Claims And Issues

MORE ON "Federal Taxpayers Likely to Lose, Again, on TARP Refunds".

This is an update to the post here on May 19, 2009.

    Attention is being paid.  See Mark Pittman, "TARP Warrants Show Banks May Reap 'Ruthless Bargain' (Update 2)" (Bloomberg.com, Friday, May 22, 2009).

    Mr. Timothy Geithner does not have good negotiation skills.

    Separately and in addition, Mr. Geithner clearly does not have the stomach to negotiate for people making anything less than, say, $500,000 a year.

There is a connected post on this update at www.insuranceclaimsbadfaith.typepad.com.

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Direct Liability to Excess, for Excess, or Not?

    Two cases decided by the same Florida Appellate Court decades apart, leave the existence of a direct duty in doubt from a Primary Liability Carrier to an Excess Liability Carrier.

    In the earlier of the two cases, Florida's First District Court of Appeal held that there is no direct duty to an Excess Carrier from the Policyholder's (or other Insured's) Primary Carrier.  Hartford alleged that it was the Excess Carrier and claimed that The Travelers was the Primary Carrier acting in Bad Faith.  "We further find Hartford's remaining claim that Travelers owes a direct duty to Hartford not cognizable under Florida law."  Download Hartford v. Travelers (Fla. 1st DCA 1989), review denied, (Fla. 1990).

    In 2007, three different distinguished Judges of Florida's First District Court of Appeal reached the opposite conclusion.  "Therefore, [the Primary Carrier] owed [the Excess Carrier in this case] a duty of good faith."  Download Progressive American Insurance Co. v. Nationwide Insurance Co. (Fla. 1st DCA Case No. 1D06-2159, Opinion Filed February 14, 2007). 

   Primary Liability Carriers will have a hard time adjusting their conduct to meet the demands of Florida Insurance Law, until the apparent conflict in the Florida case law is resolved.

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FURTHER THOUGHTS ON "Insurer Regularity Insured by State Regulators".

This post adds to a previous post here on May 21, 2009.

    Insurance operations have not failed.  Life Insurance Companies are the only Insurance Companies known at this time to have applied for Federal Bailout Funds, for example, yet even Life Insurance Company operations are not failures.  Instead, Life Insurance Companies foolishly invested in money-losing schemes like derivatives and their losses on those investments are bringing them down, not their Insurance operations, which are stable and not collapsing.

    Further, even those Insurance Companies which may fail in the Current Collapse do not pose a risk of "systemic" failure.

    State Insurance Commissioners have successfully regulated Insurance Companies even while other corporations fail miserably and require massive infusions of Taxpayer Funds during the Current Collapse.

    Federal Regulators, on the other hand, have exhibited a cluelessness about financing that is amazing, frankly.

    What reason exists, then, to abandon successful State regulation of Insurance in favor of more Federal failure?  See also "Florida Insurance Commissioner Urges Congressional Delegation to Maintain State-Based Regulation of Insurance" Press Release, Thursday, May 21, 2009.

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UPDATE on "AIG Trust Agreement, Feds and Trustees: Who Do They Work For?"

This is an update of a post here on April 21, 2009:  "AIG Trust Agreement, Feds and Trustees:  Who Do They Work For?"

    It is rumored that the three Trustees of AIG, appointees of the New York Fed and ostensibly servants of the Federal Taxpayers, testified before the U.S. House of Representatives Committee on Oversight and Reform on or about Wed., May 13, 2009.  However, trying to locate any substantive news about their actual testimony has not yet resulted in much.  It is as though their testimony was either unimportant in the eyes of newspaper and other media reporters, or perhaps the very important testimony anticipated from the Three Trustees was not easily understandable.  I intend to keep trying to locate and digest whatever it is these three people actually said.

    In the meantime:  The experience base of Trustee Jill Considine has become clearer through this report by Mark Pittman, James Sterngold and Hugh Son, "AIG Trustees Should Answer to Taxpayers, Not Fed, Towns Says" (Bloomberg.com, Wed., May 12, 2009).  Ms. Considine is described in the linked report as "lead director of Ambac Financial Group, Inc., the New York-based bond insurer whose shares have dropped 98 percent from a 2007 peak."

See also www.insuranceclaimsbadfaith.typepad.com, Categories:  "Fiduciary Duty, Market Performance".

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Insurer Regularity Insured by State Regulators.

   Innovation in finance resulted in securitization.  Securitization resulted in the Current Collapse.  Present newspaper reports tell of how the Wall Street failures who brought us securitization are demanding that it, and they, be bailed out.  They must have been successful, the Wall Streeters tell us and the newspapers dutifully report how much money was made on Wall Street because of securitization.  Unfortunately, they spent all that money.  The only people around to bail them out are the Federal Taxpayers.  How is that innovation thing going?

    Innovation in Insurance Regulation is one of the reasons put forward in favor of Federal regulation of Insurance.  The States have regulated Insurance since the Eighteenth Century.  State Insurance Regulators are concerned with consumer protection, with keeping complexity of Insurance to a much lower level than some Insurance Companies would like to market, and with stability.  How is that stability thing going?    See generally Jeff Segal and Dwight Cass, "Breakingviews.com/Insurance Dilemma" p. B2, col. 2 (New York Times Nat'l ed., "Business Day" Section, Tuesday, May 19, 2009); Dwight Cass, "Breakingviews.com/Insurer Oversight Is Not Yet Broken" p. B2, col. 1 (New York Times Nat'l ed., "Business Day" Section, Thursday, April 30, 2009).

     A phenomenon of American life in 2009 is that people who fail are often treated as though they succeeded like they said they succeeded.  That is sad, really.  It can also be dangerous.

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Expert Disclosures in Florida Governed by Courts, Not Statutes.

    Florida Statute Section 57.071(2) used to provide that Expert Witness fees could not be taxed as Costs unless the retaining party provided certain Expert Witness Disclosures within certain timeframes:

        (2)  Expert witness fees may not be awarded as taxable costs unless the party retaining the expert witness furnishes each opposing party with a written report signed by the expert witness which summarizes the expert witness's opinions and the factual basis of the opinions, including documentary evidence and the authorities relied upon in reaching the opinions.  Such report shall be filed at least 5 days prior to the deposition of the expert or at least 20 days prior to discovery cutoff, whichever is sooner, or as otherwise determined by the court.  This subsection does not apply to any action proceeding under the Florida Family Law Rules of Procedure.

Section 57.071(2) was held unconstitutional by a 4-to-3 majority of the Florida Supreme Court:  Download Massey v. David (Fla. Case No. SC07-776, Opinion Filed April 3, 2008).  The facts of that case certainly did not influence the outcome of the decision.  All of the information required to be disclosed under Subsection (2) of the Statute was timely and fully provided in that particular case:

    During both briefing and oral argument, it has been confirmed that all of the information that is required to be in the written report pursuant to section 57.071(2) was actually provided in this case to the parties through expert disclosures, answers to interrogatories, and affidavits and sworn deposition testimony.  This information was provided based upon written court orders with regard to discovery requiring disclosure, and those disclosures occurred within the timeframe contemplated by the statute.  Thus, the spirit of the statute was fulfilled in this case because expert witness information was exchanged.

Id. at 22 in attached slipsheet opinion.  [Emphasis by the Florida Supreme Court.]  The facts of the case did not save the constitutionality of the statute, however:

    In conclusion, we hold that section 57.071(2) impermissibly encroaches on the rulemaking authority of this Court because it imposes procedural requirements with regard to both the discovery of expert witnesses and the taxation of expert witness fees as costs which do not exist under the rules of practice and procedure that have been promulgated by this court.

Id. at 23.  This decision came in a legal malpractice action, but its reach is certainly long enough to include Experts in Insurance Cases and the Disclosures required of them by the Florida Courts.

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Federal Taxpayers Likely to Lose, Again, on TARP Refunds.

This is a Postscript to the post here on May 18, 2009:  "Fiduciaries Avoid Federal Pay Limits, Pay Back Low-Interest Bailouts?"

    As a part of the consideration for making low-interest loans from the Troubled Assets Relief Program to failing corporations, the borrowing corporations sold "warrants" to the Federal Taxpayers.  These particular warrants reportedly convey to Federal Taxpayers the right to buy the borrowers' stock at an agreed price even in the future, "in this case, 10 years."  Eric Dash, "Efforts to Repay Bailouts May Undercut Benefit for Taxpayers" p. B1, col. 1 (New York Times Nat'l ed., Tuesday, May 19, 2009).  Some borrowers of Federal TARP money want to pay it back early and are making low bids to pay off the warrants.  See id.  It is also reported that there is confusion about how to value the warrants.

    One of the few banks which has paid back TARP loans including warrants succeeded with a lowball offer.  The borrowing bank recently held its annual shareholders meeting.  The news that the bank's lowball bid had been accepted by the current Federal government was reportedly greeted with applause.  See id.

    Clearly the Federal Taxpayers did not attend that meeting.

    As far as finding a mechanism to put a value on the warrants that TARP borrowers sold to the Federal Taxpayers, what reason exists for being afraid to put the warrants up for sale and let the market forces determine their value?

See a related post at www.insuranceclaimsbadfaith.typepad.com, Categories:  "Fiduciary Duty," "Market Performance".

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Fiduciaries Avoid Federal Pay Limits, Pay Back Low-Interest Bailout?

    Now that some Life Insurance Companies have received approval to apply for Federal TARP or Bailout funds, it is worthwhile to address some questions raised by the behavior of some large Corporations that have already received TARP funds.

    TARP funds are loaned at lower interest rates than corporations can obtain anywhere else.  "For starters, it's cheap capital."  Antony Currie and Dwight Cass, "Breakviews.com/Shareholders Hurt in Bailout Payback" p. B2, col. 1 (New York Times Nat'l ed., Wed., May 13, 2009).  Paying back TARP funds by issuing new shares can however have the effect of diluting the value of the existing shares held by the existing shareholders.  Id.

    The only apparent reasons for paying TARP funds back at this time are (1) limits on bonus payments to executives, officers and directors of the borrower and (2) the fear that other, unknown, unspecified limitations might be imposed on TARP loans in the future.  See id.

    Are these reasons enough to require Fiduciaries to pay back low-interest loans that cannot be obtained anywhere else, weighing the interests of the shareholders against the interests of the Fiduciaries, i.e., the executives, officers and directors?

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Lifeline and Mr. Liddy: Federal Taxpayers Bail Out Allstate Too.

    Six Life Insurance Companies which applied for Federal TARP or Taxpayer Bailout Funds, have reportedly received preliminary approval for the Taxpayer money.  Jeremy Hobson, "Life Insurers Get a Piece of the Bailout," Friday, May 15, 2009, available online in print or broadcast form at Marketplace on National Public Radio.

    Life Insurance Companies have been robustly applying for the Bailout money for months.  "Life insurers have clamored for six months to get into a program that the nation's biggest banks are trying to flee to avoid governmental restrictions."  Andrew Frye and Rebecca Christie, "Prudential Among Insurers Cleared for U.S. Bailout (Update 2)" (Bloomberg.com, Friday, May 15, 2009).  Credit Default Swaps are the major reason for the clamor by Life Insurance Companies for Federal Bailout money.  As was previously posted here several times, Life Insurance Companies literally made poor bets with Credit Default Swaps and their share prices fell accordingly.

    One of the few surprises in today's announcement is that Allstate is among the applicants.   See also Eric Dash and Diana B. Henriques, "Six Insurers Named to Get Taxpayer Aid" p. B1, col. 1 (New York Times Nat'l Ed., "Business Day" Section, Friday, May 15, 2009)(identifying the qualifying Life Insurance Companies but not noting that they are all Life Insurance Companies nor why these Life Insurance Companies applied for the money).  It was not previously reported, or at least not widely reported, that Allstate had even applied.  They apparently did so because of their Life Insurance operations.  See Andrew Frye and Rebecca Christie, supra, reporting that since October, 2008, "Allstate cut its dividend by 50 percent, halted share buybacks and announced plans to cut 1,000 jobs at its money-losing life insurance unit."

    Allstate advertises Life Insurance products at Allstate Financial online.

    Mr. Edward Lilly is famous, at the present time, for receiving "only" $1.00 for heading up AIG during its current time of trial.  AIG is apparently forced to use mostly Taxpayer Bailout money in its budget at the present time.  (Federal Taxpayers own 79.9 percent of the shares of AIG at this point.)  It is very well known that Mr. Liddy previously headed up Allstate until he came out of retirement to head up AIG.

    Allstate reportedly declined to say how much money it stands to receive, but there is no doubt that the amount is much more than "$1.00".  The Hartford reportedly announced that it alone could now receive $3.4 Billion of Federal Taxpayer money.  Eric Dash and Diana B. Henriques, supra.  Another qualifying applicant, Lincoln National, "said it may receive $2.5 billion."  Andrew Frye and Rebecca Christie, supra.

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Can You Write "LIFE" Insurers Seek TARP Funds?

    Property and Casualty Insurance Companies give every evidence of solvency.  They are not the Insurance Companies which are seeking TARP Funds or Bailouts using Federal Taxpayer Funds.

    Instead, the Insurance Companies which are seeking Federal Taxpayer Funds are all Life Insurance Companies.  A couple of the newspaper reporters who have gotten this are David S. Hilzenrath and Brady Dennis, in "Treasury Weighs Investment in Life Insurers" (Washington Post Online, Thursday, April 9, 2009).  Compare, for example, Robert Cryan and Jeffrey Goldfarb, "Breakingviews.com/Little Rationale to Aid Insurers" p.B2, col. 1 (New York Times Nat'l Ed., "Business Day" Section, Thursday, April 23, 2009)(a report which does not report that the "insurers" seeking the "aid" are all life insurers).

    Why are Life Insurance Companies seeking a Bailout while Property and Casualty Insurance Companies are not?  Life Insurance Companies, unlike Property and Casualty insurers, foolishly invested heavy amounts of their shareholders' funds in securitized financial products such as Credit Default Swaps (read:  AIG financial techniques practiced by companies with other names).

    Sadly, the shareholders of these Life Insurance Companies suffered great losses.  Their sadness is no reason for shifting that sadness or that liability to Federal Taxpayers.

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"Stress Test" Results and Credit Default Swaps.Credit Insurance Policies.

    "Stress test" results have been released by the Federal Reserve Board in 37 pages of text, charts and graphics, plus 1 cover page:  Download Stress Test Results.050709.

    In a continuous revelation of a secret hidden in plain view, the results are clear that Credit Default Swaps (CDS's) and other "derivatives" offer intolerable risk to the larger economy.  See  Floyd Norris, "High & Low Finance / Findings, But No Final Word" p. B1, col. 1 (New York Times Nat'l Ed., "Business Day" Section, Friday, May 8, 2009):  "We know that there could be further losses on mortgage-backed securities -- despite claims by many banks that the securities have already been marked down to absurdly low levels."  See also Louise Story and Eric Dash, "The Great Divide/Results of Bank Stress Tests Split the Financial Landscape" p. B1, col. 2 (New York Times Nat'l Ed., "Business Day" Section, Friday, May 8, 2009).

    CDS's are now widely recognized as unregulated Credit Insurance unbacked by Capital-Reserves.  E.g., post here of March 18, 2009 and previous posts listed in it.  See also related posts on April 1, 2009 and on April 16, 2009.

    The intolerable risk of CDS's to the larger economy is that Federal Taxpayers will pay the freight for the ride taken by a few, who immediately cashed in the checks they were paid for selling the unregulated, uncapitalized CDS's.  See Mary Williams Walsh, "A.I.G. Cuts Loss Sharply to $4.35 Billion in First Quarter" p. B5, col. 1 (New York Times Nat'l Ed., "Business Day" Section, Friday, May 8, 2009).

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"Unauthorized Insurer" Purchasing Reinsurance in Florida Can Sue As "Insured".

    Florida, like many jurisdictions, has a Statute which prohibits "suits by unauthorized insurers".  In Florida, the Statute in question is Florida Statute Section 626.903, accessible here.  Section 626.903 provides in essence that "no unauthorized insurer shall institute, file, or maintain, or cause to be instituted, filed, or maintained, any suit, action, or proceeding in this state to enforce any right, claim, or demand arising out of any insurance transaction in this state."

    The purpose and wording of this Statute are regulatory.  It is part of a scheme regulating unauthorized insurers in Florida, and encouraging them to become authorized.  The Florida Statute does not reach status in the sense that no unauthorized insurer can ever seek redress in the Florida Courts about anything simply because it, the Plaintiff, is an unauthorized insurer.

    Thus, it was recently held by Florida's Fourth District Court of Appeal that Section 626.903 did not bar an unauthorized insurer, Advantage General Insurance Co., from suing a Reinsurance Company for Coverage in Florida State Court after the Reinsurer denied all Coverage:  "However, when Advantage purchased reinsurance from KILN & QBE in Florida, Advantage was the insured.  In making this purchase of reinsurance, Advantage was not 'transacting insurance' within the meaning of the Florida Insurance Code ....  Since Advantage filed suit as an insured, not an insurer, we conclude that section 626.903 does not bar Advantage's claim against KILN & QBE."  Download Advantage General Insurance Co. v. KILN.QBE International (Fla. 4th DCA Case No. 4D08-1944, Opinion Filed April 29, 2009).  See attached slipsheet opinion at 2.  [Emphasis by the Fourth District Court of Appeal.]

Florida Statutes, Cases, and Administrative Agency Rules and Regulations, along with other authorities, are freely accessible through the portals at www.dennisjwall.com.

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Mortgage Modification Motivations: Impure But Insurable.

    The pending Congressional amendments to TARP apparently include encouraging mortgage modifications for potentially impure motives, according to some persons.  These objections are reported by Gretchen Morgenson, "Fair Game/A Reality Check on Mortgage Modification" p. 1, col. 2 (New York Times Nat'l Ed., "SundayBusiness" Section, Sunday, April 26, 2009).

    If enacted, these amendments would encourage two outcomes for reasons that these persons find objectionable:

1. The proposed amendments encourage mortgage modifications by mortgage servicing companies.  If the servicer of a mortgage was also the initial lender, then in that case reportedly the proposed amendments would immunize the servicer for correcting the original abusive mortgage terms, even though that same company was the lender in that case and when it made the loan it unfairly insisted on the abusive mortgage terms.  In other words, the mortgage would be modified, which is a good thing according to the great majority of the Members of Congress who have so far voted for these amendments, but mortgages would be modified for the wrong reason if the service companies intended to be immunized rather than turn about and do the right thing for the right reasons.

2. The other impure motive that would be counted on to produce desired results if these amendments are adopted by Congress, concerns lien priorities.  Reportedly, many mortgage servicing companies are Banks that hold second liens, second in priority to first mortgages that were bundled and sold to 'innocent' investors wrapped into and parceled out from "securitizations".  (Securitization is at the heart of the Credit Collapse of 2007-2009, which we are living through right now.)  If these mortgage service companies modify the onerous terms of the first mortgages on the same properties on which they themselves hold second liens, they will reportedly be harming the priority status of the first lienors.  It is readily apparent how this might adversely affect the predatory lenders who insist on enforcing abusive first mortgages and adamantly obstruct any attempt to ameliorate the harshness of those terms.  It is inconceivable, however, that modifying the abusive first mortgages could do anything but assist the mortgagors -- that is, the borrowers -- including to pay most of the mortgages back to the parties that claim the right to be paid under the first mortgages.

Who is it, then, that reportedly objects to these amendments proposed by Congress?   The objectors are "some" unknown, unnamed "investors and securitization lawyers".  Id.

     If the mortgagors totally default on the mortgages, why is there no mention of the Mortgage Insurance if any which any prudent mortgagee would insist upon at the same time that she, he or it takes back a mortgage as security for any loan?

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Current Health Insurance Coverage Issues.

            There are a great many Health Insurance Coverage issues that have come to the surface of late.  There are so many, it is easy to lose track.  These are some of them.

            1.  A trade association of Health Insurance Companies has floated an “offer” to charge the same Premium for equal Health Insurance Coverage to men and women.  They presently charge higher Premiums to women for the same Health Insurance Coverage that their Policies afford to men.  Robert Pear, “Health Insurers Agree to End Higher Premiums for Women” p. A16, col. 1 (New York Times Nat’l Ed., Wed., May 6, 2009).   In return – as with previous “offers” to provide Health Insurance Coverage to sick people or to those with pre-existing conditions, the “offer” comes with strings for the Federal Government to require “all Americans to have coverage” and to leave Health Insurance Coverage to the Health Insurance Companies.   The latest posts on these Health Insurance Coverage issues, on April 2 and on April 22, 2009, address these "offers" and in addition list previous posts addressing such issues here.

            Note that some Health Insurance Companies also charge higher Premiums for older persons as a “group”.  See Reed Abelson, “Proposed Tax on Health Benefits Meets Resistance” p. B1, col. 1 (New York Times Nat’l Ed., “Business Day” Section, Friday, May 8, 2009).

            2.   Proposed limitations on Government Plans for Health Insurance Coverage include charging Premiums high enough to pay all Claims from the Premiums collected by the Government.  See Robert Pear, "Schumer Points to a Middle Ground on Government-Run Health Insurance" p. A18, col. 1 (New York Times Nat'l Ed., Tuesday, May 5, 2009).  Private Insurance Companies, including private Health Insurance Companies, are not required to pay all Claims made upon their Policies from the Premiums they collect.

            3.  Another recent Health Insurance Coverage issue seems as if it came straight out of the book by Ms. Shannon Brownlee, "Overtreated".  See www.overtreated.com.  The usefulness of this book has been mentioned several times before in this space.

            Preventive care is not yet a part of Health Insurance Companies' and Medicare's "payment system".  Reed Abelson, "Hospitals Pay For Cutting Costly Readmissions" p. B1, col. 2 (New York Times Nat'l Ed., "Business Day" Section, Saturday, May 9, 2009).  This appears to be changing.  For example, one of General Electric's announced corporate goals is reportedly "supporting consumer-driven preventive care."  Steve Lohr, "In Strategy Shift, G.E. Plans Lower-Cost Health Products" p. B8, col. 1 (New York Times Nat'l Ed., "Business Day" Section, Friday, May 8, 2009).

            In addition to reducing its own costs -- and presumably driving down its Health Insurance Premiums as well -- the actions of G.E. reflect a much larger movement of the medical model toward preventive care.  The Health Insurance Coverage model will ultimately have no choice but to follow.

            4.  "Domestic partner benefits," almost entirely but not exclusively directed to gay couples, are much in debate and in controversy.  However, the issue of availability of Health Insurance benefits to domestic partners affects other concerns common to many other types of Health Insurance Coverages.  See generally Walecia Konrad, "For Gay Couples, an Obstacle Course to Health Insurance" p. B6, col. 1 (New York Times Nat'l Ed., "Personal Business/Patient Money," Saturday, May 9, 2009).

            The common concerns addressed in the linked newspaper report include the need to Document, offering a handy reference for all potential Health Insurance Policyholders, to the web site www.insure.com; Taxes, again offering a handy reference to a web site, in this instance to an I.R.S. worksheet on page 33 of I.R.S. Publication 17 to use for determining support and dependency issues, at www.irs.gov/pub/irs-pdf/p17.pdf; Children; and COBRA.  Previous posts on COBRA in particular, and other Health Insurance Coverage issues in general, can be found here most recently on April 2 and on April 22, 2009.

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Florida PIP Benefits Not Payable Held Not Overdue, No Penalties.

    PIP benefits are overdue when not paid according to Florida Statute Section 627.736(4)(b) including its time limit of 30 days.  Access the Florida PIP Statute here.  When overdue in Florida, PIP payments draw penalties:  simple interest and, if the Policyholder (or assignee) files a lawsuit for PIP payments, then also the Insured's/Assignee's attorney's fees.  Fla. Stat. § 627.736(4)(d) & (8).

    However, by the terms of the Florida PIP Statute, "any payment shall not be deemed overdue when the insurer has reasonable proof to establish that the insurer is not responsible for the payment."  Fla. Stat. § 627.736(4)(b).  "This paragraph does not preclude or limit the ability of the insurer to assert that the claim was unrelated, was not medically necessary, or was unreasonable or that the amount of the charge was in excess of that permitted under, or in violation of, subsection (5)."  Id.

    It has recently been held that the 30-day time limit of Section 627.736(4)(b) "does not apply to claims for unrelated, unreasonable, or unnecessary treatment."  Download United Auto. Insurance Co. v. Millennium Diagnostic Imaging Ctr., Inc. (Fla. 3d DCA Case No. 3D08-772, Opinion Filed May 6, 2009).  See attached slipsheet opinion at 7.  [Emphasis added.]  "Therefore, an insurer may challenge such treatment at any time, and is permitted to rely on a report, obtained pursuant to section 627.736(7)(a), even if the report is obtained more than thirty days after the claim was submitted.  The insurer, however, must keep in mind that if its challenge fails, it will be liable for interest and attorney's fees."  Id. at 8.  [Emphasis added.]

    All Florida Statutes, Cases, Administrative Agency Rules and Regulations, and other authorities are accessible on links through www.dennisjwall.com.

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Life Insurance Companies Get Premiums From Swine Flu.

    One person's panic is another person's Premium.  Fears of swine flu have increased the number of people paying Premiums to Life Insurance Companies, it is reported on his blog by Robert Trigaux, St. Petersburg Times Business Columnist, "Venture" Blog, April 30, 2009 post, "Florida Busniesses Prep For, React to Swine Flu," on St. Petersburg Times Online.

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Hartford Changes Accounting, Announces Transformed Financials.

    Before The Hartford and other corporations changed their mark-to-market accounting values, The Hartford in particular was headed for a huge loss.  The large loss would have followed these recent developments:

    1.  The National Association of Insurance Commissioners repealed a requirement that certain Insurance Companies maintain a high level of Reserves sufficient to meet claims.  The repeal of the Reserves requirement was particularly sought by Life Insurance Companies.  The Hartford got about $1,000,000,000.00 or $1 Billion "of regulatory relief from capital and reserve requirements meant to protect policyholders" in this way.  See David S. Hilzenrath, "Accounting Changes Boost Hartford's Books" (Washington Post Online, Friday, May 1, 2009).  

   2.  The Hartford reportedly is looking at corporations within its group which it can sell to raise capital.  Id.

  3.  In addition, The Hartford recently announced that it will not issue new business either in Japan or in the U.K.  Id.

  After many large corporations changed to mark-to-management accounting values instead, they were able to release rosier reports on their financial condition.  See Joe Nocera, "Talking Business/Same Data, Conflicting Forecasts" (New York Times Online, Saturday, May 2, 2009).  This included The Hartford, which reported "a pre-tax gain of $550 million" partly due to the change in accounting values.  Even with these changes, it reported a loss for 1Q 2009 of $1.2 Billion.  David S. Hilzenrath, supra. 

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Bond Insurance Company Sues Insured it Issued Credit Default Swaps.

    MBIA issued a press release dated April 30, 2009 announcing a lawsuit which it and its subsidiary, LaCrosse Financial Products, LLC filed against their insured.  The defendant is Merrill Lynch, their Insured-Counterparty.  See also Jody Shenn, "MBIA Sues Merrill Lynch Over Sub-Prime Debt Protection (Update 2)" (Bloomberg.com, Thursday, April 30, 2009).

    Although MBIA posted that the Complaint itself was available on its web site, it was not yet located there the last time I personally tried to find it there.  A search this date on the "SCROLL" or "Supreme Court Records On-Line Library" site provided by the New York State Supreme Court, where the suit was filed, reveals that "no documents have been scanned" on this case as yet.

    The alleged claims or causes of action identified in the press release are Misrepresentation and Breach of Contract.  MBIA and LaCrosse allege that they were fraudulently induced to issue Credit Default Swaps and other Insurance Policies to Merrill.  The Bond Insurance Company seeks the remedy of Rescission for all CDS's and Insurance Policies which were issued to Merrill, and Damages "where the CDS Contracts and related policies were issued to third party counterparties [insureds] other than Merrill Lynch."

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Mr. Warren Buffett, Economic Pearl Harbor Passed, But Derivatives Tick.

    Mr. Warren Buffett earlier in 2009 described the Great Recession of 2007 - 2009 as an "economic Pearl Harbor".  Before the annual convention of his chief corporation, Berkshire Hathaway, Inc., began on Saturday, May 2, 2009 he advised that the economic Pearl Harbor has passed but the war is not over.  "Buffett:  'Economic Pearl Harbor' Has Passed" (MSNBC.com, updated Friday, May 1, 2009 before the Berkshire Hathaway annual convention began).

    Perhaps indicative of the war that rages still, Berkshire is exposed to "derivative contracts, many of which are long-term bets that stock market indexes will rise and junk bond defaults will not go sky-high."  Id.  Derivatives contracts which are not tied to any insurable interest are hardly anything more than wagering contracts, it is clear.

    Reportedly, if the markets reached the same levels at which they stood even as late as December, 2008,Berkshire's derivatives contracts exposure would reach $13,000,000,000.00 or $13 Billion.  See id.

    For additional information on the business results reported by Berkshire Hathway for 2008, see its 2008 Annual Report here.

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"Moral Hazard" Overwhelms Seventh Circuit Interpretation of a CGL Policy.

    Importing a justification for current foreclosures into the arena of Insurance Policy Interpretation, a panel of the Seventh Circuit Court of Appeals has held that under Indiana law, a residential General Contractor's CGL or Commercial General Liability Insurance Policy with a pre-1986 form provides no Coverage to the General Contractor when a Subcontractor causes damage and the G.C. is sued by the homeowners to pay for it:  Download Westfield Insurance Co. v. Sheehan Construction Co. (7th Cir. Opinion Filed April 29, 2009).

    The panel opinion wrote that the CGL was confined to "accidents of the sort we have mentioned," but then proceeded to say that the Court assumed that the case before it involved covered "Property Damage" caused by an "Occurrence".  The damage in that case resulted from water intrusion into residential homes.  See attached slipsheet at 1-2.  The Court applied  the Policy's "your work" Exclusion to bar all Coverage.  First, the "work" of a General Contractor in the opinion of the Court "is the whole project".  Id. at 3.  Naturally, then, an Exclusion of Property Damage "to '"your work'" arising out of it or any part of it and included in the "products-completed operations hazard"' is outside the policy's scope."  Id. at 2-3.

    Moreover, an Exemption added by a form first published by or for CGL Insurers in 1986 to the "your work" Exclusion, that this Exclusion "does not apply if the damaged work or the work out of which the damage arises was performed on your subcontractor," simply did not apply to this case.  The G.C.-Policyholder's CGL Policy contained an endorsement which included a Definition of, "your work," to include work or operations performed by the G.C. or on its behalf.  "The italicized phrase means that subcontractors' work is included in the scope of 'your work'."  Id. at 4.

    Indiana law applied by this panel of the Seventh Circuit required that CGL Coverage be totally excluded, the Court concluded.  The result would likely be different in other jurisdictions, such as Florida or Tennessee.  Id. at 5.

    A parallel post on this new decision is on Insurance Claims Bad Faith Law Blog at www.insuranceclaimsbadfaith.typepad.com.

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Property Insurers' Agenda Increases Premiums of Florida House.

    Property Insurance Companies' proposed legislation passed the Florida House.  The bill awaits the Florida Senate and the Governor.  Among other long-sought features, the Property bill would:

• Increase Citizens Property Insurance Company Premiums by 10% per year.
• Enable a Commission to recommend elimination of all or most of the Premium discounts for Hurricane Mitigation measures recently enacted into Florida Law -- measures to strengthen the construction of Florida Homes that were recently demanded by Property Insurance Companies.
• Increase Property Insurance Premiums including Homeowner's Insurance Premiums apparently, by 10% per year.
• Restrict Policyholders and other Insureds on adjusters they hire for assistance on their Homeowner's and other Property Insurance Claims, and enable another Commission to recommend more restrictions.

The potentially biggest feature of this bill even when it is put alongside these other very big features?  "Gradually reduce the $29 billion Florida Hurricane Catastrophe Fund by $12 billion."  Julie Patel, "Rates Would Rise Under Legislation/Florida House Passes Sweeping Property Insurance Bill" (South Florida Sun-Sentinel.com, Friday, May 1, 2009).

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