK) PLC v. Stephens Garden Creations, Inc., 119 F. Supp. 3d 297, 306 (E.D. Pa. 2015).

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with  Supplements).  See in particular § 9:6 in Volume 2 which addresses the issues which were addressed in the Great Lakes case, "The Question of Bad Faith -- Timely Investigation and Evaluation Before and After The First-Party Insurer is Sued for Bad Faith."  All rights reserved.

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Pennsylvania Supreme Court: "Yes" to Assigning Statutory Bad Faith Claim.

TEXAS DRILLING DAMAGE IN PENNSYLVANIA: ALL RISKS PROPERTY COVERAGE?

          Reportedly an oil company based in Texas is trying to use Pennsylvania "forced pooling law" to permit fracking or other oil drilling under the land of Pennsylvanians who refuse to sign the Texas company's oil and gas drilling lease.  "Law May Force Drilling on Balking Landowners" p. A11, col. 1 (Associated Press Copyrighted story published in New York Times Nat'l ed., Monday March 31, 2014).

          One of the publicly stated purposes of forced pooling laws is apparently to limit the number of "unsightly drilling rigs on the surface" by allowing oil companies to drill even where a landowner refuses the companies permission to drill.  See id.

          A question rises to the surface here:  Is property damage if any which may be caused by the unwanted drilling, going to be covered under Homeowner's standard "all risks" policies?

          Or will there be some sort of Exclusion for acts of government?

          And, if it is true as the Texas-based oil company says, see id., that it has already obtained leases from 99% of the property owners in that Pennsylvania locale, then why in heaven's name does it need to drill under the land of the remaining 1%?

          And, if one of the leasing landowners who reportedly owns a 200-acre golf course received half-a-million dollars "plus 18 percent royalties on future production," id., then instead of reportedly being upset with Pennsylvania landowners --"I don't understand how people that own four acres of ground can hold up such a big thing"-- try being upset instead either with the outside agitators that are going to put the oil derricks there --

          or try living with a half-a-million dollars and 18% oil royalties on account of the oil rigs that the golfers will be looking at.

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

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Law May Force Drilling on Balking Landowners

 

FORECLOSE, BUY, RENT ... WHITHER HOMEOWNER'S INSURANCE?

Foreclosures result in judicial sales.

"[I]nvestors have snapped up foreclosed homes and bid up prices in the past year."  "Pending Home Sales Fall Again," p. B8, col. 6 (New York Times Nat'l ed., Tuesday, November 26, 2013; Associated Press Copyrighted News Report).

Pending home sales have fallen for the last five months in a row.  The number of pending sales -- where there is a signed contract but not a completed sale -- is at the lowest reading calculated by the National Association of Realtors since December, 2012.  "October Pending Home Sales Down Again, But Expected to Level Out" (National Association of Realtors Press Release, November 25, 2013); see "Pending Home Sales Fall Again," AP report published in the New York Times, supra.

I have  not seen any reports or studies on the purchase of property insurance by the investors that purchase these properties.

Moreover, since these investors do not carry mortgages, they do have no need to buy mortgage insurance.

Further, the number of homeowners is necessarily declining since fewer homes are being sold and purchased in 2013.  It seems that as a consequence the number of homeowner's insurance policies must also decline.  That will have clear results in falling homeowner's insurance sales and premiums.  What effects will it have on the handling of homeowner's insurance claims in a tightening market?

There is potentially good news on the other hand for sellers of tenants and renters insurance policies.  Investors are buying the foreclosed homes in order to rent them.

Simple math.  That is one reason, at the least, why home ownership is in decline.  There are fewer homeowners because there are fewer homes bought and sold; instead, homes in 2013 are increasingly bought and rented.

 

© 2013 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

 

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

... UNDERWRITERS POINT TO THEIR COMPUTER MODELS TO TEE OFF ON SANDY DAMAGE.

           Computer models.  Underwriters are now using computer models to justify talk of higher Premiums to come in the Northeast after all the damage that Sandy caused, if property or flood insurance are going to be made available at all in the Northeast.

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

          There is definitely something to it, in a sense.  There is a recognition in that repeated observation that climate change is not only real right now, it is also so much the reality of our future that even the Northeast can expect previously unusually destructive weather and coming at previously unusual times of the year, as Sandy did.

          However, the idea that opinions about what exactly the future will bring, fed by underwriters into computer programs which exist for the purpose of supporting premium rate increases which are going to be requested from State Insurance Commissioners, is suspect, notwithstanding.

          This shameful exercise with computer programs force-fed by underwriters is not good faith nor fair dealing.

Please Read The Disclaimer.    

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

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

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

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

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

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

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

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

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

Have a good St. Patrick's Day today!

Please Read The Disclaimer.

PART PAYMENT OF FLORIDA PROPERTY CLAIMS.

          In Florida, the Unfair Claim Settlement Practices Act has been amended to apply to situations of “partial coverage”:

 (i) Unfair claim settlement practices.--

***

 e. Failing to affirm or deny full or partial coverage of claims, and, as to partial coverage, the dollar amount or extent of coverage, or failing to provide a written statement that the claim is being investigated, upon the written request of the insured within 30 days after proof-of-loss statements have been completed ....

 Fla. Stat. § 626.9541(1)(i)3e.  Paragraph (i) of Subsection 626.9541(1), quoted above, is made actionable by Fla. Stat. § 624.155(1)(a), “the Florida Bad Faith Statute”.

        A more recently enacted Florida statutory provision, Fla. Stat. § 627.70131(5)(a), provides in pertinent part:

    Within 90 days after an insurer receives notice of an initial, reopened, or supplemental property insurance claim from a policyholder, the insurer shall pay or deny such claim or a portion of the claim unless the failure to pay such claim or a portion of the claim is caused by factors beyond the control of the insurer which reasonably prevent such payment.

 Failure to comply with this provision is a violation of the Florida Insurance Code.  Fla. Stat. § 627.70131(5)(a).  "However, failure to comply with this subsection does not form the sole basis for a private cause of action."  Fla. Stat. § 627.70131(5)(a).  [Emphasis added.]

        It has therefore been held in the Florida case law that failure to comply with this subsection does not provide a separate claim.  However, the same Court that announced this holding also stated in apparent dicta that a violation of this statutory subsection could nonetheless be considered in evidence in a bad faith claim or a Department of Insurance review.  Buckley Towers Condo., Inc. v. QBE Insurance Corp., 2008 WL 2490450 *11 (S.D. Fla. June 18, 2008)(Torres, United States Magistrate Judge), report and recommendation adopted by United States District Judge in 2008 WL 2856457 (S.D. Fla. July 24, 2008).  Accord as to holding, QBE Insurance Corp. v. Dome Condo. Ass'n, Inc., 577 F. Supp. 2d 1256, 1261-62 (S.D. Fla. September 16, 2008).

        Perhaps in response to such Federal judicial decisions, a new statutory Unfair Claims Practice was thereafter enacted by the Florida Legislature:

       4.  Failing to pay undisputed amounts of partial or full benefits owed under first-party property insurance policies within 90 days after an insurer receives notice of a residential property insurance claim, determines the amount of partial or full benefits, and agrees to coverage, unless payment of the undisputed benefits is prevented by an act of God, prevented by the impossibility of performance, or due to actions by the insured or claimant that constitute fraud, lack of cooperation, or intentional misrepresentation regarding the claim for which benefits are owed.

 Fla. Stat. § 626.9541(1)(i)4.  The new provision applies to residential property insurance claims. 

           New Florida case law clarifies the meaning and application of the statutory mandates for paying undisputed parts of residential property insurance claims.

 To be continued on Insurance Claims and Issues Weblog ....

 Please Read The Disclaimer.

 

CALIFORNIA "REASONABLENESS" FIRST-PARTY BAD FAITH STANDARD: NATIONAL STANDARD SAME?

     The case of Bafford v. Travelers Casualty Insurance Co. of Am., 2012 WL 5465851 (E.D. Cal. November 8, 2012), involves a burglary claim under an auto repair shop owner's Property Insurance Policy.  The Travelers, the Property Insurance Company, denied all Coverage "on the grounds that [the Policyholder] had made material misrepresentations during the investigation and while being examined under oath."  Bafford v. Travelers Casualty Insurance Co. of Am., 2012 WL 5465851 *4 (E.D. Cal. November 8, 2012).

     The Policyholder then became a Plaintiff and The Travelers became a Defendant.   The Plaintiff sued for alleged Breach of Contract and for alleged Bad Faith.  The Travelers filed a Motion for Partial Summary Judgment on the Bad Faith Claim, in part here pertinent.  The Defendant's Attorneys attended the Hearing, while the Policyholder's Attorney did not attend the Hearing.  Only after what appears to be nothing less than a dissection of the entire record in this case, Bafford v. Travelers Casualty Insurance Co. of Am., 2012 WL 5465851 *1-*4 (E.D. Cal. November 8, 2012), the District Court denied the Motion for Partial Summary Judgment on the Bad Faith Claim under established rules of California Bad Faith law, which can accurately be summarized in three parts, below.

1.  "Reasonableness" is an Objective Standard in California to Measure a First-Party Insurer's Exposure to a Bad Faith Claim.

            The Federal Court reiterated established standards of California Bad Faith law at the beginning of its decision.  A Plaintiff-Policyholder claiming Bad Faith under a First-Party Insurance Policy must, under California law, show in essence that (1) the Damage claim was covered by the Policy and (2) the First-Party Insurance Company's withholding of the Covered benefits was objectively "unreasonable".  See Bafford v. Travelers Casualty Insurance Co. of Am., 2012 WL 5465851 *5-*6 (E.D. Cal. November 8, 2012).  In stating this holding, the Court followed not just California Bad Faith law, but the Court also followed the established majority First-Party Bad Faith view in United States jurisdictions:

The legal standard governing an insurer's settlement conduct is one of reasonableness.  D. Wall, Litigation and Prevention of Insurer Bad Faith § 9.03 (1985).

Cruz v. American United Insurance Co., 580 So. 2d 311, 312 (Fla. 3d DCA 1991).

2.  Reasonable conduct includes a "reasonable" investigation.  It does not include a pretextual investigation where the Insurer's conclusion was already reached before the investigation was concluded.

     "One form of objectively unreasonable conduct is failure to fully investigate the grounds for denial."  Bafford v. Travelers Casualty Insurance Co. of Am., 2012 WL 5465851 *6 (E.D. Cal. November 8, 2012).  In other words, "reasonable" conduct includes conducting an objectively reasonable investigation.

    The Federal Court in this case fully explored the contours of California case law on this Insurance Bad Faith issue as well.  Bafford v. Travelers Casualty Insurance Co. of Am., 2012 WL 5465851 *6-*7 (E.D. Cal. November 8, 2012).  One species of the generic "unreasonable" investigation recognized by the California Courts is a "pretextual" investigation, although the California cases summarized by the Federal Court in this case do not appear to use that description.  An unreasonable failure to investigate, in short, includes an investigation which is shut down early and the Insurance Company refuses to reconsider a denial of its Coverage for the Claim even when presented with evidence of factual mistakes during the investigation or further evidence which has not yet been explored.

3.  In the Bafford Case, the Movant Insurance Company Did Not Negate Record Evidence That It Made Its Mind Up Long Before Its Investigation Was Complete.

     The Travelers failed to meet its Burden as the party requesting the entry of a Partial Summary Judgment when it failed to negate record evidence that would support the Plaintiff's-Policyholder's Claim.  Bafford v. Travelers Casualty Insurance Co. of Am., 2012 WL 5465851 *10 (E.D. Cal. November 8, 2012).

    To say again, the Court reviewed what appears to be the entire record in this case, and apparently left no stone unturned in doing that.  Bafford v. Travelers Casualty Insurance Co. of Am., 2012 WL 5465851 *1-*4 (E.D. Cal. November 8, 2012).  After that review, the Court appears to be convinced that the legal questions based on this record could not be clearly decided in the Insurance Company's favor.

    Twice the Court used the word, "disingenuous," to describe several arguments.  See Bafford v. Travelers Casualty Insurance Co. of Am., 2012 WL 5465851 *11 (E.D. Cal. November 8, 2012).  "Finally, the evidence suggests that Travelers concluded quite early in the investigation that Bafford had submitted a fraudulent claim and proceeded to seek information confirming that position."  Bafford v. Travelers Casualty Insurance Co. of Am., 2012 WL 5465851 *11 (E.D. Cal. November 8, 2012).  [Emphasis added.]

    In all cases, it is a best practice as it were to behave with objectively verifiable Good Faith.  In no case is it ever a best practice to behave in what a Judge or Jury can reasonably perceive as the opposite.

One Thing More:  The Court in the Bafford case could not conclude that there was a "genuine dispute" here as a matter of law.

     In reading the Bafford case, California lawyers will also be interested in the fact that The Travelers pursued its Motion for Partial Summary Judgment on the additional ground of what California Courts call "the 'genuine dispute' doctrine."  However, the Court concluded that the doctrine or rule, which operates as a Defense as a matter of law in California, does not relieve an Insurance Company from its "duty" to perform a reasonable investigation and that includes this case.  Bafford v. Travelers Casualty Insurance Co. of Am., 2012 WL 5465851 *12 (E.D. Cal. November 8, 2012).

Dennis Wall is a featured speaker at this year's National Forum on Bad Faith Litigation in Orlando, Florida on November 28 and 29, 2012.  I will be speaking on both days.  On November 28, I will be part of a panel addressing the handling of Bad Faith litigation.  My particular topic will focus on Expert Witnesses.  On November 29, I will be one of the leaders of a Florida Workshop.  Here is the American Conference Institute's website:  www.americanconference.com/badfaith.

Please Read The Disclaimer.

TWO DECISIONS ON BAD FAITH AND FORCE-PLACED Flood INSURANCE.

Remember the Veterans and All Who Gave Their Lives For Our Country, Including Chaney, Schwerner, and Goodman!

    The Federal First Circuit has issued a pair of 2-to-1 decisions affecting Insurance issues that are significant to people and businesses struck by Hurricane Sandy and many other Catastrophes.

    Both decisions were issued on the same day.

    Both involve alleged class actions by Mortgagors suing back against a Lender's alleged national program of force-placed or lender-placed Flood Insurance.

    Both involve Bad Faith claims.

    The first of the two cases involves New Jersey Insurance Law:  Kolbe v. BAC Home Loans Servicing, LP d/b/a Bank of America, 695 F.3d 111 (1st Cir. September 21, 2012).

    The other case involves Massachusetts Insurance Law:  Lass v. Bank of America ["BOA"], 695 F. 3d 129 (1st Cir. September 21, 2012).

    In future posts, we will explore the significance these decisions offer in common both to Homeowners and to Commercial Property owners particularly after the onslaught of the Hurricane Sandy Catastrophe and before the avalanche of Claims as a result.

To be continued .....

Please Read The Disclaimer.

"GOTCHA": $125,000 BECOMES $5,000 WHEN SETTLING WITHOUT SUBMITTING WRITTEN POL.

            It may not be a universal law.  But it is a 'best practice' generally to submit a written Proof of Loss ("POL") as a part of making any First-Party Insurance Claim.  If it is in writing, not only is it a "Proof of Loss," but it is a clearly provable Proof of Loss in Court.

            In Katie Realty, Ltd. v. Louisiana Citizens Property Insurance Corp., 2012 WL 4901067 (La. October 16, 2012), the corporate Policyholder made a claim on its Citizens Commercial Property Insurance Policy for Property Damage caused by Hurricane Gustav.  The Policyholder succeeded.  The claim was settled at Mediation for a Quarter of a Million Dollars ($250,000.00).

            Unfortunately, "Citizens failed to timely pay the settlement funds".  Katie Realty then "filed a motion to enforce settlement and to assess penalties pursuant to La. Rev. Stat. §§ 22:1892 and 1973."  The Louisiana penalties statutes invoked by Katie Realty trigger a penalty for delayed payment and, collectively, they also import a duty of Good Faith and Fair Dealing with additional penalties in the event of a finding of arbitrary and capricious behavior or 'Bad Faith' on the part of the Insurance Company.

            Citizens was assessed total penalties of $125,000.00 in this case for the delayed payment and for alleged Bad Faith in delaying the payment.  Katie Realty, Ltd. v. Louisiana Citizens Property Insurance Corp., 2012 WL 4901067 *1 (La. October 16, 2012).  On appeal, the Louisiana Supreme Court reduced the penalties assessment from $125,000.00 to $5,000.00.

            The reason for the reduction rests on the fact that Katie Realty apparently mediated and settled its Property Insurance Claim without submitting a satisfactory Proof of Loss.  Katie Realty, Ltd. v. Louisiana Citizens Property Insurance Corp., 2012 WL 4901067 *1, *6 (La. October 16, 2012).

            The Louisiana penalties statutes invoked by Katie in this case all require satisfactory Proofs of Loss.  Without them, only nominal penalties could be assessed under the Louisiana statutes here.  This legal result was reached by the Louisiana Supreme Court redefining 'proofs of loss' to mean 'proof of claim' after the Trial Court and Appellate Court had ruled that the settlement was a legally sufficient Proof of Loss to trigger the penalties statutes.

            Here, the payment which was delayed was payment of a settlement.  That made all the difference to the Louisiana Supreme Court.  "A settlement, however, is not an insurance claim arising under a contract of insurance."  Katie Realty, Ltd. v. Louisiana Citizens Property Insurance Corp., 2012 WL 4901067 *7 (La. October 16, 2012).  Therefore, said the Supreme Court, not Bad Faith penalties but only "a penalty award of $5,000 is appropriate and warranted."  Katie Realty, Ltd. v. Louisiana Citizens Property Insurance Corp., 2012 WL 4901067 *8 (La. October 16, 2012).

Please Read The Disclaimer.

RECORD: NO BAD FAITH FAILURE TO INVESTIGATE FIRST-PARTY CLAIM.

     In Scorpio v. Underwriters at Lloyd's, London, 2012 WL 2010168 (D.R.I. June 5, 2012), the Federal District Court in Rhode Island was confronted with an alleged claim of First-Party Bad Faith denial of a Property Insurance claim.  Specifically, the Plaintiff-Policyholder submitted a claim for Property Damage after a building containing six (6) residential apartment units was damaged by rainwater which accumulated on the roof during heavy rain storms during the policy period, on July 24, 2008.  Scorpio v. Underwriters at Lloyd's, London, 2012 WL 2020168 *1 (D.R.I. June 5, 2012), Download Scorpio v. Underwriters at Lloyd's, London (D.R.I. No. 10.325, Memorandum and Order Filed June 5, 2012) PUBLIC ACCESS.

    The Plaintiff claimed Bad Faith as a result of the Defendant Insurance Company's alleged failure "to properly investigate the claim."  Scorpio v. Underwriters at Lloyd's, London, 2012 WL 2020168 *6 (D.R.I. June 5, 2012).  The District Court held that the evidence of record disputed every element of this claim.

    In its ruling granting Defendant's Motion for Summary Judgment on this Bad Faith claim, the District Court compared the record evidence in that case, to every element of First-Party Bad Faith required by Courts in most jurisdictions, including Rhode Island.  First, the Federal Court announced the applicable State Bad Faith standard of liability:

    In order for Plaintiff to succeed on her bad faith claim she must “demonstrate an absence of a reasonable basis in law or fact for denying the claim or an intentional or reckless failure to properly investigate the claim and subject the result to cognitive evaluation .” Skaling v. Aetna Ins. Co., 799 A.2d 997, 1012 (R.I.2002).

 Scorpio v. Underwriters at Lloyd's, London, 2012 WL 2020168 *7 (D.R.I. June 5, 2012).

     Next, the Federal Court compared each relevant item of record evidence to that standard of Bad Faith exposure.  Recast in bullet points, the following complete quotation from the Court's opinion illustrates this comparison:

•  Defendant's actions do not even approach the bad faith standard.
• The record reflects that Defendant acted in a reasonable manner by timely and appropriately investigating the claim,
• engaging its own expert,
• and reviewing the appropriate information, including Plaintiff's engineer's report, before denying the claim.
• Defendant's denial letter noted the pertinent policy provisions and that the policy provided that a building that is still standing is not considered to be in a state of collapse.
• Defendant's actions, in addition to the Court's conclusion that the collapse provision is ambiguous and thus the claim is fairly debatable, leads this Court to conclude that Plaintiff's bad faith claim cannot survive Defendant's motion for summary judgment.

 Scorpio v. Underwriters at Lloyd's, London, 2012 WL 2020168 *7 (D.R.I. June 5, 2012).

     This is a "case study," if you will, in the kind of record evidence -- and the kind of conduct in First-Party claim handling -- that can defeat a claim of First-Party Bad Faith in most Courts.

Please Read The Disclaimer. 

Force-Placed Insurance Issues in New York: Your State, Too.

     The New York State Department of Financial Services has issued an order to three Insurance Companies to submit new Premium rates for force-placed Insurance, because the companies overcharged millions of dollars for it.  The three companies have until July 6, 2012 to respond.  The companies receiving the order are Assurant (a unit of American Security Insurance Company), QBE, and American Modern Home Insurance Company.  These three companies "make up more than 90 percent of the so-called force-placed insurance market in New York."  Zachary Tracer, "New York Asks Insurers of Lapsed Borrowers for New Rates" (Bloomberg.com, posted June 12, 2012).

    Other reports previously estimated that Assurant and QBE alone control about 90 percent of the force-placed insurance market in New York State.  See "Forced-Placed Insurance Under Investigation," posted here on May 22, 2012.     

    And here is a link to the New York State Department of Financial Services' Press Release announcing this action and the requirement that responses must be submitted by July 6, 2012:  Press Release, "Governor Cuomo Announces DFS Action Could Save Some New York Homeowners Millions in Overcharges to Home Insurance," June 12, 2012.

    Do not think that the issues of force-placed Insurance belong only to New York State.  The issues of force-placed Insurance apply across the nation.  The issues include Premium charges, forced placement of Insurance selected by the Lenders and their Mortgage Servicers when homeowners are not actually in default in carrying the Insurance which the homeowners selected, and issues involving an implied covenant of Good Faith and Fair Dealing not only by the Force-Placed Insurance Companies, but allegedly by Banks, Lenders, and Mortgage Servicers too.  See, e.g., "Force Placed Insurance and the Duty of Good Faith," posted here on June 12, 2012; "Good Faith in Lender-Placed Insurance?" posted here on April 12, 2012. 

Please Read The Disclaimer.

FOURTEEN FOR THE EXPERTS: NEW INSURANCE CASES THAT MAKE EXPERT WITNESS LAW ....

.... TWO MORE:  ELECTRONIC FILING, AUTHENTICATION, AND GENUINE ISSUES OF MATERIAL FACT.

    In a change-of-pace, Insurance Claims and Bad Faith Law Blog and Insurance Claims and Issues Weblog will carry consecutive posts addressing a single common theme:  Court rulings on Expert Witness Testimony and Reports in recent Insurance Cases.  For the previously developed rules of law and judicial decisions on these issues, see generally as to Liability Insurance Cases, volume 1 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 8:17 (West Publishing 3d ed. 2011; 2012 Supplement in process), and see generally as to all types of First-Party Insurance Cases, volume 2 id. § 12:18.

 Expert Witness Testimony:  Where Electronic Filing is Required, File Electronically; Authentication is Required in All Courts for All Exhibits.

   Where Exhibits to an Expert's Affidavit or Report are required to be electronically filed by Local Rule, but are not, the Exhibits may be stricken especially where they have not been authenticated.  References in reliance on those Exhibits in the Expert's Report and in pleadings are subject to being stricken as well upon the same grounds.  Such rulings came in an Insurance Case in which two Counts were alleged against the  Defendant Insurance Company:  Breach of the "individual disability income" Insurance Policy, and alleged breach of Good Faith and Fair Dealing, in Bonenfant v. Standard Insurance Co., 2011 WL 3904300 *3 (E.D. Cal. September 6, 2011), Download Bonenfant v. Standard Ins. Co. (E.D. Cal. Case No. CIV S.10.0361, Order Filed September 6, 2011) PUBLIC ACCESS.  In this Order, the District Court granted the Defendant Insurance Company's Motion for Partial Summary Judgment on the Plaintiff's Bad Faith Claim.  This Order, as noted, was entered on September 6, 2011.  The next day, the Plaintiff filed a Notice of Settlement, according to PACER, the Online Docket for this Federal Court case.  At the end of that same month, on September 29, 2011, the Court entered a 'minute order' dismissing the entire case with prejudice, each side to bear its own attorney's fees and costs.

 

  Expert Witness Testimony May Provide a Jury Question on Bad Faith Denial of Insurance Coverage.

    Expert Testimony on Hurricane Ike Wind Damage, or not, provided a Jury Question on Bad Faith Denial (or not) of all Insurance Coverage under a "wind and hail" Commercial Insurance Policy, precluding Summary Judgment, in Beaumont Preservation Partners, LLC v. International Catastrophe Insurance Managers, LLC, 2011 WL 6707287 *12 (E.D. Tex. October 6, 2011)(Hawthorn, USMJ), Download Beaumont Preservation Ptrs., LLC v. International Cat. Ins. Mgrs., LLC (E.D. Tex. Case No. 1.10CV548, Report and Recco of USMJ Filed Oct. 6, 2011) PUBLIC ACCESS, report and recommendation adopted, 2011 WL 6709920 (E.D. Tex. December 21, 2011), Download Beaumont Pres. Ptrs., LLC v. International Cat. Ins. Mgrs., LLC (E.D. Tex. Case No. 1.10CV548, Order of USDJ, Filed Dec. 21, 2011) PUBLIC ACCESS.

   The Expert who filed the Report in question is a lawyer "who is experienced in cases involving insurance disputes."  2011 WL 6702787 at *12.

Part of  a Series.  To be continued ....

Please Read The Disclaimer.

Hurricane Winds, Conflicting Expert Testimony, Bad Faith Jury Question.

   In Beaumont Preservation Partners, LLC v. International Catastrophe Insurance Managers, LLC, 2011 WL 6707287 *6-*9,  *9 (E.D. Tex. USMJ Report and Recommendations Filed October 6, 2011), Download Beaumont Preservation Ptrs., LLC v. International Catastrophe Insurance Mgrs., LLC (E.D. Tex. Report and Recco of USMJ Oct. 6, 2011) PUBLIC ACCESS, a U.S. Magistrate Judge in Texas recommended, id. at *9, that the Federal District Judge rule that differing Expert Testimony on the existence and extent of Hurricane Ike Wind Damage, provides a Jury Question on Bad Faith Denial of a Commercial First-Party Property Claim.

   The Federal District Judge recently agreed with this recommendation and adopted the Magistrate Judge's Report, in  2011 WL 6709920 (E.D. Tex. December 12, 2011, Order of U.S. District Judge Adopting Report and Recommendation of USMJ).

   In other words, the conflicting evidence available on the underlying claim for Coverage in this peculiar case made the Bad Faith Claim a Jury Issue in this case.

   This was one of many interesting rulings and recommendations in this Texas case.  Some will be posted further here and on Insurance Claims and Issues Web Log.

    Please Read The Disclaimer.

No Bad Faith Where Coverage Reasonably Disputed, BUT ...

  What did you say that Policyholders' "duty" was, again?

     In Northrop Grumman Corp. v. Factory Mutual Insurance Co., 2011 WL 4501945 (C.D. Cal. September 28, 2011), Download Northrop Grumman Corp. v. Factory Mut. Ins. Co. (C.D. Cal. Case No. CV05.08444, Order Granting Partial Summary Judgment Filed Sept. 28, 2011) PUBLIC ACCESS, a Federal Judge applied existing California law.  Then he invented new law out of thin air.

   The Insurance Company contested Insurance Coverage in that case.  The Policyholder's claim was for Hurricane Katrina damage.  Ultimately, the Insurance Company won on Coverage in an appeal to the Ninth Circuit Court of Appeals.  "[T]he Ninth Circuit reversed, holding that the Excess Policy's Flood Exclusion encompassed storm surge damage."  Id. at *1.

  One of the Policyholder's alleged claims in the present litigation against the Insurance Company was for Tortious Breach of the Implied Covenant of Good Faith and Fair Dealing.  Under existing California law, the duty imposed on an Insurance Company -- specifically, the duty imposed on a First-Party Insurance Company providing "property insurance" Coverage for Business Interruption losses incurred by its own Policyholder, as in this case -- "is not to unreasonably withhold payments due under the policy....  Because there was a genuine dispute as to whether Northrop was entitled to flood-related time element damages, Factory Mutual's withholding of these claimed damages was neither unreasonable nor without proper cause."  Id. at *3.  [Emphasis in original.]

   This conclusion follows from existing California law, as noted.  However, in reaching this conclusion (which may have been totally correct under the circumstances of that case and which is not in question in this post), the Federal Judge constructed a "duty" upon a Policyholder that never existed before in California.

   Or anywhere else.

   That may be why the opinion did not contain any supporting citations of authority.  There aren't any.

   The Federal Court constructed a duty upon the Policyholder which negated the Good Faith, "genuine dispute" Coverage duty upon the Insurance Company in this case:

Where a contract is ambiguous, Northrop had the duty to seek clarification at the time of entering and agreeing to the policy.  Under the facts of this case, failure to seek clarification at the time of signing resulted in a surviving ambiguity and a concomitant forfeiture of the right to seek bad faith damages.

Id. at *3.

   To paraphrase this unique holding, what this Federal Court is saying is that a Policyholder had the duty to seek clarification at the time of entering and agreeing to the policy, presumably in the knowledge that years later Hurricane Katrina would make landfall and cause an ambiguity in the Business Interruption Coverage.  Since a Policyholder cannot make such a forecast, of course, it means that whenever Coverage provisions are ambiguous as applied to an actual claim, there is always "a concomitant forfeiture of the right to seek bad faith damages."

   That is one holding too far.

   It should have been enough that Factory Mutual had a legitimate, reasonable basis to contest Business Interruption Coverage in that case, without resort to fiction.  Citing no authority, this ruling in turn provides no authority for rulings in other cases in the same or other Courts. 

    The 22nd Annual Bad Faith Litigation Conference of the American Conference Institute is being held in 2011 in Orlando, Florida.  The author will be speaking.  Here is a link to the American Conference Institute Website Page which features this Conference including registration. If you or someone you know would like to attend, the ACI is offering a discount to the readers of this weblog.  If you would like to explore the ACI discount offer, contact:

Marc Gerstein
Delegate Coordinator
Office: 1-212-352-3220  x5432

m.gerstein@americanconference.com

 

Please Read The Disclaimer.

 

More From Pepperwood: This Time, Association's Interrogatories; Privilege Log Required.

   In a decision made after this site's post on September 8, 2011, the Pepperwood Court was confronted with a Motion to Compel Better Answers to Interrogatories.  Pepperwood of Naples Condominium Ass'n v. Nationwide Mutual Fire Insurance Co., 2011 WL 4382104 (M.D. Fla. September 20, 2011)(Polster Chappell, USMJ).

   In pertinent part, the Federal Court repeated its previous rulings in accord with nearly unanimous holdings in the Federal Courts:  "Even though the practice has become common here and elsewhere, courts have found that whenever an answer accompanies an objection, the objection is deemed waived, and the answer, if responsive, stands."  Id. at *5.

   One of the Policyholder-Condominium Association-Plaintiff's Interrogatories asked for the names, addresses and telephone numbers of persons who have personal knowledge of files that the Insurance Company opened "relating in any way to the policy or claim".  The claims files had already been produced.  The Defendant Insurance Company responded, in part:

Answer:  Objection.  This interrogatory is overbroad and seeks to invade the work product doctrine and the attorney-client privilege.  Subject to this objection, and without waiver of the same, [the Defendant referred the Condominium Association to the claim files already produced by the Defendant].

However, the Defendant did not file a Privilege Log when it objected on the grounds of the work product doctrine and the attorney-client privilege.  "If this is the case, Nationwide is obligated to provide Pepperwood with a privilege log setting forth this information.  The party invoking the privilege bears the burden of proof.  Id. at *8.  [Emphasis by the Court.]

   The Court in this case proceeded to grant the Motion to Compel as to this Interrogatory in part and deny it in part.  The Defendant was ordered to "provide the names, addresses and phone numbers" of the fact witnesses asked for in this Interrogatory, quoted above, in pertinent part.  "Any other requests within the interrogatory are denied as the Court finds that this information can be found in the claims files themselves."  Id. at *9.

   Presumably, this information includes the alleged work product and privileged information which was produced when the claims files were produced.  At any rate, after noting that the Defendant in this case did not provide a Privilege Log at all, after invoking the work product doctrine and the attorney-client privilege, and describing what should be in a Privilege Log to be considered by a Court, the Court in this case did not write another word about it.

    The 22nd Annual Bad Faith Litigation Conference of the American Conference Institute is being held in 2011 in Orlando, Florida.  The author will be speaking.  Here is a link to the American Conference Institute Website Page which features this Conference including registration, if you or someone you know would like to attend.

Please Read The Disclaimer.

Citizens Property Insurance Corporation: Are All States' Citizens Corporations Immunized?

In statutory language that likely has parallels in other States, Florida has enacted Section 627.351(6)(a)(1), that qualifies Citizens Property Insurance Corporation as a public body.  The qualifying language is located in Section 627.351(6)(a)(1), which provides in pertinent part:

 The Legislature intends by this subsection that affordable property insurance be provided and that it continue to be provided, as long as necessary, through Citizens Property Insurance Corporation, a government entity that is an integral part of the state, and that is not a private insurance company.

[Emphasis added.]  This statutory provision has been in effect since the creation, so to speak, of Citizens Property Insurance Corporation.  In  Citizens Prop. Ins. Corp. v. Garfinkel, 25 So.3d 62, 64 (Fla. 5th DCA 2009)(subscription required), the Florida appellate court concluded that Citizens is shielded by sovereign immunity from bad faith claims because “it is explicitly clear that Citizens is not a private insurance company, but rather is a state body”.

  There may be an incipient conflict among the Florida Courts, however, which the Florida Supreme Court will ultimately have to resolve.  At least one Trial Court has reasoned as follows, and its reasoning does not appear to be disputed by another of Florida's intermediate Appellate Courts other than the one which decided Garfinkel:

Citizens is a statutory corporation created by the legislature to ensure that properties in Florida can be insured against hurricane damage.  See § 627.351(6)(a)(1), Fla. Stat.  In creating Citizens for this purpose, the legislature imbued Citizens with the status of a government entity, see § 627.351(6)(a)(1),  and gave Citizens a limited grant of immunity in connection with Citizens' performance of its duties or responsibilities. See § 627.351(6)(s)(1), Fla. Stat.  However, section 627.351(6)(s)(1) provides that such immunity does not apply to a willful tort or for a breach of contract pertaining to insurance coverage.

   In its section 624.155 action, San Perdido alleged that Citizens engaged in a series of bad faith practices in its handling of San Perdido's insurance claim, and that such conduct was both a breach of contract and a willful tort under section 624.155.  In denying Citizens' motion to dismiss, the trial court reasoned that San Perdido's section 627.155 [sic] lawsuit is within the section 627.351(6)(s)(1) exceptions to Citizens' immunity. Although Citizens could challenge that ruling after an adverse judgment if San Perdido should prevail on the merits of its lawsuit at trial, Citizens now seeks an immediate writ of prohibition or certiorari, and asks this court to preclude any further proceedings in the trial court.

Citizens Property Ins. Corp. v. San Perdido Ass'n, 46 So.3d 1051, 1052 (Fla. 1st DCA 2010)(subscription required), review granted by Citizens Property Ins. Corp. v. San Perdido Ass'n, 56 So.3d 765 (Fla. Feb 17, 2011).  The Supreme Court of Florida's Online Docket shows that Oral Argument was held on September 8, 2011 and that this case is still pending as of Thursday, September 14, 2011.

   The Supreme Court apparently granted discretionary review in order to assess the appellate jurisdictional issues addressed differently by the Fifth and First District Courts of Appeal in the Garfinkel and San Perdido Association cases.  However, the Supreme Court can of course resolve any issue it chooses to address having now assumed jurisdiction to do so.  It is possible if not likely that the Supreme Court will resolve the issue, in Florida, of whether Citizens Property Insurance is statutorily immunized from Bad Faith Claims or not.

     The 22nd Annual Bad Faith Litigation Conference of the American Conference Institute is being held in 2011 in Orlando, Florida.  The author will be speaking.  Here is a link to the American Conference Institute Website Page which features this Conference including registration, if you or someone you know would like to attend.

Please Read The Disclaimer.

 

 

Conditional Objections Are Waived Objections in Insurance (or Any) Case.

    In Download Pepperwood of Naples Condominium Ass'n v. Nationwide Mut. Fire Ins. Co. (M.D. Fla. Case No. 2.10cv753, Order of USMJ Filed Aug. 29, 2011) PUBLIC ACCESS, also published as 2011 WL 3841557 (M.D. Fla. August 29, 2011)(authorized password required to access Westlaw), a U.S. Magistrate Judge compelled production of Civil Remedy Notices, from other allegedly similar cases, in a Statutory Bad Faith Case in Florida.  This ultimate holding is not in itself very unusual.  Such holdings are fairly common in Statutory First-Party Bad Faith Actions in Florida. 

   How the Court arrived at its holding is worth noting, however.  I have discussed this holding and its reasoning with Defense and Policyholder Insurance Lawyers, and they tend to agree with it.  It reflects their practice not to raise objections, for example, unless they intend to pursue them and have the Judge resolve the issue if need be.  As one Policyholder Attorney reflected, "That's what Courthouses are for."

   The Plaintiff in the Pepperwood case is a Condominium Association.  It claims that it incurred Hurricane Damage in 2004.  The Condominium Association alleges in its Complaint that Nationwide Mutual Fire Insurance Company recognized Coverage for Property Damage under its Policy issued to Pepperwood, but did not pay all Covered Damages.  Instead, Nationwide allegedly "tendered" $30,270.20.  Pepperwood of Naples Condominium Association v. Nationwide Mutual Fire Insurance Co., 2011 WL 3841557 at *1.

   After various further developments including the Condominium Association hiring a Public Adjuster to interface with Nationwide, and an Appraisal in Pepperwood's favor for "$1,901,645.06 (Replacement Cost) and $1,535,468.28 (Actual Cash Value)," in response to which Nationwide "tendered an additional $1,391,674.64 in owed insurance benefits," Pepperwood sued Nationwide for Breach of Contract and for Statutory Bad Faith.  Id. 

   The Condominium Association then propounded Discovery.  This included a Request No. 1 in "Plaintiff's Second Request for Production," to which Nationwide duly responded.  The Request, and Nationwide's Response, were quoted together by the Court as follows:

Request No. 1: A copy of any and all civil remedy notices (“CRN”) and related correspondence, including Nationwide's responses to the CRN, regarding similarly situated policy holders as Pepperwood from January 2004 until the present.

* * *

Nationwide's Response: Objection. This request is overbroad in temporal and subject scope; this request is vague with respect to the phrase “similarly situated policy holders”; this request is burdensome and harassing; this request seeks irrelevant information that is not reasonably calculated to lead to the discovery of admissible evidence. Subject to these objections and without waiver of the same, this request seeks information that is publicly available online from the Florida Department of Financial Services [FDFS], and can be obtained from that source as easily by Plaintiff as by the Defendant.

Id. at *2.  Time to break out the Discovery issues, much as the Court did.  The focus in the Court's Opinion, and in this post, is on the Defendant's Response, for reasons which will become apparent.

   The Defendant's Response involved four (4) sets of objections, which are addressed below in the order in which the Court addressed them and which was not the order in which Nationwide listed them.  

 The first of four sets of Objections:  "Subject to these objections and without waiver of the same" is a Conditional Objection and did result in waiver of the same.

   The first thing that the Court in this case wrote about the Defendant's Conditional Objection is that "this court is reluctant to sustain the objection."  Then the Court cited case law from other Courts in support.  Id.  The fact that "this seems to be an increasingly common approach to discovery," and "[e]ven though the practice has become common here and elsewhere," it has not received favorable treatment from the Courts which sometimes have to consider them.  The Courts in Insurance Coverage and Insurance Bad Faith Cases, and in other kinds of cases as well, seem to be fairly unanimous in rejecting Conditional Objections to Discovery.

   So it was in this case.  "[I]f a party objects to a question or request but then answers, has the objection been waived despite the claimed reservation of the objection?  This court cannot logically conclude that the objection survives the answer.  Simply put, the rules do not on their face give a party that option."  Id.  [Emphasis added.] 

   Not only is there no "Rule" basis for this practice, in the eyes of this particular Magistrate Judge there is no "rational basis," either.  "There is either a sustainable objection to a question or request or there is not."  Id. at *3.

   In this as in many another case of Conditional Objections to Discovery, "the objection is deemed waived, and the answer, if responsive, stands."  Id.

 Second set of Discovery Objections here:  "Overbroad in temporal and subject scope;" vague; burdensome; and harassing.

    Like many other Courts, the Court in this case referred to objections of this kind, which were made without substantiation, as "boilerplate".  A "boilerplate objection/response ... is not well taken.  Defendant must state specific grounds for each objection."  Id.

 Third set of Discovery Objections:  Irrelevant and not reasonably calculated to lead to the discovery of admissible evidence.

    This objection, too, must by law include a specific explanation saying why.  "Thus, Defendant's objection to this Request as to relevancy was improper."  Id. at *4.

 The "equally available" Response, treated in this case as another Objection.

   The Court first pointed out that "[t]his assertion made by the Defendant is incorrect.  Only the CRN is available online, the other information contained within Plaintiff's request is solely within the control of the Defendant and unavailable to Plaintiff."  Id.

   Second, even if the Response had been accurate in this regard, "'this exact objection is insufficient to resist a discovery request.'"  Id. 

    The Court's decision in this case is not unique.  It is equally available to support Discovery Requests to Plaintiffs as well as to Defendants.  Whether Discovery will be compelled in a given Insurance Bad Faith Case, as in any case in this respect, depends largely on the Responses including Objections to the interrogating parties' Discovery Requests.

    The 22nd Annual Bad Faith Litigation Conference of the American Conference Institute is being held in 2011 in Orlando, Florida.  The author will be speaking.  Here is a link to the American Conference Institute Website Page which features this Conference including registration, if you or someone you know would like to attend.

Please Read The Disclaimer.