Claims And Issues

"OTHER INSURANCE" CASE: GENERAL MAXIMS SPECIFICALLY EXPLAINED IN ILLINOIS DCA.

            In order to decide a case of competing "other insurance" clauses, an Illinois District Court of Appeal needed to specifically define general maxims of "horizontal exhaustion" and "target tender of a defense".

            The principle of horizontal exhaustion requires an insured who has multiple primary and excess policies covering a common risk to exhaust all primary policy limits before invoking excess coverage.

 Vedder v. Continental Western Insurance Co., 2012 IL App (5th) 110,583, 2012 WL 5331563 *5 ¶ 21 (Ill. 5th DCA October 29, 2012).  [Emphasis added.]

            "Targeting" an Excess Carrier to be tendered a defense is simply not done in such a "horizontal exhaustion" jurisdiction:

Our courts have consistently held that an insured cannot target tender a defense to his excess insurer while primary coverage remains unexhausted.

 Vedder v. Continental Western Insurance Co., 2012 IL App (5th) 110,583, 2012 WL 5331563 *5 ¶ 21 (Ill. 5th DCA October 29, 2012).  [Emphasis added.]

            To rephrase Oliver Wendell Holmes, general maxims and phrases are more often an excuse for lack of accurate analysis, than an aid in interpreting an Insurance Policy, and the decision in this case proves it.  In the Vedder v. Continental Western Insurance Company decision, the Judges had to define general words and phrases before they could decide the case before them.

Please Read The Disclaimer. 

MORE HURRICANE SANDY DEDUCTIBLES, THIS TIME WIND?

 

Sandy Hurricane Deductibles are addressed in two articles posted here, first on November 4, 2012, "Hurricane Sandy Damage Claims:  Whether Homeowners Hurricane Deductibles Apply" and second, on November 19, 2012, "Postscript to Not-a-Hurricane Sandy and Your Hurricane Deductible."

    This article addresses the likelihood that Property Insurance Policies including Homeowner's Policies that contain Wind Deductibles will surface in the handling of Hurricane Sandy Claims.  Sandy was not a Hurricane when it made landfall but according to the National Weather Service it was something called a 'post-tropical storm'.  This has been a factor in Governors and some Insurance Commissioners in Connecticut, New Jersey, and New York instructing Insurance Companies that the Insurance Companies should not apply Hurricane Deductibles to reduce Sandy Claims.

    However, there is another deductible potentially available to reduce or bar Sandy Claims, and it is the Wind Deductible.  It is similar to the Hurricane Deductible in that it, too, was first written after Hurricane Katrina and the Claims which devastated the Property Insurance Industry.  It, too, is based on a percentage of insured value rather than setting a fixed amount, say $1,000.00 or so; the percentage is usually 5% of the total insured value of the property so that if your House is worth $100,000.00 then in that example your Claim would have to be for more than $5,000.00 to exceed your Deductible.  See also Joe Ryan, "Insurance Deductibles Snag in Sandy Winds"  (Newsday Online, posted November 15, 2012).

    As was said in the earlier articles published here and everywhere about the Hurricane Deductible, the requirements of Wind Deductibles depend on your and your clients' Policy language.  The best possible course in handling Sandy Claims is to read your Policy to know what these Deductibles actually say. 

Please Read The Disclaimer.

 

Mediation and Appraisal of Florida Property Insurance Claims.

    In a recent decision, a Florida Appellate Court was seemingly confronted with a difficult choice:  Applying the Florida Statutes then in effect, or applying a Property Insurance Policy Provision:  First Protective Insurance Co. v. Schneider Family Partnership, 2012 WL 5499987 (Fla. 2d DCA November 17, 2012)(STATED NOT FINAL).  Actually, there was no choice at all under the facts of that case.

    The Florida Statutes then extant set out the requirements regarding Appraisal, or not, following a Mediation of Property Insurance Claims.  The Statutes then provided that in a situation where the Insurance Company requested Mediation, and the Mediation is unsuccessful, only an Insured, not the Insurance Company, can elect an Appraisal as the next step before litigation.  The current Florida Statute is Fla. Stat. § 627.7015(7)(2012), and it retains that requirement.

    The Florida Appellate Court, however, ruled in this case that the Property Insurance Policy Provision trumped the Florida Statute on the record facts.  "Because the statute does not address a situation where the insured requests mediation and the parties cannot reach an agreement, we conclude that under the statute FPIC is entitled to pursue an appraisal pursuant to the terms of the contract."   First Protective Insurance Co. v. Schneider Family Partnership, 2012 WL 5499987 *1 (Fla. 2d DCA November 17, 2012).  [Emphasis added.]

HAVE A GOOD THANKSGIVING, REMEMBER THE HUNGRY!

Please Read The Disclaimer.    

Postscript to Not-a-Hurricane Sandy and Your Hurricane Deductible.

This is a postscript to the article posted here on November 4, 2012, "Hurricane Sandy Damage Claims:  Whether Homeowners Hurricane Deductibles Apply."

    Retired Professors of Atmospheric Science, particularly from Florida, have insights which even Insurance Professionals sometimes do not have.  The National Oceanic and Atmospheric Administration has been criticized by "local TV weather people" who are quick to call every storm a Hurricane, particularly if it boosts TV ratings.  Yet, NOAA produced "superb storm forecasting" says Professor Emeritus Joseph M. Prospero of Miami, Florida in a Letter to the Editor published in the New York Times Science Section on Tuesday, November 13, 2012.

    Sometimes these insights are seemingly not available even to Insurance Professionals employed in the Insurance Industry, or employed perhaps in those parts of the Insurance Industry which stand to benefit financially from applying higher Hurricane Deductible limits to your Homeowner's Claim if Sandy were a "Hurricane" than if NOAA called it something else.

    Was it Upton Sinclair or Sinclair Lewis who said something like, "It is difficult to get a person to acknowledge a fact when his salary depends on his not knowing it"? 

   Please Read The Disclaimer.  

LAWYER'S ETHICAL RULES TRUMP PROFESSIONAL LIABILITY POLICY "VOLUNTARY PAYMENTS" PROVISION.

    In a recent decision, three Judges on an Illinois District Court of Appeal unanimously agreed that a Professional Liability Carrier has a Duty to Defend a legal malpractice claim.  They part company, however, in their opinions about the application of the Carrier's "Voluntary Payments" provision in this case:  Illinois State Bar Association Mutual Insurance Co. v. Frank M. Greenfield & Assoc's, P.C., 2012 IL App (1st) 110337, 2012 WL 5471875 (Ill. 1st DCA November 9, 2012)(STATED NOT FINAL).

    The 2-Judge majority saw this issue as one of first impression:

    This appeal is essentially a case of first impression and concerns whether an admission of error in a legal malpractice claim by a policyholder without his insurance company's approval gave the company the right to deny coverage and not defend the attorney and his law firm.

 Illinois State Bar Association Mutual Insurance Co. v. Frank M. Greenfield & Assoc's, P.C., 2012 IL App (1st) 110337, 2012 WL 5471875 *1 ¶ 1 (Ill. 1st DCA November 9, 2012).  The majority in this case repeated the question this way, in addition:

    We note that there is very little case law concerning the effect of a “voluntary payments” clause such as that at issue in the case at bar. Indeed, the case at bar is essentially a case of first impression, as there is only one Illinois case that concerns the question of whether an insured admitted liability in violation of a provision of his insurance policy ... and that case is no longer binding precedent ....

 Illinois State Bar Association Mutual Insurance Co. v. Frank M. Greenfield & Assoc's, P.C., 2012 IL App (1st) 110337, 2012 WL 5471875 *8 ¶ 21 (Ill. 1st DCA November 9, 2012). 

    The Professional Liability Carrier is the Plaintiff in a Declaratory Judgment Action.  It accepted its Insureds' defense but issued a Reservation of Rights to deny all coverage based on the following provision in its Policy:

Voluntary Payments.  The INSURED, except at its own cost, will not admit any liability, assume any obligation, incur any expense, make any payment, or settle any CLAIM, without the COMPANY'S prior written consent.

Illinois State Bar Association Mutual Insurance Co. v. Frank M. Greenfield & Assoc's, P.C., 2012 IL App (1st) 110337, 2012 WL 5471875 *2 ¶ 5 (Ill. 1st DCA November 9, 2012).  [Emphasis added.]   The only part of the quoted provision at issue in this case is the emphasized "except at [the INSURED'S] own cost, [the INSURED] will not admit any liability ... without the COMPANY'S prior written consent" language.

    The Carrier argued that this prohibition deprived its Insureds, an Attorney and his Law Firm, of all Coverage when the Insured Attorney sent the underlying legal malpractice claimants (who thereafter became the underlying legal malpractice action Plaintiffs) a letter which the Attorney -- and the Appellate Court majority, clearly -- conceived as required by the Attorney's ethical obligations of disclosure to his clients.  See Illinois State Bar Association Mutual Insurance Co. v. Frank M. Greenfield & Assoc's, P.C., 2012 IL App (1st) 110337, 2012 WL 5471875 *9 ¶ 24 (Ill. 1st DCA November 9, 2012).  It appears that the Professional Liability Carrier, too, had this conception of the thing:  "Both parties acknowledge that, as an attorney, Greenfield had a duty to disclose his mistake ...."  Illinois State Bar Association Mutual Insurance Co. v. Frank M. Greenfield & Assoc's, P.C., 2012 IL App (1st) 110337, 2012 WL 5471875 *7 ¶ 20 (Ill. 1st DCA November 9, 2012). 

    The Trial Court entered Summary Judgment for the Insureds in the Declaratory Judgment Action on the question of the Carrier's Duty to Defend.  The Trial Judge was careful to state that there was no ruling on the separate question of the Carrier's Duty to Indemnify.

    The Trial Court's Summary Judgment that there is a Duty to Defend is based on several grounds in this case, including that the letter in question did not constitute an admission of legal liability in violation of the Policy Provision.  A majority of the Appellate panel ruled on an entirely different ground, however.  The majority refused to enforce the Professional Liability Carrier's quoted "Voluntary Payment" prohibition in this case.  It did so on the express ground that public policy trumped the Insurance Policy in this regard, that the public interest in Attorneys obeying Ethics Rules of disclosure to their clients is greater than any interest the Carrier has in enforcing its 'no admission of liability without the Carrier's consent' Policy Provision in this particular case.  Illinois State Bar Association Mutual Insurance Co. v. Frank M. Greenfield & Assoc's, P.C., 2012 IL App (1st) 110337, 2012 WL 5471875 *9 ¶ 24, *10 ¶ 27 (Ill. 1st DCA November 9, 2012).

    As was noted above, the Justice on the panel who wrote a Special Concurring opinion agreed that here, the Carrier has a Duty to Defend its Insureds in the underlying legal malpractice action.  The Concurring Justice was of the separate views, however, that any decisions on the Policy Provision or on the Carrier's Duty to Indemnify would be "premature" here. 

            Sometimes, Public Policy trumps the Insurance Policy.  One of those times appears to have arrived in the Illinois State Bar Association Mutual Insurance Co. case.  The enforceability of coverage and policy defenses to a Duty to Defend are addressed by Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" §§ 5:24 and 5:25 (Third Edition West, 2012 Supp.).

Dennis Wall is a featured speaker at this year's National Forum on Bad Faith Litigation in Orlando, Florida on November 28 and 29, 2012.  Readers of this blog can receive a discount on registration through I believe November 15, 2012 it is, by mentioning my name as a Speaker at this Forum at the time of registration.  Here is the American Conference Institute's website:  www.americanconference.com/badfaith.

Please Read The Disclaimer.

Computer Models Doing Good After Hurricane Sandy? Not so Much.

    Computer models have been used by Property and Homeowner's Insurance Companies to justify higher prices.  See the Category on this Blog, "Computer Models to Predict Premium Rates".

    Now, it appears that computer models are being used to 'predict' insured losses for claims not yet made following the destruction wrought by Hurricane Sandy.  E.g., Beth Pinsker Gladstone, "Insurance Divides Haves From Have-Nots After Sandy" (Reuters, Saturday, November 3, 2012); "Too Much Computer Modeling Makes Fools of Us All," article posted here on October 31, 2012.

    Far from justifying higher prices as yet, these computer 'predictions' of Hurricane Sandy Damages Claims are bad news for Homeowner's and other Property Insurance Companies in the Northeast:

    Insurers, the group that will feel the storm's effects most acutely, plunged as analysts warned that the storm will eat into their income.

"Rising Estimates of Costs of Storm Weigh on Wall St.," a "Stocks & Bond" copyrighted report of the Associated Press, published by the New York Times, p. B7, col. 6 (New York Times Nat'l ed. Saturday, November 3, 2012).

    Computer models.  What good do they do when losses can actually be determined, not merely 'predicted'?

Please Read The Disclaimer.

 

HURRICANE SANDY DAMAGE CLAIMS: WHETHER HOMEOWNERS HURRICANE DEDUCTIBLES APPLY.

            Hurricane Sandy has left more than damage behind.  Hurricane Sandy has spun off a little confusion about Hurricane Deductibles and the millions of Northeastern Homeowners who will be making Hurricane Damage Claims on their Homeowner's Insurance Policies.  It will make a difference to every one of them, because if Hurricane Deductibles apply instead of standard Homeowner's Policy Deductibles, these Homeowners will be paying a lot more of their own money before they can make a claim.  See also Beth Pinsker Gladstone, "Homeowners Dodge Sandy Deductibles, Face Other Costs" (Reuters, Thursday, November 1, 2012).

            The damage in Hurricane Sandy's wake is pretty well known, and becoming more well known with each passing day.  The confusion over Hurricane Deductibles began around Halloween and it lingers.

            A standard Homeowner's Policy Definition of a "Hurricane" for purposes of applying a "Hurricane Deductible," or not, is this:

Definitions

As used in this endorsement hurricane means a storm system that has been declared to be a hurricane by the National Hurricane Center of the National Weather Service. The duration of the hurricane includes the time period, in this state:

1. beginning at the time a hurricane watch or hurricane warning is issued for any part of this state by the National Hurricane Center of the National Weather Service;

2. continuing for the time period during which the hurricane conditions exist anywhere in this state; and

3. ending 24 hours following the termination of the last hurricane watch or hurricane warning for any part of this state by the National Hurricane Center of    the National Weather Service.

Spansel v. State Farm & Fire Casualty Co., 683 F. Supp. 2d 444, 451 (S.D. Miss. 2010)(Hurricane Katrina case).

            Application of this Policy Definition is a pretty straight-forward question of fact which Courts are used to handling, as indeed  it was a straight-forward question of fact in the Spansel case itself.  (The District Court ultimately held in that case that in accordance with Mississippi Law, "the Hurricane Deductible Endorsement does not create coverage for storm surge."  Spansel v. State Farm & Fire Casualty Co., 683 F. Supp. 2d 444, 452 (S.D. Miss. 2010).)

            Hurricane Sandy is responsible for damage, but not for confusion over the Hurricane Deductible.  The confusion began when Hurricane Sandy made landfall.  At that time and afterward, or so it has been reported, the National Weather Service declared that Sandy was "a post tropical storm" rather than a Hurricane.  Mary Williams Walsh and Shaila Dewan, "Governors Promote Lower Deductibles for Homeowners" (New York Times Online, Wednesday, October 31, 2012).   This left a question of fact, which some have misunderstood as a question to be decided by "state officials, who regulate insurance, to declare how the laws would be administered."  Id. 

            Good politicians and governors that they are, Governors Cuomo of New York, Christie of New Jersey, and Malloy of Connecticut all apparently issued press releases on Halloween "that the lower deductibles [and not the higher Hurricane Deductibles] would apply to homes in their states."  Id.  See Ann Carrns, "A Refresher on Hurricane Deductibles and Flood Coverage" (Bucks Blog on New York Times online, Tuesday, October 30, 2012, updated on Wednesday, October 31, 2012).  These press releases represent good politics, but they do not represent law.

            For how the law will declare your Homeowner's Policy, and your clients' Homeowner's Polices, read the Policies.  And know that ultimately if necessary, Courts exist to decide controversies over questions of fact, as well as issues of law.

Please Read The Disclaimer.