Claims and Bad Faith Law Blog

BAD FAITH EXPOSURE, PROPERTY INSURERS, AND FLORIDA.

This article continues the report of changes to Florida insurers' laws in 2022, and again in 2023.

The original version of Section 624.1551 was effective May 26, 2022.  It put limitations on Florida's Bad Faith Statute whenever property insurers are involved:

Notwithstanding any provision of s. 624.155, a claimant must establish that the property insurer breached the insurance contract to prevail in a claim for extracontractual damages under s. 624.155(1)(b).^[1]

            Until Section 624.1551 was enacted in May, 2022, there was never any requirement in Florida law that any insurance carrier could only be liable for alleged bad faith conduct if a court adjudicated that it also breached its insurance contract, in this case, a property insurance contract.  It will also be recalled that in Florida, first-party bad faith is never actionable except under the Bad Faith Statute, Section 624.155.[2]  Without the benefit of an action under Section 624.155, there is no room for bad-faith actions or any other claims for extracontractual damages against property insurers in Florida.[3]

          In December, 2022, the Florida Legislature amended the recently enacted Section 624.1551 in Special Session, in pertinent part as follows:

Notwithstanding any provision of s. 624.155 to the contrary, in any claim for extracontractual damages under s. 624.155(1)(b), no action shall lie until a named or omnibus insured or a named beneficiary has established through an adverse adjudication by a court of law that the property insurer breached the insurance contract and a final judgment or decree has been rendered against the insurer.  Acceptance of an offer of judgment under s. 768.79 or the payment of an appraisal award does not constitute an adverse adjudication under this section.^[4] 

To be continued ....   All these changes to Bad Faith Law are reported and analyzed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:17, Fairly or Reasonably Debatable Claims (West Publishing Company, 3d Edition, 2023 Supplements in process).

[1]  Fla. Stat. § 624.1551, as amended by 2022 Fla. Sess. Law Serv. Ch. 2022-268, § 6 (S.B. 2) (West).

[2] See, e.g.,  § 9:14, supra.  "There was no such thing as first-party bad faith in Florida until Section 624.155 was enacted."  Dennis J. Wall, Consumers Had No Voice:  Changes to Property Insurers' Laws in Florida, 45 Ins. Litig. Rptr. 73, 77 (March 3, 2023).

[3] E.g., State Farm Mut. Auto. Ins. Co. v. Laforet, 658 So. 2d 55, 62 (Fla. 1995) ("Florida differs, however, from most jurisdictions given that first-party bad faith actions are actionable only under section 624.155 and not the common law."); Utd. Prop.& Cas. Ins. Co. v. Chernick, 94 So. 3d 646, 647 (Fla. 4th DCA 2012); Gen. Star Indem. Co. v. Atl. Hospitality of Fla., LLC, 93 So. 3d 501, 503 (Fla. 3d DCA 2012).

[4] Fla. Stat. § 624.1551 (emphasis supplied), as amended by 2022 Fla. Sess. Law Serv. Ch. 2022-271, § 2 (S.B. 2-A) (West), effective December 16, 2022.

Please read the disclaimer.  This blog article ©2023 Dennis J. Wall.  All rights reserved.

PROPERTY INSURERS REMOVED FROM REACH OF FLORIDA'S BAD FAITH STATUTE.

    Since the December 2022 amendments to Florida Statute Section 624.1551 became effective on December 16, 2022, so many limitations and restrictions have been added onto actions for extracontractual damages against property insurers, that property insurers have for most intents and purposes been removed from the reach of Florida's Bad Faith Statute.[1]

 

[1] See Fla. Stat. § 624.1551, as amended by 2022 Fla. Sess. Law Serv. Ch. 2022-271, § 2 (S.B. 2-A) (West), effective December 16, 2022.  The original enactment of this statute in 2022, and subsequent amendments to it made in the same year, are all discussed at length in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH §§ 9:14 & § 11:17.50 (3d Edition West Publishing Co., 2023 Supplements in process).

Please read the disclaimer.  This blog article ©2023 Dennis J. Wall.  All rights reserved.

HOW THE FLORIDA LEGISLATURE PRACTICALLY ENDED ACTIONS AGAINST INSURANCE COMPANIES.

I wrote when I left off this subject here,  that I hoped that I could do justice to changes made by the Florida Legislature in 2022 and again in 2023 to Florida bad faith law.  They also made many changes to all kinds of actions against insurance companies.  Here we go.

           In 2022, the Florida Legislature immunized property insurers from the reach of Florida's Bad Faith Statute, Section 624.155.^[1]  There were no changes to Section 624.155 in 2022.  Rather, during its Regular Session in 2022, the Florida Legislature enacted an entirely new statute^[2] which became Section 624.1551, titled Civil remedy actions against property insurers.^[3]

          This original version of Section 624.1551 was effective May 26, 2022.  It imposed a brand-new requirement that regardless of anything that past Florida Legislatures wrote in the Bad Faith Statute, "a claimant must establish that the property insurer breached the insurance contract to prevail in a claim for extracontractual damages under s. 624.155(1)(b)."^[4]

          In Florida, first-party bad faith is never actionable except under the Bad Faith Statute, Section 624.155.^[5] 

          In December, 2022, the Florida Legislature amended the recently enacted Section 624.1551 in Special Session, and added further limitations on the separate Bad Faith Statute, Section 624.155:

    Notwithstanding any provision of s. 624.155 to the contrary, in any claim for extracontractual damages under s. 624.155(1)(b), no action shall lie until a named or omnibus insured or a named beneficiary has established through an adverse adjudication by a court of law that the property insurer breached the insurance contract and a final judgment or decree has been rendered against the insurer.  Acceptance of an offer of judgment under s. 768.79 or the payment of an appraisal award does not constitute an adverse adjudication under this section.^[6] 

           These changes are too complicated to summarize in a single article.  It is enough to begin for now by putting them all on display.  They will be addressed in detail in future articles to be posted here.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

 

[1] Fla. Stat. § 624.155, titled Civil remedy (West, Westlaw current with laws and joint resolutions in effect from the 2022 second reg. sess. and spec. A, C and D sess's of the Twenty-Seventh Legis.).

 [2] 2022 Fla. Sess. Law Serv. Ch. 2022-268 § 6 (S.B. 2) (West).

[3] Fla. Stat. § 624.1551 (West, Westlaw current with laws and joint resolutions in effect from the 2022 second reg. sess. and spec. A, C and D sess's of the Twenty-Seventh Legis.). 

[4]  Fla. Stat. § 624.1551, as enacted by 2022 Fla. Sess. Law Serv. Ch. 2022-268, § 6 (S.B. 2) (West).

[5] "There was no such thing as first-party bad faith in Florida until Section 624.155 was enacted."  Dennis J. Wall, Consumers Had No Voice:  Changes to Property Insurers' Laws in Florida, 45 Ins. Litig. Rptr. 73, 77 (March 3, 2023).

[6] Fla. Stat. § 624.1551 (emphasis supplied), as amended by 2022 Fla. Sess. Law Serv. Ch. 2022-271, § 2 (S.B. 2-A) (West), effective December 16, 2022.

"NO ATTORNEY'S FEES FOR YOU!" ONLY PROPERTY INSURERS NEED APPLY.

 

A Courtroom.  (Pacific Standard)

The risk of paying an insured's  attorney's fees in the event the insured  prevails in litigation with an insurer is one of the factors that insurers must take into account.  This is something that comes to an insurer's attention first at the stage when the carrier decides whether it will deny coverage.  At that stage, the calculus includes the insurer's best guess whether the fact, timing, or context of denying an insured's claim is likely to lead to litigation.

          Once in litigation, most if not all insurers will continue the calculus by estimating the likelihood that its insured  may prevail.  The threat of paying its insured's attorney's fees is a continuing factor in making the insurance carrier's decision whether to affirm or deny coverage, whether that decision is made before or after litigation with the insured has begun.  The threat of paying an insured's attorney's fees cannot be underestimated. 

          In 2022, the statute which previously authorized a prevailing insured to recover its  attorney's fees in litigation caused by its insurer, was changed exclusively for the sole benefit of property insurers. Since the change, policyholders that win their case cannot recover their attorney's fees from a property insurer even if their property insurer was the one that caused the fees to be incurred.   However,  other insurance companies remain subject to the risk.  See Fla. Stat. § 627.428.

          The property insurers were also protected by changes to the Surplus Lines Statute governing Attorney's Fees.  In a mirror image of Section 627.428 applicable to all insurers generally, before 2022 insureds prevailing in litigation caused by their surplus lines insurers could recover their attorney's fees incurred in defending or prosecuting the litigation.  That changed in 2022, as well, but once again  only with respect to property insurers.  Other surplus lines insurance companies remain subject to the risk.  See Fla. Stat. § 626.9373.

Thomson Reuters is publishing the author's forthcoming article, Consumers Had No Voice:  Changes to Property Insurers' Laws in Florida, in the next edition of Insurance Litigation Reporter.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

MANDATORY PROPERTY INSURANCE ARBITRATION

 

In Special Session in December, 2022 the Florida Legislature adopted much if not all of the property insurers' agenda.  It was a desperate but understandable effort to keep property insurance companies doing business in Florida, although what benefit it might be to Florida policyholders to pay premiums for a lot less coverage – if any – is a good question.  The Session was originally billed, by the way, as an attempt to lower property insurance premiums.  That was before the agenda was enacted into law, of course.

One of the features of the Special Session was the enactment of a new statute providing for mandatory arbitration provisions in property insurance policies issued in Florida.  (Just property insurance policies.)

The new statute is Section 627.70154.  It provides what appear to be several requirements in order for property policies to be issued in Florida with mandatory arbitration provisions.  One of them  is that "[t]he insurer also offers the policyholder a policy that does not require that the policyholder participate in mandatory binding arbitration."  Fla. Stat. § 627.70154(5).

Nothing is said about premiums for the alternative property policy in the new statute, nor is anything said about alternative property premiums anywhere else in the insurance code so far as is known, or for that matter, anywhere else in the Florida Statutes.

What will property insurance companies issuing policies in Florida charge for policies without mandatory arbitration provisions?

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

"A FINAL JUDGMENT OR DECREE" BEFORE BAD FAITH: SETTLEMENT PROPHYLAXIS?

Judge's gavel.  (Handout photo by The Sun Sentinel)

The Florida Legislature amended Fla. Stat. § 624.1551 to require two things before a property insurer can be sued for bad faith under Fla. Stat. § 624.155(1)(b), part of Florida's Bad Faith Statute.  Both of the two new requirements became effective December 26, 2022.

The two new requirements in Section 624.1551 are, first, "an adverse adjudication by a court of law" (there goes an  arbitration award as the functional equivalent of a judgment) that the property insurer breached the policy and, second, "a final judgment or decree has been rendered against the insurer."  Presumably, this last requirement refers to a final judgment or decree by a court of law that the property insurer breached the policy.

What happens when the property insurer settles the breach of contract claim in order to forestall a bad faith claim, which now expressly requires that some sort of "final judgment or decree has been rendered against the insurer."  If the property insurer settles the contract claim, usually there will not be a final judgment or decree; in the ordinary simple breach-of-contract case there is just a settlement which is not ordinarily followed by a "final judgment or decree."

It appears to be a live issue of what effect will be given to the new statutory requirement of "a final judgment or decree … rendered against the insurer" when, by settling, the insurer prevents a final judgment or decree from being rendered ?

There clearly appears to be an issue.  Time will tell how it is resolved.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

NO "DIRECT PHYSICAL LOSS," NO "DAMAGE TO," NO BAD FAITH.

(Image by NASA)

The reach of holdings that demonstrable physical injury be proven in order to trigger property insurance policy coverage under policies which require "direct physical loss of or damage to" property, is illustrated by the holding in EMOI Serv's, L.L.C. v. Owners Ins. Co., ___ N.E.3d ___, No. 2021-1529, 2022 WL 17905839 (Ohio Dec. 27, 2022) (stated "PRELIMINARY COPY, SUBJECT TO FURTHER EDITING").

In EMOI Services , the issue was whether "a businessowners insurance policy issued by appellant, Owners Insurance Co. ('Owners'), and held by appellee, EMOI Services, LLC ('EMOI'), covers losses that resulted from a ransomware attack on EMOI's computer-software systems."  EMOI Services, 2022 WL 17905839, ¶ 1, at *1.  The issue was so clear in the eyes of the Ohio Supreme Court that no trial would be required.

The businessowners insurance policy at issue conditioned coverage on a “direct physical loss of or damage to” the property in question in the loss, in this case, the software.  As there was no demonstrated direct physical loss of or damage to software as a result of a ransomware attack on EMOI, "Owners is not responsible for covering the resulting loss."  EMOI Services, 2022 WL 17905839, ¶ 1, at *1. 

The contrary intermediate appellate court decision was reversed and the trial court's entry of summary judgment was "reinstated" on EMOI's alleged claims for breach of contract and for insurer bad faith in Owner's denial of coverage.

 Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

SOMETIMES PARTIAL PAYMENT MAY NOT BE ENOUGH GOOD FAITH.

 

(Black Hole Image Courtesy of NASA)

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

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

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

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

WHEN PROPERTY CARRIERS RECOUP FROM INSUREDS WHAT THEY PAY TO MORTGAGEES.

In some cases, property carriers can recoup the amounts they paid to mortgagees from their own insureds, the mortgagors.  “Stated another way, ‘[W]hen an insurer pays a mortgagee for loss from an insured’s  arson, the property insurer is entitled to recoupment and restitution of that amount from the insured.’”  Allstate Indem. Co. v. Dixon, No. 6:14-cv-03489-MDH, 2018 WL 11427943, at *7 (W.D. Mo. March 30, 2018), aff’d with opinion, 932 F.3d 696 (8 th Cir. 2019).

When one insured’s act destructive of coverage binds its co-insureds, there is simply no insurance coverage available for damage or loss that results from the destructive act.  This principle appears broad enough to apply even in cases involving destructive acts besides setting fires.  “Where an insurer makes mortgage payments to a mortgagee on the insured’s  behalf because it is required to do so by the policy, and a determination is later made that the insured was not entitled to coverage under the policy, the insured has no right to benefit from the payment.”  Allstate v. Dixon, 2018 WL 11427943, at *8.

In this case, a jury previously found that a destructive fire was set by or at the direction of a husband.  The Court ruled under Missouri law that this act of the husband bound his co-insured wife under their Allstate property insurance policy.  Accordingly, the Court granted the carrier’s “motion to recoup the mortgage payment made to the [mortgagees by the mortgagors-insureds] in the amount of $107,526.29,” among other things.  Allstate v. Dixon, 2018 WL 11427943, at *9, aff’d, 932 F.3d at 703.

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.     

ANOTHER POST-LOSS ASSIGNMENT HELD VALID: NOW FLORIDA.

(Luis Sinco / Los Angeles Times) 

Extreme Energy Fire & Water Restoration LLC came to Homestead.  They went to the home of Mr. and Mrs. Julio and Nora Lugones.

The Lugoneses could not afford what Extreme needed to repair and mitigate damage to their home.  However, they had a homeowner's policy with Lloyd's.  Extreme contracted with the Lugoneses to repair and mitigate the damage to the Lugoneses' home in exchange for Lugoneses' right to be paid for the loss under their homeowner's policy with Lloyd's.

There was a problem, though, it seemed.  Lloyd's thought so.  There was an anti-assignment provision in the Lloyd's policy.  Lloyd's refused to recognize Extreme as the Lugoneses' assignee of the policy proceeds.

So Extreme sued Lloyd's for breach of the homeowner's insurance contract.  Lloyd's defended on the basis of the anti-assignment clause in the same  homeowner's insurance policy.  The trial judge agreed with Lloyd's that the assignment was barred by the policy.

On appeal, Florida's Third District Court of Appeal reversed.  The Florida appellate court made short work of Lloyd's argument:

    For more than a century, the law in Florida has been well-settled: an insured need not obtain the consent of the insurer before making a post-loss assignment of its right to payment of a claim under an insurance policy, and any attempt by an insurer to restrict the insured's right to do so is invalid. 

Extreme Emergency Fire & Water Restor. LLC v. Certain Underwriters at Lloyd's of London, No. 3D20-5, 2020 WL 7379133, at *1 (Fla. 3d DCA December 16, 2020) (stated NOT FINAL).

That settles the matter in Florida, at least until any further review by the full Third District Court of Appeal in this case, perhaps, or by the Supreme Court of Florida in this or some other case.  At the same time, the Supreme Court of Oklahoma reached a similar result one day before the decision was reached in the Extreme case.  The Oklahoma Supreme Court's decision was discussed in an article published here the day after it was decided, MAJORITY WINNER RECOGNIZED ON ISSUE OF POST-LOSS ASSIGNMENT ... OF PROPERTY INSURANCE COVERAGE CLAIM.  That was the same day that the Third District panel published the Extreme decision, which is now the subject of this article.

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MAJORITY WINNER RECOGNIZED ON ISSUE OF POST-LOSS ASSIGNMENT ...

... OF PROPERTY INSURANCE COVERAGE CLAIM.

(Matt Whittaker / New York Times)

In Johnson v. CSAA Gen. Ins. Co., No. 118689, 2020 WL 7349186 (Okla. December 15, 2020) (stated not released for official publication at this time),  the Oklahoma Supreme Court recognized that a majority of Courts addressing the issue has held that an insured's post-loss assignment of its property insurance coverage claim to a contractor is valid.  The Supreme Court held in this case that such a post-loss assignment is the permissible assignment of a chose in action, and not an impermissible assignment of the policy.

    The Oklahoma Supreme Court's framing and resolution of this issue is so well-stated that no attempt to summarize it can improve it.  Here is how the Supreme Court stated the matter:

    This case involves an insured assigning a post-loss property insurance claim to a construction company for the purpose of the company repairing her property after a storm. Insurer argued the insured property owner was required to obtain written consent from the insurer prior to making the assignment. We agree with a majority of courts stating an insured's post-loss assignment of a property insurance claim is an assignment of a chose in action and not an assignment of the insured's policy. We hold insured's assignment was not prohibited by either the insurance policy or 36 O.S. § 3624. We conclude the District Court's judgment was erroneous when it dismissed the construction company as a party because written consent for the assignment was not provided by insurer to the insured. We reverse the judgment of the District Court and remand for further proceedings. The insurer's motion to dismiss the appeal is denied.

Johnson, 2020 WL 7349186, at p. *1, ¶ 1.

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

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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Download IBF 06.18.19.

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

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

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

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

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

Photograph by Dennis J. Wall.

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

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

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

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

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

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

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

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

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

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

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

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

Photograph by Dennis J. Wall.

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

Photograph by Dennis J. Wall

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

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

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

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

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

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

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

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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).

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"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.

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Related articles

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.

Related articles

No Coverage, No Bad Faith Under Pennsylvania Law.

CYBERINSURANCE LIABILITY COVERAGE:  NO IT'S COVERAGE FOR "DAMAGES."

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.

Related articles

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.

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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!

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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 ....

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