Claims And Issues

FHA Waives Waiting Period, Offers Mortgage Insurance on Foreclosed Homes.

     The Federal Housing Administration is modeling parts of a new law that previously passed the House of Representatives and is apparently awaiting action in the Senate.  The FHA reportedly adopted a narrowly focused new policy to last one year.  Under the new, temporary and narrowly focused policy, the FHA will waive its established 90-day waiting period for new ownership of a home.  This means that the FHA will offer immediate Mortgage Insurance to buyers of homes that have been foreclosed.  See Alison Vekshin, "U.S. Lifts Limits on Insurance for Foreclosed Homes (Update 1)" (Bloomberg.com, Friday, June 13, 2008).

     The housing bill that passed the House and is awaiting action by the Senate contains many other provisions besides the particular provision affecting the FHA waiting period.  Vikas Bajaj, "As Bill Evolves, Default Rate is Snowballing" p. 1, col. 1 (New York Times Nat'l Ed., Sunday, June 29, 2008, published online as "As Housing Bill Evolves, Crisis Grows Deeper").  83 Senators recorded their support for the entire housing bill, including of course the provisions that would affect the FHA.  It is apparently one of the few bills on which the Senate successfully voted to end a filibuster apparently only by Republican Senators.

     After that, however, one Senator, also a Republican, insisted that an amendment be added to the housing bill that would extend credits for renewable energy.  The amendment, still pending at the time of this post, is co-sponsored by a Democrat.  However, she is not reportedly insisting on halting the housing bill.  The House previously rejected the same amendment several times as it passed the housing bill and sent it to the Senate.  In the face of amendment insistence from the one Senator, the Senate adjourned for its Fourth of July recess without taking up the housing bill.  Lori Montgomery & Jeffrey H. Birnbaum, "Political Maneuvers Delay Bill After Bill in Senate" (Washington Post Online, Saturday, June 28, 2008).

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Credit Ratings Equality Foreshadows No More Bond Insurance.

     Unnamed "investors and analysts" see no need for Bond Insurance whatsoever if a credit ratings company rates Municipal Bonds by the same assessments that it uses to rate Corporate Bonds, it is definitely reported by Michael McDonald, "Moody's Muni Ratings Overhaul Undermines MBIA, Ambac (Update 1)" (available at www.Bloomberg.com, Friday, June 13, 2008).

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Earthquake Shakes Up Some Insurance Coverage Expectations.

     A newspaper report about Insurance Coverage and Catastrophe Claims following the Sichuan earthquake in China, highlights issues important to people in the United States who face the real possiblity of having to make Catastrophe Claims.

    Concentrating on two types of Insurance, it is reported that holders of Property Insurance Policies are left with little more than uncovered Catastrophic Damage, while the much smaller group of Chinese Life Insurance Policyholders have fared much better.  Life Insurance Policies in China, as elsewhere including in the United States, generally pay benefits upon an accidental death regardless of cause.  Earthquakes as a cause of loss are almost always Excluded in Property Insurance Policies in China, however.

     "[A]s in California," in order to obtain Coverage for losses caused by Earthquakes, for example, "you have to buy a special policy and pay extra."  "In China, Few Are Covered by Earthquake Insurance," by Don Lee (Los Angeles Times Online, Tuesday, June 24, 2008). 

     These differences are illustrated in the newspaper report by convincing numbers.  First, so far about a quarter of a million Property Insurance Claims have been presented to China Property Insurers as a result of this Catastrophe.  Most of those CatClaims are reportedly on account of damage to personal property.   In addition, some Three Million houses were destroyed.  Approximately $15 Billion to $20 Billion of Property Damage is estimated as a result of the Sichuan earthquake.  Property Insurance Companies have paid out $20 Million in CatClaims.

     With regard to Claims on Life Insurance Policies, on the other hand, an unreported number of Claims has been presented since the Sichuan earthquake.  It is reported that "only a tiny fraction of people hold such policies."  Reportedly, Life Insurance Companies paid out $26 Million in Claims resulting from the earthquake.

     Finally, it is of more than passing interest to Homeowners seeking Property Insurance Coverage outside of China, that the Earthquake Exclusion was reportedly adopted after a 1996 meeting of "earthquake scholars" and "experts".  In that meeting, participants predicted that earthquakes would trouble China for the next ten to twenty years.  The Property Exclusion was almost immediately written in response, it is reported.

     In the United States, one of the central and largely unreported battlegrounds concerning Property Insurance Coverage, particularly for CatClaims, has been the use of new Catastrophe Models that result in predictions of more Catastrophes such as Hurricanes, and in higher Premiums or Exclusions, than seem justified by authorized and fact-based Catastrophe Models that have been relied on by Insurance Departments, Insurance Companies, Agents and Brokers, and of course ultimately, relied on by Policyholders.  Events associated with that battleground and other largely unreported areas of interest to Insurance Coverage for Catastrophes have been reported here in the categories of "CatClaims" and "Catastrophe Models," along with "Property Insurance" and many other related kinds of Insurance.

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Health Insurance Coverage for Anorexia or Bulimia?

     Can anorexia or bulimia be covered under Health Insurance Policies?  They can if the Legislature mandates Coverage.  There is an act that recently reached  the desk of the Governor of Illinois, which would reportedly make Illinois the 17th State to mandate Health Insurance Coverage for anorexia and bulimia, if the Governor signs the law.  See Bonnie Miller Rubin & Ahsley Wiehle, "Anorexia, Bulimia May Soon Become Part of Mandatory Health Insurance in Illinois" (chicagotribune.com, Tuesday, June 24, 2008).

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Different Business, Different CatClaim Preparations.

     Different businesses get ready for Catastrophe Claims in different ways, it is reported in "Getting Ready for Storms is Major Job For Big Businesses" p. C1, col. 5 "Central Florida Business" Section (Orlando Sentinel, Friday, June 13, 2008), published online as "Past Storms Taught Lessons Big Businesses Won't Forget".

     Something these businesses all have in common with each other, and with every individual as well:  Finding and keeping Insurance Coverage for Catastrophe Claims in the near future now, and in future days far ahead.

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Some Issues to Explore in Obtaining Individual Health Insurance Coverage.

     Applying for individual Health Insurance Coverage presents at least two issues addressed by David Lazarus, "Consumer Confidential/Gender Can Cost You in Individual Health Insurance" (Los Angeles Times Online, Sunday, June 22, 2008).

     One issue in applying for individual Health Insurance Coverage that is addressed in this newspaper article is that part time employees may need individual Health Insurance since most employers will not offer either a Health Insurance Plan or the expensive benefit of paying all or part of Premiums for Health Insurance Coverage for part time employees.

     The other issue addressed in this newspaper article is gender.  Women are charged higher Premiums than men for individual Health Insurance Coverage as explained by the newspaper reporter who wrote this article.

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ERISA Plan Administrators' Conflict of Interest Now in Plain View.

     In a landmark opinion released yesterday, the Supreme Court of the United States changed the factors to review in employee challenges to adverse disability benefit decisions.  The High Court ruling was by an overwhelming vote, 6 to 3.  From now on, judicial review of a plan administrator's denial of benefits must include the administrator's conflict of interest, it is reported by Mary Williams Walsh, "In a Ruling on Benefits, Justices Aid the Worker" p. C3, col. 6 (New York Times Nat'l Ed., Friday, June 20, 2008).

     Plan administrators are hired by employers to run group health and disability plans for insurance benefits given to employees.  By statute, plan administrators are mandated to act in the best interests of the employee, it is reported, when they decide whether the employer's plan extends the requested insurance benefits to that particular employee.   The review applied before yesterday's decision allowed Federal Courts to overturn an administrator's decision only if the decision was proven to be "arbitrary, capricious or unprincipled," in basic terms.  The Supreme Court's ruling adds another factor into the mix for a Court reviewing a plan administrator's insurance benefit decisions. 

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Crop and Flood Losses Bring Claims to Midwest.

     Several of the larger Crop Insurance Companies in the United States are Wells Fargo, Ace Ltd., and Deere & Co.  Jeff Wilson, "Corn-Crop Losses Widen as U.S. Midwest Fields Flood (Update 1)" (Bloomberg.com, Tuesday, June 17, 2008).  Wells Fargo & Co.'s Rural Community Insurance Services alone is reported to have already received this year triple the amount of Flood-loss claims for farms that it received in the year 2007.

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To and From Each According to Their Abilities.

     The idea of underperforming corporate executives giving back some or all of their pay, in exchange for the opportunity that exists now of receiving enormous bonuses and other payments when the corporation performs well financially (and now, actually, even if it does not), has been joined by, among others, the president of a New York investment firm quoted in Gretchen Morgenson, "Fair Game/Approve This Deal, or Else" p. 1, col. 3 "SundayBusiness" Section (New York Times Nat'l Ed., Sunday June 15, 2008.

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Munis to Receive Equal Credit Rating Treatment?

     The credit of Municipal Bonds may soon be rated the same exact way that the credit of Corporate Bonds has always been rated.  This may mean that there is no longer a need for Bond Insurance.  See Vikas Bajaj, "Moody's May Align Municipal Debt Ratings With Corporate" p. C5, col. 1 "Business Day" Section (New York Times Nat'l Ed., Friday, June 13, 2008).

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Health Insurance Mandates in Massachusetts Change Some Behavior, Not All.

     Massachusetts has required universal purchase of Health Insurance Coverage or the Commonwealth will impose severe penalties on the intentionally uninsured, in basic terms.  A new study by the Urban Institute reportedly discloses that even the fear of potential penalties under the new law has not changed the use of emergency rooms as primary care physicians, if you will, for the poor.  This finding is reported alongside findings that the law is forcing many of the poor to purchase Health Insurance Coverage -- some 350,000 people out of an estimated 600,000 previously uninsured residents of Massachusetts have reportedly purchased Health Insurance Coverage since the law went into effect in 2007. See Kevin Sack, "Study Finds State Gains in Insurance," New York Times, Tuesday, June 3, 2008, no hyperlink directly available to the article through the web log host TypePad at the time of this post by the author, but available online at www.nytimes.com.

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Level of Insurance Coverage Levels the Playing Field.

     Disputes between Insurance Companies and their Policyholders is nothing new.  In California, for example, there is a dispute brewing about who is responsible for maintaining levels of Insurance Coverage necessary to provide the money to rebuild after recent wildfires there, the Insurance Companies or the Policyholders, or both.  Marc Lifsher, "Wildfires Heat up Debate on Inadequate Insurance Coverage" (Los Angeles Times Online, Friday, June 6, 2008, a link which may or may not work if TypePad issues are not resolved, but available online at www.latimes.com.

     One thing remains certain.  Maintaining the level(s) of Insurance Coverage which provide payouts adequate to rebuild a home after a covered loss is a very good idea if the desired result is to rebuild a home after a covered loss.

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Bond Insurance Companies Ratings Drop.

     As previously posted here, MBIA was the No. 1 Bond Insurance Company.  Ambac Financial stood in at the No. 2 position.  Until recently, perhaps.  Their respective credit ratings have both been downgraded below the rating that has always been necessary in order to sell Bond Insurance.  The developments are reported in several places including Reuters Report, "Moody's May Downgrade Ratings of MBIA and Ambac Units," p. C2, col. 1 (New York Times Nat'l Ed., Thursday, June 5, 2008), available online at www.nytimes.com; and Associated Press Report, "Stocks & Bonds/Investors Fret Over Financial Sector," p. C10, col. 4 (New York Times Nat'l Ed., Thursday, June 5, 2008), available online at www.nytimes.com.

     In the meantime, three of the Credit Ratings Companies reportedly have reached or are negotiating a deal with the New York State Attorney General to change some of their business practices -- although not the source of their income, which when they began in that business was the person asking to find out a rating but now is, and would remain, instead the business that is being rated.  The reported deal would also leave unchanged the opportunity for the business purchasing the services of a Credit Ratings Company to go to another Credit Rater if it did not like the rating, which it would not be compelled to disclose even as it shops for a better rating.  See, for example, "Moody's, S&P and Fitch Agree to Deal on Fees," published on Friday, June 6, 2008 by the Los Angeles Times Online "From Times Wire Services", available online at www.latimes.com;  Jenny Anderson & Vikas Bajaj, "Rating Firms Seem Near Legal Deal on Reforms," p. C1, col. 5 (New York Times Nat'l Ed., Wed., June 4, 2008), available online at www.nytimes.com.

     "The deal with [the New York State Attorney General] applies only to debt backed by U.S. subprime and other so-called non-prime loans."  "Moody's, S&P and Fitch Agree to Deal on Fees," supra.

As soon as the web log host, TypePad, provides again the opporunity to hyperllink directly to these sources, the author will try to make that happen but it is not possible to do so at the time of this post.  Instead, the websites of the sources should work and for that reason are made available here in the interim.

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... And Now, On To Everyone's Business Preparing for Catastrophe.

     Good advice for preparing for CatClaims that everyone can put to use is found in "Preparation Eases the Aftermath," published on Friday, June 6, 2008 by the Los Angeles Times Online, found at www.latimes.com.

     Among the good advice given there is to contact your agent or broker --before Catastrophe strikes -- to determine the levels of Insurance Coverage right for you.

     Also, keep records of everything new in your home -- not just recently added personal property such as jewelry but also home improvements and renovations.

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Foreclosed Properties in Florida May Mostly be Empty.

What Does This Mean to Insurance Coverage?

    Foreclosure is miserable.  The awful effects of foreclosure proceedings on many of the human beings involved in them are detailed in the anecdotes reported by Damien Cave, "In South Florida, Eviction Spares Few," p. A13, col. 1 (New York Times Nat'l Ed., Wed., June 4, 2008)., and as a link directly to that article through the web log host, TypePad, is just not avalable at the time of this post, the author provides this link to the website, available online at www.nytimes.com.  There is this nugget of anecdotal evidence included among the things expected:  "These days, however, most houses are empty when the police arrive."

     Depending on the types of Insurance Policies that may be at issue, this can give rise to many potential Insurance Coverage Questions, among them:

          How long has the residential property been empty?

What precautions were taken, if any, to safeguard the property?

Was the property in question purchased empty, and if so has it remained empty, and if not, when did it become "empty"?

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Small Business Planning for Catastrophe (Heaven Forbid).

     Some things that small businesses can include in their planning for CatClaims are addressed very well by Joyce M. Rosenberg, Associated Press, "Disaster Planning for Small Businesses," May 26, 2008, available online at www.latimes.com.

     The first order of small business planning is to provide for adequate Insurance Coverage.  This includes Coverage for Catastrophe losses as well as losses from fires, storms, floods or earthquakes depending on where the business is located.  The article also offers good advice to look into Business Interruption Insurance.

     On-the-ground Catastrophe planning mentioned in the article includes:

• "Contact list":  One person quoted by the newspaper reporter recommends having not less than five (5) ways to get ahold of every single employee.
• "Data":  As recommended not only in this newspaper report but in many, many other pieces by many other people as well, look into a USB port.  They are easily portable and are easily stored in a secure location.  Many automatically -- or, as in my office, at the command of only a few key strokes -- back up hard drives.
• "Backup generator":  Perhaps a good idea for businesses that have the capacity and opportunity, as suggested in this newspaper article, but impractical or impossible for many business owners who lease.

Other suggestions are raised in the newspaper article, among other reports.  Last but not least, here are some websites for further ideas and suggestions:

• The Institute for Business & Home Safety:  www.disastersafety.org; and

• U.S. Small Business Administration:  www.sba.gov/bewareandprepare/business.html.

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Katrina: A Catastrophe Continues.

     No Homeowner's Insurance.

     No homes.

     Soon, no place to stay.

     Katrina:  A Catastrophe mishandled by some of the people currently in charge of the Federal government, continues.  See Jenny Jarvie, "Displaced by Katrina and Edged Out of FEMA Trailer Parks" www.latimes.com, Sunday, June 1, 2008.

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When Jack Nicholson Talks About Catastrophe, Florida Listens.

     No, not that Jack Nicholson.  The Jack Nicholson who is identified as the manager of the Florida Hurricane Catastrophe Fund.

     Reportedly, bonds will be issued by the "Cat Fund" to pay for still-unpaid CatClaims from Florida's 2005 Hurricane Season, together with past and future assessments on all sorts of Insurance Policies in Florida.  See Aaron Deslatte, "2005 Storm Season Still Proving Costly/The Sale of Bonds -- and Levies on Insurance Policies -- Could Help Pay Off Outstanding Claims," p. B3, col. 3 (Orlando Sentinel, Wed., June 4, 2008), available online at www.orlandosentinel.com.

      In 2004, Florida was visited by the Four Hurricanes, Charley, Frances, Ivan and Jeanne.  Hurricane Wilma struck South Florida in 2005, causing great damage.

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Flip-Flopping Premium Hikes Rejected in Florida.

     Hartford reportedly at first "voted" against Premium Rate Hikes by announcing it would reduce Premiums by 13.6% effective 06.01.08, then it "voted" for Premium Rate Hikes by asking for a 39.6% Premium Rate Hike effective in 09.08.  Following a new procedure in Florida, the Hartford first presented its request to an Adminstrative Law Judge.  The Florida Judge denied Hartford's Rate Hike request.  Then Hartford took an appeal to the Florida Office of Insurance Regulation.  The O.I.R. affirmed the Judge's decision.  See Anika Myers Palm, "State Curbs Hartford Rate Hike," p. C2, col. 2 (Orlando Sentinel, Tuesday, June 3, 2008), available online at www.orlandosentinel.com.

     It is also re-reported in the newspaper article that in February, 2007, Hartford announced that it was not renewing 40,000 Homeowner's Insurance Policies in Florida.

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Credit Default Swaps: The New Credit Insurance?

     Credit default swaps are a hard thing to understand.  It almost seems as if those who use them benefit by not describing them in language that can be readily understood by other people.  The more a person learns about credit default swaps, the more they seem like unregulated Insurance, however.  See, for example, Gretchen Morgenson, "First Comes the Swap.  Then It's the Knives." p. 1, col. 2, "Sunday Business" Section (New York Times Nat'l Ed., Sunday, June 1, 2008), available online at www.nytimes.com.

     Parenthetically, a definition of the term, "counterparty," is given in this newspaper column.  A counterparty on a credit default swap is the insurer.

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Some Health Insurance Companies Demand Sterlization ....

.... Before They Will Even Consider Covering Women Who Have Had a Caesarean.

     Insurance Companies willing to issue private Health Insurance Policies, i.e., Policies that are not employer-based and that do not depend on a group of employees, but are instead issued to individuals, are skittish about covering women who have had a Caesaren Section.  They contend that having a Caesarean Section is a marker of possible future Health Insurance claims which they do not want to cover.  Some Health Insurance Companies demand that such a woman applicant be sterilized, before they will even consider offering a Health Insurance Policy to a woman who has had a Caesarean Section, it is reported by Denise Grady, "Some Insurers See Past Caesarean as Costly Risk" p. 1, col. 4 (New York Times Nat'l Ed., Sunday, June 1, 2008, available online at www.nytimes.com).

     However, sterlization is no guarantee of obtaining a Health Insurance Policy or, having obtained one, of having a claim be paid, according to the newspaper report.

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Vioxx Decision Shows Limits of Expert Witness Testimony.

     "An expert's bare opinion will not suffice to support a jury's verdict."  Download Merck_Co. v. Ernst (Tex. 14th Ct. App. Case No. 14-06-00835-CV, Opinion Filed May 29, 2008)..txt at page 15 of 20.

     In this recent Texas appellate decision, the Texas appellate court reversed a judgment entered on a jury verdict against Merck & Company in a wrongful death case.  Mrs. Carol Ernst contended that Vioxx, a drug manufactured by Merck, killed her husband.  Three Expert Witness physicians testified in the Plaintiff's behalf.  Their testimony was unsupported by sufficient facts in the record, the Texas appellate court ruled.  "The substance of the [experts'] testimony must be considered."  Id.

    The legal standards governing the weight to be given to Expert Witness testimony, including on appeal, mark the same weight that Expert Witness testimony will have to carry in Insurance Cases, or similarly be deemed legally insufficient to support a jury's verdict against the defendant it appears.

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