Claims And Issues

Insurance Coverage, if Liability for Washington Navy Yard Mass Murders ....

Postscript to "INSURANCE COVERAGE, IF LIABILITY FOR WASHINGTON NAVY YARD MURDERS?" posted here on Friday, September 27, 2013.

  More information is being reported on the background checker relevant to the insurance issues explored in this previously posted article.

   The background checker was paid by volume.  There was a perceived need for immediate background checks in huge numbers after 911.  There was a perceived almost hysterical desire for massive volumes of security clearances then.  The Office of Personnel Management was immediately confronted with a huge wave of applications for security clearances.

    The Bush Administration responded by entering into contracts with private contractors who would suddenly assume 75% of the OPM security clearance work at least by 2007.  In 2007, the Washington Navy Yard mass murderer was 'background-checked'.  See Trip Gabriel, "Shortcuts Seen By Firm Doing Security Checks / Managers Say Quotas Were Set Monthly" p. A1, col. 1 (New York Times Nat'l ed., Saturday, September 28, 2013).  Parenthetically, given the huge volume of applications, to say again, the contractors were paid by volume and, allegedly, they may have taken shortcuts when they were processing these large numbers of applcations in order to make money.  See, e.g., id.

Please Read The Disclaimer and the main article posted here on Friday, September 27, 2013.

 

INSURANCE COVERAGE, IF LIABILITY FOR ENABLING WASHINGTON NAVY YARD MURDERS?

            Newspaper reports point out that the Washington, D.C. Navy Yard mass murderer had glaring reasons in his background to deny him access to places like the Navy Yard.  "Federal contractors who conducted a background check on Aaron Alexis when he enlisted in the military knew that he falsely reported that he had never been arrested or charged with any firearms offenses but he nevertheless was granted a security clearance, Navy officials disclosed Monday."  Craig Whitlock, "Aaron Alexis Didn't Report Gun Arrest During Background Check, Received Clearance" (Washington Post Online Monday, September 23, 2013).    [Emphasis added.]  The background checkers knew more than that apparently.  They also allegedly knew, for example, that the mass murderer they were checking had been arrested a couple of times, and that on at least one police report the police wrote down that the killer told them that he heard voices before he got violent -- and the police sent a copy of the police report to the Navy to check it out.

          The background checker on the Navy Yard killer is a private contractor for the Office of Personnel Management.  Joe Davidson, "Does Profit Motive Affect Security Clearance Investigations?" (Washington Post Online Monday, September 23, 2013).  Parenthetically, the checker on the mass murderer's background is the same checker on the background of Mr. Ed Snowden who reportedly leaked NSA secrets to certain members of the public press.  Michael S. Schmidt, "Shooter Said Electronic Brain Attacks Drove Him to Violence, F.B.I. Says" p. A17, col. 1 (New York Times Nat'l ed., Thursday, September 26, 2013).  The background checkers on Mr. Snowden reportedly contacted his mom and his fiancée.  Those two are the only persons the checker checked with, allegedly.

          There is a clear possibility of claims against the contractor.  The claims will or may come in a multitude of ways.  There seem to be grounds for perhaps alleging intentional torts, or alleging negligence in that they knew or should have known the backgrounds, or some other bases of liability.

          When these claims are alleged, much will depend of course on how they are alleged, if at all, in the eyes of a Court.  Will Directors and Officers Coverage be implicated as to the directors and officers of the background checker of the mass murderer?  If he had not received clearance, he would not have been in the Navy Yard, his shotgun would not have been there either, and since he and his shotgun would not have been there, it can be argued, his finger could not have pulled the trigger and killed 12 people before he killed himself.

          Would there be CGL ("Commercial General Liability") Coverage or its equivalent under these reported circumstances, either for an "occurrence" resulting in "property damage" or "bodily injury," or for an "offense" resulting in "personal injury"?

          Would there be E&O Coverage or its equivalent, if any, for the Errors and Omissions of the background-checker-corporation?

          The insurance coverage questions will not be answered by the Courts until after the liability claims come, of course.  The application of Exclusions may prevent coverage under insurance policies altogether in cases like these.

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IN RHODE ISLAND, WHEN UM/UIM LIMITATIONS BEGIN ....

          In a unanimous answer to a certified question, the Supreme Court of Rhode Island addressed a case of first impression and ruled that the statute of limitations on an Uninsured Motorist/Underinsured Motorist claim does not begin to run on Rhode Island UM/UIM claims on the date of the accident.  Rather, the statute of limitations on a UM/UIM claim begins to run on the date that the UM/UIM carrier breached its contract of insurance.  American State Ins. Co. v. LaFlam, 69 A.3d 831, 839-41 (R.I. 2013).

          The Supreme Court went beyond answering the certified question to declaring a contrary limitations period in the insurance contract void as against public policy.  American State Ins. Co. v. LaFlam, 69 A.3d 831, 844 (R.I. 2013).

           However, the issue of propriety of a contractually shortened UM/UIM limitations period was left open for development in future cases.  The Supreme Court was careful to note that "our holding in this case is limited:  we need not and do not decide whether an insurance policy may properly contain a shortened time period within which a UM/UIM claim may be brought after the cause of action accrues ...."  American State Ins. Co. v. LaFlam, 69 A.3d 831, 845 (R.I. 2013).

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HOMEOWNER STATES COVERAGE CLAIMS UNDER FORCE-PLACED INSURANCE POLICY.

Federal Court denies Balboa Insurance Company's motion to dismiss for failure to state a claim.

           In a ground-breaking decision, a landowner's/homeowner's claims under a force-placed insurance policy will be allowed to proceed in Paulino v. Balboa Insurance Co., 2013 WL 4845919 (M.D. Fla. September 10, 2013).

          The plaintiff homeowner, Ms. Sagrada Paulino, alleged two claims:  Breach of contract and declaratory judgment.  The claims are "against Defendant Balboa Insurance Company related to a lender-placed policy of insurance.  Count I of the complaint alleges a breach of contract claim for Balboa's failure to pay damages related to loss and damage to the subject property arising from sinkhole activity, a covered loss."  Paulino v. Balboa Insurance Co., 2013 WL 4845919 *1  (M.D. Fla. September 10, 2013).

          Until now, a homeowner has had no recognized legal rights under a force-placed, lender-placed policy of insurance.  FPI is not substitute homeowner's insurance protecting the homeowner.  The interests protected by FPI are the interests of the lender exclusively.  The total premium for an FPI policy, however, is paid by the homeowner.

          Balboa accordingly argued that Ms. Paulino "does not have third-party standing to assert her breach of contract claim because the subject policy was placed with the lender."  Paulino v. Balboa Insurance Co., 2013 WL 4845919 *1 (M.D. Fla. September 10, 2013).  The Federal Court in this case denied Balboa's motion and ordered Balboa to file an answer within 14 days of the date of the Order, Paulino v. Balboa Insurance Co., 2013 WL 4845919 *2 (M.D. Fla. September 10, 2013), or by Tuesday, September 24, 2013.

          The Court also denied Balboa's motion to dismiss Paulino's second alleged claim, her declaratory judgment claim.  She based that claim on what the Court called "an actual controversy," contrary to Balboa's argument in favor of dismissal that there was no controversy and the declaratory claim was "subsumed by the breach of contract claim" according to Balboa.  Paulino v. Balboa Insurance Co., 2013 WL 4845919 *1 (M.D. Fla. September 10, 2013).  The "actual controversy" ripe for declaratory judgment is Paulino's alleged claim that Balboa should have "meaningfully consulted" with her "on the selection of the expert to perform subsidence testing and remediation recommendations."  Paulino v. Balboa Insurance Co., 2013 WL 4845919 *1 (M.D. Fla. September 10, 2013).

          The Court addressed this claim as raising a question for the Court to declare an answer, "is she bound by Balboa's expert to determine the extent of the damages? ...  This issue is not subsumed by the breach of contract claim," the Court held, "because it must be separately determined before the extent of any breach can be determined.  In other words, the extent of Balboa's obligation under the subject policy to meaningfully consult with Paulino in the selection of the expert is a separate issue from the issue of whether Balboa breached the subject policy by failing to pay damages."  Paulino v. Balboa Insurance Co., 2013 WL 4845919 *1 (M.D. Fla. September 10, 2013).

          The Paulino case bears close watching, I think.  I will be monitoring it from here on out.  Beyond September 24, 2013 when Balboa's answer is due to be filed, I have no doubt.

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A Call for Assistance: Insurance Coverage for Mortgage Servicers?

And:  Insurance Coverage for Property Management Corporations?

   Investment banks either hire mortgage servicers, or they contract for their subsidiaries or divisions to be hired out as mortgage servicers for other lenders and mortgagees.  If the investment banks hold the mortgages themselves, they generally hire mortgage servicers.  If the investment banks do not hold the mortgages, they almost always hire themselves out as mortgage servicers to the lenders that do hold the mortgages.

    Do any of my readers know what kind of insurance policies if any would or may provide coverage for the investment banks in either capacity, either as the principal when they hire mortgage servicers, or for their own direct liability when they act as mortgage servicers for others?

    Another role investment banks have is as property managers of properties which are either in foreclosure or are forced into foreclosure.  See the post on Insurance Claims Bad Faith Law Blog on Sunday, September 15, 2013, in which this clear potential bad faith issue is addressed.  What insurance coverage might be available to the investment banks when they hire property management corporations which commit the acts explored in the Insurance Claims Bad Faith Law Blog article, including boarding up properties which have neither been abandoned nor are in foreclosure in order to treat the properties as "abandoned," identifying properties as "abandoned" when in fact the properties are not even in foreclosure, billing the investment banks for hauling away trash after the managers lock up the house, and so on?

    Thanks in advance for any help you can give on answering these questions.  I appreciate it.

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Climate Change: The Insurance Companies Know. Don't You?

   The United Nations is in the midst of one of the many controversies swirling around climate change.  See Justin Gillis, "By Degrees / A Climate Alarm, Too Muted for Some" p. D1, col. 1 (New York Times Nat'l ed., "ScienceTimes," Tuesday, September 10, 2013).

   To property and casualty insurance companies and their reinsurers, there are no controversies.  There are only increasing risks and rising payouts as a result of climate change.  See, in particular, the Category "Climate Risk" on this blog.

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Related articles

Policyholder Attorney's Fees Award in a Florida "Confirmed Sinkhole Case".

POLICYHOLDER ATTORNEY'S FEES AWARD IN A FLORIDA "CONFIRMED SINKHOLE CASE".

          In Lumpuy v. Scottsdale Insurance Co., 2013 WL 4648500 (M.D. Fla. August 29, 2013), the plaintiff-policyholder prevailed at trial on what the Court called "a surplus lines confirmed sinkhole case".  Lumpuy v. Scottsdale Insurance Co., 2013 WL 4648500 *4 (M.D. Fla. August 29, 2013).  The plaintiff requested attorney's fees.

          The defendant objected.  The Court awarded $151,022.50 in attorney's fees, "with prejudgment and post-judgment interest accruing as of April 25, 2013 at the statutory rates."  Lumpuy v. Scottsdale Insurance Co., 2013 WL 4648500 *5 (M.D. Fla. August 29, 2013).  The Court previously awarded the plaintiff $6,059.69 in costs in that case.  Lumpuy v. Scottsdale Insurance Co., 2013 WL 4648500 *1 n.1 (M.D. Fla. August 29, 2013).

          The Court applied what it called "the federal lodestar approach" to determine the amount of the attorney's fees award.  That approach requires a Federal Court to multiply "the number of hours reasonably expended on the litigation times a reasonable hourly rate."   Lumpuy v. Scottsdale Insurance Co., 2013 WL 4648500 *1 (M.D. Fla. August 29, 2013).  [Emphasis added.]  The defendant objected on many grounds and for the most part, the defendant's objections were overruled.

          The defendant objected as to "pre-suit hours" claimed by the policyholder's attorneys, a total of eight hours.  In that case, the Court agreed with the objection that none of those pre-suit hours is compensable in this case.  Lumpuy v. Scottsdale Insurance Co., 2013 WL 4648500 *2 (M.D. Fla. August 29, 2013).

          The defendant objected to what its attorneys called "unit billing," which the Court rejected.  Unit billing is a concept familiar to defense attorneys retained by insurance companies (it is also called "block billing," in which time entries on the attorney's bill are lumped together into one block or unit "such as reviewing documents, emailing, and proofreading"), but Courts generally do not impose the same requirements on policyholder attorneys that insurance companies may impose on defense attorneys submitting bills for their time.  So it was in this case, in which the Court refused to reduce the policyholder's attorneys' fees claim because of so-called "unit billing" time entries on the policyholder's attorneys' fee bills.

          The defendant also objected to the hourly rates charged by the seven (7) policyholder attorneys in this case.  This objection met with greater favor from the Federal Judge than any of the defendant's other objections.  The Court's disposition of the defendant's hourly rate objections is instructive.

          Three of the seven attorneys first started practicing law in 1996 and each is AV rated.  As to each of the three, the Court had no trouble finding that an hourly rate of $425.00 is a reasonable rate for such attorneys.  Lumpuy v. Scottsdale Insurance Co., 2013 WL 4648500 *3 (M.D. Fla. August 29, 2013).

          Two of the remaining attorneys began practice in 2002 and in 2004, respectively.  The Court found that their respective reasonable hourly rates are $350.00 and $325.00 in that case, and rejected an hourly-rate-claim of $425.00 for either of them.  Lumpuy v. Scottsdale Insurance Co., 2013 WL 4648500 *3 (M.D. Fla. August 29, 2013).

          That left two of the policyholder's attorneys.  One began practice in 2008, and the Court found that his reasonable hourly rate is $250.00; the other did not begin practice until 2011, and the Court found that her reasonable hourly rate in that case is also $250.00.  Lumpuy v. Scottsdale Insurance Co., 2013 WL 4648500 *3 (M.D. Fla. August 29, 2013).

          When a policyholder prevails against an insurance company on an insurance coverage issue in Florida, as in most jurisdictions, the insurance company is left with more to pay than the cost of coverage.  The Lumpuy case demonstrates that such jurisdictions include Federal Courts in appropriate cases.

 

Please Read The Disclaimer.  Copyright © 2013 by Dennis J. Wall.  No claim to original U.S. Government works.