Claims And Issues

Due Process Denied? Directors and Officers Dismissed.

     Where a Federal Judge ruled that Due Process was denied them, Directors and Officers have been dismissed as defendants in a criminal prosecution.  This chapter of the story is told by Lynnley Browning, "Charges Dropped Against 13 in KPMG Tax-Shelter Case" (New York Times Online, Tuesday, July 17, 2007).   Previous chapters are told here, for example, in posts on May 25, June 10, June 12, June 26, and July 3, 2007.  The effects on many potential Director's and Officer's Insurance Coverage Issues surfaced many times in that case and they are addressed in the posts here.

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Florida Reimbursement of UNCOVERED Defense Expenses: WHEN?

In June's Seminar at the Orange County Bar Association in Orlando, Florida, "Survey of Insurance Issues EVERYONE Should Know,"  one of my topics was an Overview including Recent Cases. One of those cases was decided by a Florida Appellate Court within the past year, and it represents pretty well-established  Florida law as to when reimbursement of defense expenses may be available to a liability insurer which defends its policyholders: 

Florida allows a liability insurer to claim reimbursement of certain uncovered defense expenses, such as where (1) the liability insurance company "timely and expressly" reserved a right to later ask for reimbursement of the liability insurance company's defense costs incurred in defending clearly uncovered claims, (2) the policyholder clearly accepted the insurance carrier's offer of a defense in the face of such a right, and (3) a court determines that there was never any duty to defend the uncovered claims.  Jim Black & Assoc's, Inc. v. Transcontinental Ins. Co., 932 So. 2d 516, 517 (Fla. 2d DCA 2006.)

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New Florida Case Law on Proof of Compliance With Conditions.

In last month's Seminar at the Orange County Bar Association in Orlando, Florida, "Survey of Insurance Issues EVERYONE Should Know," one of my topics was an Overview including Recent Cases.  Two cases in particular decided in the past year re-emphasize a couple of lessons regarding proof in a Florida Court of compliance with conditions in an insurance policy:

        COOPERATION: Under Florida law, the liability insurance company has a duty to take reasonable steps to attempt to obtain the insured's cooperation. See Continental Cas. Co. v. City of  Jacksonville, 2006 WL 2048249 *5 (M.D. Fla. July 20, 2006)(Richardson, Magistrate Judge).

        NOTICE: Florida law generally raises a presumption of prejudice if there is late notice of a claim against the insured-policyholder, but as a practical matter the parties benefit by introducing evidence on the issue of prejudice, one way or the other, where there is likely to be a holding or finding of late notice.  See, e.g., Donovan Constr., Inc. v. Vacker, 938 So. 2d 597, 598-99 (Fla. 4th DCA 2006)(Late Notice issue under a CGL or Commercial General Liability insurance policy, and underlying liability claim was based on the presence of mold; summary judgment for insurance company was reversed).

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FOURTH OF JULY NEWS: Success Requires Better Results.

     Florida continues to face problems of receding Insurance Coverage availability and rising rates for what Coverage is available.  These problems continue in the face of approaching Hurricanes and resulting likely Catastrophe Claims.

     The background to these problems comes of course from Hurricane Charlie and all the other Hurricanes, tornadoes and other perils that have passed through Florida since 2004.   My testimony submitted to the Florida Legislature concisely summarizes the situation in "An Open Letter to the Florida Legislature in Special Session" posted here on January 4, 2007, for example.  Subsequent posts providing additional information can be found on this site as of March 11 and June 10, as well.

      Solutions were attempted.  One was a moratorium on leaving the State or raising rates.  Recent news reports inform that Homeowner's and Property Insurance Companies that would or might provide Insurance Coverage for Catastrophe Claims again continued to pull out of the State of Florida, or request rate rises, right after the State-sponsored moratorium expired.   The Florida Legislature and Governor passed and approved additional attempted solutions in January, 2007 to the problem of unavailable Insurance Coverage and rising rates for what Insurance Coverage is available.

    Today, July 4, 2007, newspapers report that many remaining Insurance Companies providing potential Coverage for Catastrophe Claims under Homeowner's and Property Insurance Policies, perceive the need to continue to raise rates.  They have asked the State to be allowed to raise their rates on Homeowner's and Property Insurance Policies accordingly.   See Linda Kleindienst, "Higher Rates Put Insurers, Crist at Odds," Page C1, Col. 4 (Orlando Sentinel, Central Florida Business, July 4, 2007) , and Paul Owers, "Higher Home Rates Still Needed, Five Providers Say" (South Florida Sun-Sentinel June 29, 2007).  (The "five providers" from high request to low, are AUTO OWNERS -- seeking permission for a 42% hike, Cincinnati Insurance, Florida Farm Bureau, The Hartford, and Metropolitan Property & Casualty which seeks a 14.9% increase).

     The solutions proposed earlier this year are not working so far.  Success requires better results than these.

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Once More, Into the "Breach"?

     Previous posts on this site follow the saga of KPMG's policy to pay defense expenses of former employees and its sudden refusal to do so.  The reversal in policy and reversal in fortunes of the former employees, allegedly came in response to pressure from the department of justice which filed a criminal proceeding against 18 individual defendants including 16 former employees of KPMG whose fortunes were reversed, so to speak, in the reversal of KPMG's prior policy of many years to pay defense expenses of defendant former employees.  Four posts here in the last six weeks tell the tale, or so we all thought or hoped, perhaps:  Including posts on May 25, June 10, June 12 and most recently, on June 26, 2007.

     The latest thread was spun by the Federal Trial Judge presiding over the criminal proceeding.  Previously suggesting that the Federal Court might dismiss the indictments that started the current criminal proceedings, as a sanction on the nasty behavior by the doj that the same Federal Trial Judge has found as facts, at a recent Hearing the Federal Trial Judge suggested that even though he found the behavior to be nasty, that the remedy for the ill might not be dismissal, after all.  In other words, perhaps all the criminal defendants should stand trial now, regardless of what the doj did or did not do -- and perhaps regardless of who if anyone pays the defendants' Director's and Officer's defense expenses which some or all of the individual defendants cannot afford to pay themselves.  See Lynnley Browning, "In a Shift, Judge Demurs on Dismissing KPMG Case," Page C3, Col. 5 (New York Times National Edition, Business Day Section, Tuesday, July 3, 2007).

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