Claims And Issues

From The CPCU Society Annual Meeting: Insurance Knowledge Shared.

   This post comes from the CPCU Society Annual Meeting or Convention in Orlando, Florida.

   There is a tangible consensus at this Convention:  The Insurance Coverage that is most likely to affect the most people as a result of the Gulf Oil Catastrophe is Business Interruption Coverage.  And Catastrophes have regional impact.

   Here is a framework for analysis of the Covered Damages of a Business Interruption Claim which I have pieced together from various speakers at this CPCU Convention:

1.  Business Interruption Coverage exists for the protection of profit, which is also called Net Income.

2.  The goal of Business Interruption Coverage is to put the Policyholder in the same position it was in before the loss.  (Most BI Claims are predictably anticipated to come under Commercial Policies, whether held by large or small Businesses, as opposed to Personal Insurance Policies.)

3.  Business Interruption Coverage depends on a "Period of Restoration".  That is the time, in basic and general terms, during which the Insured-Policyholder gets back on its feet, up and running in business after the Catastrophe that caused the Claim.  In this regard, it is crucial to understand that the Period of Restoration depends on economic conditions.  For example, we are currently living through a Great Collapse economically and we are expected to have to live through it a good while longer.  The actual Period of Restoration on the ground, so to speak, is likely to be a long time coming.  In terms of Business Interruption Coverage, there is in addition no "extended period" of Coverage until the "Period of Restoration" is exhausted.  This is an Insurance Coverage Issue that is usually settled, the CPCUs in attendance seem to agree, which would explain why there are relatively few Court opinions on the Issue.

More to Come from the CPCU Society Annual Meeting.

 The Insurance Questions presented in current Catastrophes have largely been experienced before.  That includes Business Interruption Insurance Issues, which perhaps affect the most people.  These and similar Insurance Questions have in general terms been addressed by many Courts, in many decided Cases.  Dennis Wall is Co-Author of the leading book on Insurance Coverage for Catastrophe Claims, "CATClaims:  Insurance Coverage for Natural and Man-Made Disasters" (West Publishing Company 2008; 2010 Supplement in process).  Mr. Wall will speak on Business Interruption Insurance Coverage Issues including those arising out of the BP Oil Spill Catastrophe, on November 17, 2010, at a Seminar of the Insurance Law Committee sponsored by the Orange County Bar Association in Orlando, Florida.   Mr. Wall will also speak on a panel at the American Conference Institute's Bad Faith Litigation Conference in Orlando, Florida on November 30, 2010 on "Dealing With Catastrophic Disasters:  How to Properly Investigate and Handle Overwhelming Claims".  The American Conference Institute is offering a discount to readers of this Blog:  Download ACI Advises Readers of the Insurance Claims and Issues and Insurance Claims and Bad Faith Law Blog are entitled to a discount.

Please Read The Disclaimer.

NAIC Set to Follow Federal Lead, May Set Higher Reserves.

   The National Association of Insurance Commissioners ("NAIC") has announced that it is set to follow the Federal lead established in Regulations to be written "under the financial-overhaul package approved this year".  The NAIC currently operates by imposing reduced Reserves requirements as a result of many Mortgage-Backed Securities held as investments by many Insurance Companies.  See Andrew Frye, "U.S. Insurers May See Higher Capital Requirements" (Bloomberg.com, September 21, 2010).

   The National Association of Insurance Commissioners is scheduled to hold their Fall National Meeting in Orlando in the week beginning October 17, 2010.  I will be there to report on many of the proceedings.

Please Read The Disclaimer. 

Catastrophes have Consequences.

    Fears of future Catastrophes include "surcharges" which may force "millions of unaffected people to help pay claims on damaged homes," it is reported by USA Today.  See  Thomas Frank, "Hurricanes May Cost Beyond Those Hit" (USA Today Online, Wed., September 22, 2010).

   It is significant to future predictions concerning such surcharges, that in the past almost "$6 billion in surcharges were imposed after the 2005 hurricanes, including $4.2 billion in Florida and $500 million in Mississippi and Texas."  Id.  Since that time, "eight coastal state plans from North Carolina to Texas have doubled the combined value of the property they cover".  The Florida and Texas plans concerning surcharges on "unaffected people" are of particular interest:

• USA Today reports that in Florida, a State plan "insures property worth $433 billion, and for losses exceeding $15 billion it would have to levy surcharges".
• In Texas, USA Today reports, about 1/6 th as much property value would be insured by the State "plan," with $150 million in cash to pay Claims, no Reinsurance, and "no ability" to pay Claims beyond $2.5 billion in surcharges.

Id.

 The Insurance Questions presented in current Catastrophes have largely been experienced before.  That includes Business Interruption Insurance Issues, which perhaps affect the most people.  These and similar Insurance Questions have in general terms been addressed by many Courts, in many decided Cases.  Dennis Wall is Co-Author of the leading book on Insurance Coverage for Catastrophe Claims, "CATClaims:  Insurance Coverage for Natural and Man-Made Disasters" (West Publishing Company 2008; 2010 Supplement in process).  Mr. Wall will speak on Business Interruption Insurance Coverage Issues including those arising out of the BP Oil Spill Catastrophe, on November 17, 2010, at a Seminar of the Insurance Law Committee sponsored by the Orange County Bar Association in Orlando, Florida.   Mr. Wall will also speak on a panel at the American Conference Institute's Bad Faith Litigation Conference in Orlando, Florida on November 30, 2010 on "Dealing With Catastrophic Disasters:  How to Properly Investigate and Handle Overwhelming Claims".  The American Conference Institute is offering a discount to readers of this Blog:  Download ACI Advises Readers of the Insurance Claims and Issues and Insurance Claims and Bad Faith Law Blog are entitled to a discount.

Please Read The Disclaimer.

 

 

 

Attorney's Fees, Calculating Them, and Prejudgment Interest: First-Party Appraisal.

   In the case of Travelers of Florida v. Stormont, Download Travelers of Florida v. Stormont (Fla. 3d DCA Case Nos. 3D09.1100, 3D08.2835, Opinion Filed September 15, 2010) (STATED NOT FINAL; PUBLIC ACCESS) also published as 2010 WL 3564708 *1 (Fla. 3d DCA September 15, 2010)(Westlaw subscription required to access Westlaw), the principal issue stated by the Appellate Court "is whether, and to what extent, an insured is entitled to attorney's fees for legal services rendered in connection with an appraisal under an insurance policy."  Stated differently, the principal questions presented in that appeal concern (1) Whether and When an Insured is entitled to Attorney's Fees in connection with an Appraisal under a First-Party Policy, (2) If so, in what amount, and (3) Prejudgment Interest.

   1.  Whether and When an Insured is entitled to Attorney's Fees in connection with an Appraisal under a First-Party Policy.  The Court in this case expressly held that not all Attorney's Fees can be recovered in such a case.  "In order to be entitled to attorney's fees, it must have been reasonably necessary for the insured to file a court action."  The available remedy, if any, is provided by Fla. Stat. § 627.428.  Travelers of Florida v. Stormont, 2010 WL 3564708 at *2.  "Where suit is filed without any necessity to do so, attorney's fees under section 627.428 will be denied."  Id.

   Where suit is filed prematurely, the Insured is not entitled to recover Section 627.428 Attorney's Fees.  In that case, the Insured filed suit contending that the Insurance Company's selection of a supposedly incompetent Appraiser was a violation of the Insurance Company's Policy obligation to select a competent Appraiser and was "Bad Faith."  The Florida Appellate Court held that filing a lawsuit at this juncture was premature.  "The insured was not entitled to attorney's fees for this phase of the trial court proceedings."  Id. at *3.

   In contrast, the same Insurance Company's refusal to pay an ultimate Appraisal Award and its half of the neutral Umpire's fee to boot, entitled the Insured in the same case to Attorney's Fees under the Florida Statute:  "It was entirely reasonable for the insured to file this motion [to enter judgment in accordance with the award] after the insurer not only failed to pay the award, but also failed to pay its half of the umpire's fee."  Id.

   2.  If so, in what amount.  In Florida as in other jurisdictions, a "multiplier" is judicially sanctioned for awarding Attorney's Fees.  In this case, the Trial Court awarded a 2.5 multiplier, which the Appellate Court held "must be eliminated."  The Third District in this case followed the lead of previous First District case law holding that under circumstances where there is no question that there would be a recovery of damages, the correct multiplier is only 1.0.  Id. at *4.

   3.  Prejudgment Interest.  This case involved a Theft Loss.  the Insured claimed Interest from the date of the Theft, which was January 28, 2006.  The Appellate Court disagreed.  "The prejudgment interest award must be reduced, so as to cover the period from the date of the [Appraisal] award until the date of the insurer's payment of the $95,000 principal amount of the award."  Id. at *4.

   The Appellate Court panel unanimously signed off on the Opinion in this case, which was written by Judge Gerald B. Cope.  He has been a respected Appellate Judge in Florida for over 20 years.  He resigned effective October 31, 2010 to enter private practice.  He and his demonstrated expertise in Insurance Law will be greatly missed.  Best wishes to Judge Cope as he enters another phase of his honorable career.

Please Read The Disclaimer.

Limited Relief for Chinese Drywall Damages Claims, Insurance Coverage Difficult.

   In a consolidated lawsuit pending in New Orleans, 5,600 Homeowners are suing 1,600 Defendants over alleged Chinese Drywall Damages.   The Defendants include "manufacturers, builders, installers and insurers" and the lawsuit is expected to take a long time to reach any resolution.  See Andrew Martin, "Drywall Flaws:  Owners Gain Limited Relief/Chinese Product Forces Many From Homes" p. A1, col. 1 (New York Times Nat'l ed., Saturday, September 18, 2010).  The first Jury Award of Chinese Drywall Damages seems to have come from Florida, and it was addressed in a post here on June 21, 2010.

   Insurance Coverage Issues have not been fully addressed under all types of Insurance Policies perhaps, but the first Insurance Coverage Case to be resolved was not very favorable to the Policyholders' positions.  See the post which analyzed that decision here, on June 16, 2010.  See in addition the April 15, 2010 post on Insurance Claims and Bad Faith Law Blog.

   General principles of Insurance Coverage govern the outcome in the absence of decided cases, of course.  They were first addressed here in a post going back to August 24, 2009.  The Insurance Coverage outlook simply does not look favorable for Coverage under Insurance Policies of various kinds for Chinese Drywall Damages Claims.

Please Read The Disclaimer.

IN-Competent Appraiser Remedy Stated by Florida Appellate Court.

   What is the remedy when an Insured-Policyholder or Insurance Company chooses a supposedly incompetent Appraiser but the Insurance Policy obligates them both to select competent Appraisers?

   According to the Florida Appellate Court in Travelers of Florida v. Stormont, Download Travelers of Florida v. Stormont (Fla. 3d DCA Case Nos. 3D09.1100, 3D08.2835, Opinion Filed September 15, 2010) (STATED NOT FINAL; PUBLIC ACCESS) also published as 2010 WL 3564708 (Fla. 3d DCA September 15, 2010)(Westlaw subscription required to access Westlaw), the remedy comes in two parts.

   First, "promptly" make a written demand for a new and competent Appraiser.  If the other Party refuses, then "plan B" is to file a Complaint seeking that the Appraiser be removed.  Travelers of Florida v. Stormont, 2010 WL 3564708 at *2.

   The Appellate Court panel unanimously signed off on the Opinion in this case, which was written by Judge Gerald B. Cope.  He has been a respected Appellate Judge in Florida for over 20 years.  He has resigned effective October 31, 2010 to enter private practice.  He and his demonstrated expertise in Insurance Law will be greatly missed.  Best wishes to Judge Cope as he enters another phase of his honorable career.

Please Read The Disclaimer.

Binder Renounced, Wrong Decision: Bad Faith Recovery Awarded, Plus Fees.

   "A binder is a contract of insurance that provides coverage pending the issuance of the insurance policy."  Chicago Title Insurance Co. v. AMZ Insurance Serv's, Inc., Download Chicago Title Insurance Co. v. AMZ Insurance Serv's, Inc. (Cal. 4th DCA, Div. 3, Case No. G041188, Opinion Filed September 9, 2010) PUBLIC ACCESS also published as 2010 WL 3506365 *1 (Cal. 4th DCA September 9, 2010)(Westlaw subscription required to access Westlaw).  In that case, the Trial Court and the Appellate Court both held as a matter of law that an "Evidence of Property Insurance" document was an enforceable binder of Homeowner's Insurance as against Pacific Specialty Insurance Company, for a fire loss incurred by the putative Policyholder, Ms. Cheryl Mustain.  Id.  This was bad news for PSIC.

   After the Trial Court determined that the EOI was an enforceable binder as a matter of law, the matter was given to a Jury to determine fact questions concerning "whether AMZ had actual or ostensible authority to issue binders on behalf of PSIC and whether the EOI was lawfully cancelled before Cheryl Mustain's loss."  The Jury determined not only that the EOI document was not lawfully cancelled, and that AMZ had actual or ostensible authority from PSIC to issue the EOI, but further determined that "PSIC acted in bad faith by failing to properly investigate the loss and pay proceeds under the policy."  Id.

   That was not the end of PSIC's bad day, however.  "The court awarded Chicago Title [assignee of Ms. Mustain's rights against PSIC] a stipulated amount of recovery under the EOI and its attorney fees."  Id.

First-Party Bad Faith Claims are addressed in Chapter 9 of Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" (Shepard's/McGraw-Hill Second Edition; West Publishing Co. 2010 Supplement).  Defenses to First-Party Bad Faith Claims are examined in Chapter 11, id., and various issues including Responsibilities of the Insured in Presenting First-Party Claims (Chapter 10) and Discovery (Chapter 12) are also major topics of discussion, id.

Please Read The Disclaimer.

   

Statutory Exclusivity Provision for "Bad Faith".

   The Florida Birth-Related Neurological Injury Compensation Act, or Plan, has been summarized by one of Florida's Appellate Courts as follows, in a recent appeal in a case challenging the Plan:

   The parents of a child with birth-related neurological injuries appeal an administrative order awarding them $100,000 jointly, in parental compensation, pursuant to section 766.31(1)(b)1, Florida Statutes (2007).  That section provides for "an award of compensation ... to the parents or legal guardians ... which award shall not exceed $100,000."

Samples v. Florida Birth-Related Neurological, Download Samples v. Florida Birth-Related Neurological (Fla. 5th DCA Case No. 5D09.3378, Corrected Opinion Filed June 18, 2010) PUBLIC ACCESS also published as 40 So. 3d 18, 20 (Fla. 5th DCA 2010)(Subscription required to access Southern Third).

   The Plan allows a Civil Action to be filed when certain events take place.  The Plan is, by its own terms, not exclusive when the Plaintiff presents "clear and convincing evidence of bad faith or malicious purpose or willful and wanton disregard of human rights, safety, or property," subject to certain exceptions from the exceptions.  Fla. Stat. § 766.303(2) (2009).  [Emphasis added.]

   The Bad Faith exception exists in this Statute in order to allow what the Statute otherwise is intended to abolish:  Common-law Claims.  See Samples v. Florida Birth-Related Neurological, 40 So. 3d at 29 & n.6.

Please Read The Disclaimer.

 

"Known Loss Doctrine" Applied to Liability Insurance ...

   ... by Federal Court in Florida.

   It is sometimes difficult to distinguish the so-called Known Loss "Doctrine" from Policy Limitations on Coverage Grants, such as limitations to Covered Loss or Damage "commencing ... During the policy period shown in the Declarations," as in the case of 3303-05 Marina Road, LLC v. West Bend Mutual Insurance Co., Download 3303-05 Marina Road, LLC v. West Bend Mut. Ins. Co. (Wis. Ct. App. Case No. 2009AP1629, Opinion Filed September 8, 2010) PUBLIC ACCESS also published as 2010 WL 3489391 ¶15 (Wis. Ct. App. September 8, 2010)(Westlaw subscription required to access Westlaw; page numbers not available at time of this publication).  As the Wisconsin Court described the "doctrine" in this First-Party Case, in which it appears to have been exclusively applied (until recently):  "'The known loss doctrine is a common law defense to insurance coverage according to which insurers are not obligated to cover losses that are already occurring when the coverage is written or [that] have already occurred."  Id. ¶21.

   A Federal Court in Florida may have recently extended the "Known Loss Doctrine" to Liability Insurance Coverage; the decision actually appears to have depended on language found in the Liability Insurance Policies at issue there.  In that case, a Homeowner sued the Contractor who constructed her home, "alleging that her residence contained numerous construction defects."  She recovered a Judgment against the Contractor totaling $1,297,998.36, and another Award for Costs in the amount of $167,147.71.  The Federal Judge was faced with five CGL or Commercial General Liability Policies issued to the Contractor, including two "initial" Policies and three "renewal" Policies from two different Liability Insurance Companies.  Arnett v. Mid-Continent Casualty Co., Download Arnett v. Mid-Continent Casualty Co. (M.D. Fla. Case No. 8.08CV2373, Order Filed July 16, 2010) PUBLIC ACCESS also published as 2010 WL 2821981 *2 (M.D. Fla. July 16, 2010)(Westlaw subscription required to access Westlaw; the Online Docket of this case on Pacer reflects that this Federal Declaratory Judgment Action has been temporarily Stayed by Order of Court until an appeal "of the underlying state court judgment" is exhausted.).

   Among other Insurance Coverage Claims, the two Insurance companies asserted in that Federal Declaratory Judgment Action that the underlying Damages Claims of the Homeowner against their Insured, the Contractor, "constituted known injuries".  "The insurers argue that [the Insured-Contractor] became aware of the damages during [the] initial policy, and therefore, [that] the damages constituted 'known losses' which are not covered under any subsequent policies."  Immediately after stating this contention, the Federal Court pointed to specific language in the Liability Insurance Policies which expressly addressed knowledge of "bodily injury" or "property damages" prior to the policy period and provided that "any continuation, change or resumption of such 'bodily injury' or 'property damage' during or after the policy period will be deemed to have been known prior to the policy period.'"  Arnett v. Mid-Continent Casualty Co., 2010 WL 2821981 at *3.

   The Federal Court held in that case that there was Coverage under the Liability Insurance Policies for some, but not all, of the Damages claimed by the Homeowner based upon whether or not "the known loss clause bars coverage," or not.  See id. at *4.

   The Federal Court's decision may bear on the resolution of some Catastrophe Claims which may or arguably were known to the Policyholders and other Insureds before the Policy Coverage began -- perhaps even before the Liability Insurance Policy Coverage began.

    Dennis Wall is Co-Author of the leading book on Insurance Coverage for Catastrophe Claims, "CATClaims:  Insurance Coverage for Natural and Man-Made Disasters" (West Publishing Company 2008; 2010 Supplement in process).  Mr. Wall will be a featured speaker on several panels which will address the BP Oil Spill Catastrophe.  On September 15, 2010, he will be a featured speaker on a panel addressing "BP Oil Spill Damages Claims:  The Coverage Predicates" at the September 15, 2010 Seminar of the Insurance Law Committee sponsored by the Orange County Bar Association in Orlando, Florida.   Mr. Wall will speak on a panel at the American Conference Institute's Bad Faith Litigation Conference in Orlando, Florida on November 30, 2010 on "Dealing With Catastrophic Disasters:  How to Properly Investigate and Handle Overwhelming Claims".  The American Conference Institute is offering a discount to readers of this Blog:  Download ACI Advises Readers of the Insurance Claims and Issues and Insurance Claims and Bad Faith Law Blog are entitled to a discount.

Please Read The Disclaimer.

  

Wisconsin Court Holds: First-Party Loss "During Policy Period" Coverage.

   The Court of Appeals of Wisconsin has held that a limitation in First-Party Policies to "cover loss or damage commencing:  (1) During the policy period shown in the Declarations" is a part of the Property Insurance Policies' Coverage Grant.  3303-05 Marina Road, LLC v. West Bend Mutual Insurance Co., Download 3303-05 Marina Road, LLC v. West Bend Mut. Ins. Co. (Wis. Ct. App. Case No. 2009AP1629, Opinion Filed September 8, 2010) PUBLIC ACCESS also published as 2010 WL 3489391 ¶¶15, 22 (Wis. Ct. App. September 8, 2010)(Westlaw subscription required to access Westlaw; page numbers not assigned at time of this publication).

   "In other words, the parties agree that by the plain language of the Policies, the Policies only cover 'physical loss of or damage to Covered Property' beginning after the Property was added to the Policies by the October 23, 2003 endorsement."  Id. ¶16.

   The nature of the Policyholders' Claims against West Bend included both Coverage and Bad Faith.  they filed suit against West Bend, "alleging that West Bend had breached its obligation to provide coverage for the damages to the Property under the terms of the Policies and did so in bad faith."  Id. ¶8.  After a month-long Bench Trial which included ten days of testimony, the Trial Court dismissed the Complaint.  "The trial court's decision was based on its finding that damage to the Property pre-existed the policy period."  Id. ¶ 9.  For the above reasons, the Court of Appeals of Wisconsin affirmed.

   Although West Bend attempted to raise the "known loss" doctrine on appeal, neither the Trial Court nor the Appellate Court rested their judgments on this ground.   Moreover, as the Appellate Court noted, in the Trial Court, "West Bend did not assert the known loss doctrine as a defense."  Id. ¶8.  "In any event, our conclusion that the plain language of the Policies excludes coverage is dispositive, regardless of whether any comments from the trial court imply that it considered the known loss doctrine."  Id. ¶22.

    Dennis Wall is Co-Author of the leading book on Insurance Coverage for Catastrophe Claims, "CATClaims:  Insurance Coverage for Natural and Man-Made Disasters" (West Publishing Company 2008; 2010 Supplement in process).  Mr. Wall will be a featured speaker on several panels which will address the BP Oil Spill Catastrophe.  On September 15, 2010, he will be a featured speaker on a panel addressing "BP Oil Spill Damages Claims:  The Coverage Predicates" at the September 15, 2010 Seminar of the Insurance Law Committee sponsored by the Orange County Bar Association in Orlando, Florida.   Mr. Wall will speak on a panel at the American Conference Institute's Bad Faith Litigation Conference in Orlando, Florida on November 30, 2010 on "Dealing With Catastrophic Disasters:  How to Properly Investigate and Handle Overwhelming Claims".  The American Conference Institute is offering a discount to readers of this Blog:  Download ACI Advises Readers of the Insurance Claims and Issues and Insurance Claims and Bad Faith Law Blog are entitled to a discount.

Please Read The Disclaimer.

Lawyers Analyze BP Report on Fault Before it is Released.

Extent of Prepublication Scrutiny by Legal Counsel Not Known.

   The involvement of lawyers in the review, writing and editing process of BP's Report on Fault for the Gulf Oil Well Catastrophe was first reported on Thursday evening, September 9, 2010.  See Spencer Swartz, "BP Lawyers Reviewed Report on Accident" (Wall Street Journal Online, Thursday, September 9, 2010). 

   It is an ordinary thing to have lawyers review a written Report intended for release to the public, before the Report is actually released for public consumption.  This is true despite BP's statements seemingly to the contrary.  See Ben Casselman and Spencer Swartz, "BP Report Pins Most of Blame on Others" p. A4, col. 1 (Wall Street Journal, Thursday, September 9, 2010):   "BP said the investigation, led by one its executives, Mark Bly, was conducted without interference from senior management and didn't take legal liability into account."

   The extent of BP's lawyers involvement in reviewing this particular Report is receiving intense scrutiny.  As of the time of this post, reporters' attention seems to be focused on whether the lawyers were also writers and editors.

   An interesting question which has not yet been asked is, What were the specialties of the lawyers in question?  Did their specialties include Insurance Coverage?  If so, what types of Insurance Coverage do the reviewing lawyers deal with?

   Time will tell, perhaps.

 Dennis Wall is Co-Author of the leading book on Insurance Coverage for Catastrophe Claims, "CATClaims:  Insurance Coverage for Natural and Man-Made Disasters" (West Publishing Company 2008; 2010 Supplement in process).  Mr. Wall will be a featured speaker on several panels which will address the BP Oil Spill Catastrophe.  On September 15, 2010, he will be a featured speaker on a panel addressing "BP Oil Spill Damages Claims:  The Coverage Predicates" at the September 15, 2010 Seminar of the Insurance Law Committee sponsored by the Orange County Bar Association in Orlando, Florida.   Mr. Wall will speak on a panel at the American Conference Institute's Bad Faith Litigation Conference in Orlando, Florida on November 30, 2010 on "Dealing With Catastrophic Disasters:  How to Properly Investigate and Handle Overwhelming Claims".  The American Conference Institute is offering a discount to readers of this Blog:  Download ACI Advises Readers of the Insurance Claims and Issues and Insurance Claims and Bad Faith Law Blog are entitled to a discount.

Please Read The Disclaimer.

Fear Strikes Florida West Coast, Moves Visitors to East Coast, Elsewhere.

   The Gulf Oil Well Explosion is a Catastrophe which, predictably and understandably,  has frightened many people.  For example, fear is moving many people to move their travel plans from Florida's West Coast, the Gulf Coast, to Florida's East Coast, and elsewhere.  See Steve Huettel, "Oil Spill Sent Florida Visitors to East Coast, Statistics Show" (St. Petersburg Times Online, September 8, 2010).

   In fairness, many people made their travel plans long before the effects of the Catastrophe became better known.  Even now, the Damages effects including Business Income Loss -- and the effects on Insurance Issues -- remain to be determined.

 The Insurance Questions including Business Interruption Coverage Issues have largely been experienced before, and they have in general terms been addressed by many Courts, in many decided Cases.  Dennis Wall is Co-Author of the leading book on Insurance Coverage for Catastrophe Claims, "CATClaims:  Insurance Coverage for Natural and Man-Made Disasters" (West Publishing Company 2008; 2010 Supplement in process).  Mr. Wall will be a featured speaker on several panels which will address the BP Oil Spill Catastrophe.  On September 15, 2010, he will be a featured speaker on a panel addressing "BP Oil Spill Damages Claims:  The Coverage Predicates" at the September 15, 2010 Seminar of the Insurance Law Committee sponsored by the Orange County Bar Association in Orlando, Florida.   Mr. Wall will speak on a panel at the American Conference Institute's Bad Faith Litigation Conference in Orlando, Florida on November 30, 2010 on "Dealing With Catastrophic Disasters:  How to Properly Investigate and Handle Overwhelming Claims".  The American Conference Institute is offering a discount to readers of this Blog:  Download ACI Advises Readers of the Insurance Claims and Issues and Insurance Claims and Bad Faith Law Blog are entitled to a discount.

Please Read The Disclaimer.

Indiana Public Adjusters Held Not Personally Liable For Various Torts.

   In the case of Meridian Security Insurance Co. v. Hoffman Adjustment Co., Download Meridian Security Insurance Co. v. Hoffman Adjustment Co. (Ind. Ct. App. Case No. 45A03.0911CV538, Opinion Filed August 18, 2010) PUBLIC ACCESS also published as 2010 WL 3250173 (Ind. Ct. App. August 18, 2010)(Westlaw subscription required to access Westlaw), the Indiana Trial and Appellate Courts held that the Plaintiff Homeowner's Insurance Company did not have available to it the independent torts it alleged against the Public Adjusters in that Case.  The Indiana Court of Appeals held:

(1)  A Public Adjusting Agency could not be personally liable as the Insured's agent, for Tortious Interference with a Preexisting Contractual Relationship because, as the Insureds' agent for presenting their Homeowner's Insurance Claim, its acts were their acts and they could not tortiously interfere with their own contractual relationship, and similarly there was no basis for imposing independent Tort Liability on the Public Adjusting Agency for other torts allegedly committed in the presentation of the Homeowner's Claim, such as actual or constructive Fraud, Breach of Contract, or Failure to Act in Good Faith (even if Indiana Insurance Law were to recognize a reciprocal duty of Good Faith from an Insured to the Homeowner's Insurer, which it does not).  Meridian Security Insurance Co. v. Hoffman Adjustment Co., 2010 WL 3250173 at *4-*5 .

(2)  A Public Adjuster's alleged destruction of evidence did not provide the basis for a Spoliation of Evidence Claim against the Public Adjuster in that case, because Indiana Law had not recognized an independent cause of action for Spoliation of Evidence in a First-Party Case, and further, since a defense based on the alleged Spoliation was available, Equity did not mandate the fashioning of a remedy in that case.  Id. at *5-*6.

Please Read The Disclaimer.

 

BP, Transocean "Reports" Deflect Blame to Others for Gulf Catastrophe....

   ... Insurance Claims Will Not Be Deflected, However.

   BP has released a report which is the result of its own internal investigation conducted by its "safety chief".  (Who knew?)  The report casts blame upon BP's contractors for the major fault at the heart of the Gulf Oil Well Explosion Catastrophe.  Transocean and Halliburton are singled out in BP's report for their alleged fault in particular.

   Not one to be outdone in this fiasco, Transocean is reportedly conducting its own internal investigation.  It is not known whether the Transocean investigation is headed by a newly found "safety chief" of its own, but it is clear that Transocean disagrees that it is at fault.

   Halliburton released only a news release rejecting the idea that it was at fault.  Perhaps a report from its own internal investigation, with or without any "safety chief," is on the way.

   One reported newspaper source of this information is by Ian Urbina, "BP Spill Report Hints at Legal Defense" (New York Times Online, Wednesday, September 8, 2010).

Dennis Wall is Co-Author of the leading book on Insurance Coverage for Catastrophe Claims, "CATClaims:  Insurance Coverage for Natural and Man-Made Disasters" (West Publishing Company 2008; 2010 Supplement in process).  Mr. Wall will be a featured speaker on several panels which will address the BP Oil Spill Catastrophe.  On September 15, 2010, he will be a featured speaker on a panel addressing "BP Oil Spill Damages Claims:  The Coverage Predicates" at the September 15, 2010 Seminar of the Insurance Law Committee sponsored by the Orange County Bar Association in Orlando, Florida.   Mr. Wall will speak on a panel at the American Conference Institute's Bad Faith Litigation Conference in Orlando, Florida on November 30, 2010 on "Dealing With Catastrophic Disasters:  How to Properly Investigate and Handle Overwhelming Claims".  The American Conference Institute is offering a discount to readers of this Blog:  Download ACI Advises Readers of the Insurance Claims and Issues and Insurance Claims and Bad Faith Law Blog are entitled to a discount.

Please Read The Disclaimer.

 

Discovery Issues Regarding Communications to or From Reinsurers.

   In Royal Bahamian Ass'n v. QBE Insurance Corp.,  Download Royal Bahamian Ass'n v. QBE Insurance Corp. (S.D. Fla. Case No. 10.21511, USMJ Order Granting Motion for Protective Order Filed August 30, 2010) PUBLIC ACCESS also published as 2010 WL 3448180 (S.D. Fla. August 30, 2010)(Goodman, Magistrate Judge; Westlaw subscription required to access Westlaw), ABE Insurance Corporation's Motion for Protective Order was granted in full.  That case involved alleged Property Damage resulting from Hurricane Wilma in 2005.

   In pertinent part, QBE successfully requested a Protective Order against a Subpoena Duces Tecum which was apparently served upon its adjusting company, requesting "any documents relating to reinsurance" obtained by QBE for the Property Insurance Policy at issue in that Case.  In opposition to the Motion for Protective Order:

Royal Bahamian alleges this information is relevant because it may contain QBE's assessment of its coverage obligations and whether it has previously valued Royal Bahamian's claim differently.

Royal Bahamian Ass'n v. QBE Insurance Corp., 2010 WL 3448180 at *3.  The Federal Magistrate Judge disposed of this contention in a sentence:

However, this Court does not believe that this information is relevant to the factual matter of whether Royal Bahamian is entitled to coverage.

Id.  [Emphasis added.]  This holding represents the decided majority view.  See generally Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" § 8:13 "Communications to or From Reinsurers [Addressing Discovery in Third-Party Cases] and § 12:13 "Communications to or From Reinsurers" [Discovery Issues in First-Party Cases] (Shepard's/McGraw-Hill Second Edition; West Publishing Co. 2010 Supplement).

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"Olympic Steamship" Attorney's Fees Denied in Federal Case.

   The State of Washington follows the Olympic Steamship rule for awarding Attorney's Fees.  According to a Federal Judge in a recent decision, this rule is based on the case of "Olympic S.S. Co. v. Centennial Ins. Co., 811 P.2d 673, 675 (Wash. 1991) [which] ... stands for the proposition that '[w]hen insureds are forced to file suit to obtain the benefit of their insurance contract, they are entitled to attorney's fees.'"  American Capital Homes, Inc. v. Greenwich Insurance Co., Download American Capital Homes, Inc. v. Greenwich Insurance Co. (W.D. Wash. Case No. C09.622, Order Filed August 30, 2010) PUBLIC ACCESS also published as 2010 WL 3430459 *8 (W.D. Wash. August 30, 2010)(Westlaw subscription required to access Westlaw).

   Not so in that Federal Case, however.  "At this point, pursuant to Defendant's quarterly billing cycle, Littler Mendelson's fees for the first quarter of 2009 were one month overdue."    Id.  The Defendant Insurance Company had already expressed its willingness to pay the 1Q 2009 Bill of these Defense Attorneys selected by the Insureds to represent them in the underlying case against the Insureds.  The same Defendant had already paid Littler Mendelson $197,862.00 for 2008 Fees.  Against this record, "Plaintiffs have produced no evidence that a one month delay is so unreasonable as to require filing suit and merit an award of attorney fees."  Id.  "Accordingly, Plaintiffs' claims for Olympic Steamship fees are DISMISSED."  Id.

The rule of law followed in Washington State and which was explained by the Federal Court in this case, is essentially the same rule of law followed by Courts across the nation in which Insureds are forced -- or not forced -- to file suit to collect benefits under their Policies.  See generally Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 13:14 "Attorney's Fees--Prosecution of Action Against the Insurer" (Shepard's/McGraw-Hill Second Edition; West Publishing Co. 2010 Supplement).

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Labor Day, 2010: A Day to Work on Reflections.

    

   Have a safe and productive day this Labor Day, 2010!  We will reflect on the meaning of the day, not least reflecting on the sacrifices made by others in order for us to have the time for enjoying reflection.

    This includes reflecting on the many Bad Faith Claims (and many posts to come about them) which were recently filed against an Insurance Company that provided Coverage for certain types of Employment Lawsuits.  The alleged Bad Faith Claims grew out of the Claims Handling of a Wrongful Termination Lawsuit, addressed in American Capital Homes, Inc. v. Greenwich Insurance Co., Download American Capital Homes, Inc. v. Greenwich Insurance Co. (W.D. Wash. Case No. C09.622, Order Filed August 30, 2010) PUBLIC ACCESS also published as 2010 WL 3430495 (W.D. Wash. August 30, 2010)(Westlaw subscription required to access Westlaw). 

Dennis Wall is Co-Author of the leading book on Insurance Coverage for Catastrophe Claims, "CATClaims:  Insurance Coverage for Natural and Man-Made Disasters" (West Publishing Company 2008; 2010 Supplement in process).  Mr. Wall will be a featured speaker on several panels which will address the BP Oil Spill Catastrophe.  On September 15, 2010, he will be a featured speaker on a panel addressing "BP Oil Spill Damages Claims:  The Coverage Predicates" at the September 15, 2010 Seminar of the Insurance Law Committee sponsored by the Orange County Bar Association in Orlando, Florida.   Mr. Wall will speak on a panel at the American Conference Institute's Bad Faith Litigation Conference in Orlando, Florida on November 30, 2010 on "Dealing With Catastrophic Disasters:  How to Properly Investigate and Handle Overwhelming Claims".  The American Conference Institute is offering a discount to readers of this Blog:  Download ACI Advises Readers of the Insurance Claims and Issues and Insurance Claims and Bad Faith Law Blog are entitled to a discount.

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Participants Announced by ALI in its Project, "Principles on Insurance."

   This updates a post here on May 25, 2010 which, due to the length of time between that post and now, is reproduced here in full for your ease of reference.  The purpose of the current post is to provide readers with a link to a list which will identify the Reporter, Associate Reporter, Advisers, and Members Consultative Group for the "Principles of the Law of Liability Insurance" Current Project of the American Law Institute.

   Here is the text of the previous post following the ALI's announcement of this Current Project at its 2010 Annual Meeting in May in Washington, D.C.:

 American Law Institute to Issue Restatement of Principles on Insurance.   At the Annual Meeting of the American Law Institute in Washington, D.C., earlier this month [May, 2010], it was announced that the ALI is going to address Insurance in one of its projects.  The word is that there will be a future Restatement of Principles issued by the ALI on Insurance.

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Fact-Based Florida Bad Faith Cases: SUBSEQUENT HISTORY.

   This post updates the history of a case reported on the May 5, 2010 post here, "Fact-Based Florida Bad Faith:  UPDATE. "

    The Southern District of Florida's decision was affirmed with an opinion by the Eleventh Circuit Court of Appeals in Aboy v. State Farm Auto. Ins. Co., 2010 WL 3394405 (11th Cir. August 30, 2010)(Westlaw subscription required to access Westlaw), stated "Not Selected for Publication in the Federal Reporter".

   In its own opinion, the Federal Appellate Court echoed the Federal District Court regarding Florida law on the issue of a Liability Insurer initiating settlement negotiations where, in broad terms, liability is probable and damages are great: 

   Here, State Farm lacked any actual knowledge of the extent of Aboy's injuries until its June conversation with Aboy's attorneys.  Unlike the insurer in Gutierrez [Gutierrez v. Yochim, 23 So. 3d 1221, 1225 (Fla. Dist. Ct. App. 2010)] that delayed settlement negotiations pending confirmation of the oral description of injuries, State Farm acted immediately upon receiving verbal information about Aboy's injuries, offering to settle within days.  The record indicates that Aboy contacted State Farm on multiple occasions during the relevant period, but failed to provide State Farm with his medical information or access to it.  Nothing in Florida law indicates that an insurer breaches its duty to settle by delay when the claimant declines to reveal the scope and severity of his injuries.

Id. at *3.

The duty to initiate settlement negotiations in a Liability Insurance Case is recognized in every jurisdiction in the United States in which the question has been addressed to date.  The duty, and when it arises according to the reported case law, are examined in Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" § 3:13 (Shepard's/McGraw-Hill Second Edition; West Publishing Company 2010 Supplement).

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Prior Litigation Exclusion Applied to Bar All D&O Coverage: ...

   ... Primary and Following Form, Too.

   Acosta, Inc. and Acosta Sales, LLC were provided D&O Coverage pursuant to a series of Insurance Policies, both Primary and Excess.  National Union Fire Insurance Company's Policy was treated by the Courts in this case as Primary.  The National Union Fire Policy contained a "prior litigation" Exclusion which excludes all Loss in connection with a Claim made against the Insured, here, both Acosta corporations.  As published by the Florida Appellate Court, that Exclusion reads as follows:

(e) alleging, arising out of, based upon[,] or attributable to as of the Continuity Date [November 1, 2001], any pending or prior:  (1) litigation; or (2) administrative or regulatory proceeding or investigation of which an Insured had notice, or alleging any Wrongful Act which is the same or Related Wrongful Act to that alleged in such pending or prior litigation or adminstrative or regulatory proceeding or investigation[.]

Acosta, Inc. v. National Union Fire Ins. Co., Download Acosta, Inc. v. National Union Fire Insurance Co. (Fla. 1st DCA Case No. 1D09.3215, Substituted Opinion on Denial of Rehearing) PUBLIC ACCESS also published as 39 So. 3d 565 (Fla. 1st DCA July 30, 2010)(Westlaw subscription required to access Southern Third via Westlaw; page numbers not provided at time of this post).  [Bracketed material except for Continuity Date by the Court; Continuity Date added.]

   The Trial Court entered Summary Judgment in favor of National Union Fire under its "prior litigation" Exclusion, based largely upon the following observation:

The policy issued by National Union is a claims made policy.  These policies offer coverage for claims filed during the time when the policy is in effect[;] however[,] the exclusions protect the insurers from being "sandbagged" when the insured was aware of pending claims likely to be filed or as a result of prior litigation.  [citation omitted].

Id. [Bracketed material again by the First District.] 

   This is a case of first impression in Florida.  The First District affirmed the Trial Court's grant of Partial Summary Judgment to National Union and Summary Judgment to Arrowood in this case, based upon National Union's above-quoted prior litigation Exclusion:

The trial court determined that National Union and Arrowood properly denied coverage under a "prior litigation" exclusion due to the relationship between the underlying suit and a suit brought by Marketing Specialists Sales Co. ("Marketing Specialists") against Acosta in 2001 ("the turnover suit").

Id.  The Arrowood D&O Policy was excess and "following form" to the National Union Fire D&O Policy here.  Id. n.2.  The First District affirmed entirely on the basis of the National Union Fire prior litigation Exclusion.  Id.

"Relation of Primary Insurer With Excess Carriers and Reinsurers" is the subject of an entire Chapter in Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" Ch. 6 (Second Edition Shepard's/McGraw-Hill; 2010 Supplement West Publishing Company).

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MORE Consequential Damages From Oil Well Explosion Catastrophe: Insurance Coverage?

   First, to add to a post here on August 31, 2010, "Consequential Damages from Oil Well Explosion Catastrophe:  Insurance Coverage Issues," is this report about the action of a Florida House of Representatives special committee on public sector losses, i.e., damages to government agencies and bodies.  The committee reached a recent decision via telephone conference call.  The group's decision was to approve, telephonically as noted, a final draft of a report devoted in large measure to urge "local governments to vigilantly record spill-related expenses."  Michael Peltier, "House Panel Urges Communities to Tally Losses Related to Oil Spill" p. B9, col. 1 (Orlando Sentinel, Tuesday, August 31, 2010), substantially rewritten online.

   Second, it appears that BP and legions of lawyers have been providing press releases to reporters willing to read them and, often, to publish them as news.  Seventy-five witnesses have reportedly "been grilled by an armada of lawyers and government experts" before a government panel of unreported name which is investigating the responsibility for the Oil Well Explosion Catastrophe.  Press reports for months have tended to point to BP as the leading figure in the drama, with smaller parts played by others.  "But the government has released no conclusions, and many questions about the disaster still exist."  Robbie Brown, "In Oil Inquiry, Panel Sees No Single Smoking Gun" p. A12, col. 5 (New York Times Nat'l ed., Saturday, August 28, 2010) (byline added online for Henry Fountain).

   Right.

   Aside from the extent of Damages which Juries will award against all responsible parties, the remaining questions about the disaster which still exist in reality, are for the most part questions of whether one form or another of Insurance Coverage will apply, or not.

Dennis Wall is Co-Author of the leading book on Insurance Coverage for Catastrophe Claims, "CATClaims:  Insurance Coverage for Natural and Man-Made Disasters" (West Publishing Company 2008; 2010 Supplement in process).  Mr. Wall will be a featured speaker on several panels which will address the BP Oil Spill Catastrophe.  On September 15, 2010, he will be a featured speaker on a panel addressing "BP Oil Spill Damages Claims:  The Coverage Predicates" at the September 15, 2010 Seminar of the Insurance Law Committee sponsored by the Orange County Bar Association in Orlando, Florida.   Mr. Wall will speak on a panel at the American Conference Institute's Bad Faith Litigation Conference in Orlando, Florida on November 30, 2010 on "Dealing With Catastrophic Disasters:  How to Properly Investigate and Handle Overwhelming Claims".  The American Conference Institute is offering a discount to readers of this Blog:  Download ACI Advises Readers of the Insurance Claims and Issues and Insurance Claims and Bad Faith Law Blog are entitled to a discount.

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