Claims and Bad Faith Law Blog

CALIFORNIA'S UNFAIR COMPETITION LAW, COVID COVERAGE, AND IMPLIED COVENANT BREACH.

With reference to California's Unfair Competition Law specifically, it may be "that allegations sufficient to support a cause of action for breach of the covenant of good faith and fair dealing are also sufficient to support a claim for violation of the UCL."  Shusha, Inc. v. Century-Nat'l Ins. Co., 87 Cal. App. 5th 250, 303 Cal. Rptr. 3d 100, 114 n. 11 (Cal. 2d DCA, Div. 7 2022) (COVID insurance coverage case involving a commercial policy for lost business income; Century-National did not dispute that possibility in this case), review granted, 307 Cal. Rptr. 3d 1, 527 P.3d 271 (2023).

Express Statutory Causes of Action in first-party cases in the United States are discussed in Section 9:14 of 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (West Publishing Company 3d Edition, 2023 Supplements in process).

This blog article ©2023 Dennis J. Wall.  All rights reserved.

NATIONAL CONSUMER LAW CENTER DECEMBER WEBINARS FOR THE AGES.

The issue of confidentiality was on the table for discussion in an outstanding December Webinar put on for the National Consumer Law Center by Steve Koval, Esquire and Ahmad Keshavarz, Esquire, Don't Mess Up The Settlement Agreement!

          John Rao, Esquire of NCLC moderated another outstanding Webinar, this one presented by Phillip Robinson, Esquire and Yongmoon Kim, Esquire, Using Violations of Mortgage Servicing Rules Without Private Rights of Action as Predicates for FDCPA [Fair Debt Collection Practices Act] and UDAP [Unfair and Deceptive Acts and Practices, by whatever name] Claims.

          Alpha Taylor, Esquire of NCLC and Marissa Ditkowsky, Esquire jointly presented still another informative Webinar, The Intersection of Disability and Consumer Law.

          These Webinars were presented less than two months ago, but they are timeless.  If you have access to these NCLC Webinars, give thanks for the opportunity.  Watch, listen and learn.

          And one more that is more than worth your while ....

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

DOING NOTHING IS NO DEFENSE TO BAD-FAITH SETTLEMENT CONDUCT.

For years, some defense lawyers have counselled their insurance company clients that an insurance company has no legal duty to do anything in settlement negotiations.  This insistence on the theoretical obscures the reality of bad-faith claims decided by judges and juries.  If a carrier follows such advice, the consequences can include exposure to extracontractual liability and the policy limits will be irrelevant in such a case.

 

SETTLEMENT DUTIES OF INSURANCE CARRIERS:  THE THEORETICAL UNIVERSE vs. THE PRACTICAL, THE REAL, THE ACTUAL WORLD.

 

          In Nichols v. Zurich Am. Ins. Co., ___ S.W.3d ___, No. 2020-SC-0284-DG, 2021 WL 4487529 (Ky. September 30, 2021)(stated not final and not yet to be cited as authority in Kentucky courts), the Kentucky Supreme Court confronted just such a case, i.e., a case in which the record showed that the carrier did little to nothing to settle an Uninsured Motorist (UIM) claim.

          The carrier's settlement conduct was bound up in its belief that there should not have been any UIM coverage under the policy at bar.  On a previous appearance of this case in the Kentucky Supreme Court, the Court disagreed.  The Court held that the policy at issue provided UIM coverage at all material times, in effect.  The case presented many issues the first time around, but the one we are concerned with here relates to the Supreme Court's treatment of the carrier's conduct concerning settlement negotiations.

 

RECORD EVIDENCE OF DOING SOMETHING TO INITIATE SETTLEMENT NEGOTIATIONS IN GOOD FAITH.

 

          Putting evidence into the record can go a long way toward proving the carrier's settlement conduct in good faith; having no evidence in the record can be bad.   See generally 1 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith, § 3:16, Duty to initiate settlement negotiations.

          "When insurance companies investigate the applicability of policy provisions to individual claims, their conduct is governed by the UCSPA [Unfair Claims Settlement Practices Act] as well as common law principles of good faith and fair dealing."  Nichols, 2021 WL 4487529, at *4.

          The Uniform Claims Settlement Practices Act has been enacted in much the same form across the country.  See generally 1 Dennis J. Wall, supra, § 3:28 Legal bases of liability in settlement--Statutory (third-party or liability insurance bad-faith claims); 2 id., §§ 9:14 & 9:15 (Express and Implied statutory causes of action in first-party bad-faith claims). 

          As the Nichols Court pointed out, the UCSPA incorporates a duty of good faith to attempt to effectuate "prompt, fair and equitable settlements of claims in which [the insured's] liability has become reasonably clear."   Kentucky's version of this duty is embodied in Ky. Rev. Stat. Ann. § 304.12-230(6):

    It is an unfair claims settlement practice for any person to commit or perform any of the following acts or omissions:

* * *

    (6) Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear[.]

The Kentucky Supreme Court applied this statutory standard in Nichols.

 

EVIDENCE OF POST-LITIGATION SETTLEMENT CONDUCT

 

          There was one crucial addition in this case that applies in most States, not just in Kentucky:   The Kentucky Supreme Court's case law is predicated "on the understanding that the insurer's duty of good faith to the insured does not end until the claim has been settled."  Nichols, 2021 WL 4487529, at *6.

          That observation led the Court in Nichols to consider the discovery of post-litigation materials, meaning discovery of materials generated by the insurance carrier after the bad-faith lawsuit was filed.  The Court made it clear in Nichols that "even evidence of settlement behavior is not automatically admissible."  Nichols, 2021 WL 4487529, at *6.  In fact, in this case, the Court expressly ruled that "Nichols is entitled to the internal Zurich documents relating to the insurer's initial denial of his claim."  Nichols, 2021 WL 4487529, at *7.

          The Supreme Court further cautioned "that in all circumstances trial courts must remain vigilant and cautious prior to admitting any post-litigation evidence."  Earlier in its opinion, the Kentucky Court noted that "[t]he trial court granted Nichols' discovery requests in part, limiting it specifically to Zurich's settlement conduct." Nichols, 2021 WL 4487529, at *4.

          Later in its opinion, the Kentucky Supreme Court added this observation regarding evidence of the carrier's post-litigation settlement conduct in this case:

However, since Zurich simply opted out of engaging in the settlement process entirely, Nichols has no other remedy under our procedural rules.

Nichols, 2021 WL 4487529, at *7 (emphasis added).

 

CONCLUSION

 

          In the end, doing nothing is no defense.  Simply opting out of engaging in the settlement process entirely is not a good option, even in those few jurisdictions which do not require insurance carriers to do something to initiate settlement negotiations.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

NORTH CAROLINA BUCKS THE TRENDS, OR DOES IT?

Under North Carolina law, "a bad faith claim may proceed even where it is determined that the underlying contract was not breached."  Duke Univ. v. Endurance Risk Sol's Assur. Co., No. 5:20-CV-672-BO, 2021 WL 2345014, at *4 (E.D.N.C. June 8, 2021).

          Under the North Carolina Unfair Trade Practices Act, a "mere breach of contract" does not state a claim, but if "a breach of contract claim is 'surrounded by substantial aggravating circumstances,'" there might be an unfair and deceptive trade practice claim under the North Carolina statute.  Duke University v. Endurance Risk Solutions Assurance Co., 2021 WL 2345014, at *4.

          The federal court denied the insurance carrier's motion to dismiss a bad faith claim and a UTPA claim in this case accordingly.

          In this ruling, North Carolina law is bucking the apparent trend to anchor bad faith claims to coverage.  But -- buttressed by this ruling (pun intended) -- why would bad faith be anchored to coverage if, for example, the complaint is divorced from coverage considerations, such as when the parties instead dispute the carrier's conduct in failing to settle a covered claim?

          This case apparently concerned something different from settling an underlying liability claim.  This case apparently concerned instead an insured's claim to be reimbursed for covered defense expenses.  But even in this case, the insured's complaint stated a claim for bad faith.  How much stronger should the case be for stating a claim for bad faith divorced from a coverage claim, in a case where there is no coverage dispute but there is a dispute about failure to settle covered claims?

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

The Second Part: LENDER FORCE-PLACED INSURANCE PRACTICES: UNFAIR TRADE PRACTICES.

This is the second of two parts.  The first part of this article was published on Wednesday, April 28, 2021, LENDER FORCE-PLACED INSURANCE PRACTICES:  RESPA AND UNFAIR TRADE PRACTICES.

In a decision that was just published on Westlaw, a federal judge in the U.S. District Court for the District of South Carolina decided that Mary Beth Jeffords plausibly stated both a state unfair trade practice claim, and a federal RESPA or Real Estate Settlement Procedures Act claim.  Ms. Jeffords's claims arose over the forced placement of insurance.  The federal judge's decision in her case is now published in Jeffords v. U.S. Bank National Association.[1]

          Ms. Jeffords sued U.S. Bank "as servicer of her federally-related mortgage loan[.]"[2]  She alleged that U.S. Bank "failed to pay her insurance premium from her escrow account as it became due," that her insurance policy lapsed as a result, that U.S. Bank force-placed insurance on the property, that she was charged the premium for the force-placed insurance, that she also had to obtain a replacement policy for the one that had lapsed (for which she obviously had to pay another premium), and that she incurred a loss from water damage that the replacement policy did not cover.[3]

---------------------------------------------------------------------------------------------------           

         As to the SCUTPA claim, U.S. Bank's line of attack was to argue for dismissal on the ground that Jeffords failed to allege an injury to the public interest as distinct from a merely private dispute, which is a requirement of the SCUTPA cause of action.[1]  The Court again disagreed with U.S. Bank and denied the bank's motion to dismiss the SCUTPA claim:

Plaintiff alleges that she met this low bar by alleging that “Defendant has an established and documented pattern of repetition (including previously unfairly assessing force place[sic] insurance against 139,000 members of the public).” Am. Compl. at ¶ 58.  The court agrees with Plaintiff.[2]

The Court denied the bank's motion to dismiss on this ground, and on one other:

And second, Plaintiff alleges that “Defendant profits ... for assessing forced place[sic] premiums” and “has an established and documented pattern of repetition” of this process. [Am. Compl.] at ¶ 58. Taken together, these allegations are more than mere conclusory allegations that this court customarily finds insufficient to support the third [or public interest] element of a SCUTPA claim.^{3] 

To put it in the affirmative, these allegations are legally sufficient to support an unfair trade practice claim, in the eyes of this federal judge in South Carolina.

Force-placed insurance cases including the Jeffords case are discussed in 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith §§ 9:33 - 9:35 (West 3d ed., 2021 Supplements in process), and in Dennis J. Wall, Lender Force-Placed Insurance Practices, published by American Bar Association Publishing.  A frequently refreshed selection of Chapters and Sections from these and other books is freely accessible at www.dennisjwall.com.

 

(Photo of Litigation and Prevention of Insurer Bad Faith volumes courtesy of Thomson Reuters West Publishing.  Photo of Lender Force-Placed Insurance Practices book ©Donna M. Bruno and Dennis J. Wall.)

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

[1] Jeffords, 2020 WL 9348167, at *2 n.3.

[2] Jeffords, 2020 WL 9348167, at *2.

[3] Jeffords, 2020 WL 9348167, at *2.

LENDER FORCE-PLACED INSURANCE PRACTICES: RESPA AND UNFAIR TRADE PRACTICES.

 

In a decision that was just published on Westlaw, a federal judge in the U.S. District Court for the District of South Carolina decided that Mary Beth Jeffords plausibly stated both a state unfair trade practice claim, and a federal RESPA or Real Estate Settlement Procedures Act claim.  Ms. Jeffords's claims arose over the forced placement of insurance.  The federal judge's decision in her case is now published in Jeffords v. U.S. Bank National Association.[1]

          Ms. Jeffords sued U.S. Bank "as servicer of her federally-related mortgage loan[.]"[2]  She alleged that U.S. Bank "failed to pay her insurance premium from her escrow account as it became due," that her insurance policy lapsed as a result, that U.S. Bank force-placed insurance on the property, that she was charged the premium for the force-placed insurance, that she also had to obtain a replacement policy for the one that had lapsed (for which she obviously had to pay another premium), and that she incurred a loss from water damage that the replacement policy did not cover.[3]

          Her amended complaint survived the bank's motion to dismiss her RESPA claim, which the bank seems to have filed on one ground:  that Ms. Jeffords "failed to allege any damages tied to U.S. Bank's actions[.]"  The District Judge disagreed:  "The court finds that Plaintiff adequately pleaded damages sufficient to survive dismissal."[4]

          More specifically, the Court listed some six allegations or groups of allegations of damages, "at least some" of which which the Court in this case held "alleged a plausible connection [with] U.S. Bank's alleged failure to pay the insurance premium when due":

1. lost insurance benefits which her prior insurance policy would have provided, "'including but not limited to the cost of repairs less her deductible';"
2. delay damages from the time it took to effectuate repairs;
3. an apparently higher premium for the replacement policy than she paid for her original policy;
4. the bank's charge for force-placing insurance;
5. "'miscellaneous costs including postage expenses and lost time';" and
6. emotional distress damages apparently including but not limited to "'worry, anxiety, frustration and lost time.'"[5]

As noted, the allegation of these damages alleged "a plausible connection between U.S. Bank's alleged failure to pay the insurance premium when due and at least some of the above-listed actual damages alleged by Plaintiff in her pleading.  U.S. Bank's motion to dismiss the RESPA claim is denied."[6]

To be continued ....  Force-placed insurance cases including the Jeffords case are discussed in 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith §§ 9:33 - 9:35 (West 3d ed., 2021 Supplements in process), and in Dennis J. Wall, Lender Force-Placed Insurance Practices, published by American Bar Association Publishing.  A frequently refreshed selection of Chapters and Sections from these and other books is freely accessible at www.dennisjwall.com.

To be continued ....  Force-placed insurance cases including the Jeffords case are discussed in 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith §§ 9:33 - 9:35 (West 3d ed., 2021 Supplements in process), and in Dennis J. Wall, Lender Force-Placed Insurance Practices, published by American Bar Association Publishing.  A frequently refreshed selection of Chapters and Sections from these and other books is freely accessible at www.dennisjwall.com.

 

(Photo of Litigation and Prevention of Insurer Bad Faith volumes courtesy of Thomson Reuters West Publishing.  Photo of Lender Force-Placed Insurance Practices book ©Donna M. Bruno and Dennis J. Wall.)

 

[1] Jeffords v. U.S. Bank Nat'l Ass'n, No. 3:20-cv-00393-SAL, 2020 WL 9348167 (D.S.C. Oct. 13, 2020).

[2] Jeffords, 2020 WL 9348167, at *1.

[3] Jeffords, 2020 WL 9348167, at *1.

[4] Jeffords, 2020 WL 9348167, at *2.

[5] Jeffords, 2020 WL 9348167, at *2.

[6] Jeffords, 2020 WL 9348167, at *2.

"THOSE WHO HAVE EARS TO HEAR, LET THEM HEAR."

In answer to two certified questions, the Supreme Court of Washington has unanimously given us enough material to fill books. This will be the second of two posted articles addressing these answers. The first article was posted here on Tuesday, December 3, 2019.

    In Peoples v. Utd. Serv's Auto. Ass'n, ___ Wash. 2d ___, ___ P.3d ___, No. 96931-1, 2019 WL 6336407 (Wash. Nov. 27, 2019), the Supreme Court of Washington was confronted with two questions. Both were certified by a U.S. District Court for answers under Washington State law.

    The two questions arose out of the claims of two of the plaintiffs in the District Court, one Krista Peoples and one Joel Stedman. Both of them were physically injured in a motor vehicle accident. Both claimed Personal Injury Protection or PIP benefits to pay for the bills of their medical providers. Both of them were denied PIP benefits.

    Besides this common core of facts, their claims presented the same broad question of whether the plaintiffs were injured in their business or property so that they could claim standing to sue under Washington State's Consumer Protection Act.

    That is where the questions posed by their separate claims diverged.  The first question, the one posed by the claims of Krista Peoples' class, were discussed here on Tuesday, December 3, 2019.

    Joel Stedman presented the second question.  He alleged that his insurance carrier, Progressive, impermissibly interjected a condition into the statutorily required availability of Personal Injury Protection (PIP) benefits.  This issue has reverberations beyond the boundaries of the State of Washington.

    In Washington State, as in most States, PIP benefits are required to be provided in policies like Stedman's.  The condition challenged in Stedman's action was Progressive's termination of required benefits whenever a claimant reached "Maximum Medical Improvement," or MMI, which it determined.  MMI is not a limitation authorized by the PIP Statute on the receipt or payment of PIP benefits.

    In Stedman's case, filed as a class action, Stedman alleged "that by terminating benefits on the basis of 'Maximum Medical Improvement,' Progressive routinely fails to pay all reasonable medical expenses for treating an insured’s injuries arising from a covered event, in violation of" Washington State Statutes.  Peoples, 2019 WL 6336407, at *1, ¶ 4.

    The Federal judge certified the question whether Progressive's reliance on MMI to terminate PIP benefits satisfied the Consumer Protection Act requirement of an injury to business or property, where an insured like Mr. Stedman was physically injured in a motor vehicle accident and whose PIP benefits were terminated.

    The Washington Supreme Court's short answer is "yes," such claims satisfy the requirement of an injury to business or property.  The Court's reasoning was applied both to the Joel Stedman class claims and to the Krista Peoples class claims discussed in this space on Tuesday, December 3, 2019:

[T]he plaintiffs here do not allege the defendants caused their personal injuries. Their CPA suits do not seek to vindicate their right to be free of bodily harm but, rather, their property interest in the benefits they bargained for in their insurance contracts. When parties enter an insurance contract, the insured obtains a legal right to benefits upon the happening of a particular event. [Citation omitted.]  An insurance contract also gives rise to a quasi-fiduciary relationship between the parties, which requires them to deal in good faith. [Citation omitted.]  An insured, therefore, has a legally protected property interest in benefits due under the contract and a related right to insurance dealings free from bad faith. Claims mishandling and wrongful denial of benefits invade this property interest, regardless of the type of event that triggers coverage.

Peoples, 2019 WL 6336407, at *4, ¶ 12.

    After placing its reasoning in a place where causation of the alleged Consumer Protection Act damages is not a part of the equation at hand, i.e., "regardless of the type of event that triggers coverage," the Court turned its attention to the question of recoverable damages for the alleged injury in fact.

    Stedman and his class sought "to recover excess premiums paid for the PIP coverage," together with "the costs of investigating the unfair acts, and/or the time lost complying with the insurer's unauthorized demands[.]"  Peoples, 2019 WL 6336407, at *2, ¶ 5.  The Washington Supreme Court unanimously spent very little time on the issue of damages recoverable by the Stedman class.

    To begin with, the Supreme Court declined to reach "the portion of the question that asks about excess premiums."  The Court devoted a footnote to Peoples' -- not Stedman's -- use of the phrase as "an alternative way of characterizing unpaid benefits."  Accordingly, in the Court's view, "it is unnecessary to address Peoples' alternative theory about 'excess premiums.'"  Peoples, 2019 WL 6336407, at *4, n.2.  What was good for the Peoples was good for Stedman, too, as the Court declined to address the issue of recovery of any "excess premiums" for unpaid PIP coverage.

    With respect to Stedman's remaining alleged damages, "the costs of investigating the unfair acts" and "the time lost complying with the insurer's unauthorized demands," the Supreme Court answered succinctly that "when a CPA claim is predicated on an insurer’s mishandling of a PIP claim, ordinary CPA principles govern whether investigation costs or time lost are injuries to business or property."   Peoples, 2019 WL 6336407, at *4, ¶ 14.  In answering the questions certified by the Federal court, the Washington State Supreme Court felt no compulsion to hold further whether the actual damages alleged by the Stedman class would if proven be recoverable under the Consumer Protection Act, but it did offer guidance from Washington State case law.

    The Court pointed to its own precedents to note that "we have we have continued to recognize that expenses incurred to investigate a deceptive act or practice are cognizable injuries and damages under the CPA."  Peoples, 2019 WL 6336407, at *4, ¶ 14.

    The Court then turned to precedent from the Washington lower courts concerning the allegation of lost time as a recoverable item of damage under the CPA.  "The Court of Appeals has also held that taking time away from business to respond to unfair practices may satisfy the injury requirement." Peoples, 2019 WL 6336407, at *4, ¶ 14.

    The Court was satisfied that this was all the guidance that litigants would need in cases like the present one:  "The principles articulated in these cases apply when a CPA claim is predicated on an insurer’s mishandling of a PIP claim." Peoples, 2019 WL 6336407, at *4, ¶ 14.

    To summarize what was summarized before, the key issue in the Peoples case was standing to sue.  The key to resolving the standing issue, in turn, was that the alleged 'injury to business or property' in both the Peoples' claims and the Stedman claims was "the deprivation of contracted-for insurance benefits." That was their injury. That conferred their standing to sue.

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

"THOSE WHO HAVE EYES TO SEE, LET THEM SEE."

In answer to two certified questions, the Supreme Court of Washington has unanimously given us enough material to fill books.  This will be the first of two posted articles addressing these answers.  The second article will be posted here later.

    In Peoples v. Utd. Serv's Auto. Ass'n, ___ Wash. 2d ___, ___ P.3d ___, No. 96931-1, 2019 WL 6336407 (Wash. Nov. 27, 2019), the Supreme Court of Washington was confronted with two questions.  Both were certified by a U.S. District Court for answers under Washington State law.

    The two questions arose out of the claims of two of the plaintiffs in the District Court, one Krista Peoples and one Joel Stedman.  Both of them were physically injured in a motor vehicle accident.   Both claimed Personal Injury Protection or PIP benefits to pay for the bills of their medical providers.  Both of them were denied PIP benefits.

    Besides this common core of facts, their claims presented the same broad question of whether the plaintiffs were injured in their business or property so that they could claim standing to sue under Washington State's Consumer Protection Act.

    That is where the questions posed by their separate claims diverged.

    Krista Peoples presented the first question.  She alleged that USAA routinely denied PIP claims based on a "practice of algorithmic review[.]"  Peoples, 2019 WL 6336407, at *1, ¶ 3:

    Specifically, Peoples alleges that USAA refuses, without any individualized assessment, to pay medical provider bills whenever a computerized review process determines that the bill exceeds a predetermined limit. According to Peoples, USAA’s failure to investigate or make an individualized determination regarding the reasonableness or necessity of a provider’s charges before denying payment[.]

Peoples's claim was alleged as a class action.  But that was not important to the outcome of her question.  She and the class prayed for "actual damages, including unpaid medical bills and expenses incurred to investigate USAA's wrongful conduct." Peoples, 2019 WL 6336407, at *1, ¶ 3.

    But Peoples and the class emphatically did not sue for their personal injuries incurred in the accident.  Nor did they sue simply because the benefits for which they contracted related to payment of treatment for their personal injuries.

    Rather, they sued because they were deprived of contract benefits, the benefits of statutorily required PIP coverage.  That was their alleged injury to property or business, and that is what conferred standing upon them to sue under the Washington State Consumer Protection Act.

    Stripped to its simplest elements, their question was whether "the wrongful denial of PIP benefits is an injury to 'business or property' under" the CPA.  It bears repeating that "they seek to hold their insurance companies liable for benefits owed under contract. We conclude that the deprivation of contracted-for insurance benefits is an injury to 'business or property'” and that the type of contracted-for insurance benefits does not matter.  Peoples, 2019 WL 6336407, at *3, ¶ 9.

    Beyond contracted-for insurance benefits, the Court answered that policyholders also have "a related right to insurance dealings free from bad faith," that this "protected property interest" is invaded by "[c]laims handling and wrongful denial of benefits, ... regardless of the type of event that triggers coverage." Peoples, 2019 WL 6336407, at *4, ¶ 12.

    In other words, the "algorithmic review" challenged by Krista Peoples and her class may have been the alleged cause of contract benefits being denied here, but it was the wrongful denial of benefits that was important to the outcome.  What was important to the Supreme Court in this decision was the result and not the cause. 

    For all these reasons, the Washington Supreme Court's answer to the Krista Peoples's certified question was in the affirmative:

Therefore, to the extent proved, the plaintiffs may recover actual damages, including out-of-pocket medical expenses that should have been covered, and can seek injunctive relief to compel the payment of benefits to medical providers.

Peoples, 2019 WL 6336407, at *4, ¶ 13.

    To summarize, the key to alleged 'injury to business or property' in the Peoples' class claims was "the deprivation of contracted-for insurance benefits."  That was their injury.  That conferred their standing to sue.

In the next article arising from the Peoples case, the second certified question will be addressed along with the question of whether "injuries to business or property" can ever include "investigative costs or time lost."

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

When Judges Say They're "Afraid of Being Fired" For Rulings: A Postscript.

This is a postscript to an article posted here on October 3, 2019.

"With every decision, the judge has to weigh the risk of being fired against the oath of office he or she has taken.  And we have already seen the impact of this travesty with the 'Stay in Mexico' or the MPP program, where judges have confided that they have made rulings out of fear of losing their jobs."  Hon. A. Ashley Tabaddor, Judge of the Immigration Court and President of the National Association of Immigration Judges, the union of Immigration Judges, quoted by Catherine E. Shoichet, Immigration Judges Accuse Justice Department of Unfair Labor Practices, CNN Politics, posted online on Tuesday, September 27, 2019.

The "administration's so-called Migrant Protection Protocols [MPP] program" is the one "which forces some asylum seekers to wait in Mexico while their cases make their way through the system[.]"  Id.

The background behind the headline of this report, that the Immigration Judges are accusing the justice department of Unfair Labor Practices, includes a few things.  For one, the department has called for the judges' union to be terminated.

The justice department has sent the judges anti-Semitic stories as a part of the briefing they send to these judges.

The department has also imposed "case competition quotas and the removal of [immigration judges'] power to administratively close cases."  Id.

When judges are afraid that their rulings will get them fired then perhaps unfair labor practices, while real issues, are the tips of a much larger iceberg.

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

 

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.

FILED RATE DOCTRINE DID NOT BAR STATUTORY UNFAIR PRACTICE CLAIMS.

 

In Washington State as elsewhere, the filed rate doctrine is a defense under certain circumstances.  In basic and general terms as laid out by a federal court in the case of Harvey v. Centene Mgt. Co. LLC, No. 2:18-CV-00012-SMJ, 2018 WL 6112407, at *5 n.1 (E.D. Wash. Nov. 21, 2018), it is Washington State law that the "filed rate doctrine" was made by courts to cover cases involving regulated utilities.  The effect is to shelter the appropriately filed rate from attack, whether directly or indirectly.  In other words, the reasonableness of a rate filed with a governing regulatory administrative agency and approved by that agency is a settled issue, not subject to dispute.

The Harvey case is an insurance case.  Specifically, that case involves health insurance policies.

In the Harvey case, the plaintiff alleged that the defendants breached contracts and violated Washington's Unfair Business Practices and Consumer Protection Statutes by failing to deliver the benefits of their "Ambetter health insurance policy" which they allegedly promised and represented that they would deliver.  The plaintiff alleged these claims on behalf of a putative class of Ambetter policyholders.  Harvey v. Centene Mgt. Co. LLC, No. 2:18-CV-00012-SMJ, 2018 WL 6112407, at *1 (E.D. Wash. Nov. 21, 2018).

In part here pertinent, the federal judge in Washington held in accordance with the concisely phrased headings of his rulings that "1.  The filed rate doctrine does not apply to claims that are merely incidental to and do not directly attack Insurance Commissioner-approved health insurance premiums," Harvey v. Centene Mgt. Co. LLC, No. 2:18-CV-00012-SMJ, 2018 WL 6112407, at *5 (E.D. Wash. Nov. 21, 2018), and "2.  Harvey's claims are merely incidental to and do not directly attack Insurance Commissioner-approved health insurance premiums."  Harvey v. Centene Mgt. Co. LLC, No. 2:18-CV-00012-SMJ, 2018 WL 6112407, at *6 (E.D. Wash. Nov. 21, 2018).  In short, claims based on allegations that the defendants did not deliver the insurance benefits they sold were not barred by the filed rate doctrine.

Even if the Court had not been completely convinced of this ruling, the Court went further in Harvey and stated that this decision was based on a motion to dismiss and "'the better practice'" in any case is to address the filed rate doctrine either on a motion or motions for summary judgment, or at trial.  Harvey v. Centene Mgt. Co. LLC, No. 2:18-CV-00012-SMJ, 2018 WL 6112407, at *7 (E.D. Wash. Nov. 21, 2018).

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NEW: "INJURY IN FACT": WHAT HAPPENS TO INSURER BAD FAITH STATUTES?

FROM THE 2018 SUPPLEMENT:

 

Litig. & Prev. Ins. Bad Faith § 9:14.50 (3rd ed.)

Litigation and Prevention of Insurer Bad Faith, Third Edition

A pdf of this new section can be accessed here or on my website at www.dennisjwall.com.

 

July 2018 Update

Dennis J. Wall

Part III. First-Party Claims

Chapter 9. Standards of Insurer Conduct

• 9:14.50. “Injury in Fact”: What happens to bad faith statutes?

Claims handling and penalties statutes regulating the business of insurance may not any longer provide causes of action to many policyholders and claimants.

In 2016, the Roberts Court grafted a requirement onto the U.S. Constitution which is not found in it—standing — but which is instead found in the Court's cases. Cases decided in lower courts since the Roberts Court raised standing to a constitutional prerogative are divided over whether Congress and State Legislatures can provide standing by providing remedies for statutory violations.

In Spokeo, Inc. v. Robins,¹ the Court raised the judge-made doctrine of standing to constitutional status. “Standing to sue,” the Court recognized, “is a doctrine rooted in the traditional understanding of a case or controversy. The doctrine developed in our case law,” said the Court in Spokeo, Inc. v. Robins.²

One of the elements of standing is “injury in fact,” which the Spokeo Court raised to “a constitutional requirement” which bars legislatures from conferring standing on people and organizations in most cases. To establish injury in fact, a person invoking a statutory remedy now must meet a newly-found constitutional requirement that she or he had a legally protected interest that is concrete and individualized to her or him, and that the harm is “actual” or “imminent,” not “conjectural” or “hypothetical.”³The Spokeo case itself was presented when Mr. Thomas Robins filed a lawsuit claiming an alleged violation of the Fair Credit Reporting Act by an internet search engine service which incorrectly provided information to the world about him. The Roberts Court remanded for a determination of whether Robins adequately alleged an injury in fact in his complaint.

As it has done by replacing “ultimate facts” pleading with “plausibility” pleading, in which allegations of fact in a complaint must be weighed by each individual judge who must dismiss the complaints that he or she does not think are “plausible,” the Roberts Court has laid down another obstacle to filing lawsuits in Federal Courts.⁴ It is fundamental to its process to note how many times the Court would have people believe that its work has consisted for several years now of finding procedural and constitutional limitations which other Courts somehow must have overlooked.

In an interesting application of the Spokeo “standing-means-injury—in-fact” requirement, the District Court in Stromberg v. Ocwen Loan Servicing, LLC^4.10 was confronted with a lawsuit filed as an alleged class action by “Plaintiff Bonnie Lynne Stromberg [who] asserts a California state law claim against two mortgage lenders and a mortgage loan servicing company for failing to reconvey a deed of trust on real property within thirty days after repayment of her home loan.”^4.20 The Court rejected the mortgage lenders' and mortgage servicer's challenges to Ms. Stromberg's standing to sue them by ruling that she had sufficiently alleged “injury in fact” through these “conclusory” allegations (which she handily supported with an affidavit and which the Court considered together with the allegations in her complaint):

The Court does not need to decide whether a bare procedural violation of California's analogous prompt-recording statute constitutes a concrete injury-in-fact for standing purposes because Stromberg has not alleged “a bare procedural violation, divorced from any concrete harm.” Spokeo, 136 S. Ct. at 1549. To the contrary, she has alleged “additional harm beyond the one [the legislature] has identified.” Spokeo, at 1549–50 (emphasis in original). In her complaint, Stromberg alleges that she “suffered injury in the form of slander of title, incurred costs, impaired credit and incomplete and inaccurate public records respecting her financial obligations and credit worthiness.” Compl. ECF No. 58 ¶ 43. Even if this allegation regarding injury is, as Defendants contend, too conclusory by itself to establish an injury-in-fact, Stromberg has also submitted an affidavit that includes further factual support for her standing. ECF No. 101-1, Ex. A.^4.30

Other Courts have found Spokeo standing to assert Fair Debt Collection Practices Act claims,^4.40 Telephone Consumer Protection Act claims,^4.50 Fair Credit Reporting Act claims alleged by a pro se plaintiff,^4.60 and products liability claims in multi-district litigation which include allegations of noncompliance with standards set under regulations issued by the federal Environmental Protection Agency and by the California Air Resources Board.^4.70

As an example of lower federal courts actively seeking situations in which people simply cannot sue for alleged violations of State statutes, even though States have provided the statutory remedies alleged in the given case, the Eleventh Circuit Court of Appeals held after Spokeo that a borrower-mortgagor in New York State could not bring that particular lawsuit for an alleged violation of New York Real Property Law because now the United States Constitution forbids such a suit.⁵ The Eleventh Circuit's decision in this case has been rejected by name in other Circuits,⁶ and it has been distinguished in the Eleventh Circuit based, perhaps ironically, on other Eleventh Circuit case law.⁷

However, this decision is by no means alone.⁸ In Spokeo itself, the Court deciding that case remanded for a determination of “plausibility,” in effect, of whether Thomas Robins and persons like him had alleged injury in fact as the U.S. Constitution now apparently requires.

The following case did not directly involve the Spokeo “injury in fact” directive, but it does illustrate the relative probabilities of success of any statutory action under a “Consumer Protection Act” by whatever name. In Fat Bullies Farm, LLC v. Devenport,⁹ potential sellers of real property brought a New Hampshire Consumer Protection Act (“CPA”) claim against prospective purchasers on account of the alleged conduct of the prospective purchasers. To describe the attitude of the New Hampshire Supreme Court in rejecting a New Hampshire CPA claim in this case as hostile, is to put it mildly. It is nonetheless instructive:

Viewing Fat Bullies and Simmons's [the prospective purchasers'] misrepresentation in conjunction with the remainder of their course of conduct does not alter our determination. Even taken together, the acts of showing up unannounced with an attorney and an option agreement, not recommending that the Devenports [the potential sellers of the real property] obtain legal counsel, attempting to negotiate price, not explaining the meaning of the language contained in the draft agreement, threatening and attempting to enforce an option agreement, and pursuing a contentious litigation strategy would not “raise an eyebrow of someone inured to the rough and tumble of the world of commerce.” (Citations omitted.) We cannot conclude that the subject conduct offends established public policy, is immoral, unethical, oppressive, or unscrupulous, or causes substantial injury. (Citation omitted.)

For these reasons, we reverse the trial court's ruling on the Devenports' CPA claim and its award of attorney's fees to the Devenports as damages under the CPA.¹⁰

If the idea of “injury in fact” has been elevated surreptitiously from standing to the U.S. Constitution, it can certainly have an effect on claims based on State statutes providing remedies to ‘private attorneys general’ that the States rely on to enforce the laws. Time will tell whether State Unfair Claim Handling Practices Acts and Penalties Statutes governing the business of insurance will feel the effects and, if so, how.

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

Footnotes

1

Spokeo, Inc. v. Robins,  U.S. , 136 S. Ct. 1540 (2016).

2

Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016).

3

Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547-48 (2016).

4

See, e.g., Klika v. Capital One Bank, N.A., No. C15-0107RSL, 2016 WL 4544373 at *1 (W.D. Wash. June 30, 2016), and “PLAUSIBILITY AS A STANDARD? DON'T BELIEVE IT,” published on Insurance Claims and Issues Blog on Monday, May 1, 2017, at http://insuranceclaimsissues.typepad.com/insurance_claims_and_issu/2017/05/plausibility-as-a-standard-dont-believe-it-its-just-another-way-of-saying-theres-nothing-left-to-lose-with-apologies-to-m.html.

4.10

Stromberg v. Ocwen Loan Servicing, LLC, No.15-cv-04719-JST, 2017 WL 2686540 (N.D. Cal. June 22, 2017).

4.20

Stromberg v. Ocwen Loan Servicing, LLC, No.15-cv-04719-JST, 2017 WL 2686540at*1 (N.D. Cal. June 22, 2017).

4.30

Stromberg v. Ocwen Loan Servicing, LLC, No.15-cv-04719-JST, 2017 WL 2686540at*6 (N.D. Cal. June 22, 2017).

4.40

E.g., Ferrell v. HSI Fin. Serv's, LLC, No. 1:16-cv-04624-RWS-AJB, 2017 WL 8186795 at *4 (N.D. Ga. December 22, 2017) (“After careful consideration of the pleadings and the rapidly expanding catalogue of case law interpreting and applying Spokeo, the undersigned is persuaded that Plaintiff's pleadings are sufficient to establish standing. The Court finds Defendant's motion unavailing on several grounds.”); Abraham v. Ocwen Loan Servicing, LLC, 321 F.R.D. 125, 166 (E.D. Pa. 2017) (“Numerous courts have applying Spokeo found a sufficient ‘injury in fact’ to support a FDCPA claim from allegations that a plaintiff suffered an ‘informational injury’ because the character of a debt had been misrepresented.”).

4.50

Progressive Health & Rehab Corp. v. Strategy Anesthesia, LLC, 271 F. Supp. 3d 941 (S.D. Ohio 2017) (“Indeed, as Plaintiff points out, the overwhelming number of courts that have addressed standing in a TCPA case subsequent to Spokeo have found standing.”) (pinpoint page references not available in April 2018).

4.60

Lovess v. Embrace Home Loans, Inc., No. JKB-17-2212, 2017 WL 4745452 at *2 (D. Md. October 20, 2017) (“This case is very close to Spokeo, but not quite there. Plaintiff is similarly alleging a procedural violation of FCRA and claiming that she is harmed by potential future consequences. But she has also alleged actual damages in the amount of $100,000 stemming from emotional distress and mental anguish, and therefore this is not a ‘bare’ procedural violation of the type at issue in Spokeo.”).

4.70

In re Chrysler-Dodge-Jeep Ecodiesel Marketing, Sales Practices, & Prod's Liab. Lit., No. 17-md-02777-EMC, 2018 WL 1335901 at *6 (N.D. Cal. March 15, 2018)(“Because Plaintiffs allege a financial injury, Spokeo does not support dismissal of their case.”).

5

Nicklaw v. Citimortgage, Inc., 839 F.3d 998, 1002-03 (11th Cir. 2016).

6

See, e.g., Weldon v. MTAG Services, LL, No. 3:16-cv-783 (JCH), 2017 WL 776648 at *6 (D. Conn. Feb. 28, 2017).

7

See Tillman v. Ally Fin. Inc., No. 2:16-cv-313-FtM-99CM, 2016 WL 6996113 at *4 n.7 (M.D. Fla. Nov. 30, 2016).

8

See also Michael G. McLellan, “Finding a Leg to Stand On: Spokeo, Inc. v. Robins and Statutory Standing in Consumer Litigation,” 31 Antitrust 49 (Summer 2017).

9

Fat Bullies Farm, LLC v. Devenport, 170 N.H. 17, 28, 164 A.3d 990 (2017).

10

Fat Bullies Farm, LLC v. Devenport, 170 N.H. 17, 164 A.3d 990, 998–99 (2017).

End of Document	© 2018 Thomson Reuters. No claim to original U.S. Government Works.

Reprinted from Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith, Third Edition (Thomson Reuters). Further reproduction of this article without the express consent of the publisher is prohibited.

MAYDAY, MAYDAY! INSURANCE ADJUSTERS LIABLE UNDER WASHINGTON CONSUMER PROTECTION ACT!

In Washington State, a motorist was injured in an accident.  The injured motorist brought an action against the adjuster for the at-fault motorcyclist's automobile insurance company.  The injured motorist sued for bad faith and for alleged violation of the Washington Consumer Protection Act.

The Superior Court, King County, Washington, Case No. 15-2-18663-9, John P. Erlick, J., dismissed the injured motorist's action but certified the case for discretionary review, which was granted.

On appeal, the Washington Court of Appeals held that:

1. the duty of good faith imposed by Washington statutes on “all persons” involved in insurance applies equally to individuals and corporations acting as insurance adjusters, and
2. individual insurance adjusters can be liable for a violation of the Washington Consumer Protection Act.

"Thus, we hold that an individual insurance adjuster may be liable for bad faith and CPA violations."  Holding of the appellate court:  Reversed and remanded.

The case in the appellate court is published at Keodalah v. Allstate Ins. Co., 413 P.3d 1059 (Wash. Ct. App., Div. 1, 2018).

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INTEREST ON AN EXTRACONTRACTUAL JUDGMENT IN MASSACHUSETTS HELD NOT TRIPLED.

In Anderson v. National U. Fire Ins. Co., 476 Mass. 377, 67 N.E.3d 1232, 1235 (2017), a third-party bad faith case, the Supreme Judicial Court of Massachusetts held that in a bad-faith case in which a judgment was already recovered on the bad-faith claims, interest on that judgment is not tripled under Massachusetts law:

We conclude that in a case where the amount of actual damages to be multiplied due to a wilful or knowing violation of G. L. c. 93A or G L. c. 176D are based on the amount of an underlying judgment, that amount does not include postjudgment interest.

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WHEN THIRD-PARTY GOES TO THE MOVIES WITH "FIRST-PARTY.".

 

A Federal District Judge recently wrote that Florida's bad-faith statute, Section 624.155, provides a remedy to an insured who has a first-party bad faith claim:

Count I: Insurance Bad Faith

In Florida, an insured is authorized by statute to bring a first-party bad-faith claim against an insurer, when the insured is damaged by: (1) the insurer's failure to attempt “in good faith to settle claims when, under all the circumstances, it could and should have done so;” or (2) the insurer's violation of enumerated statutory provisions, including Fla. Stat. § 626.9541(1)(i), which prohibits unfair claim settlement practices. See Fla. Stat. § 624.155(1)(a), (b).

Kapral v. GEICO Indemnity Co., No: 8:13-cv-2967-T-36EAJ, 2016 WL 7234147, at *3 (M.D. Fla. January 5, 2016).

There is so much wrong with this that I could spend all the time between now and Christmas writing about it.

A few words will avoid that fate.  First, section 624.155 does indeed authorize "an insured" to bring a first-party bad faith claim against an insurer.  At common law in Florida before this statute was enacted, an insured did not have a claim for first-party bad faith in Florida.  That is the main reason that section 624.155 was enacted.

Second, section 624.155 provides a statutory cause of action to "any person damaged" (emphasis added) by an insurance carrier's alleged bad faith.  The statute does not limit its availability to "an insured." 

Third, in the above quotation and especially following the above quotation in its opinion, the Court in this case went on to cite and summarize Florida rules governing alleged third-party bad-faith-in-settlement.  That is after all what the Kapral case was all about, namely, alleged bad faith by a liability carrier in failing settle an underlying claim within liability policy limits.

But none of that makes "third party" mean "first party," or "first party" mean "third party."  As the warden said when the character Luke was shot to death in the movie "Cool Hand Luke":

What we have here is failure to communicate.

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"REASONABLE AND APPROPRIATE" INSURANCE BACKDATING; CHARGING COMMISSION, NOT SO MUCH.

The Federal Judge in New York had a tough job in the case of Purifoy v. Walter Investment Mgt. Corp., No. 13-cv-937 (RJS), 2015 WL 9450621 (S.D.N.Y. December 21, 2015).  He was faced in particular with two hard questions about the plaintiffs' breach of contract claims, and he had to apply Florida law to answer them.

Both questions arose as a result of Green Tree Servicing's motion to dismiss.  The first question was whether Green Tree's mortgage servicing was "reasonable and appropriate" under the mortgage when Green Tree charged the plaintiffs for backdated insurance.

Now, here is what the plaintiffs alleged when they claimed that Green Tree was not authorized to force them to pay premiums for backdated insurance.  The plaintiffs argued that the mortgage loan servicer did not have this power because of the nature of insurance. 

In other words, even if the plaintiffs breached the mortgage by not keeping collateral protection insurance in effect at all times, still the servicer could not force-place backdated insurance because there is no such thing as "insurance" which is "backdated":

Plaintiffs' assertion that there was “no risk of loss” during the lapse in coverage (FAC ¶ 31) and, therefore, no need to backdate the force-placed insurance because “the purpose of insurance is to protect against future risks” (Opp'n at 9), misconstrues the nature of hazard insurance and the risks that accompany lapses in insurance coverage.

Purifoy v. Walter Investment Mgt. Corp., No. 13-cv-937 (RJS), 2015 WL 9450621, at *7 (S.D.N.Y. December 21, 2015) (emphasis added).

We may never know what the Federal Judge in New York meant by this, because he did not explain how or why anybody but him misconstrued the nature of insurance.  He turned instead to cases decided under Illinois, Minnesota, and New York law on an issue common to all of those cases as well as to this case:  The issue of whether it is plausible for a plaintiff to allege that no loss occurred during the period when the collateral protection insurance purchased by the plaintiffs lapsed.

That was not the issue the judge said he was addressing.  The issue which he did address has nothing to do with the purpose of insurance which is to protect against future risks, and the cases he cited have nothing to say about the purpose of insurance.

At any rate, the judge in this case ruled that under Florida law, Green Tree Servicing acted reasonably and appropriately in charging the plaintiffs-homeowners for backdated insurance.  Unfortunately, that ruling is missing any support from Florida case law, or otherwise.

The second issue on the plaintiffs' alleged claim for breach of contract concerned their allegations that Green Tree breached the mortgage by taking back "commissions" through its insurance subsidiary, and including them in the force-placed insurance premiums that Green Tree charged the homeowners.  The "commissions" were allegedly payments that Green Tree took back from the insurance carrier after it placed the policy through that carrier.

 Finding several cases decided in Florida in addition to citing cases decided in California and distinguishing a case decided in Minnesota offered by Green Tree, the New York Federal Judge denied Green Tree's motion to dismiss the plaintiffs' breach of contract claim with respect to Green Tree's taking "commissions" for the insurance it force-placed on the plaintiffs.  Purifoy v. Walter Investment Mgt. Corp., No. 13-cv-937 (RJS), 2015 WL 9450621, at *7-*8 (S.D.N.Y. December 21, 2015).

Insurance.  What you don't know can hurt you.

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SEKULA TWO:  ORLANDO FEDERAL JUDGE DECONSTRUCTS RES JUDICATA DEFENSE.

THE QUOTATION ALONE IS WORTH THE TRIP.

“'If the highest aim of a captain were to preserve his ship, he would keep it in port forever.'” This aphorism is attributed to St. Thomas Aquinas, whose resume did not include ocean yacht racing."  Federal Ins. Co. v. Speedboat Racing Ltd. v. Rambler 100 LLC, No. 3:12-cv-1480 (CSH), 2016 WL 4250222 (D. Conn. August 9, 2016).

The Court approved a stipulation between Federal and Speedboat which resolved claims between them related to Speedboat's insurance coverage with Federal.  Speedboat and Federal called their agreement a "Stipulation of Discontinuance."

Claims between Speedboat and its lessee, Rambler 100 LLC, continue on, however.  These claims include new and amended claims by Rambler for alleged violations of the Connecticut Unfair Trade Practices Act by Speedboat.  Federal Ins. Co. v. Speedboat Racing Ltd. v. Rambler 100 LLC, No. 3:12-cv-1480 (CSH), 2016 WL 4250222, at *25 (D. Conn. August 9, 2016).

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"STRANGER" HAS NO PLAUSIBLE BAD FAITH, UNFAIR INSURANCE PRACTICES CLAIM.

This article concerns the tale of a pro se plaintiff named John O'Reilly.  There were other issues and a deceased co-plaintiff in an alleged class action in Mr. O'Reilly's case, but the only issues to be addressed here concern a couple of claims alleged by Mr. O'Reilly in the Connecticut Federal Court case of Navin v. WELLS FARGO BANK, N.A., WELLS FARGO INSURANCE, INC., ASSURANT INC., AMERICAN SECURITY INSURANCE COMPANY, AMERICA'S SERVICING COMPANY and HSBC BANK USA, ___ F. Supp. 3d ___, No. 3:15-cv-671 (MPS), 2016 WL 4184010 (D. Conn. August 8, 2016).

O'Reilly was allegedly the "manager" of property owned by co-plaintiff Navin.  The gist of their lawsuit was the forced placement of insurance involving all of the defendants to one degree or another.  Mr. O'Reilly alleged that the conduct of the defendants violated the Connecticut Unfair Trade Practices Act ("CUTPA") or the Connecticut Unfair Insurance Practices Act ("CUIPA"), as may be applicable to the respective defendants.  However, Mr. O'Reilly alleged personal injuries resulting from mold that grew up separately and apart from any lender force-placed insurance practices:

O'Reilly alleges that “[w]hen a claim was put in for serious water damage, Defendant Assurant, after agreeing to compensate the claim, took the total proceeds and kicked them back” to HSBC and the Wells-Fargo Defendants. (FAC ¶ 91.) As a result, he alleges, he, his wife, and his son were exposed to hazardous mold for nearly six months, and the kitchen ceiling collapsed on him.

Whether the lender force-placed insurance practices that O'Reilly alleged might have violated either CUTPA or CUIPA in this case was beside the point here.  O'Reilly's alleged injuries could not have been proximately caused by the statutory violations he alleged in this case:

    The only injuries O'Reilly alleges he suffered are personal injuries caused by water damage to the Property. O'Reilly alleges that “[w]hen a claim was put in for serious water damage, Defendant Assurant, after agreeing to compensate the claim, took the total proceeds and kicked them back to HSBC-Wells Fargo Defendants through America's Servicing Company,” leaving O'Reilly and Navin without repairs or money to repair the water damage. O'Reilly seems to allege that Defendants' failure to pay for repairs exposed him to mold and caused the Property's ceiling to collapse on top of him. He seeks monetary and other relief for his injuries. Even if such personal injuries are covered under CUTPA, and even if Defendants' “deceptive acts or practices” were prohibited by CUTPA, O'Reilly has not plausibly alleged that Defendants' conduct proximately caused his injuries. O'Reilly is a stranger to all of the Defendants' acts specifically identified as violations of CUTPA and CUIPA—failing to maintain borrower's existing insurance, using “discretion to choose a forced-placed insurance provider and policy in bad faith,” selecting FPI providers “according to pre-arranged secret deals,” “[a]ssessing excessive ... premiums,” “backdating” FPI policies, and the like. (FAC ¶ 148.) Again, O'Reilly was neither a borrower nor an insured, and paid no mortgage payments or insurance premiums. To the extent the Defendants engaged in these acts, they did not proximately cause O'Reilly any harm.

Navin v. Wells Fargo Bank, N.A., ___ F. Supp. 3d ___, No. 3:15-cv-671 (MPS), 2016 WL 4184010, at *8 (D. Conn. August 8, 2016) (emphasis added).

The Federal District Judge accordingly granted the defendants' motions to dismiss Mr. O'Reilly's CUTPA and CUIPA claims along with all of the other claims alleged in this Federal case in Connecticut.

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TOO SCARED TO TRY: FEDS BEG WALL STREET TO SETTLE …

…All the Big Cases.

This article is being posted simultaneously on Insurance Claims Bad Faith Law Blog and on Insurance Claims and Issues Blog.

HSBC was accused by the Federal Government of what amounts to laundering money for terrorists.  The Feds settled the HSBC matter although they had good chances of success if they went to trial against HSBC and especially against many of its officers and employees.  What trial lawyer would not want to have the prosecution side of a case against terrorists and their sympathizers?  Apparently the Feds.  See Gretchen Morgenson in her "Fair Game" column published in this morning's Sunday New York Times, "A Bank Too Big to Jail" (posted Online on July 15, 2016), which you can also post in your browser at http://www.nytimes.com/2016/07/17/business/a-bank-too-big-to-jail.html?ref=business&_r=0.  Ms. Morgenson's column features an unofficial report released by Republican staffers of the U.S. House Financial Services Committee without the Committee's approval.  Although obviously partisan, it appears that this investigative report offers a lot of actual evidence and not just opinions.

For example, after the Feds decided not to take the HSBC case to trial, they wanted so much to settle with HSBC that they offered immunity from prosecution to HSBC's officers and employees if only HSBC would settle.  The HSBC settlement apparently offers a lesson in settling on unfavorable terms.  Anyone who has ever settled a case knows that once the other side of a negotiation knows that your side wants to settle badly, that is exactly how your side will almost certainly end up settling, which is badly.

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SETTLEMENT ON THE CHEAP.

This is less than they spend on public relations.  Heck, this is public relations.  See Nathaniel Popper, "Goldman Mortgage Settlement is Much Less Than Meets the Eye" (New York Times Online, posted Monday, April 11, 2016).

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of "Lender Force-Placed Insurance Practices" (American Bar Association 2015).  All rights reserved.

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FLORIDA DECEPTIVE AND UNFAIR TRADE PRACTICES ACT PREEMPTED.

 

"By its express terms," said the Court, the Florida Deceptive and Unfair Trade Practices Act "'does not apply to ... [b]anks and loan associations regulated by federal agencies.'"  Wilson v. Everbank, N.A., 77 F. Supp. 3d 1202, (S.D. Fla. 2015), quoting Fla. Stat. Section 501.212(4)(c).  The Court accordingly granted a federally regulated savings and loan association's motion to dismiss a FDUTPA claim with prejudice in that lender force-placed insurance practices case.

However, the Court entertained a cornucopia of claims allegedly arising under Florida, New York, or Illinois law, some of which it left standing, including claims based on the Truth-in-Lending Act, and alleged breaches of contract and of the implied covenant of good faith and fair dealing.

Please Read The Disclaimer.  Copyright 2015 by Dennis J. Wall, author of "Lender Force-Placed Insurance Practices" (American Bar Association 2015).  Listen to the author's most recent Thomson Reuters Legal Current podcast.  All Rights Reserved.

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Federal Loan Modification Program Another Profit Center for Predatory Lending.

Only Homeowners Are Barred From Negotiating in Mortgages.

INSURANCE, UNCONSCIONABILITY, AND THE AMERICAN LAW INSTITUTE.

    The intersection of insurance, unconscionability, and the American Law Institute is explored in a two-post article on Thomson Reuters' Legal Solutions Blog:  Unconscionability in law and in force-placed insurance: Part 1 December 3, 2014 and Unconscionability in law and in force-placed insurance: Part 2 December 5, 2014.

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CALIFORNIA STATUTES IN BAD FAITH CLAIMS.

   Contrary to popular belief, there are statutes at work in bad faith complaints filed in California.   Appearances in decided cases have been made in California by various and sundry State Unfair Business Practices Statutes and Unfair Competition Laws, whatever these laws may be named.

   The Supreme Court of California cleared the way for the application and use of these statutes when it reviewed lower courts' handling of a claim against an insurance company in 2013 in the case of Zhang v. Superior Court, 57 Cal. 4th 364, 304 P.3d 163, 159 Cal. Rptr. 3d 672 (2013). That case involved a claim against an insurance company based on the California Unfair Competition Law, Cal. Bus. & Prof. Code § 17200.  In Zhang, the California highCourt held that an Unfair Competition Law claim could proceed even against an insurance company just so long as that claim is not based entirely on an implied cause of action premised in turn on a presumed  Unfair Insurance Practices Act ("UIPA", Cal. Ins. Code §§ 790 and following) violation.

   Implied causes of action under the California UIPA have been prohibited since the Royal Globe decision, which allowed them, was overruled in 1988.   Where the UIPA is not the only predicate for the Unfair Competition Law claim in the case against the insurance company, i.e., where the claim under a statute other than the Unfair Insurance Practices Act is not based only on an alleged UIPA violation -- and therefore not based only on a prohibited implied UIPA cause of action against the insurance company, then a claim, invoking a statute different from the UIPA of course, would be allowed against an insurance company, in this case, against a first-party carrier.  Zhang v. Superior Ct., 57 Cal. 4th 364, 383-84, 304 P.3d 163, 176-77, 159 Cal. Rptr. 3d 672, 688-89 (2013).

 

Express statutory causes of action in first-party insurance bad faith cases are examined in 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 9:14 (3d Ed. and 2014 Supp. West Publishing Co.), and implied statutory claims are discussed in 2 id. § 9:15.

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

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Make Insurance Derivatives Safer: Get Swaps Addicts Off the Street.

    The power of derivatives manufacturers is legendary.  And apparently never comes to an end.

    Derivatives manufacturers, including investment banks that hold no deposits and never have held deposits but are called 'banks' anyway, notoriously fought against regulation of their swaps.  Years after Congress passed a law authorizing the U.S. Commodity Futures Trading Commission to finally regulate swaps, the derivatives manufacturers may have struck again by all appearances.

    Swaps are so famously complex that very few people can understand these deliberately opaque financial transactions, let alone regulate them.  The Federal Government turned to a company that held itself out as understanding swaps.

    Equally important, the company, DTCC Data Repository, LLC, held itself out as having the software and hardware mechanisms in place to provide the CFTC with information required to regulate swaps.  One of the theories behind the CFTC concept of effective regulation of swaps is transparency.  This is kind of like Justice Brandeis's famous observation that sunlight is the best disinfectant.

     Accordingly, for the purpose of transparency the CFTC designated DTCC as "a swap data repository pursuant to section 21 of the Commodity Act and section 49.3(b) of the Commission's regulations."  CFTC Press Release, "CFTC Approves Application of DTCC Data Repository, LLC For Provisional Registration as a Swap Data Repository" (September 30, 2012).

     Surprisingly to some, perhaps, the CFTC just issued a "Special Announcement" that the data it has been receiving from DTCC Data Repository "understated" the "notional rate values in the interest rate class" affecting, naturally, the values of interest rate swaps regulated by the CFTC.  Special Announcement, "DTCC Data Repository (DDR)" (most recent CFTC "Weekly Swaps Report").  Parenthetically, in some circles and in some rather snarky reporting, the data failure is attributed not to DTCC whence it came, but to the CFTC which in reality is the victim of DTCC's data dump failure.

     Information asymmetry.  This is a concept familiar to bad faith practitioners.  It occurs when one party has greater access to information concerning a mutual transaction involving another party which has little or no access to the same level of information about their mutual transaction.  2 DENNIS J. WALL, "LITIGATION AND PREVENTION OF INSURER BAD FAITH" § 9:5, "The Question of Bad Faith -- Presence or Absence of Fault" (Thomson Reuters West Third Edition and 2013 Supplement).

    So, it may be very difficult to regulate swaps with inaccurate information, just as it was previously impossible to regulate swaps with no information at all.

     For more on the story of the long and undying resistance to swap regulation by derivatives manufacturers and purveyors of similar weapons of mass financial destruction, as they say, see also Silla Brush and Robert Schmidt, "How the Bank Lobby Loosened U.S. Reins on Derivatives" (Bloomberg News, posted on www.bloomberg.com on September 4, 2013).

 HAPPY NEW YEAR IN 2014!

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

 

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Bad Insurance Deals Push Cities to Brink.

             U.S. counties and cities are going bankrupt.  County administrators and city managers blame employees and the employees' pensions and unions, with whom they contracted.

          The real problem is not enough money.  Bad insurance products are a much bigger cause of bad budgets than anything else including pensions.  The root cause is the people who made, and make, bad budget decisions.

          Interest rate swaps and credit default swaps ("CDS," another form of credit insurance) are not subject to pressure.  Munis must pay the premiums.  There is no exemption for derivatives, for which the munis contracted as a part of their financing, even if the munis declare bankruptcy.  The derivatives manufacturers made sure of that.  See, e.g., Mary Williams Walsh, "Detroit Wins $55 Million Concessions From 2 Banks" p. B1 (New York Times Nat'l ed., Wednesday, December 25, 2013); Mary Williams Walsh, "'Safe Harbor' in Bankruptcy is Upended in Detroit Case" p. B1 (New York Times Nat'l ed., Tuesday, December 24, 2013).

          As a result, bankrupt debtors including counties and cities have no ability to pressure a creditor whose deal is backed up by law enforcement.

           Nor do bankrupt debtors have any incentive to draw unwanted attention to their derivatives creditors.  If they do, they might not get financing the next time.

          Small-government or muni administrators who agreed to have their munis pay for these insurance products had and have little experience with them.  They do not know what they are getting into.  DENNIS J. WALL, 1 "LITIGATION AND PREVENTION OF INSURER BAD FAITH" §§ 3:109 & 3:110, "The New 'Credit Insurance?' Credit Default Swaps" & "Bond Insurance on and for 'Municipal Bonds,' and the Subprime Credit Crisis" (THOMSON REUTERS WEST THIRD EDITION AND 2013 SUPPLEMENT).

          Employees, pension plans and unions are subject to intense pressure on the other hand.  That pressure includes small-government officials putting out the story that government employees and unions are responsible for bad budgets.  See Rick Lyman and Mary Williams Walsh, "Police Salaries and Pensions Push California City to Brink" p. A1, col. 5 (New York Times Nat'l ed., Saturday, December 28, 2013).  The reporters' story is written much more fairly than the headline written by an editor suggests.  But we know from previous New York Times reports in particular that bad financial insurance products are a much greater cause of bad muni budgets.  Again, see, e.g., Mary Williams Walsh, "'Safe Harbor' in Bankruptcy is Upended in Detroit Case" p. B1 (New York Times Nat'l ed., published in print on Christmas Eve, 2013); Mary Williams Walsh, "Detroit Wins $55 Million Concessions From 2 Banks" p. B1 (New York Times Nat'l ed., published in print Christmas Day, 2013).

          The root cause of bad municipal budgets today is the bad insurance purchasing decisions made yesterday.  Those bad decisions were made by some if not most of the same muni managers that are also responsible for misdirecting our attention away from their bad insurance purchasing decisions, to the contracts they entered into for employee pensions, i.e., to their employees.  County and city employees are to be forgiven if they are under the impression that small governments would stand by the contracts they made with their employees, too.

 

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

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BAD FAITH POWER GRAB BY FEDERAL INSURANCE OFFICE.

   The Federal Insurance Office is an office without enough to do.  For one thing, Congress gave the FIO the responsibility of reporting on "how to modernize and improve the system of insurance regulation in the United States" in the aftermath of the Great Recession.  More about that particular task in a future article.

   The FIO seized upon its report-writing responsibility as an opportunity to grab power.  The chief of the Federal Insurance Office wants Congress to expand the role of the FIO, he reported in his report on how insurance companies have performed in the aftermath of the Great Recession.

   If Congress were to confer these new powers of regulating insurance companies on the Federal Government, then in addition to enacting new laws, Congress would also have to repeal at least a part of the Sherman Antitrust Act and the McCarran-Ferguson Act, and probably more Federal statutes.  Under these and similar statutes, Congress reserved the authority to regulate insurance to the States.  That is how State Insurance Commissioners have accumulated lots of experience in regulating insurance companies, and how Federal authorities have accumulated virtually zero experience in regulating insurance companies.  Parenthetically, the FIO's enabling statute was only passed in Congress in 2010.

   This is a particularly inopportune time for the Federal Insurance Officer to announce his pursuit of greater regulatory powers.  In particular, the expertise if any of the Federal government in insurance matters is not held in high regard right now, not with the manifest failures of www.healthcare.gov for the past two-and-one-half months and continuing even now.

   The FIO's report goes too far.  Not only substantively but historically.  For example, the FIO report advances the notion that State officials were the officials who failed to adequately regulate the use of credit default swaps, which are really a form of credit insurance after all.  Federal Insurance Office, U.S. Department of the Treasury, "How to Modernize and Improve the System of Insurance Regulation in the United States," pp. 18 et seq. (December, 2013; released to the public on Thursday, December 12, 2013).

   What the FIO leaves out of this poorly timed, inadequately thought out report, is that Congress prohibited States from regulating credit default swaps.  In particular, the infamous Gramm-Leach-Bliley law exempted the regulation of credit default swaps from the jurisdiction of State Insurance Commissioners.

   This FIO report is not simply off the mark.  That does not fully describe what is going on here.  A full description would include that what the FIO is doing is in bad faith.

 

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

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MIS-INTERPRETATION OF ADDITIONAL INSURED ENDORSEMENT CAUSES BAD FAITH DAMAGES ... Continued.

          In Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 (W.D. Wash. December 17, 2012) the Court was faced with a General Contractor which was denied a Defense under an Additional Insured Endorsement.  The General Contractor sued for a Declaration of Insurance Coverage and for Bad Faith Damages.  In our first article posted regarding this decision, we explored the background of the case and the Federal Court's grant of Summary Judgment to the General Contractor on Coverage, i.e., that Burlington owes TRC, the G.C., a Defense under an Additional Insured Endorsement.  "Contrary to Burlington's assertion, it is clear to the Court that Burlington has a duty to defend TRC against the 2011 Complaint."  Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 *6 (W.D. Wash. December 17, 2012).  [Emphasis added.]

          Having determined the Coverage Claim in favor of the General Contractor, the Court turned its attention to both the Bad Faith Claims in this case, and TRC's Claims based on several Model Unfair Claim Practices Act provisions which are enacted into the Washington State Insurance Fair Conduct Act.  The underscored language in the quotation immediately above, gives a clear indication of how the Court was going to rule on the Bad Faith Claims.  "An insurer acts in bad faith if its breach of the duty to defend was unreasonable, frivolous, or unfounded."  Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 *7 (W.D. Wash. December 17, 2012).

          Since Burlington's breach of its Duty to Defend in this case was based on its "unreasonable" interpretation of its own Additional Insured Endorsement, the Court granted TRC's Motion for Summary Judgment on TRC's Bad Faith Claim based on Burlington's Denial of its Duty to Defend TRC.

          TRC also based its lawsuit on two provisions of the Revised Code of Washington State and the Washington Administrative Code, which are typical provisions found in many State Unfair Claim Practices Acts.  TRC contended that Burlington violated these two provisions, and the Federal Court granted TRC's Motion for Summary Judgment against Burlington as to both of them.

          The first provision is WAC (Washington Administrative Code) § 284-30-350(1), made actionable in pertinent part by RCW § 48.30.015(5)(b):

(1) No insurer shall fail to fully disclose to first party claimants all pertinent benefits, coverages or other provisions of an insurance policy or insurance contract under which a claim is presented.

It will be noted that by its terms this provision applies with regard to disclosure "to first party claimants".  A review of the Washington Administrative Code and of the Revised Code of Washington gives no reason to believe that the term, "first party claimants," means anything different in the quoted provision than it means generally in other United States jurisdictions, which is a Policyholder or other Insured which claims Policy Benefits directly under her, his or its own Insurance Policy for a loss claimed by the Insured due to damage suffered or incurred by the Insured.

          Without ever explicitly conferring the status of "first party claimant" upon TRC which claimed a defense from Burlington under a Comprehensive General Liability Policy in this case, the Federal Court held that Burlington's apparently uncontested failure to disclose "the existence of the new additional insured endorsement in the 2010-11 Burlington Policy, much less coverage available" under it, coupled with Burlington's apparently belated assertion that its Additional Insured Endorsement is somehow limited "temporally," led to the Federal Court's entry of Summary Judgment in favor of TRC on its claim that Burlington violated this provision of Washington State law.  Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 *7 (W.D. Wash. December 17, 2012).

          The second provision of the Washington Administrative Code which Burlington allegedly violated in this case, is WAC § 284-30-330(13), made actionable by RCW § 48.30.015(5)(a):

(13) Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.

The Federal District Court granted TRC's Motion for Summary Judgment on this claim, too.  "Burlington may have been prompt" in denying a Defense, the Court allowed, but "Burlington did not provide a reasonable explanation of the basis for their denial.  Summary judgment on this issue is granted."  Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 *7 (W.D. Wash. December 17, 2012).

          The Court then held TRC entitled to "an award of attorneys fees," Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 *8 (W.D. Wash. December 17, 2012), presumably referring to the fees incurred by TRC in its defense of the Underlying Case against it.

          The Federal Court reserved ruling, however, on TRC's claim for statutory treble damages; the Court reserved "ruling on the total award of damages until the time the underlying lawsuit is resolved."  Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 *8 (W.D. Wash. December 17, 2012).

          For the parties, the Insurance Company's denial of all Coverage including any Duty to Defend is perhaps the central issue.  For observers standing outside of this lawsuit, however, a major question raised by this ruling is how an Insured under a Commercial General Liability Policy, particularly one which (successfully) claims a Defense under that Policy, can ever be seen as a "first party claimant" for purposes of the Carrier's exposure to extracontractual damages.

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MIS-INTERPRETATION OF ADDITIONAL INSURED ENDORSEMENT CAUSES BAD FAITH DAMAGES.

          In Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 (W.D. Wash. December 17, 2012) the Court was faced with a General Contractor which was denied a Defense under an Additional Insured Endorsement.  The General Contractor sued for a Declaration of Insurance Coverage and for Bad Faith Damages.  The Court granted the General Contractor's Motion for Summary Judgment in all pertinent respects.

          Tim Ryan Construction, Inc. ("TRC") is the General Contractor.  Its subcontractor on a commercial building project, Sound Glass, purchased a Commercial General Liability Policy from Burlington.  Burlington's CGL has an Additional Insured Endorsement under which TRC is 'indisputably' "covered as an additional insured under Burlington's policies with Sound Glass."  Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 *1 (W.D. Wash. December 17, 2012).

          In the State of Washington, Coverage for a Defense under a Liability Policy can be determined by comparing the Policy language with the Underlying Complaint, or by comparing a combination of the language of these documents with facts extrinsic to the Underlying Complaint.  Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 *3 (W.D. Wash. December 17, 2012).  "In arriving at this decision, extrinsic evidence cannot be used to deny the duty to defend, only to trigger it."  Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 *5 (W.D. Wash. December 17, 2012).  [Emphasis added.]

          TRC was sued in an Underlying Complaint filed in 2011 which did not mention its subcontractor, Sound Glass.  Burlington denied TRC a Defense to the 2011 Complaint for that reason, relying also on the language of the Additional Insured Endorsement to the effect that Additional Insureds are Burlington's Insureds "'only with respect to liability arising out of 'your work' for that insured by or for you....  [Further,] any other insurance maintained by the Additional Insured [here, TRC] shall be excess and noncontributory but ... only if such claim, loss or liability is determined to be solely due to the negligence or responsibility of the Named Insured [i.e., of Sound Glass in this instance].'"  Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 *4 (W.D. Wash. December 17, 2012).  Burlington contended that since Sound Glass was not named in the 2011 Complaint, there was no Duty to Defend TRC.

          The Federal Court disagreed in this case.  The Court accepted the position advanced by TRC that the silence of the 2011 Complaint "leaves open the possibility that Sound Glass was one of the various subcontractors who was responsible for the alleged damages".  Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 *4 (W.D. Wash. December 17, 2012).  In essence, to decide that question was to rely on extrinsic evidence to deny a Duty to Defend, contrary to Washington State law.  This is what Burlington did by looking to the "final determination of the named insured's loss and liability," a determination which "has no bearing" on the Duty to Defend question in the first place, the Court wrote.  "Contrary to Burlington's assertion, it is clear to the Court that Burlington has a duty to defend TRC against the 2011 Complaint."  Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 *6 (W.D. Wash. December 17, 2012).  [Emphasis added.]

          Having determined the Coverage Claim in favor of the General Contractor, the Court turned its attention to both the Bad Faith Claims in this case, and TRC's Claims based on several Model Unfair Claim Practices Act provisions which are enacted into the Washington State Insurance Fair Conduct Act.

The Federal Court's disposition of the Bad Faith Claims and the IFCA Claims, and Damages, will be addressed in a further article to be posted here.  To Be Continued ....

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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. 

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Force Placed Insurance and the Duty of Good Faith.

    It has just been held under Florida law, that allegations of Breach of the Implied Covenant of Good Faith and Fair Dealing, which is implied in all contracts, state a claim or cause of action against Mortgage Servicers, Lenders, and Insurance Companies in a lawsuit involving force-placed (or forced-placed) Insurance.  Kunzelman v. Wells Fargo Bank, N.A., 2012 WL 2003337 *5 (S.D. Fla. June 4, 2012), Download Kunzelmann v. Wells Fargo Bank (S.D. Fla. No. 9.11.cv.81373, Order Entered 06.01.12, Filed 06.04.12) PUBLIC RECORD.   In particular, the Court pointed out these allegations as the bases for its ruling:

In his Complaint, Plaintiff alleges that Defendants breach their implied duty of good faith and fair dealing by, among other things, choosing an insurance policy in bad faith and in contravention of the parties' reasonable expectations, failing to seek competitive bids for the insurance policies, and selecting insurance companies that would pay unearned kickbacks to Defendants. (DE 37 at ¶ 78). Accordingly, I find that Plaintiff has sufficiently pleaded his claim for breach of the covenant of good faith and fair dealing and therefore dismissal is not appropriate.

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