Claims And Issues

The Jury Pool for Katrina Coverage Lawsuits

    In any lawsuit, the Venire must be considered by the parties.  The Venire is the list of potential jurors, the potential jury pool, the group from which a Jury will be selected at Trial.  In Mississippi, most individuals did not have Flood Insurance as was true across all of the Gulf Coast before Katrina.  However, many people in Mississippi as well as other States did not have Homeowner's Insurance or Property Insurance either.  They are left to counter the devastation left by Katrina either with the help of volunteers, or by waiting for Government assistance God help them.   See this news article published today for a fuller description of their situation:  Peter Whoriskey, "As Aid Lags, Volunteers Shoulder Rebuilding on Gulf Coast/Local Gratitude Mixes With Frustration Over Government's Failures" (Washington Post,  Sunday, January 28, 2007, p. A03).

    The Venire must be carefully considered in any case, and in no lawsuits should the Venire -- the Jury Pool -- be given more careful consideration than that available to decide fact issues in the Katrina Damages lawsuits.

    A recent case that went to verdict in Mississippi, in which the Trial Judge directed a verdict on Coverage for the apparent Policy Limits and in which a Jury assessed Punitive Damages of $2,500,000.00 was previously posted here on January 12, 2007.  A more detailed discussion of it is also posted today, and on January 15, 2007, on Insurance Claims and Bad Faith Law Blog.

 Please see Disclaimer.

The Settlement is in the Details, or, Show Me The Facts.

     On January 24, 2007, I wrote on this site about the prospective State Farm global settlement of Mississippi Katrina-related Claims.  The potential global settlement heads to a Federal Judge for approval and facts need to be known, I wrote.  On  Friday, January 26, 2007, Senior Judge L.T. Senter, Jr. -- the Federal Judge in question -- issued an Order denying approval because the parties did not present enough facts to allow him to approve their settlement.  Here is a link to Judge Senter's Order: Dennis R. Woullard and S. Imani Woullard, et al. v. State Farm Fire & Casualty Co. (S.D. Miss. Civil Action Case No. 01.06.CV1057, Order January 26, 2007).

      And here is a link to a news report about the Judge's Order and some of the specific questions concerning the proposed settlement arrangement:  Joseph B. Treaster, "Judge Puts Settlement in Question" (New York Times, Saturday, January 27, 2007, page B1, col. 6).

     If this global settlement is finally approved by Judge Senter in the U.S. District Court for the Southern District of Mississippi, it bears reminding that all the Insurance Coverage Questions and arguments pretty much remain pending against every other Property Insurance Company and Homeowner's Carrier in Mississippi, not to mention that the Questions and arguments of Insurance Coverage for Damages caused by Katrina and later Hurricanes remain pending against every Insurance Company in Alabama, Louisiana, Texas -- and anywhere else outside the territory of this potential global settlement that has been proposed in Mississippi.  Many Insurance Coverage Questions and Arguments were analyzed, with available case law, in an article I wrote shortly after Katrina struck.  That article was published by the American Bar Association in the Property Insurance Law Newsletter.  Here is a link to it:   "Flood Exclusions, Hurricanes, and Theories of Insurance Coverage" published by the American Bar Associaiton, Tort Trial & Insurance Practice Section, Property Insurance Law Committee Newsletter 7 (Fall 2005).

                                                                 Please read the disclaimer.
 

Settlement of Many Katrina Claims in Mississippi.

 A settlement announced yesterday in Mississippi will resolve many claims and lawsuits there that were filed after Katrina.  The global settlement in Mississippi will apparently have no effect on Katrina claims and lawsuits pending in other places including in New Orleans, in the rest of Louisiana, or in Alabama.  Here is a link to today's solid reporting by Joseph B. Treaster, "Big Insurer Will Pay 640 Katrina Claims and Reopen Others"  (New York Times, page A1, col. 6, Wed., January 24, 2007).  State Farm is the "big insurer" in this news report.  Based on this report, here is a list of what State Farm will pay and what it will apparently get in this global settlement.

    The Insurer will pay:

• $80,000,000.00 to settle 640 Mississippi lawsuits.  This figure is reported to include the full value under each policy of 300 homes evidenced only by a slab and nothing else on the site after Katrina, and also including various amounts in partial payment toward another 340 other homes for which the Claims showed a range of damages apparently falling short of complete destruction.
• A reported minimum of $50,000,000.00 on previously closed Coverage Claims which will now be reopened, with reported estimates as high as $600,000,000.00.
• $46,000,000.00 more in attorney's fees to the attorneys representing the Policyholders whose Claims are included in this global settlement.

    Here is what State Farm reportedly will receive as a part of this global settlement in Mississippi:

• Dismissal and Releases of the 640 Claims in suit.
• Presumably, Releases as well on all reopened and amicably paid Claims.
• Dismissal of Criminal Proceedings commenced by Mississippi Attorney General Jim Hood.
• Dismissal of a Civil Suit filed by General Hood.
• Unclear approval of the Mississippi Insurance Commissioner, George Dale, presumably being the Commissioner's agreement to the settlement of the 640 lawsuits filed by Homeowners and others.

It is unclear at this moment whether the Mississippi global settlement includes any Businesses.  Further, it is reported in the above newspaper article that the Federal Judge assigned to many of the Katrina Claims filed in Mississippi is being asked to approve the terms of all or part of the global settlement.  More facts will become known soon, in all likelihood.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

Partial Payment of Coverage Claims

                             Katrina and the Insurance Contract.   

    An Insurance Company has been ordered to pay over $232,000 in Covered Compensatory Property Damages under a Homeowner's Policy by a Federal Judge, and has also been assessed $2,500,000.00 in Punitive Damages by a Jury in Federal Court in Mississippi.  The Federal case involves Claims for Damages following Hurricane Katrina.  News outlets began broadcasting the report last evening and they continue today, as expected.  An insightful article is published online at Bloomberg.com.  Here is a link to it:  Lawrence Viele Davidson & Erik Holm, "State Farm Must Pay Couple $2.7 Million for Katrina (Update4)" (www.bloomberg.com/apps/news, dateline Jan. 11, 2007 (Bloomberg)).

POSTSCRIPT added January 15, 2007:

A good analysis of the history leading up to these newsbreaking events in the First-Party Insurance Coverage and Bad Faith Federal Court case in Mississippi, is available as of Monday, January 15, 2007 in Insurance Claims And Bad Faith Law Blog.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

Input for Computer Models to be Public.

    The extent to which opinions are input into Computer Models of Hurricane and other Catastrophe Claims is in shadows.  Until now -- perhaps.

     Four "firms" that sell the output of these Computer Models to justify Premium Increases for Catclaim Coverage have agreed "to release hurricane loss projects models for review" by the Florida House of Representatives, a press release issued today by the Florida House asserts:   "Modeling Firms Agree to House Request" (Florida House of Representatives Press Release January 11, 2007). 

    This is a welcome development.  It may represent public disclosure of acts previously done in darkness.  Attention focused in testimony and also in an Open Letter to the Florida Legislature, posted here on January 4, 2007, that certain Computer Models are tossing away facts in favor of inputting opinions of anonymous persons.  These 'models' are used to justify Premium Increases on Florida Homeowners and Businesses, and they are run by people from outside of Florida.  Listed in today's Press Release, none of the four organizations is located in Florida.

    According to today's Florida House Press Release, the four paid organizations are joined by the Florida Office of Insurance Regulation which also responded to a request "to release copies of their hurricane loss projection models and the underlying assumptions contained in those models to the [Florida] House for review."

    The Florida Legislature will meet in Special Session beginning on Tuesday, January 16, 2007 to address the Florida Property Insurance Crisis.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

 

Katrina Settlement in Mississippi.

    A major settlement of many Katrina-spawned Insurance Coverage lawsuits in Mississippi are all but settled today, it is reported this morning in the New York Times in an article by Joseph B. Treaster, "State Farm is Settling Gulf Claims" (Tuesday, January 9, 2007, p. C1, col. 6).   The settlement is awaiting the formal approval of Mississippi State officials including the Mississippi Attorney General, who have helped to reach the settlement in the first place.

    This settlement of Katrina-related Insurance Coverage litigation in Mississippi will not affect claims and litigation over Insurance Coverage after Katrina in Louisiana, it is reported.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

Liability Insurance Policies and Defense Under a Reservation of Rights.

    It is neither a breach of the Liability Insurance Contract nor Third Party Bad Faith, for the Liability Insurance Company to defend under a Reservation of Rights and also file a Declaratory Judgment Action, it was recently held in Download State_Auto_Property_Casualty_Insurance_Co. v. Stillwell Masonry Co. (M.D. Ala. Case No. 3.06.CV.435, Opinion Filed December 22, 2006).pdf.    Although that case involved "a Series I Contractor's Policy" and Alabama Insurance Law, it is consistent with the vast majority of decisions in jurisdictions across the United States under similar circumstances involving all types of Liability Insurance Policies which provide a duty to defend.
 

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

 

   

An Open Letter to the Florida Legislature in Special Session.

    The following post contains the testimony given by Dennis J. Wall, Esquire to the Florida Legislature on January 3, 2007 for the upcoming Special Session on the Florida Property Insurance Crisis.

Re: Special Session of the Florida Legislature to address the Insurance Crisis, beginning January 16, 2007.

 

     I wish the pleasure had been indefinitely postponed, Ebenezer Scrooge said to one of the Ghosts of Christmas at their first meeting. Since Hurricane Charley, we who live and work in Florida are like Ebenezer Scrooge in this sense:  After the visits of Hurricane Charley and the Hurricanes that followed, our lives (and our Insurance) are changing in front of our eyes.

    You have the authority to do something about the Insurance crisis for Florida Homeowners, Business Owners, and State and Local Governments, too.  First, continue the required use of the current fact-based Computer Model to assess Risk.  All Catastrophe Insurance Premiums such as for Homeowners Insurance and all kinds of Property Insurance, are based on a solid, fact-based Computer Model.  Florida is the first State -- and as of now, perhaps the only State -- to develop its own CatClaims Computer Model which is used to assess Rate Hike requests.  The history of Hurricane damage, for example, is input into that Computer Model to reflect the reality on the ground since statistics about Hurricane damages began.

    In 2006, Florida spent $2,700,000 to obtain a "computer catastrophe model" of CatClaims.  Florida officials are also continuing to use Property Insurers' computer models, which were the only available source of claims predictions data until Florida developed its own CatClaims Model.

    Recently, some corporate headquarters in other States have quietly submitted Premium Increase Requests in Florida using opinion-based  'models' instead.  One such 'model' originates in California and is based on the input opinions of several paid anonymous persons. See, for example, my December 3rd, December 23rd, and Christmas Eve December 24, 2006 posts on my Web Log, and see the link also on my Blog to an informative article in the Los Angeles Times by Peter G. Gosselin, "Insurers Learn to Pinpoint Risks -- and Avoid Them" (Los Angeles Times, Tuesday, November 28, 2006, page A1, col. 2).

However, the Florida Office of Insurance Regulation, it seems, is not accepting Premium Increase submissions based on anything but the facts.  Many recent examples are given by many different submissions seeking Premium Rate Increases, which are rejected when they are based on an unapproved and 'opinion-based model'.

The First thing to do is to stick to the requirement that a fact-based Computer Model be used always, to assess Risk and so to assess Premium Rate Increase Requests.  Using Florida's Computer Model will  bring a huge return on investment to Florida of the $2,700,000.00 cost to bring that Computer Model online just in time.

     Second, the 2006 Florida Legislature changed Citizens Property  Insurance Corporation's Rate structure to base Wind Coverage Premium Rates on charges that are not related to Catastrophe Claims that have actually been made.  Wind Coverage Premium Rates became tied to costs which Citizens has never paid and never will pay.  Those costs are claimed to relate, but do not relate, to the costs paid by Citizens for reinsurance for Policyholders in the High Risk Account category.  Effective March 1, 2007 under this 2006 legislation, Premium Rates for Policyholders in High Risk areas will increase based on the prevailing charge for reinsurance in the open market, and whether or not reinsurance is actually purchased.  This will result in a projected additional Wind Coverage Premium Rate increase of 55.8 percent by Citizens, as I understand it. 

       The additional 55.8 percent Wind Coverage Premium Rate Increase is on top of a Premium Rate Increase of 25.9 percent for Wind Coverage set to take effect yesterday, January 1, 2007, based on the fact-based input of the Computer Model of future Hurricane occurrences including Catastrophe Claims.  The 25.9 percent increase is at least arguably compatible with Citizens' mission to be a source of Insurance Coverage, yet charge higher Premiums than the open market and so be the Florida insurer of last resort. 

    Premium Rates charged by Citizens Property Insurance Corporation should be totally based on a fact-based input Model of Hurricane and other Catastrophe Claims, just as Rate increases sought by private, commercially run Insurance Companies must be judged by a fact-based Model.  The additional 55.8 percent Citizens' Wind Coverage Rate Premium increase scheduled to take place March 1, 2007 is not reflected in any fact-based Model and so it should not be imposed. 

    Third, regarding Commercial Nonresidential Property Insurance policies in a High Risk Account that provide coverage for the peril of Wind, it is my understanding that Citizens' actuarial and underwriting committee has recommended yet another increase.  The proposed Premium Rate increase for such HRA businesses seeking this Insurance is over six (6) times what businesses in this category pay Citizens now.  The committee's announced justification is a desire to match the Rates likely to be charged by the new Florida Property and Casualty Joint Underwriting Association.  If the members of the Florida Legislature want this type of Premium Rate Increase by Citizens, then that is a policy choice which they alone have the authority to make.  To make it, the Florida Legislature would have to declare that the effects of such an increase on an already burdened economy in Florida are mandated, for some reason, by the existence of the new PCJUA or by any other cause.  Nothing in the statutory authority provided to Citizens Property Insurance Corporation exists to allow Citizens to impose this six-fold Insurance Premium Rate increase, not in 2007 or ever. 

    I respectfully urge you, as people who will have great authority addressing the issues of Insurance that come before the Florida Legislature in Special Session in two weeks, to include the concerns and costs borne by Homeowners, by Owners of Businesses, and by State and Local Governments in moving forward on all these issues.  Thank you for your consideration.

Dennis J. Wall

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

 

 

The Bottom Line.

    Happy New Year! Here is an out-of-the-way link to a free site, today at any rate, that usually requires Paid Subscription Access:  Wall Street Journal Article"  Ian McDonald, "Insurance Rates Take a 'No Worries' Tone", published Tuesday, January 2, 2007, p. C3, col. 1.     If that link does not work with the WSJ site today, go to the WSJ site, and there go to "Deals & Deal Makers", and on THAT online page do an "Article Search" for "Insurance Rates" (doing an article search on the site's main or home page does not work, not after many tries).   Much of the article is devoted to reporting that Premiums have fallen on many lines of Insurance except CatClaim Insurance Coverage.

    The bottom line of this article is also significant:  The Insurance Information Institute reports that the Property-Casualty Insurance sector in 2006  produced its highest results from Underwriting in almost 60 years.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

 

Eating Disorders, With or Without a Physical Basis.

Happy New Year! Here is an unusual link to a free site, today at any rate, that usually requires Paid Subscription Access:  Wall Street Journal Article:   Elizabeth Bernstein, "Eating Disorders:  Families Fight Back/Insurers Have Long Covered Only a Fraction of Huge Costs; Now, Pressure to Pay More", published Tuesday, January 2, 2007, p. D1.  To get there, scroll down halfway to "Health" and click on the WSJ link to this well-written, interesting article.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

 

 

New Cases, Old Lesson.

 Happy New Year! 

    New cases illustrate the differences in applying the "Reasonable Expectations Doctrine".  This important doctrine is not applied in all jurisdictions, and there is a split among the courts which apply it.   In a decision so new that it is not yet accessible (to me, anyway) and is not listed on the District Court's public web site, the Federal Court in the District of Arizona explained one view of this important doctrine:  "Under Arizona law, even unambiguous policy language will not be enforced against the insured if the insured had a reasonable expectation of coverage."   Madsen v. Fortis Benefits Ins. Co., 2006 WL 3771803 *8 (D. Ariz. Case No. CV 04-1959-PHX-JAT, Opinion Filed December 21, 2006)(subscription required to access Westlaw version).  [Emphasis added.]

    Before passing on to other recent cases involving a Reasonable Expectations Doctrine, several other rulings under Arizona law were made in this important new decision.  The Madsen case involved claims involving alleged First Party Bad Faith and Coverage.  The Plaintiff in that case, Ms. Jacqueline Madsen, "claims she was an additional insured under a nonrenewable Short Term Medical Policy" issued by Fortis.  (Id. at *1.)   The Federal Judge reiterated Arizona law (id. at *9), and entered Summary Judgment for the First Party Insurance Company in that case because of the Court's ruling that the Arizona Reasonable Expectations Doctrine required a jury determination of fact which, in the Federal Judge's view, clearly supported a determination that the Defendant acted reasonably and not in Bad Faith.  Further, something more was required to support Ms. Madsen's claim for Punitive Damages than even a showing of First Party Bad Faith.  "The something more that must be shown is evidence that Fortis was aware of and consciously disregarded a substantial and unjustified risk that significant harm would occur."  (Id. at *10.)  "Accordingly," said the Federal Judge, the ruling that the Plaintiff's First Party Bad Faith Claim in that case "fails as a matter of law" means that Summary Judgment is also granted in favor of Fortis in that case "on the punitive damages claim."

    In other jurisdictions that recognize a Reasonable Expectations of the Policyholder Doctrine, the doctrine is a rule of Insurance Contract Interpretation that applies only when there is an ambiguity.  The Supreme Court of Kentucky reviewed this doctrine in a famous Third Party or Liability Insurance Case involving a claim to Coverage under "a commercial automobile liability insurance policy, for example, in Brown v. Indiana Insurance Co., 184 S.W.3d 528, 531 (Supreme Court of Kentucky Case No. 2004-SC-0065-DG, et al., Opinion Filed December 22, 2005)(subscription required to access via Westlaw, Supreme Court of Kentucky public web site too difficult to access in time for this post).  The Doctrine of Reasonable Expectations, held the Supreme Court of Kentucky in that case, is a "principle [that] pertains to alleged ambiguities within the policy."   The Supreme Court held that there is no ambiguity in the Worker's Compensation Exclusions in the Commercial Auto Liability Insurance Policy before it  in that case.  "Accordingly, the opinion of the Court of Appeals [reversing the Trial Court with directions to enter Judgment in favor of the Insurance Company] is affirmed."  Id. at 540.  Recently, an alternative way of expressing the Reasonable Expectations Doctrine was addressed by a Federal Judge in another Liability Insurance Case in Download Travelers_Indem. Co. v. Bowling Green Professional Assoc's, PLC (W.D. Ky. Case No. 1.05CV171, Opinion Filed July 21, 2006).pdf.  This case is also reported at 440 F. Supp. 2d 652.  As applied in that case to "a Professional Liability Insurance for Specified Medical Professions Policy" (Slipsheet Opinion at 10), the Reasonable Expectations Doctrine will be defeated only where the Insurance Policy at issue unequivocally, conspicuously, plainly, and clearly manifests an Exclusion.  (Slipsheet at 12.)  In that Federal Case, "[t]he Court finds that there is no ambiguity in the ... Policy."  As a result, "the Court finds that [the Liability Insurance Company] owes no duty to defend or indemnify" its Policyholder in an underlying liability case and enters Summary Judgment in favor of the Liability Insurance Company which issued the Policy.  (Slipsheet Opinion at 13.)

    The clear lesson of these new decisions is an old lesson of caution:  Care must be taken to understand the Insurance Law of the place where the Insurance Policy is at issue and will be interpreted.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.