Claims And Issues

Post-Postscripts Two, "Federal Court: No Defense, No Tribute"....

     First Post-Postscript:  The department of justice filed a memorandum in their criminal case filed against 18 Defendants including 16 former employees of accounting firm KPMG.  In the memo, the doj apparently agrees that if they abused the constitutional rights including rights to counsel of certain defendants, then the Federal Trial Court has no alternative but to dismiss the indictments against those Defendants.  It will be remembered from earlier posts here that the Federal Appellate Court suggested exactly that, namely, dismissing the indictments against those Defendants in the criminal case filed by the department, rather than having the Federal Trial Court start a civil case to declare the rights of those Defendants to Director's and Officer's Coverage or defense expenses from their one-time employer, KPMG.  See Lynnley Browning, "Prosecutors Invite a Dismissal in KPMG Tax-Shelter Case, Burdened by Technicalities", Page C3, Column 1 (New York Times, Business Section, Tuesday, June 26, 2007).     The New York Times news article goes on to report, however, that the doj denies any wrongdoing.   It is not known if or why the doj still thinks it is okay to mess with attorney-client relationships because each Defendant is presumed guilty in their eyes until proven innocent.  Let them go to the Federal Appeals Court and make that argument, then.  We will closely follow these developments to see what the Appeals Court has to say, if it goes that far.

Second Post-Postscript to the Postscript:  The New York Times reports in the same article published on Tuesday, June 26, 2007 that a different accounting firm, Ernst & Young, is also a criminal Defendant and that Ernst & Young is paying the defense fees of its current and former employees who are also Defendants.  The potential Insurance Coverage issues of Director's and Officer's Coverage abound.

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Allstate Settles Many Hurricane Katrina CatClaims

     Allstate Corporation is a defendant in many Hurricane Katrina Insurance Coverage cases pending in Louisiana and Mississippi courts.  In one such case, a jury in Federal Court in Louisiana awarded covered damages, mental anguish damages, and penalties.  The plaintiff-policyholder is Mr. Robert Weiss, and he was awarded $561,600.00 for covered Property Damage, and Allstate was assessed damages for Mr. Weiss's mental anguish plus penalties in the additional amount of $2,250,000.00 according to an excellent news report by Erik Holm, "Allstate to End Appeal of $2.81 Million Katrina Verdict, Settle", published Friday, June 22, 2007 at Bloomberg.com.

     The Federal Jury's verdicts were apparently reduced to Judgment and the Judgment was appealed by Allstate, which reached an otherwise undisclosed settlement of the appeal from Louisiana Federal Court.  See the June 22, 2007 article, above.

     That caused dominoes to fall and logs to unjam, apparently.    Allstate has now entered into a reported global settlement of Hurricane Katrina Catastrophe Claims that were filed in Mississippi Federal Court.   The terms are similarly undisclosed.  See for example Natalie Chandler, "Allstate, Policyholders Settle Katrina Claims" (Clarion Ledger, Jackson, Mississippi, Monday, June 25, 2007).

    Previous global settlement efforts in Mississippi involving State Farm, and a resulting lawsuit against State Farm for allegedly backing out of the particular global settlement deal, are posted here for example on June 11, 2007 and on March 20, 2007.

     More is to come, undoubtedly.

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States, Insurance Companies, and the Real World.

     Some insurance industry spokespersons are quoted as saying that State-sponsored Homeowner's and Property Insurance is driving private insurance companies from the Coasts of Florida where private insurers may want to write insurance.  See, for example, Anika Myers Palm, "Homeowners in Coastal States Feel Bite From Higher Premiums," Page C1, Col. 1 (Orlando Sentinel, Central Florida Business Section, Wednesday, June 20, 2007).   

     We in Florida know that Insurers are choosing to follow the market.  They make business decisions, and they are entitled to.  But we know reality.  In Florida, private insurers decline the risk of CatClaims on the coasts -- and everywhere else in Florida, almost totally. 

     See the post here on June 10, 2007:   If Insurance Companies decline to accept the risk of CatClaims, they are free to decline the risk.  Whether State solutions on the other hand, or any of them, are desirable or effective in the future remains to be experienced in the future.  For now, the solutions offered by the States are almost totally the only solutions at all.

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Hearing Set on the Postscript to "Federal Court in New York to U.S.: Nothing for Defense, and No Tribute."

     It is reported on June 12, 2007 in The Wall Street Journal that the Federal Judge in the KPMG proceedings has set a Hearing for July 2, 2007.  The motions to be heard then are motions directed to payment of the criminal defendants' defense expenses.  Those motions raise issues surrounding KPMG paying the defendants' Directors' and Officers' legal expenses, dismissing the indictment due to the reported misconduct of the department of justice, and any other possible remedies.  See Paul Davies & David Reilly, "In KPMG Case, the Thorny Issue of Legal Fees", Page C5, Col. 1 (Wall Street Journal, Tuesday, June 12, 2007)(Online Access Subscription Only).
     More to come, no doubt.
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Suit for Alleged Breach of (First) Settlement Agreement.

     It appears that a settlement of many filed and potential CatClaims resulting from Hurricane Katrina in Mississippi has blown up.  There was once a settlement agreement, among many policyholders and State Farm.  The proposed settlement agreement was subject to Federal Court approval.  The Federal Judge found wrong in the proposed settlement and refused to approve it.   State Farm then reportedly reached a settlement agreement of many of the same claims with the Mississippi Insurance Commissioner's Office.  This lengthy previous history was summarized in "Update to the Update:  New Settlement in Mississippi," posted here on March 20, 2007.

     It is now reported that through its Attorney General, the State of Mississippi filed suit on Monday, June 11, 2007 in Mississippi State Court.  The Complaint alleges that State Farm breached the (first) settlement agreement and thus breached a contract, claiming compensatory and punitive damages. As of the night of June 11, 2007, there is a temporary silence on the subject on the web sites of both the Mississippi Attorney General and the Mississippi Insurance Commissioner.

     Here is a link to State Farm's Press Release of June 11, 2007,which State Farm entitled "Mississippi Attorney General's Lawsuit Threatens to Disrupt Hurricane Katrina Settlement Process with MIssissippi Insurance Department". 

     There will be more to come on the settlement (or not) of Hurricane Katrina CatClaims in Mississippi, and elsewhere, there can be no doubt.
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Postscript to "Federal Court in New York to U.S.: Nothing for Defense, and No Tribute."

     Since the time that the above post was written here on May 25, 2007, subtitled Federals' Alleged Alarming Strong-Arm Tactics At Center of Dispute, many new events appear from a review of the Criminal Docket for United States v. Stein, et al., Criminal Case No. 05-0888 pending in the United States District Court for the Southern District of New York.  Among them:  The many defendants in the District Court Criminal proceeding have joined in a motion to dismiss the indictment on the ground of the department of justice's alleged misconduct.

     This comes after the Second Circuit Court of Appeals' statement in its opinion that a motion to dismiss the indictment on that ground is appropriate.  The Second Circuit's opinion was the subject of the previous post here, reversing the District Court's attempt to lead the defendants or some of them into filing an action essentially for Declaratory Relief against KPMG for payment of their Directors' and Officers' defense expenses, and the District Court's attempt to exercise jurisdiction over that Civil action in the pending Criminal proceeding.

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Does Government Rush In, Or Do Insurers Rush Out?

     Some Insurance industry spokespersons are quoted with this opinion:  State Governments are anti-competitive when they make limited forms of Property Insurance available through access to the State Treasury in the event of a Catastrophe.  See, for example, "Coastal States Taking More of Insurance Risk" published online on Saturday, June 9, 2007 by the St. Petersburg Times (not currently available online as of June 10, 2007), try accessing this site Online. 

     We in Florida know different.  We know reality.  In Florida, private insurers decline the risk of CatClaims, almost totally.  The overwhelmingly Republican Legislature has put the treasury of the State of Florida behind the worst of possible CatClaims, to the extent of $452,000,000.00 it is reported in the article.   The Legislatures and Assemblies of California, Massachusetts, Louisiana, and Texas -- all coastal States -- have exposed their own State Treasuries to the extent of a collective $131,000,000.00 according to the same article.

     States are rushing in and forcing insurers out?  Wrong.  State governments are attempting to provide different solutions to the same problem of private Insurance Companies fleeing the risk of CatClaims.  If Insurance Companies decline to accept the risk of CatClaims, they are free to decline the risk.  Whether these solutions on the other hand, or any of them, are desirable or effective in the future remains to be experienced in the future.  For now, they are the undisputed evidence of reality.

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Postscript to Secrecy Postings of May 23 and May 24, 2007.

     A new column published on Sunday, June 10, 2007 adds a postscript to the issues addressed in two recent posts here.  One post raised secrecy issues that will almost certainly be soon addressed concerning "Settlement of Bad Faith Claims .... When is That Settlement Confidential and Protected, And When is it Concealment and Void? " on May 23, 2007, and the second post visited the "World Trade Center Insurance Claims Settlement: Revisiting Confidentiality vs. Concealment " on May 24, 2007.

     Now, see also this column, "America's Secret Obsession", published in the Washington Post on Sunday, June 10, 2007.  It takes a look at how many sealed court cases can involve excessive secrecy that puts the public at risk, among many other areas of potentially excessive secrecy that may increase threat levels.

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