Claims and Issues, an exploration of questions and a presentation of research on all sorts of interesting subjects including legal research on many topics.
THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT OR OTHER PROFESSIONAL RELATIONSHIP.
The information provided on this site is informational, only. No legal advice is given and no attorney/client or other relationship is established or intended.
We are independent of cross links and do not warrant their accuracy or applicability.
We are located in Florida and comply with all ethical rules of the Florida Bar. Some States may require the word, "Advertisement," or similar words to appear.
No professional relationship will be deemed to exist unless and until an agreement in writing for professional services has been signed by both client and Mr. Wall after appropriate interviews and conflict checks.
Just in time for the American Law Institute's Principles of Liability Insurance Law Project, which is meeting in Philadelphia today and tomorrow, a new judicial decision underscores the importance of addressing the insurability of punitive damages.
The ALI Project is considering a draft proposal that would make it the default position that punitive damages are insurable. It is important to take that position carefully, and it is important to be equally careful in drafting language authorizing policy exclusions from liability coverage for punitive damages.
When the starting point in a coverage inquiry is that punitive damages are insurable, then some will press the view that even if certain damages are "punitive in nature" they are not necessarily going to be excluded as "punitive damages". See Williams v. SIF Consultants of Louisiana, Inc., 2014 WL 718060 *5-*6 (La. Ct. App., 3d Cir., February 26, 2014)(holding that an exclusion of coverage for "punitive damages" and similar types of damages, quoted at length below, did not exclude coverage for damages sought in the case at bar because the exclusion did not specifically exclude "a damage punitive in nature.").
This is not to say that making punitive damages insurable ought not to be the default position of liability insurance. Nor is it to say that if that result happened regardless of policy language, i.e., that punitive damages are insurable and not excluded, that it would be the first time that a result was reached regardless of the language of the insurance policy.
Rather, it is to say that when the chosen policy position is that punitive damages are insurable, care must be taken in saying exactly what that means. And the care that should be taken is not only in drafting the default position that, in this instance, punitive damages are insurable. Care should be taken further, and it should be taken in the drafting of principles which authorize liability insurance companies to exclude coverage for punitive damages under their policies.
Even if in some cases the results seem predetermined.
In the case of Williams v. SIF Consultants of Louisiana, Inc., 2014 WL 718060 *5 (La. Ct. App., 3d Cir., February 26, 2014), the insurance carrier's subject exclusion listed "'fines, penalties, taxes, and punitive, exemplary ormultiplied damages.'" [Emphasis added.] The underlying plaintiffs' claims were all for damages under a Louisiana statute which subjected the policyholder "'to damages payable to the provider of double the fair market value of the medical services provided, but in no event less than'" $50.00 per day or $2,000.00. Williams v. SIF Consultants of Louisiana, Inc., 2014 WL 718060 *5 (La. Ct. App., 3d Cir., February 26, 2014), quoting La. R.S. 40:2203.1(G). [Emphasis added.]
The appellate court in this case held that the exclusion did not apply here. Two of the judges on the three-judge panel joined in an opinion that expressed the panel's ruling in these words:
While there are exclusions listed thereafter, those exclusions do not include a monetary amount that is a statutory damage or a damage punitive in nature.
Williams v. SIF Consultants of Louisiana, Inc., 2014 WL 718060 *6 (La. Ct. App., 3d Cir., February 26, 2014).
Other than quoting the policy exclusion including the language which excludes coverage for "multiplied damages," the opinion never referred to that policy language.
After quoting the statute's provision on damages which only describes one form of recoverable damages under that statute, namely, multiplied damages, the opinion never referred to that statutory language again.
The third judge on the panel in this case did not join in the opinion of the other two judges, but instead concurred in the result.
Before concurring in the result, and certainly before concurring in any opinion, to say again care should be taken in how punitive damages are declared insurable, and how they are declared excludable from coverage.
Monday, March 31, 2014 is the current deadline to sign up for health care online. It will almost certainly be worth your time, if you like saving money and having adequate health insurance. OBAMACARE: WHAT'S IN A NAME? NOTHING. LOOK IT UP.
P.S. BREAKING NEWS! MARCH 31, 2014 IS NOT THE DEADLINE FOR EVERYONE! MAJOR SURPRISE ANNOUNCED BY OBAMA ADMINISTRATION FOR NEWEST SIGN-UP DEADLINE!
Open enrollment was scheduled to end on Monday for all Americans. The White House had previously insisted that the deadline was firm and would not be extended.
Under the move planned by the administration, some people will be given a special enrollment period, beyond the deadline, if they can show they were not able to enroll because of an error by the federal exchange or by the Department of Health and Human Services. Federal officials allowed a special enrollment period, on a case-by-case basis, for some people who were unable to meet the Dec. 24, 2013, enrollment deadline for coverage starting Jan. 1 of this year.
When you sign up for health insurance online before the current deadline of March 31, 2014, allow yourself a lot of time. Plan with patience. The final results are worth the process.
The official Obamacare sign-up website, www.healthcare.gov/marketplace, may be working but it is not easy to use. See also the Department of Health and Human Services informational site at http://www.hhs.gov/healthcare/rights/index.html. User-friendly and the website do not usually appear in the same sentence. Based on experience, they shouldn't.
I am an Obamacare sign-up success story. I found a health insurance policy with a much less expensive premium and comparable coverage. However, it took patience. And time. Days in fact. And the help of my wife.
But we got it done because we planned for it in advance.
And we went beyond the labels onsite. These labels do not describe the policies and plans offered at www.healthcare.gov/marketplace, the Federal health insurance exchange:
Select.
Preferred.
Exclusive.
Enhanced.
Essential.
Essential Plus.
Prime.
Ultimate.
Deluxe.
These plans are further broken down onsite into metal brackets ("March Madness of Health Insurance"?):
To say again at the end what I said at the beginning, when you sign up for health insurance allow yourself a lot of time. Plan with patience in mind. Trust, but verify, as they say.
In a public appearance just last month that was recorded on video and linked on Insurance Claims and Bad Faith Law Blog, Gov. Christie of New Jersey said that homeowners' insurance claims were getting paid much more than in New York. Much, much more. If I recall correctly, he even said the insurance payments in New Jersey were "exponentially" more. But you can check out what he said for yourself in the linked video which recorded his public performance.
It turns out the truth is more like, "Not so much."
New Jersey policyholders pursuing Flood insurance claims after Sandy have averaged $47,264.00 in a total payout of $3.5 Billion.
New York policyholders pursuing Flood insurance claims as a result of Sandy have averaged $64,912.00 in a total payout of $3.7 Billion.
Policyholders who pursued Flood insurance claims after Katrina, in contrast, were paid an average of $97,053.00 in a total payout of $16.3 Billion. These figures come from a Federal Emergency Management Agency report accessible at www.fema.gov, reported by the USA Today newspaper in a story by Michael L. Diamond and Jean Mikle published online on St. Patrick's Day Eve, available at www.usatoday.com.
Why did New Jersey policyholders average less in claims payments than New York policyholders' claims resulting from the same storm? And why did New Jersey policyholders after Sandy get their claims paid at less than half the average rate that Flood insurance claims were paid after Katrina?
Because Sandy hit New York differently than it hit New Jersey and caused greater damage in a greater storm surge.
And because Katrina hit the GulfCoast with massively greater damage than Sandy hit New Jersey, or anywhere else. Katrina damaged expensive commercial property, for example, whereas Sandy did not. "Not so much."
That's actually the truth. Whether it's on video, or not. Whether you say it loudly or softly, it doesn't change. It's still the truth.
THE AMERICAN LAW INSTITUTE, LIABLITY INSURANCE PRINCIPLES, FIDUCIARY SETTLEMENT.
In an exclusive presentation available to Insurance Claims and Issues readers, and to readers of Insurance Claims and Bad Faith Law, this just-published article is available here: "Fiduciary in Settlement and The American Law Institute's Principles of Liability Insurance Law / Refusing the Shackles of 'Reasonable' Summary Judgments," by Dennis J. Wall, published by West Publishing in 36 Insurance Litigation Reporter 93 (March 2014): Download Fiduciary in Settlement 3 14 2014 (Copyright 2014 by West).
Publication of this article, focusing as it does on the critical subject of what are the appropriate bad faith liability standards for insurance companies in their settlement conduct, comes at an agenda-setting moment. There are less than two weeks to go before the American Law Institute Members Consultative Group meets to discuss the Principles of Liability Insurance Law in Philadelphia. Right after these Principles are discussed and as they are decided throughout the day on Friday, March 28, 2014, they will be discussed here.
Watch this space, as they say. Happy St. Patrick's Day!
In City Center West, LP v. American Modern Home Insurance Co., 741 F.3d 1338 (10th Cir. 2014), a mortgagee assigned claims against the mortgagee's excess carrier to the mortgagor after a loss. After the carrier declined to pay the post-loss claim, the mortgagor-assignee sued on the policy for coverage and also for bad faith, among other claims.
The excess carrier defended on the ground of a nonassignment provision in the policy. In its holding under Colorado law in this case, the Tenth Circuit panel held that the blanket excess policy's nonassignment provision was never meant to address post-loss assignment of individual claims under or as a result of the excess carrier's policy.
The assignment involved in this case did not transfer all claims on account of all properties, or even transfer more than the rights resulting from one burglary claim at this particular piece of property. The assignment instead left all claims but the one burglary claim concerning the one property in the hands of the excess carrier's policyholder, the mortgagee.
Accordingly the appellate panel reversed the District Court's order dismissing the complaint for failure to state a claim because it did state a claim upon which relief can be granted. "The assignment was only the assignment of one claim for a specific piece of property." City Center West, LP v. American Modern Home Insurance Co., 741 F.3d 1338, 1340-42 (10th Cir. 2014).
In a decision that tends to reflect the majority view, in general terms there is no viable claim to insurance coverage on the part of a homeowner-borrower against a lender's force-placed insurance policy. See Christie v. Bank of America, N.A., 2014 WL 805882 *2 (M.D. Fla. February 28, 2014).
However, expressing great dissatisfaction with what it described as a "shotgun complaint" -- 60 pages long, with every count or claim incorporating every previous allegation, leading to a complaint which in the end incorporates every allegation and claim into every subsequent claim for relief -- the Court in this lender force-placed insurance case gave the plaintiffs leave to amend their complaint. "The complaint, which disputes against a lender and an insurer claims resulting from a simple mortgage default on a single-family residence, should not require sixty pages -- or even half of sixty pages." Christie v. Bank of America, N.A., 2014 WL 805882 *3 (M.D. Fla. February 28, 2014).
The Court gave the plaintiffs in this case until March 21, 2014 to "amend the complaint." Watch this space.
Many of the same mortgage servicing practices which drew loud complaints when they were previously conducted by banks, are now the subject of new complaints against nonbank mortgage servicers which have taken over some of the business. These allegedly deceptive and unfair practices may include alleged robo-signing meaning signing or affirming testimony without reading it or knowing what it says, as well as "improper fees and lost paperwork." Michael Corkery, "New York Demands Mortgage Firm's Data" p. B3, col. 6 (New York Times Nat'l ed., "Business Day" Section, Thursday, March 6, 2014).
Banks are not offloading all of their mortgage servicing business, however. Banks which are also in the business of mortgage servicing are selling their subprime mortgage servicing to nonbank mortgage servicers also called "specialty" servicers. Id. (pointing out that "traditional banks seek to exit the business of servicing subprime mortgages." [Emphasis added.])
How, you might well ask, could nonbank or specialty mortgage servicers not be bound by the National Mortgage Settlement? The NMS ostensibly resolved the very unfair and deceptive practices in mortgage servicing that are now complained of when nonbank mortgage servicers practice them. So, if the nonbanks bought mortgage servicing business from banks, should the nonbanks not be bound by the National Mortgage Settlement entered into by the five (5) largest bank mortgage servicers in the U.S. at the time?
All five bank mortgage servicers agreed to separate Consent Judgments as a part of the National Mortgage Settlement. All five Consent Judgments contained the same Exhibit A which used the same language to identify the successors and assigns which will be bound by the settlement including the agreement to suspend if not terminate many of the alleged deceptive and unfair mortgage servicing practices:
References to Servicer shall mean [fill in the name of one of the five bank mortgage servicers] and shall include Servicer's successors and assignees in the event of a sale of all or substantially all of the assets of Servicer or of Servicer's division(s) or major business unit(s) that are engaged as a primary business in customer-facing servicing of residential mortgages on owner-occupied properties. The provisions of this Agreement shall not apply to those divisions or major business units of Servicer that are not engaged as a primary business in customer-facing servicing of residential mortgages on owner-occupied one-to-four family properties on its own behalf or on behalf of investors.
Pages A-41 to A-42, in voluminous Exhibit "A," the parties' "Settlement Term Sheet" attached to all five Consent Judgments (all five were entered under date of April 4, 2012), in United States of America, et al. v. Bank of America Corp., et al., Dkt. Nos. 10, 11, 12, 13 and 14 (D.C.D.C. Case No. 1:12-cv-00361).
Banks are not offloading their entire business of mortgage servicing. They are only selling off the business of servicing subprime mortgages. Michael Corkery, New York Times, March 6, 2014, supra.
And so the nonbanks do not consider themselves bound by the National Mortgage Settlement even when the nonbanks buy subprimemortgage servicing rights from the five bank mortgage servicers who agreed to it:
Bank of America;
JPMorgan Chase;
Wells Fargo;
Citigroup; and
Ally Financial.
See the article posted here on January 30, 2012 shortly after the terms of the National Mortgage Settlement were publicly announced, which lists the five bank mortgage servicers and begins to describe many of the settlement's terms and background in the first of a series.
Lenders and their mortgage servicers, and the insurance companies they use to issue insurance policies to protect their interests under residential mortgages at the mortgagors' expense, have developed an interesting relationship. They have all been accused of arrangements in which the insurance companies pay to play, so to speak, by paying money to lenders and their mortgage servicers in exchange for their place on an approved list which the lenders and servicers use to select the insurance company to issue their lender force-placed insurance.
It is often difficult to tell from the terms of any given settlement agreement whether lenders, their mortgage servicers, and their force-placed insurance companies, are completely changing all of their pay-to-play behavior. In general terms, the payments are most often called "commissions" or "reinsurance premiums". But what they are called is not the issue to be discussed here. Rather, the issue under discussion here is for how long these practices will stop.
The so-called National Mortgage Settlement was based on five servicers' agreements, brought forward in Consent Judgments against each of the five, that they would stop asking for money from force-placed insurance companies in exchange for placing the insurance companies on their approved lists. They did not agree to a prohibition of their practices for all time, however. They agreed only to a moratorium for awhile.
They agreed to stop their allegedly bad practices for four (4) years.
Defendants settling lender force-placed insurance claims likewise do not agree to stop their pay-to-play practices forever.
They agree on average to stop doing these allegedly bad things for six (6) years.
All lawyers and Judges know the risks of going to Trial. In general, that is a big reason why so many lawsuits are settled. Specifically, in the case of lender force-placed insurance practices, no lawsuit has been found which has ever gone to Trialagainst the lenders or their mortgage servicers or their lender force-placed insurance companies.
If, and perhaps that is a big "if" as they say, one of these cases went to Verdict and Judgment in which these alleged pay-to-play commissions and other payments were found illegal, then it might be easier to obtain settlement agreements in which the lenders and their servicers and their approved-list-force-placing insurance company partners would agree to stop these practices forever.
Support the Fannie Mae updates to its Guidance for Residential Mortgage Servicers. Now!
Fannie Mae, one of two mortgage-buying government sponsored enterprises keeping the mortgage book of business open in this country (the other GSE being Freddie Mac), attempted to rein in "commission taking" by lenders from insurance companies which issue lender-force-placed insurance. For all intents and purposes, Fannie was acting both for itself and for Freddie in this respect. Allegedly, a sizeable number of the insurance companies which issue lender-force-placed insurance were or are paying commissions to lenders or their mortgage servicers in exchange for being placed on the lenders' lists of insurance companies they approve to force-place insurance on residential homeowners.
Fannie Mae attempted to control commission practices in lender force-placed insurance such that Federal Taxpayers would not pay for "pay-to-play" commissions paid by insurance companies involved in the forced placement of insurance. Fannie made it clear that its authority extended only to mortgage loans which Fannie buys or guarantees.
Fannie's and Freddie's Conservator or overseer, the Federal Housing Finance Agency, rejected this ban. The FHFA instead asked for comments on its own plan concerning "appropriate administration of Fannie Mae and Freddie Mac (the Enterprises) guaranteed loans" which involve "lender place insurance".[1] In other words, the FHFA was weighing in on the same practices that Fannie and Freddie had previously tried to address in the context of loans they guarantee.
Many people responded to the FHFA's call for comments, including the author. After the period for public comments expired, the FHFA issued a press release that it was directing Fannie and Freddie "to prohibit servicers from being reimbursed with expenses associated with captive reinsurance arrangements."[2]
No official record of the FHFA action has been found to date, other than the FHFA's press release.
The press release mentioned only one of the two concerns addressed by FHFA's previous proposal, namely, reinsurance premiums. The press release did not even mention let alone prohibit the commission-taking which Fannie and Freddie were trying to rein in, by which insurance companies allegedly bought their way onto approved lists of insurance companies which would issue force-placed insurance.
One month after the FHFA's press release last year, Fannie Mae issued an "update" to its "Fannie Mae Single Family Servicing Guide" for servicing the mortgages which Fannie will guarantee. If the FHFA leaves this update to Fannie's and Freddie's mortgage servicing guidance intact, then under the Servicing Guidelines Fannie and Freddie will not pay the amounts of reinsurance premiums which were paid by lender-placed insurance companies to captive reinsurers owned by the mortgage sellers and servicers, and in addition they will not pay the amounts of sales commissions collected by the mortgage sellers and servicers in exchange for selecting favored lender-placed insurance companies.
As of the day that this article is written, the FHFA has apparently not taken any action one way or the other on the December, 2013 update to Fannie's Servicing Guide. However, the FHFA hastaken a position which seems to renounce FHFA's and Fannie's and Freddie's authority over banks, mortgage lenders, or servicers, in any respect. On Friday, January 24, 2014, the FHFA advised the author in an EMail as follows:
Please be advised that neither FHFA nor the Enterprises have regulatory or supervisory authority over banks, mortgage lenders, or servicers.
"The Enterprises" referred to by the FHFA are of course Fannie Mae and Freddie Mac, for which the FHFA is the Conservator as was previously mentioned. The quoted position taken by the FHFA puts in doubt not only Fannie's December, 2013 update to Fannie's mortgage servicing guide, but it also draws into question all of the standard contract provisions which Fannie and Freddie have published and which mortgagors, mortgagees, sellers and servicers and others have been required to use before Fannie and Freddie will consider guaranteeing the mortgage loans.
AN OPEN LETTER TO THE HON. MEL WATT.
Since the FHFA wrote its November, 2013 press release and its January, 2014 EMail, Mr. MEL WATT has been confirmed as its new Director.
Mr. Watt, the FHFA should now publicly announce its support of Fannie Mae's updates to its Guidance for Residential Mortgage Servicers.
Fairness and finance both demand that you now take this action.
A related article on this subject was previously published on Insurance Claims and Bad Faith Law Blog on January 26, 2014.