Claims And Issues

Expert Witness Testimony on Property Insurance Claims Handling Issues.

  I have been fortunate in having two articles released for publication at the same time.  I previously made one of them available to you, and with this post I am making the other one available to you as well, "Expert Witnesses on the Handling of Property Insurance Claims," published in the April, 2010 issue of The Briefs.  Here is your copy:  Download Expert Witnesses on the Handling of Property Insurance Claims.OCBA Briefs.0410.  (Copyright Dennis J. Wall 2010.  All rights reserved.  No Reproduction or any other use of this material may be made for commercial purposes.)

   I hope that you will find this to be useful and productive.

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Holding: CGL Subcontractor Exemption to Exclusion Could Be Covered "Occurrence".

   In the case of Architex Ass'n v. Scottsdale Ins. Co., Download Architex Ass'n v. Scottsdale Insurance Co. (Miss. Opinion Filed Feb. 11, 2010) also published as 27 So. 3d 1148, 1160-62 ¶¶ 28-33 (Miss. 2010)(subscription required to access Southern Reporter), the Supreme Court of Mississippi confronted the subcontractor exception to a general exclusion for a contractor's defective work, under CGL Form "© 1997".  The Supreme Court of Mississippi held that a subcontractor's defective work could in certain circumstances fall within the policy meaning of a covered "occurrence".

   The Court held in part:

The subject policy unambiguously extends coverage to Architex for unexpected or unintended "property damage" resulting from negligent acts or conduct of a subcontractor, if not excluded by other applicable terms and conditions of the policy not at issue in this appeal....  This Court concludes that under Scottsdale's CGL policy, the term "occurrence" cannot be construed in such a manner as to preclude coverage for unexpected or unintended "property damage" resulting from negligent acts or conduct of a subcontractor, unless otherwise excluded or the insured breaches its duties after loss.

Architex Ass'n v. Scottsdale Ins. Co., 27 So. 3d at 1162 ¶¶ 32-33 (Miss. 2010).

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Insurance Bad Faith Law Changed by Florida Jury Instructions.

   I am pleased to have an article published once more in Insurance Litigation Reporter.  This article is entitled, "The Florida Standard Jury Instructions Committee Alters Florida Insurer Bad Faith Law with Proposed Jury Instructions".  I am offering a copy of it to you here:  Download CoverILRArticleFlaJuryInstructionChangeBadFaithLaw.  (Copyright 2010 Thomson Reuters.  All Rights Reserved.  No reproduction or any other use of this material may be made for commercial purposes.)

   I hope that you will find this to be useful and productive.

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Attorney-Client Privilege: Court Inspection Always, Holding in Insurance Case.

   In an Insurance Case a Florida Court has apparently held that there is always a right to have a Judge inspect documents withheld from Discovery under Attorney-Client Privilege:  "If a party seeks to compel the disclosure of documents that the opposing party claims are protected by attorney-client privilege, the party claiming the privilege is entitled to an in camera review of the documents by the trial court prior to disclosure."   Alliant Ins. Serv's, Inc. v. Riemer Ins. Grp., Download Alliant Insurance Serv's v. Riemer Ins. Grp. (Fla. 4th DCA Case No. 4D09.3594 Opinion Filed Nov. 18, 2009) also published as 22 So. 3d 779, 782 (Fla. 4th DCA 2009)(subscription required to access Southern Second).   [Italics in original.]

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Unfair and Deceptive Consumer Practices Acts: Weapon Wielded Against Insurers.

    A new trend in Insurance Law has been displayed in the case of General Ins. Co. of Am. v. Clark Mali Corp., Download General Insurance Co. v. Clark Mali Corp. (N.D. Ill. Case No. 08cv2787, Opiinion and Order of Magistrate Judge Filed March 30, 2010) [Author's Note:  This pdf takes a VERY long time to download], also published as 2010 WL 1286076 *4 (N.D. Ill. March 30, 2010)(Cole, Magistrate Judge)(Westlaw subscription required to access Westlaw) .  The Magistrate Judge in that Federal Case held that Count IV of an Amended Counterclaim stated a claim under the Illinois Consumer Fraud and Deceptive Practices Act against an Insurance Company.

   The subject Amended Counterclaim was based in pertinent part upon insureds' claim for property damage and lost business income following a fire at the mall where the insureds did business.  They alleged, among other things, that the Insurance Company in that case acted and failed to act in ways that, accoridng to the Magistrate Judge, included "[s]tringing the insureds along with the intimation that things were progressing toward a resolution when, in reality, there is no end in sight, making unreasonable and irrelevant demands, and never providing a definite answer" to what is and what is not covered under the subject insurance policy.

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"Who's in Charge, Me or the SEC" Asks Goldman ...

...No Longer Sure of the Answer.

  Except to say that anyone who pays a Premium for Credit Default Swaps, i.e., Unregulated Credit Insurance, 'are sophisticated buyers who know what they are getting into and therefore you cannot defraud them.'  So, that is who is responsible for the Great Collapse through which we are now living, the victims!

   Investment Banks which did not allow for Deposits acted like they were in charge of the economy.  The People and their Government appeared to be helpless.  Regulation and reform seemed to be at the mercy of lobbyists hired by the Investment Banks.  The SEC's answer is a Complaint.  Download SEC v. Goldman Sachs & Fabrice Tourre (S.D.N.Y. Complaint Filed April 16, 2010, Case No. 10 cv 3229).  Here is the SEC's Press Release describing why they filed a Complaint and what the Claims are that are in it:  Download Press Release.041610.SEC Charges Goldman Sachs With Fraud in Structuring and Marketing of CDO Tied to Subprime Mortgages; 2010-59; April 16, 2010.

   The stock of one of the Fraud Defendants in the SEC's Lawsuit, Goldman, dropped almost as soon as the SEC's Complaint was filed.  The stock of other Investment Banks plummeted, too.  Tom Braithwaite, "Goldman Case Likely to Spur Efforts on Reform" (FT.com, Friday, April 16, 2010); Javier C. Hernandez, "Winning Streak For Wall Street Ends at 6 Days" p. B1, col. 6 (New York Times Nat'l ed., "Business Day" Section, Saturday, April 17, 2010);   Since the Complaint was filed, Goldman's stock reportedly has continued to fall.  Whatever else happens, the effects have already begun to be felt.  See Eric Dash, "Goldman Executives are Expected to Testify Before Senate Panel" p. B1, col. 2 (New York Times Nat'l ed., "Business Day" Section, Thursday, April 22, 2010).

   In addition to the effects of the Lawsuit on share prices in Investment Banks, there have also been dramatic effects on the chances of regulation and reform.  As stocks of Investment Banks have fallen, chances of reforming Derivatives -- including the sale and use of the Unregulated Credit Insurance known as Credit Default Swaps -- have risen dramatically.  E.g., Tom Braithwaite, "Goldman Case Likely to Spur Efforts on Reform" (FT.com, Friday, April 16, 2010); Walter Hamilton & Nathaniel Popper, "SEC Targets Goldman Sachs With Fraud Suit" (latimes.com, Saturday, April 17, 2010); Javier C. Hernandez, "Winning Streak For Wall Street Ends at 6 Days" p. B1, col. 6 (New York Times Nat'l ed., "Business Day" Section, Saturday, April 17, 2010); Jim Puzzanghera & Nathaniel Popper, "Goldman Sachs Case Likely to Increase Calls for Wall Street Reform" (latimes.com, Saturday, April 17, 2010);  Louise Story and Gretchen Morgenson, "S.E.C. Files a Fraud Suit Against Goldman Sachs" p. A1, col. 5 (New York Times Nat'l ed., Saturday, April 17, 2010); and Gretchen Morgenson and Landon Thomas, Jr., "A Glare on Goldman, From U.S. and Beyond" p. B1, col. 5 (New York Times Nat'l ed., "Business Day" Section, Monday, April 19, 2010).

Please Read The Disclaimer. 

 

Abstention in Insurance Declaratory Judgment Action.

   The Federal Court in the case of Evanston Insurance Co. v. Tonmar, L.P., Download Evanston Insurance Co. v. Tonmar, L.P. (N.D. Tex. Case No. 3.09.cv.0894, Opinion Filed November 5, 2009) also published as 669 F. Supp. 2d 725, 732 (N.D. Tex. 2009),  abstained from considering the Insurance Company's Declaratory Judgment Action.  The Court displayed seven (7) factors to consider in evaluating three (3) "key aspects" of the equation, "fairness, federalism, and efficiency".   "These factors are," said the Federal Court in Tonmar:

(1) whether there is a pending state action in which all of the matters in controversy may be fully litigated;

 (2) whether the plaintiff filed suit in anticipation of a lawsuit filed by the defendant;

(3) whether the plaintiff engaged in forum shopping in bringing the suit; 

(4) whether possible inequities in allowing the declaratory plaintiff to gain precedence in time or to change forums exist;

(5) whether the federal court is a convenient forum for the parties and the witnesses;

(6) whether retaining the lawsuit would serve the purposes of judicial economy; [and]

(7) whether the federal court is being called on to construe a state judicial decree involving the same parties and entered by the court before whom the parallel state suit between the same parties is pending.

Evanston Insurance Co. v. Tonmar, L.P., 669 F. Supp. 2d 725, 732-33 (N.D. Tex. 2009).

Upcoming Speaking Engagements:

DENNIS WALL will be on a panel addressing Professionalism, at Florida A&M Law School in Orlando, with Judge Emerson Thompson (retired), Judge Howard Friedman, and Orlando Attorney Jim Edwards, Esquire twice this coming week:  (1) Wednesday, April 21, 2010 beginning at 5:00 P.M. and (2) also on Friday, April 23, 2010 beginning at Noon.  All times are ET.

 

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Attorney's Fees in Insurance Cases: Compensation or Penalty?

  Courts are in conflict over whether their State's attorney's fees statutes are designed to deter undesirable insurance company conduct or are instead simply compensatory in their purpose, as has been held of Oregon Revised Statute § 742.061(1) (brought forward in 2009 Electronic Update), for example, in Alexander Mfg., Inc. Employee Stock Ownership & Trust v. Illinois Union Ins. Co., Download Alexander Mfg., Inc. Employee Stock Ownership & Trust v. Illinois Union Insurance Co. (D. Or. Case No. 06.735 Opinion Filed February 22, 2010) also published as 2010 WL 649739 *7 (D. Or. February 22, 2010)(Papak, Magistrate Judge)(Westlaw subscription required to access Westlaw).

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Fiduciary Disclosure: Only You Can Prevent Fraud Lawsuits, Says S.E.C.

   The Securities and Exchange Commission has filed a Civil Suit alleging Fraud against Goldman Sachs and one of its Officers, one Fabrice Tourre.  Download S.E.C. v. Goldman Sachs and Fabrice Tourre (S.D.N.Y. Case No. 10 Civ. 3229 Complaint Filed 04.16.10).  Here is the SEC's Press Release describing its Complaint:  Download Press Release.041610.SEC Charges Goldman, Sachs With Fraud in Connection With the Structuring and Marketing of a Synthetic CDO.

   The filing of this lawsuit set off a tremendous number of newspaper reports from Coast to Coast, and across the world.  Many reports highlight Goldman's apparently well-founded fear of potential future Criminal charges and "Investor Lawsuits" which may be filed on the same or similar Claims.  There are so many reports that a large sample will be grouped here by publication, in an effort to maintain some sort of order among them:  E.g., Bloomberg:  Joshua Gallu & Christine Harper, "Goldman Sachs Sued by SEC for Fraud Tied to CDOs (Update 4)" (Bloomberg.com, Friday, April 16, 2010); Christine Harper, "Goldman Sachs-First Promise Undercut by SEC Fraud Suit (Update 1)" (Bloomberg.com, Saturday, April 17, 2010); Jody Shenn & Bob Ivry, "Abacus Allowed Goldman to Shuffle Mortgage Risk Like Beads (Update 1)" (Bloomberg.com, Saturday, April 17, 2010); Financial Times:  Tom Braithwaite, "Goldman Case Likely to Spur Efforts on Reform" (FT.com, Friday, April 16, 2010) (pointing out a fact not noted in other reports that Fraud Lawsuits involving alleged Losses on CDO investments have been filed by private parties long before the SEC filed its lawsuit on Friday, April 16, 2010); Aline van Duyn, "Regulator's Move Risks Opening Lawsuit Floodgates" (FT.com, Sunday, April 18, 2010); Los Angeles Times:  Walter Hamilton & Nathaniel Popper, "SEC Targets Goldman Sachs With Fraud Suit" (latimes.com, Saturday, April 17, 2010); Jim Puzzanghera & Nathaniel Popper, "Goldman Sachs Case Likely to Increase Calls for Wall Street Reform" (latimes.com, Saturday, April 17, 2010);  and the New York Times:  Javier C. Hernandez, "Winning Streak For Wall Street Ends at 6 Days" p. B1, col. 6 (New York Times Nat'l ed., "Business Day" Section, Saturday, April 17, 2010); Joe Nocera, "Talking Business/A Wall Street Invention That Let the Crisis Mutate" p. B1, col. 1 (New York Times Nat'l ed., "Business Day" Section, Saturday, April 17, 2010).

   To be clear, the SEC's lawsuit is not based on the inherent characteristics or the very nature of Collateralized Debt Obligations (CDOs).  This Case involved a CDO called Abacus.  Inside the CDO were subprime mortgage securities with Credit Default Swaps (CDSs), or credit insurance policies, taken out on them.  The mortgage securities were selected for their lousy performance by a hedge fund which took out CDSs to bet against the securities it selected.  When the securities failed, the hedge fund people became even wealthier than when they started out.  Goldman allegedly issued the Credit Default Swaps -- for which they were paid hefty Premiums -- and allegedly did not tell investors in Abacus who was selecting the securities in it, or why.  To the contrary, the SEC Complaint contains allegations that Goldman actually told investors in Abacus that the securities inside it were being selected by an impartial third party.  The SEC lawsuit is based on Claims of Fraud.

   The SEC lawsuit may be a loud explosion in the world of financiers.  It is not intended to be a long-term solution, and it is not a long-term solution.  The most effective solution to the problems posed by CDOs is to dismantle them.  If CDOs are not going to be dismantled, then the next best solution may be to disclose all the arrangements made in arriving at them.

   The solution to the problems posed by CDSs is similar.  The first choice would be to dismantle them.  If CDSs are not dismantled, the same sort of crisis through which we are now living is likely to happen again; the next best solution after dismantling Credit Default Swaps is to regulate them as Credit Insurance, or as securities, or both depending on the Credit Default Swaps at issue in any given scheme.

Please Read The Disclaimer.

Postscript of Monday Morning, April 19, 2009:  On the S.E.C. Lawsuit targeting not CDOs as such, but Fraud in the use of a CDO:

"It is one thing to know that there are others betting against you; it is quite another to know that the people betting against you are selecting the bets."

Securities Law Professor Adam Pritchard, University of Michigan Law School, quoted by Gretchen Morgenson and Landon Thomas, Jr., "A Glare on Goldman, From U.S. and Beyond" p. B1, col. 5 (New York Times Nat'l ed., "Business Day" Section, Monday, April 19, 2010).

Again, Please Read The Disclaimer. 

Florida Residential Mortgage Foreclosure Mediation is No "Whim".

This is an update to previous posts here regarding Residential Mortgage Foreclosure Mediations, most recently on April 15, 2010,  March 25, 2010 and  March 26, 2010.

   Results are disheartening from the Administration's attempts to arrange voluntarily modified mortgages, and so reduce the number of defaults and Foreclosures.  See David Streitfeld, ""Failures Up In Modified Mortgages" p. B1, col. 6 (New York Times Nat'l ed., "Business Day" Section, Thursday, April 15, 2010).

   "Principal" reduction is apparently not going to be a tool volunteered by mortgage servicers and investors.  They may not have either the authority or the stimulus to resolve mortgage defaults by anything less than Foreclosure.  In fact, one of their reporters has described principal reduction itself not as an option, but as a "whim":

   The notion of cutting principal, however, has already run into some resistance from the big banks, which do not want borrowers to get the idea that their mortgage can be chopped on a whim.

Streitfeld, April 15, 2010 New York Times, supra.

   If borrowers took the position, which they have not taken, that principal repayment is a "whim," that could be described as foolish, for one thing.  It would certainly be counterproductive to any resolution short of a Foreclosure contest, as well.

   Florida now requires Residential Mortgage Foreclosure Mediations in virtually all Residential Mortgage Foreclosure actions filed in the State.  If Mediation is to have any hope of success in resolving these mortgage disputes, and not merely delaying their resolution by costly Foreclosure contests, more than moonbeam "whims" will be required of the parties who sit at the negotiating table.

Please Read The Disclaimer.

Residential Mortgage Foreclosure Mediations May not Include Principal Reduction Option ...

...After All.  This is an update to previous posts here regarding Residential Mortgage Foreclosure Mediations, most recently on March 25, 2010 and  March 26, 2010.

   Not long ago, perhaps a matter of three weeks at the most, Bank representatives were quoted as speaking with the authority of their Banks, that the Banks are now willing to consider reducing the principal on residential mortgages that are in Foreclosure.

   Not so now, say two testifying representatives of the Banks, one from JP Morgan Chase and one from Wells Fargo.  They told the House Financial Services Committee, under oath, that their Banks will not consider reducing principal after all.  Their "investors" will not let them, for one thing.  It would not be good for the country, for another thing.  See David Streitfeld, "Banks Resist Plans to Cut Mortgages" p. B1, col. 6 (New York Times Nat'l ed., "Business Day" Section, Wednesday, April 14, 2010).

   Please.  If the Banks will not reduce the amount due on their mortgage loans once they have the borrowers' signatures, that is their choice.  But spare us the lectures about morality, something about which the Big Banks clearly know so little.

   In the interim, will Mortgage Insurance Policies be called upon to satisfy the Banks which hold unpaid and perhaps never-to-be-paid Mortgages?

Please Read The Disclaimer.

Health Insurance Company's Duty of Good Faith and Fair Dealing ...

... in Nevada, Federal Court predicts.

   "A health insurer's duty of good faith and fair dealing under an insurance contract concerns administration of claims under a policy, not to selection of providers.  Although the Nevada Supreme Court apparently has not ruled in the health insurance context, the duty of good faith and fair dealing has apparently only been held to apply to bad faith denial of insurance benefits."  Insco v. Aetna Health & Life Insurance Co., Download Insco v. Aetna Health & Life Insurance Co. (D. Nev. Case No. 2.09cv01254 Opinion Filed November 5, 2009), also published as 673 F. Supp. 2d 1180, 1194 (D. Nev. 2009).  The Online Docket of this case reflects that an Order of Dismissal was entered upon a Stipulation for Dismissal With Prejudice on March 15, 2010.

Please Read The Disclaimer.

COBRA Health Insurance, Health Plans Revisited.

   As I have often done before, here again is a link to another source of explanations for common questions you and your clients may have concerning COBRA, the Health Coverage Benefits first made available under the Consolidated Omnibus Budget Reconciliation Act:  Patricia Hunt Sinacole, "Job Doc/COBRA Can Be Costly, But Beneficial" (Boston Globe Online, Sunday, April 11, 2010).

   Here also is a link to the U.S. Department of Labor which contains a section for "Health Plans" on its web site which includes COBRA information:  www.dol.gov.

Please Read The Disclaimer.

Standard Lawyer Malpractice Policy Does Not Cover "Excessive MedMal Fees," ...

   ... Illinois Courts Hold.

   A lawyer was sued in Illinois on "allegations that counsel retained an excessive amount of attorney fees from the settlement proceeds of a medical malpractice action."  Download Continental Casualty Co. v. Donald T. Bertucci, Ltd. (Ill. 1st DCA Opinion Filed March 19, 2010), also published as Continental Casualty Co. v. Donald T. Bertucci, Ltd., 2010 WL 1033448 (Ill. 1st DCA March 19, 2010).  The lawyer was also "named in attorney disciplinary proceedings" based on the same event.  In Continental Casualty, the Illinois Courts applied standard legal professional errors and omissions Coverage provisions and held that there was no Coverage.

  In the State Court action, the lawyer was sued on "claims of breach of contract, unjust enrichment, conversion, breach of fiduciary duty, fraud, and violation of the Illinois statute which limits contingent legal fees in medical malpractice actions".  Id. (page numbers unavailable at time of publication).   Both the Illinois Circuit or Trial Court, and the Illinois Appellate Court, held that there was no duty to defend or indemnify under the lawyer's policy.  In basic and simple terms, the Illinois Courts compared the Policy Definition of covered "Damages" with the damages actually sought against the lawyer in the underlying lawsuit.  The Courts concluded that there were no covered "Damages" at issue there.  The former client's State Court lawsuit "alleges only noncovered, direct and consequential injuries from the excessive legal fees [the lawyer-Policyholder] charged against her assets; it does not allege 'damages' within the meaning of the policy."

   In the Disciplinary Proceeding, the Illinois Trial Court had ruled that the event in question qualified as covered "legal services" covered under the Policy's "supplementary payments provision" for disciplinary proceedings.  The Illinois Appellate Court reversed.  There were no covered "legal services" at issue in the Disciplinary Proceeding, the Court held, any more than there were covered "legal services" at issue in the underlying State Court lawsuit, in the Appellate Court's view.

   Fee disputes by any other name will be viewed by some Courts at least, as not being covered under standard Lawyer Professional Liability Insurance Policies.

Please Read The Disclaimer.

 

 

  

Risk Management Certification Sources.

    Sources of certifications for Risk Managers are reaching out for tuition.  Demand grew for Risk Managers to bear a degree or designation to display that the current generation of Risk Managers knows what they are about, following the advent of the Great Recession, in other words, when the bottom fell out of the world economy.  Parenthetically, many Risk Managers could have told you what was coming before the Great Recession came.

The many sources of certifications for Risk Management students to pursue are outlined by Jeremy Greenfield, "Risk Managers Get Certified/As Profession Grows, Demand Increases for Standards-Setting Examinations" p. B8, col. 3 (Wall Street Journal, Thursday, April 1, 2010).

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Health Insurance Companies Agree to Obey Law.

**Author's Note:  If you have reached this blog through a list that carries advertising, your computer may or may not be put at risk either through the list or through the advertising.  I do not accept or authorize any commercial advertising of any kind on any list or post.  Placing commercial advertisements with or near any of my web log posts is prohibited.  Further, I do not recommend any products or services advertised with or near any of my posts or any list of my posts.**  

   Health Insurance Companies have agreed to obey Regulations which remain to be issued by the Health Secretary, Ms. Kathleen Sebelius.  These Regulations, in particular, would mandate Health Insurance Coverage for "children with pre-existing medical conditions."  Robert Pear, "Insurers to Cover Children's Pre-existing Health Conditions" p. A12, col. 2 (New York Times Nat'l ed., Wednesday, March 31, 2010).

   The Regulations to be issued would reflect the view held jointly by the current Administration and by a majority of the members of both Houses of the U.S. Congress, that the ban on excluding Health Insurance Coverage for children with preexisting conditions should take effect immediately, under the Healthcare Reform passed by Congress and signed into law by President Obama.  Most if not all of the Health Insurance Companies and Plans represented by their trade association, instead took the opposite view, that the new Law did not mandate such a ban immediately but only in the distant future.

   Thus, the statement that the Health Insurance Companies will obey the Regulations which remain to be issued, startled many people and made news in Washington.

Please Read The Disclaimer.

 

Misrepresentation in Insurance Application Regarding Corporate Financial Condition = Rescission.

   A Federal Court has held that misrepresentation of a corporation's financial condition in the corporation's application for Directors and Officers Liability Insurance warranted Rescission of the D&O Policy:  Download Admiral Insurance Co. v. Sonicblue, Inc. (N.D. Cal. Opinion Filed August 14, 2009), also published as Admiral Insurance Co. v. Sonicblue, Inc., 2009 WL 2512197 *7 (N.D. Cal. August 14, 2009)(Westlaw subscription required to access Westlaw).  The Court issuing this ruling attempted, apparently in vain, to limit its use:  "This disposition is not designated for publication in the official reports."  Further, the Online Docket of this case reflects that the Court entered Judgment for the Plaintiff, Admiral Insurance Company, on April 1, 2010.

Please Read The Disclaimer.

Costs of Remediating Chinese Drywall: Who Pays UPDATE.

      **Author's Note:  If you have reached this blog through a list that carries advertising, your computer may or may not be put at risk either through the list or through the advertising.  I do not accept or authorize any commercial advertising of any kind on any list or post.  Placing commercial advertisements with or near any of my web log posts is prohibited.  Further, I do not recommend any products or services advertised with or near any of my posts or any list of my posts.**     

   At least one Member of Congress, from Florida, one of the States hit the hardest by Chinese Drywall Damages Claims, has  "called on insurers to honor claims by affected families."  Javier C. Hernandez, "U.S. Urges Homeowners to Remove Chinese Drywall" p. B3, col. 1 (New YorkTimes Nat'l ed., Saturday, April 3, 2010).  On  Friday, April 2, 2010, the Consumer Product Safety Commission and the Department of Housing and Urban Development issued a joint Press Release "on Repairing Homes With Problem Drywall," in which the two Federal organizations tried very hard to have it both ways.  Download 04.02.10.Press Release. HUD and CPSC Issue Guidance on Repairing Homes With Problem [Chinese] Drywall.

First, they announced that they were issuing guidance "in recognition that many homeowners want to begin remediating their homes and offers a next step to homeowners whose homes have been determined to have problem drywall."  Small wonder that many  homeowners want to begin remediating their homes, although they will be the ones to initially pay for the costs of remediation, "which builders estimate at more than $100,000 a home."  Javier C. Hernandez, New York Times, supra.

In the next breath of the same Press Release, HUD and the CPSC tell affected homeowners that they should remove the tainted drywall:

   Based on scientific study of the problem to date, HUD and CPSC recommend consumers remove all possible problem drywall from their homes, and replace electrical components and wiring, gas service piping, fire suppression sprinkler systems, smoke alarms and carbon monoxide alarms.  Taking these steps should help both the source of the problem drywall and corrosion-damaged components that might cause a safety problem to the home.

HUD and CPSC April 2, 2010 Press Release, at unnumbered fourth paragraph on page 1.  [Emphasis added.]  The "Interim Remediation Guidance" which was also issued jointly by the CPSC and HUD on April 2, 2010, "calls for the replacement of:

1.   all possible problem drywall;

2.   all fire safety alarm devices (including smoke alarms and carbon monoxide alarms);

3.   all electrical components and wiring (including outlets, switches and circuit breakers); and

4.   all gas service piping and fire suppression sprinkler systems."

HUD and CPSC, "Interim Remediation Guidance for Homes With Corrosion From Problem Drywall" April 2, 2010, at 1.  [Emphasis in this "staff document" in original.]  Download Interim Remediation Guidance for Homes With Corrosion From Problem [Chinese] Drywall.CPSC and HUD.04.02.10.

   It is clear that the costs of remediation of the drywall itself are not likely to be borne by liability insurance, since it is the -- generally -- excluded work of the general contractor, or of the subcontractor, which carries the liability insurance.  The costs of repair of items and materials damaged by the drywall may be a different story, however, as they are arguably the damages caused by that work or product -- costs of repair now recommended by the United States Government.

Please Read The Disclaimer.

  

Orlando Basketball Bonds May Bounce; So-Called "Insurance" Demanding Payback.

**Author's Note:  If you have reached this blog through a list that carries advertising, your computer may or may not be put at risk either through the list or through the advertising.  I do not accept or authorize any commercial advertising of any kind on any list or post.  Placing commercial advertisements with or near any of my web log posts is prohibited.  Further, I do not recommend any products or services advertised with or near any of my posts or any list of my posts.**  

   The City of Orlando may default on bonds issued for the purpose of constructing a new basketball arena, it is reported on this Sunday morning by Mark Schlueb and David Damron, "Orlando Risks Bond Default, Experts Warn" p. A1, col. 3 (Orlando Sentinel, Sunday, April 4, 2010).

   The reported reason for the potential default is the decline in tourism since the bonds were issued.  Id.  Apparently people from outside of Orlando are not spending money in the numbers they used to spend money in Orlando, partly because there are fewer people from outside of Orlando who are in Orlando to spend money.

   The City of Orlando has apparently been paying money to maintain a so-called "insurance policy" issued by an unknown, unnamed company.  The "insurance  policy" has an unfortunate feature, as reported in the linked newspaper article:

The city bought an insurance policy that kicks in if the reserves are drained, though the insurance money would eventually have to be repaid with hotel taxes.

The major if not only kind of "insurance policy" that requires Policyholder payback when the Insurance Company pays Claims is a "fronting policy".  That is just like it sounds, a policy under which the Insurance Company "fronts" payment of Claims under a Policy issued in its good name, in exchange for payback by the Policyholder of all the Claim payments made by the Insurance Company.

   The author has sent an EMail to the reporters on the day of drafting this post, asking for the name of the insurance company and a copy of the "insurance policy".  If that currently missing necessary information is obtained, it will certainly be reported here.  And more than those things:  The event of "draining reserves" of the City's treasury sounds very like an "event of default" which is a trigger for payment on Credit Default Swaps and on Collateralized Debt Obligations, which in basic terms are groups of Credit Default Swaps.  What if any CDSs and CDOs has the City obligated itself or otherwise entered into with Taxpayer money here?

   There is more at work here than an unknown, unnamed "insurance policy".  Stand by.  Further developments will be by presently.

Please Read The Disclaimer.

Good Faith - Bad Faith Evidence of "Company-Wide Policies, Practices" ...

   **Author's Note:  If you have reached this blog through a list that carries advertising, your computer may or may not be put at risk either through the list or through the advertising.  I do not accept or authorize any commercial advertising of any kind on any list or post.  Placing commercial advertisements with or near any of my web log posts is prohibited.  Further, I do not recommend any products or services advertised with or near any of my posts or any list of my posts.**  

   ... Was Allowed in a Florida Statutory First-Party Bad Faith Action in Federal Court, Where the Evidence Was Offered for the Purpose of Showing That the Policyholder-Plaintiff "was directly harmed by them (i.e., that the bad faith in handling his claim resulted, at least in part, from these policies, practices, and procedures)."

This was one of the many holdings of the Court in response to 14 motions in limine filed by the parties, in Download Kearney v. Auto-Owners Insurance Co. (M.D. Fla. Opinion Filed November 5, 2009), also published as Kearney v. Auto-Owners Insurance Co., 2009 WL 3712343 *7 (M.D. Fla. November 5, 2009)(Westlaw subscription required to access Westlaw).

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Proof of Loss Provision Did Not Require Additional Documentation, So ....

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... Federal Appellate Court Declined to Rewrite It.

   The Federal Fifth Circuit recently considered an appeal involving Louisiana substantive Insurance law in Download Versai Management Corp. v. Clarendon America Insurance Co. (5th Cir. Case No. 08.30874, Opinion Filed February 19, 2010), also published as Versai Management Corp. v. Clarendon American Insurance Co., 2010 WL 572532 (5th Cir. February 19, 2010).  Specifically, one of the issues in that appeal involved the Excess Property Insurers' "Proof of Loss" provision.  The Excess Property Carriers argued that the provision required the Policyholder to support its Proof of Loss with additional documentation, although the provision did not say that at all.

   The Fifth Circuit rejected this argument.  The Court declined to rewrite the Excess Property Conditions Insurance Policies to require additional documentation where the Underwriters of those Companies had not done so:  "The plain reading of this section reveals no requirement for additional documentation to support a proof of loss."   Versai Management Corp. v. Clarendon American Insurance Co., 2010 WL 572532 *3 (5th Cir. February 19, 2010). 

   The Insurance Companies argued that "everyone does it," in essence, arguing that the Insurance Industry as a whole requires that additional documentation be produced when a Proof of Loss is submitted on a Property claim.  "If this is so, their policy breaks the mold," wrote the Fifth Circuit.  "We will not read in such a requirement where none exists."  Versai Management Corp. v. Clarendon American Insurance Co., 2010 WL 572532 *3 (5th Cir. February 19, 2010).   The Fifth Circuit reversed the District Court's grant of summary judgment to the Insurance Company Defendants and remanded in that case.

   Underwriters.  You gotta love 'em.

There is a useful post about Proofs of Loss and how Florida Courts treat them as one example of the decisions across the nation, on Insurance Claims Bad Faith Law Blog, on April 1, 2010.

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