Claims And Issues

Captured on Film, Here! Sector Snapshot Insurance.

     The reappearing "Sector Snapshot" recently featured "Insurance" in the New York Times Business Section, briefly.   Then it disappeared unless you bought the print edition!  It apparently never appeared online, or at least is more elusive than a moonshiner.

     For those without moonshine, or who for any reason missed the "Sector Snapshot/Insurance," it is enlightening.  As a service to our readers, as they say, here is a link to a tif we have experimented with so that you can access a copy of it.  This is a good place to link to the Sector Snapshot Insurance as of Friday, 10.26.07: Download heremarket_gauge102607.tif.  We have also experimented with a rich text format that you may find easier to access Download here_is_another_market_gauge.rtf.

     As before, notice that almost all of the Insurance Companies shown in the "best" of the four quadrants are all Life Insurance-only Companies, i.e., involved only in Life Insurance.

     Here is another striking fact that comes clear from a close review of this graph.  Property and Casualty Insurance Companies are below the middle bar of this graph and they are all shown as "Behind S&P 500 Over The Last Year".

 Happy Halloween!

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Catastrophic California Fires and Catastrophic Gulf Coast Floods: ...

              ... The Top Ten Reasons You Can Call Them All by the Same Name
                      But They Are Still Cousins And Not  Sisters and Brothers.

     The Fires in California are Catastrophes.  The Gulf Coast Floods from Hurricanes Katrina and Rita are Catastrophes.   FEMA calling them by the same name does not make them all the same.  Here are the top ten reasons why they are different even if they get called by the same name by the people in Washington, D.C. currently in charge, or who want us to think they are:

     (1)  Approximately 300,000 homes were damaged in Hurricane Katrina alone.   The current California fire devastation has, thankfully, stopped for at least the moment, with the destruction of either "about 2,000 houses,"
Solomon Moore & Eric Lipton, "Fires Provide Chance to Evaluate Changes in Disaster Response Since '05 Storms" p. 18, col. 1 (Sunday New York Times Nat'l Ed., October 28, 2007),  or "1,575 residences destroyed".   Kirk Johnson & Jesse McKinley, "Rethinking Fire Policy in the Tinderbox Zone" p. 1, col. 2 (New York Times Nat'l Ed., Sunday, October 28, 2007).   Either way, the horrors of California are not the same as the horrors on the Gulf Coast of America in 2005--thank the Good Lord.

     (2)  Fire "is a standard part of home insurance coverage, unlike flooding".  All remaining facts and quotations, unless otherwise indicated below, come from Solomon Moore & Eric Lipton, "Fires Provide Chance to Evaluate Changes" published as noted above in the New York Times National Edition, Sunday, Oct. 28, 2007.  In 2007 in  California,  AIG  also makes available  wildfire protection for its AIG Private Client Group.  That is a group of AIG Homeowner's Policyholders who average $19,000.00 per year on their Premiums and whose home value averages $1,700,000.00, it is reported in Daniel Taub, "AIG's Fire Trucks Save Homes of Wealthy Californians (Update 1)", Bloomberg.com, Last Updated Friday, Oct. 26, 2007.

     (3)  "California requires insurance companies to pay for temporary living expenses."  Most if not all Homeowner's Insurance Policies provide for "additional living expense," but apparently California has made efforts to reduce or eliminate the resulting Insurance Coverage battles over this Coverage.

     (4)  FEMA in 2007 will "visit homes to confirm the damage before money can be released."  This is a reported change in FEMA practice from 2005.

     (5)  FEMA will require applications for disaster assistance in 2007 to contain a Social Security number which FEMA will check out, a check "that did not consistently take place in 2005."

     (6)  FEMA has not announced plans to send trailers to California for temporary housing.  Instead, FEMA in 2007 is exploring "available rental housing".

     (7)  The Red Cross, for its part, "is trying to compile a list of damaged houses" left by the 2007 California fires, which it reportedly did not do on the Gulf Coast in 2005.

     (8)  The 2007 Red Cross is also reportedly "checking names in a computer database," also a step reportedly "generally not taken after Hurricane Katrina."

     (9)  The Federal Government received 3,000,000 applications for aid after Hurricanes Katrina and Rita on the Gulf Coast, plus applications for disaster assistance after Hurricane Wilma hit Florida, all in 2005.  "As of Friday afternoon," or October 26, 2007, "4,418 applications had come in for federal aid" as a result of damage from the fires in California, it is reported.  That means that some 682 times-- 6,820% -- more applications for Federal aid were received by the Federal officials after the 2005 Hurricanes than they have so far received after the 2007 California fires.  If the Federal regime in place then and now cannot get this Catastrophe right, then they never will.

     (10)  The tenth or maybe top reason.  This reason is not expressly mentioned as a difference in the newspaper reports read today, or at any other time:  This has happened to unlucky California before.  In 2003, Catastrophic Fires swept California at the interface between wildlands and urban areas, then as now fueled by the streaming Santa Ana winds.  Parenthetically, the results of the fires in 2003 were so horrendous in California, that in 2004 California reportedly re-wrote many Housing Construction Codes, much as Florida has done since the Hurricanes of 2004 and 2005.   In 2005, there had been no recent Hurricanes to match the furies unleashed by Hurricanes on America's Gulf Coast and there had been no previous experience of a Federal collapse of competence so complete as it was then, either.
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"Who You Gonna Believe, Me Or Your Lying Eyes?"

     Is the Homeowner's Insurance "industry" doing well?  Is the Property Insurance "sector" solvent?  Who you gonna believe?

     As the doctor asks in your eye exams, "Which is better, Number One?"  The Property Insurance "industry" has "more than $513 billion in capital".  It "can take that kind of loss in stride," meaning an estimated $1,000,000.00 in insured loss so far to homes and other property set on fire in California to date.  Property Insurance Companies "reported more than $450 billion in sales of policies last year, and a record profit of nearly $65 billion."  Joseph B. Treaster, "Fires' Cost to Insurers is in Range of $1 Billion" p.A20, col. 6 (New York Times Nat'l Ed., Thursday, October 25, 2007).

     The doctor asks you next if you can see better with "Number Two?"  Aon Reinsurance Company ("Aon Re") has reported for years that Homeowner's Insurance Companies are not making a profit at all,  they are staggered by losses.  It has just released its 2007 evaluation.  Aon Re's report on the Homeowner's business sector depends on its measure, "return on equity" or "ROE".

     That is a new phrase to me in my 30 years of following the Insurance industry, perhaps new to everyone.  The most recent study by Aon Re showing negative returns on equity for Homeowner's Insurance Companies is not yet publicly available on the company's web site, although some reports have surfaced in Insurance industry publications:  Check out the availability of the 2007 Aon Re study or press release at www.aon.com.  Past Press Releases of Aon Re are available and you can access these here or at the Aon Re site:  Aon Re Press Release of Oct. 10, 2006, "Aon Re Study: Hurricane Risk Reduces Prospective Profit of Homeowners Insurance" and Aon Re Press Release of Oct. 27, 2003, "Homeowners ROE Still Improving But At Slower Rate, According to Aon Study".

     What do you see is the economic state of Homeowner's Insurance Companies and Property Insurance Companies?

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Expert "Guesswork And Speculation" Disallowed, "Physically Impossible Assumptions" Not Excludable, ...

                               ...  and Case Dismissed.   

     "Generally, Fed. R. Evid. 702 provides the standard for admission of expert testimony [in Federal Courts].  The Rule states that an expert's opinion must be based on facts established by independent evidence properly introduced, and that expert witness testimony must be both reliable and helpful to the jury as a predicate for admissibility."  Mayton_v. Auto-Owners Insurance Co. (E.D. Va. Case No. Civ.A.3.05CV667, Opinion Filed May 2, 2006).pdf. A subscription-required report of this interesting decision is at 2006 WL 1214831.

     The Defendant Insurance Company filed a motion to exclude two Insurance Experts in that case.  One was "an independent insurance adjuster who was initially hired by Defendant Auto-Owners to conduct an investigation after the Hurricane."  Official slipsheet Opinion, linked above, at page 3.  This Expert offered opinions about "the cause of damage to a structure".  Id. at 3-4.  The Federal Judge granted the Defendant's Motion to Exclude the Expert Testimony as to the proposed opinions of this Expert.  The Federal Court held that his "proposed opinions are not the product of reliable principles and methods are are in violation of Fed. R. Evid. 702....  [Further, his] opinions regarding wind and the storm surge are unsupported by his training and education.  They only amount to guesswork and speculation."  Id. at 4.

     The other Expert at issue fared better in the Federal Court's eyes.  The other Expert is "a professional engineer," who offered opinions about wind causing damage, when in what sequence, and at what angle.  The Defendant contended that this Expert's conclusions were incorrect, that he misunderstood facts, and that his observations were based on what the Defendant argued "are physically impossible assumptions."  Id.  Without mentioning Rule 702 in regard to the proposed testimony of this Expert, the Federal  Court denied  the Defendant's Motion to Exclude his Expert Testimony.  Id.

     It is of further interest that in the same Order, the Federal Judge addressed and GRANTED the Defendant's Motion for Summary Judgment on both claims, for alleged Breach of the Insurance Contract and for alleged Bad Faith.  Id. at 7-13.  That meant that the entire case would be closed (which it was), that there would be no Trial absent a reversal on appeal (an appeal apparently was not taken), and that the Expert who was not Excluded from Testifying, will never testify at a Trial in this case because on the same day, in this same Order, the Federal Judge ruled in essence that there was no genuine issue of material fact for a Trial.

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Florida Hurricane Deductible Applies to Condominium Association Loss Assessments.

     A Federal Judge in Florida has recently applied the Hurricane Deductible on a Homeowner's Policy to "loss assessments" imposed by a Condominium Association.  The loss assessments were imposed as a result of Hurricane Wilma damage.

     Like most if not all Floridians, Mr. and Mrs. Stanley and Audrey Fabricant know, because they are the Plaintiffs-Policyholders in this new case, that the Hurricane Deductible is separate from and usually a lot larger than the ordinary Deductible on a Homeowner's Policy.  The Fabricants' Homeowner's Policy is a good example.  In their Policy, the usual Deductible is or was $500.00, whereas the Hurricane Deductible is $2,800.00.   A Federal Judge ruled recently that the after-Hurricane-Wilma loss assessments of the Fabricants' condominium association are clearly covered, but subject to the Hurricane Deductible and not the regular Deductible:  Fabricant_v. Kemper Independence Insurance Co. (S.D. Fla. Case No. 06.80527, Opinion Filed Feb. 9, 2007).pdf.  This case is also reported as 474 F. Supp. 2d 1328 (subscription required) or as 20 Fla. Law Weekly Federal D 731 (also subscription required).  This of course means a greater out-of-pocket cost to persons fortunate enough to have Coverage for loss assessments by owner associations, before the Coverage will kick in, if it is available at all.

     Specifically, ruled the Federal Judge, the Policy in that case "makes clear that the hurricane deductible is to be applied to all losses payable under 'Section I - Property Coverages' that occur as a result of a hurricane."  Page 8 of Official slipsheet Opinion, linked above.  Section I is where the Coverage provision for "loss assessments" is located.  "Reading the policy as a whole, it is apparent that the $2,800 hurricane deductible applies to the plaintiffs' loss assessment claim, and the court declines to adopt the plaintiffs' strained interpretation of the policy."  Id. at 9.

Please Read The Disclaimer.

Florida Court Interprets Ambiguous Homeowner's Exclusion With Insurance Company Aid ...

          ... By Quoting the Homeowner's Insurance Company's Internal Documents.

     In the recent case of Castillo_v. State Farm Florida Insurance Co. (Fla. 3d DCA Case No. 3DO6.2874, Opinion Filed October 17, 2007).pdf , also reported as 2007 WL 3005974 (subscription required) and as 32 Fla. Law Weekly D2474 (also subscription required), a Florida Appellate Court was confronted with the second appearance of a case on appeal.  In an unusual twist, the new appeal, which the Court dubbed Castillo II, was filed by different people who shared the same name as the appellants in the prior appeal.  The new appeal similarly involves claims under a Homeowner's Insurance Policy.

     The Policy was held ambiguous because its Earth Movement Exclusion "does not specifically address" damages caused by the matters alleged.  The Castillos alleged in their Complaint for Coverage "that vibrations and shockwaves caused by blasting and without displacement of the earth resulted in damages to an insured dwelling."  Id. at 6.

     The Florida Appellate Court then turned to extrinsic evidence for an explanation of the Earth Movement Exclusion in the Homeowner's Policy in this case, namely, evidence provided by the Homeowner's Insurance Company itself in its own internal documents:  "Given that the policy is ambiguous as to whether damages caused by shockwaves and vibrations in the absence of displacement of the earth are covered, State Farm's internal operating guideline OG 75-105 ('OG 75-105') is both instructive and admissible as parol evidence."  Id. at 6-7.

     After consulting OG 75-105, the Florida Appellate Court reversed the entry of summary judgment in favor of the Homeowner's Insurance Company.

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Notre Dame's Offense.

    The Notre Dame Fightin' Irish have not begun a football season with a record as bad as their present record, since 1960.  I yield to no-one in my support for the University of Notre Dame (Class of '73) and all things Notre Dame.  I even played Quarterback under Coach Ara Parseghian (more about that another time).

    This is the first time since I began my Web Logs many months ago that I am writing a post about something other than Insurance.  If my readers look for a "hook" to insurance, then there is this:  The shameful way in which the present leaders of the University of Notre Dame let Coach Tyrone Willingham go, after 3 years of a 5 year contract and with a better record than the present football coach, is the best 'insurance' for the job security of the present football coach. It is not likely that the people currently making decisions for the University of Notre Dame' will summon the courage to fire the current coach also after 3 years.

     Notre Dame's Offensive Coordinator of the recent past left to go to another university or college this year.  Notre Dame's offense is nonexistent this year.  The latest debacle came last Saturday at the hands of U.S.C.  "The score became lopsided thanks to Notre Dame's conservative offense, disjointed special teams and offensive linemen who at times were little more than turnstiles."  Pete Thamel, "Easy Win Over Irish Does Little For Trojans" (New York Times Sunday Nat'l Ed., Sports Section, P.7 col. 1 (Sunday, October 21, 2007).

    Coach Tyrone Willingham's recruits for Notre Dame's football team have almost all graduated after last year's comparatively successful football season.  This would be the first season of the current coach's recruits.

     Yet it all comes back to the coaching.  Does anyone have Tyrone Willingham's telephone number?  If you do, please give it to Notre Dame.

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Auto and Homeowner's Insurance One-Site Comparison Premiums Available Online.

     Comparison shopping can be a good thing.  You can check out Comparative Quotes for Auto and Home Insurance Coverages available in Delaware at the Delaware Insurance Commissioner's online site, here.  Why, you say, should you be interested in these Coverages that are available in Delaware if you do not live in Delaware?  Well, for one thing, it may provide Comparisons to your own locality!  You have nothing to lose by becoming more informed, on this issue at least.  Check it out if you can.

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Allstate Third Quarter 2007 Results Weakened by Past Catastrophe Estimates.

     Here is a link to Allstate's own Third Quarter Results Press Release.  Here are some interesting results revealed in its 33 pages.

     First, it is good to know independently that there were few if any Catastrophe Claims in the Third Quarter 2007.  Certainly, none were identified by Allstate that occurred during that time.  However, the Allstate Press Release attributes its Third Quarter 2007 economic results in part to the increased cost of catastrophe reinsurance.  See page 3 of the Allstate Third Quarter Results Press Release.

     Second, Allstate made a mistake in estimating reserves for CatClaims in past years.  Its Press Release does not actually say that it made that mistake, of course.  However, Allstate "restates" the reserves for CatClaims in past years, and inputs them as a deficit against its performance in the Third Quarter 2007.  Thus, Allstate's results for the quarter just past in 2007, are made less by Allstate's mistaken estimates in past years, including as far back at least as 2005.  See id. page 4.

     2005 was the year of Katrina and Rita.  So, in Allstate's own words, its "increased claim expense reserves for 2005 events", i.e., its increased claim expense reserves for Hurricanes Katrina and Rita and other Catastrophes in 2005, were the "primary" cause of Allstate's own "prior year reserve reestimates" in The Third Quarter of 2007.  See id. at 5.  This does not mean that anything wrong was done here; in fact, all of this accounting may be in accordance with Generally Accepted Accounting Principles or "GAAP" and thoroughly lawful.  This does mean, however, that it is not accurate for anyone to read or report based on these numbers that Allstate's reported results in the Third Quarter of 2007 are principally caused instead by Catastrophes this year.

     Third,  it is interesting that Allstate has a list of what it calls "Hurricane Exposure States," and that Allstate breaks them out not only for Homeowner's Premiums, as might be expected, but that Allstate also breaks out the same "Hurricane Exposure States" for Standard Auto Premiums:  Alabama, Connecticut, Delaware, Florida, Georgia, Louisiana, Maine, Maryland, Mississippi, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia, and Washington, D.C.  (Each of these States on the Eastern Seaboard has a coastline, of course, but how does that affect Standard Auto Premiums?  Remembering that this breakout of certain locales is for a report on economic results by a large and successful corporation, perhaps this breakout reflects not just the results but some of the thinking that shapes the reporting of those results.  In this instance, it is known that it is more lucrative for Agents to write both Homeowner's Insurance Coverage  and other Coverages offered by Allstate, too, perhaps the biggest line by far and thus the line of greatest interest among those other Coverages being Standard Auto.)

Postscript on Sunday, October 21, 2007:  Orlando Sentinel Reporter Anika Myers Palm has this to say, after reading the above Third Quarter Results Press Release:  "Allstate's results for the quarter, which include all its lines of business, stand in contrast to the results of the property-insurance industry."   Anika Myers Palm, "Allstate OK With 16% Drop in Profits" P.C1, Col. 5 (Orlando Sentinel Central Florida Business, Thurs., October 18, 2007).

Please Read The Disclaimer.   

Florida Subpoenaes Two: State Farm Settles, Allstate to Decide Response.

     State Farm Florida is in the news for three things in a report published primarily about Allstate on Wednesday, October 17, 2007:  (1) State Farm Florida reportedly agreed earlier in October, 2007 to cut its "rates" further (by a total of 9%)  than it originally announced (by 7%); (2) State Farm Florida reportedly "also agreed to change the way" it will still cancel or non-renew a reported 50,000 Florida Policyholders; and (3) apparently these concessions are part of a settlement with the Florida Office of Insurance Regulation over subpoenas issued in August, 2007, another result of which is that State Farm Florida representatives will not  be forced to testify about its Premium rates at a public hearing.

     As noted above, the focus of the current news reporting is on Allstate.  Allstate recently received subpoenas served by the Florida O.I.R., presumably the same or similar subpoenas as those served on State Farm Florida.  Allstate is mulling its response.  Here is a link to the newspaper report containing these developments:  Kathy Bushouse & Tonya Alanez, "Florida Orders Allstate to Turn Over Records on Property Insurance" (South Florida Sun-Sentinel.com,  published online Wed. October 17, 2007) and   also published in The Orlando Sentinel under the headline, "State Demands Allstate Documents" Page C1, Col. 2 (Orlando Sentinel Wed., October 17, 2007).

     One thing the Florida investigators are reportedly looking for is information about "the companies' relationships with storm risk-modeling firms".  See previous posts here in this space under the Category, "CatClaims," for related developments regarding the rapidly increasing use of new opinion-based 'models' of future Hurricane activity--and so of possible future Hurricane losses.

     Postscript on Sunday, October 21, 2007:  For one person's opinion that subpoenas of this kind likely do not cause much concern to huge corporations like Allstate, see Robert Trigaux, Times Business Editor, "Insurance Show Must Not Go On/Ever Feel Like You're Stuck Watching the Same Melodramatic and Pointless Skit in Tallahassee Over Property Insurance?" (St. Petersburg Times Online, Sunday, October 21, 2007).

                                                 Please Read The Disclaimer.

Health Insurance Costs Huff and Puff, But Continue Climbing.

     It may not be news to individual Policyholders or to many other persons, actually, but Premiums are going up for Health Insurance.   When Premiums are viewed across the nation and over the heads of many, many Policyholders you might say, then the Premiums are seen as not going up at quite the dizzying pace at which they have climbed in the recent past.  Milt Freudenheim, "Cost of Health Insurance Rises Again, But at a Slightly Slower Rate" Page C3, Col. 1 (New York Times Nat'l Ed., Wed., Sept. 12, 2007).

     Is there a possibility of adapting and adopting the Health Plan in effect for Federal Government Workers, as some office-holders and some office-seekers have suggested?  Not if your goal is to hold down medical costs, it is reported in a recent news article in the same newspaper.  It is reported that the Federal Employees Health Benefits Program includes about 4,000,000 Members of Congress and other active and retired Government workers, who are provided "a wide array of private insurance offerings with fairly generous benefits."  Reed Abelson, "Health Plan Used by U.S. is Debated As a Model" P.B1, Col. 5 (New York Times Nat'l Ed., Saturday, October 20, 2007).  It is also reported in this article that 47,000,000 Americans do not have Health Insurance at this time.  There are different views about whether the F.E.H.B.P. is a good model, for any purpose, to extend to the people in the United States who have no Health Insurance.  Every commentator and participant considers affordability of any Health Plan to be very important.  (So do the 47,000,000 uninsured people, many of whom do not have the option of purchasing Health Insurance.)  Here is a quotation from one person in the article who is reported to be an advisor to Candidates for President:

"You don't want to take them from nothing to a Cadillac."

    There are choices besides zero Premiums and unaffordable Premiums, and that is the apparent point behind this article and the quotations in it.

     On the other hand, when viewing the question from the standpoint of available Coverage, in that sense the fact that a "Cadillac" Health Plan may not be the highest actual desire of even a single person who has no Health Plan at all, does not appear to be in focus in this particular article.

    Health Insurance will continue to present challenging issues, there should be no doubt.

Please Read The Disclaimer.

Expert Properly Relies on Statutes and Regulations ...

                            ... Even If No Lawsuit Exists For Their Breach.

     Testimony of an Expert Witness was held in a recent case to be proper when based in part on statutes and regulations that did not provide a claim or cause of action for Bad Faith.  The Policyholder's claim in that case was not based on any statutes or regulations.  Her Bad Faith Claim in that case was instead based on alleged common law Bad Faith arising out of her Homeowner's Insurance Company's alleged "breach of the implied covenant of good faith and fair dealing".  She relied on the Expert's Testimony as evidence in support of her common law claim.  Jordan_v_Allstate_(Cal. 2d DCA March 22, 2007).pdf.

 Note that the statute and the regulations relied on by the Expert Witness in this Bad Faith Case involved Insurance Claim Handling Practices.  See id. at pages 19-20 and footnotes 8 and 9.

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As Florida Goes, So Goes .. the Entire Eastern Seaboard?

     New York Times reporter Paul Vitello writes:  "In the last three years, more than three million homeowners have received [nonrenewal or cancellation] letters like the Grays' as insurance companies, determined to avoid another $40 billion Katrina bill, have essentially begun to redraw the outline of the eastern United States somewhere west of the Appalachian Trail."  Paul Vitello, "Home Insurers Canceling in East/Millions Losing Policies Over Hurricane Fear" Page A1, Col. 2 (New York Times Nat'l Ed. Tuesday, October 16, 2007), published Online under the headline, "Hurricane Fears Cost Homeowners Coverage".  It is not just in the East, Mr. Vitello, and this is not a phenomenon.  This is the current way of doing business in the Insurance industry, across every coastline in the country, as witnessed for example in numerous posts on this Web Log.  The economy and peoples' ways of living are changing in the United States, perhaps forever.  It is a real question whether it is too late to awaken and do something about these huge changes, as people far from the effects of Hurricanes and other Catastrophes, they think, gradually realize that these changes affect them.

                                          Please Read The Disclaimer.

Homeowner's Insurance Nonrenewal Not Bad Faith Breach in Oklahoma.

     Oklahoma Insurance Law recognizes what its Courts call "the bad faith breach of an insurance contract."  However, this claim or cause of action must involve wrongful denial of a claim, or perhaps bad faith claim handling.  See Stanley_v. Farmers Insurance Co. (W.D. Okla. Case No. CIV.05.622.M, Opinion Filed Oct. 25, 2006).pdf , in which the Federal Court applied Oklahoma law that the conduct of the Insurance Company and the Agent in selling and issuing an Insurance Policy is not the Oklahoma tort of "bad faith breach of an insurance contract."  In the Stanley case, the Federal Court ruled that the Plaintiffs-Policyholders, Mr. and Mrs. Stanley, could not "maintain a bad faith claim based upon [their Homeowner's Insurance Company's] conduct in attempting not to renew the Stanleys' insurance policy."

     A separate aspect of this case is analyzed at Insurance Claims and Bad Faith Law Blog, in the category of, "Bad Faith:  Do You Want Coverage With That?"

                                                    Please Read The Disclaimer.

Don't Let Your Babies Grow Up To Be Experts.

     Retention of an Expert before Insurance Bad Faith was claimed is the subject of a new case and a new post at Insurance Claims and Bad Faith Law Web Log.  Here is the new case discussed there:   Ullman_v. Auto-Owners Mutual Insurance Co. (S.D. Ohio Case No. 2.05.CV.1000, Opinion Filed June 11, 2007).pdf.  Sometimes an Expert can become part of the Bad Faith Case, even if she or he does not want to be.  See the analysis at Insurance Claims and Bad Faith Law Web Log.

                                                           Please Read The Disclaimer.

$17,500,000 For Defense, Advancing Still More For Directors and Officers.

     Defendants in an adversary proceeding filed as part of the Bankruptcy of Refco, Inc. argue that their Director's and Officer's Carrier, Axis Reinsurance, should cover the $17,500,000.00 of defense costs to date and advance them the money for past and future lawyer fees and costs.  They won in a ruling delivered at a Hearing scheduled in the case for Friday, October 12, 2007 at 10:00 A.M.:  Axis Reinsurance Co. v. Phillip R. Bennett, et al. (In re Refco, Inc.)(S.D.N.Y. Bankr. Case No. 05.60006, Adv. Proc. No. 07.01712).  No official written decision has been posted online, but when it becomes available it will be posted here for easy accessibility.

     Here is Axis Reinsurance's brief and general description of its Director's and Officer's Insurance Coverage in its own words on its web site (see "D&O" mentioned under "Professional Liability").

                                         Please Read The Disclaimer.

Life Insurance Companies Graphically Lead Market Performance.

     The New York Times daily Business Section publishes an Interactive Graphic.  The Times calls its business Graphic a "Sector Snapshot".  This is a regular feature.  It occasionally focuses on Insurance, which was the focus of this Interactive Graphic published on Thursday, October 11, 2007.  (New York Times Business Section, Nat'l Ed., Page C14, Col. 1.)

     Perhaps because Sector Snapshot is an Interactive Graphic, it is very difficult to get a link to it.  Try here.   That should link to the Online Business Section home page of the New York Times; if the link is successful, go down about 3/4 of the way and there you will find Sector Snapshot.  The Times may soon take down the Interactive Graphic about Insurance, and replace it with another Sector Snapshot.  (You can try accessing the New York Times web site if you are not successful with the above link, or if you are interested in comparative business rankings in the Insurance sector or other areas:  www.newyorktimes.com.)

     Notice how most of the Insurance Companies that appear in the two positive boxes, "Leading" and "Improving," concentrate just on Life Insurance.  Life Insurance Companies also account for all but two of the larger circles that represent current market capitalization in the Times' Graphic.  Two of the larger circles belong to the diversified Insurance Companies, Allstate (located in the "Lagging" quadrant) and The Travelers ("Improving). 

    One circle stands alone, larger than all the rest.  The biggest circle belongs to AIG, the proverbial 500 pound gorilla in the room.
                                              Please Read The Disclaimer.

Florida CatClaims Coverages and Premiums: Developments and Subdivisions.

     Florida faces two new developments in CatClaims Coverage.  Manufactured housing or modular homes are different from residential homes built on site, to use a little terminology from the overlapping worlds of construction and insurance.  Premiums for CatClaims Coverage for manufactured housing are not just going sky-high in Florida, they are almost nonexistent.  The reason is that Homeowner's Insurance and Property Insurance is all but unavailable for modular homes in Florida at this time.  See  Anika Myers Palm, "Shelter From the Storm/It's Getting Tougher and Tougher to Find Insurance Coverage for Manufactured Homes" Page C1, Col. 2 (Orlando Sentinel, Central Florida Business Section, Wednesday, October 10, 2007).

     Second, Homeowner's Insurance and Property Insurance may be available to provide one form or another of CatClaims Coverage in Florida for on-site residential construction, and for commercial buildings too.  However, the Premiums can be enormous when the Coverage can be found.  Temporarily, one or another Insurance Company may have their proposed premium hikes rejected by the Florida Office of Insurance Regulation, but it is without prejudice.  In other words, the Insurance Companies simply return with a do-over, as reported for example in another interesting and well-researched article by Anika Myers Palm, "State Rejects Rate Hike on Technicality" Page C1, Col. 3 (Orlando Sentinel, Central Florida Business Section, Wednesday, October 10, 2007).

     Further developments in both Coverages and Premiums for Catastrophe Claims remain to be seen, in Florida and elsewhere.  Like taxes and sin, such developments are expected, now.

                                                          Please Read The Disclaimer.

New York Regulators Receive Raves, Reservations Re Hurricane "Reserves".

     New York State insurance regulators  have received favorable  reactions  from  some Insurance Companies about a new plan for Hurricane "Reserves".   New York has not had a major Hurricane since 1985.  Still, in  some areas of New York State, 25% of the premium for all kinds of CatClaims Coverages is due to the prospect of Hurricanes.  In years like last year, when there are no Hurricanes, that amount is profit.

    Under the plan proposed in New York, Insurance Companies would be asked to set aside a special Hurricane "Reserve" representing the amount of premium attributable to Hurricane Risk.   The CEO of The Travelers, for one, is quoted as hoping that this is the positive beginning of a model for the United States.

     Lower-level representatives of other Insurance Companies are quoted as not necessarily being so enthusiastic, however.  These people point to the effects of Federal taxation and the hard facts of business:  The money set aside in Hurricane "Reserves" under a plan like New York's, would not be deductible immediately as a business expense under Federal tax laws, and like all reserves, it could not be used to earn a profit for these Insurance Companies so long as the money was in "reserve".

     These and other raves, reservations and interesting issues involved in New York's proposed Hurricane "Reserve" are thoughtfully and insightfully explored by Joseph B. Treaster, "Special Fund Proposed for Hurricane Insurance/Industry Expected to Revisit New York Plan" Page C4, Col. 5 (New York Times Nat'l Ed., Tuesday, October 9, 2007).

                                            Please Read The Disclaimer.

 

Attorney's Fees and Florida PIP ... And Wait Till Next Year!

     Personal Injury Protection ("PIP") benefits are generally available under Automobile Insurance policies issued in the United States.  In Florida, PIP benefits were scheduled to permanently expire when the statute requiring them "sunset," or expired,  on September 30, 2007.    The Florida Legislature  passed a reauthorization of the Florida PIP statute on Friday, October 5, 2007--effective, however, on January 1, 2008.  It is difficult to find a link to this new statute which was passed three days ago at the time of this post.   Link  here  to the "enrolled" bill which appears to be a compromise Florida Senate and House Bill 13.

     New subsection (15) of Section 627.736 is of special interest.  It is found on page 85 of 89 pages on the attached link.  Subsection (15) regulates awards of attorney's fees.  In some cases, there will be no attorney's fees awarded at all under this new statute.

     Here is how it is written.  How it will work will depend on the Florida Courts.  Whenever a claimant files a lawsuit against the Insurance Company under Section 627.736 to recover PIP benefits allegedly due and owing under the Insurance Policy, the new provision purports to bar attorney's fees awards when there is a claim that "should have been brought in a prior civil action" but was not brought before, AND "the court determines" that to be the case. 

     The same new Subsection 627.736(15) also provides that "all claims related to the same health care provider for the same injured person shall be brought in one action," ordinarily.  In other words, at least one of the times when the Legislature was of the view that a PIP claim "should have been brought in a prior civil action," is whenever there was a previous claim for PIP benefits "related to the same health care provider for the same injured person".   Parenthetically, Section 627.736 did not convey a statutory definition of "health care provider" before or after the new provision was enacted.

     Whether there are any other times that a "court determines" that a lawsuit "is filed for a claim that should have been brought in a prior civil action," is of course also for the Courts to determine.

     In the interim, the Florida PIP statute was recently reenacted to take effect next year.

                                                      

                                                       Please Read The Disclaimer.

Hurricane Insurance Coverage Fears Set Florida Roof Costs Soaring.

     By October 1, 2007, the Florida Building Commission was required by the Florida Legislature to adopt and develop a couple of sets of requirements by rule, "which take immediate effect" and which shall be incorporated into the next edition of the Florida Building Code.  At least one purpose, and likely the dominant if not the only purpose, was to encourage mitigation or prevention of future Hurricane Damages and resulting Catastrophe Claims.  More solid structures, particularly homes, should reduce Hurricane Claims and in turn, Homeowners Insurance premiums and Property Insurance premiums -- where such Coverage is available.  See previous posts on this Web Log for information about developments which affect both premiums and availability of Coverage for Hurricane and other Catastrophe Claims.

     Here are some of the important new requirements imposed by the Legislature in Florida Statute Section 553.844, entitled, "Windstorm Loss Mitigation; Requirements for Roofs and Opening Protection."                  

     Single-family residential structures, unlimited by value of the structure, are in one group.  Not all single-family residential structures are addressed by the legislation, however.  The requirements apply to (1) single-family residential structures that are (2) built on site, (3) "constructed prior to the implementation of the Florida Building Code [Fla. Stat. § 553.73, 'Florida Building Code', was first enacted in 1974]", and (4) undergoing a "roof replacement".  When those things come together, then the new roof has to incorporate and comply with:

"Secondary water barriers for roofs and standards relating to secondary water barriers." 
                                       * * *
"Strengthening or correcting roof-decking attachments and fasteners during reroofing".

         

     Another set of requirements applies to certain -- but not all -- buildings with "an insured value of $300,000 or more" or that have "a just valuation for the structure for purposes of ad valorem taxation of $300,000 or more," and which receive a "roof replacement".  Such buildings must add "[p]rescriptive techniques for improvement of roof-to-wall connections" when the roof is replaced.

     The executive director of the Florida Roofing, Sheet Metal & Air Conditioning Contractors Association, Inc. is quoted as the source in a newspaper report for an estimate that water-barrier requirements applicable to the first group of site-built single-family homes above, would add between $1,600.00 and $4,000.00 to reroof a home with a 4,000-square-foot roof.

     Additional costs to reroof a single-family residential building on the coast, i.e., in the second group above, would according to the same source add at least about $5,000.00 to a three-bedroom home, for example, in Volusia or Brevard County, Florida.  (The second group above does not appear to be limited to single-family residential buildings under the statute.)  Here is a link to the newspaper report published in the Orlando Sentinel on Friday, October 5, 2007:  Robin Benedick, "New Hurricane-Safety Law is Raising the Roof on Costs"  Page A1, Col. 3 (Orlando Sentinel, Friday, October 5, 2007).  The newspaper report was originally published in the South Florida (Ft. Lauderdale) Sun-Sentinel:  Robin Benedick, "Cost of Replacing Roof Goes Sky High Under New Law" (Sun-Sentinel.com, Thursday, October 4, 2007).

     The next Hurricane Damage Claims in Florida will tell the tale of whether Insurance Coverage will be more widely available, or at a higher or lower premium, as a result of these "mitigation" or damage-prevention efforts.  Until then, roofing contractors are apparently not happy as a result of these efforts.

                                        Please Read The Disclaimer.

 

Property Insurance Stocks Plummet! And Nobody Knows a Good Reason Why!

     I think that Insurance Companies in general are pretty smart.  They know  the old saying, "Fool me once, shame on you; fool me twice, shame on me."  After the last time that Insurance Companies were hurt by value decline in collateral, they divested themselves.  People like me would expect them to do something smart like that.  However, many investors in the current stock market, a Bloomberg report points out, apparently think that Insurance Companies are not so bright.

     Property Insurance Company Stocks are in a major decline.   One large Insurance Company has not had stock prices as low since the aftermath of Hurricane Katrina and the onrush of her resulting Catastrophe Claims--and its stock is priced lower now than it was then, when it faced the prospect of thousands upon thousands of Property Claims.  The reason?  It's not a good reason, but it is a reason.  Apparently, many investors believe that Property Insurance Companies are being hit hard by the collapsed subprime mortgage market.  Believing, in this case, don't make it so.  In fact, Property Insurance Companies are hardly affected by the subprime mortgage market collapse.

     Try convincing investors!  They "know" what they know, and they do not want to be confused with the facts!  (That qualifies many of them to fill immediate job openings in the Federal government.)   Here is a link to the Bloomberg report: Josh P. Hamilton, "Property Insurers Cheapest Since 2000 on Mistaken Subprime Link" (Bloomberg.com, posted Online on Friday, October 5, 2007).

 Please Read The Disclaimer.

SCHIP: Bipartisan Support for Expansion, and Lawsuits for Insurance Coverage.

     There is reported bipartisan support in the United States Congress to  update a Health Insurance law written a decade ago.  Under the Federal law, assistance is provided for Health Insurance to children in the United States.  Simultaneously, the current Federal administration has taken steps to restrict the ten-year-old existing plan for Health Insurance Coverage for children.  Lawsuits that may determine whether Health Insurance Coverage is available to children are also very much in the news.

     The State of New Jersey filed suit recently to determine the validity of restrictions imposed in August by the current Federal government on the previously existing State Children's Health Insurance Program ("SCHIP").

     The States of New York,  Illinois, Maryland and Washington are  joining  together to file a separate suit which will also challenge the recent Federal Government attempt to impose restrictions and so to expand the eligibility of children for this Health Insurance Coverage.  SCHIP was enacted in 1997.

     More States and perhaps the District of Columbia are expected to join as Plaintiffs.  In the meantime, several States have announced that they  intend to file "friend of the court" memorandums in support of the lawsuits, including the States of Arizona, California and New Hampshire.

     Rulings in these lawsuits and the results of related developments will be posted here.   A recently published newspaper report can be found by Sarah Kershaw, "8 States Plan to Press Bush on Health Bill" Page C14, Col. 5 (New York Times Nat'l Ed. Tuesday, October 2, 2007).

     Postscript of Thursday, October 4, 2007:

     On the political side of this issue, on Wednesday, October 3, 2007 Mr. Bush silently vetoed a bill passed by Congress to "expand" the 1997 SCHIP statute to 2007 levels.  There may be an attempt to gather enough votes in the U.S. House of Representatives to override the veto, it is reported here.

     Postscript of Saturday, October 13, 2007:   

   Pressure is mounting for an override of Mr. Bush's veto of the current SCHIP legislation.  Check out a report at Bloomberg.com, for example, here.

                                                 Please Read The Disclaimer.