Claims And Issues

FLORIDA FORCE-PLACED PREMIUM PRACTICES: FEDERAL JUSTICE SYSTEM STEPS ASIDE.

It is often pointed out that whenever class action rights are taken away to require that all claims be arbitrated, then small claims will not be made because they are, well, too small to litigate.

Add to that this fact as well:  Claims may be too small for federal courts when the claims stand alone even if they are not too small when they are combined in a class action.

Adele Levine took out a mortgage for a home in Pembroke Pines, Florida.  Ms. Levine died.  Her estate disputed the payment of insurance premiums that were placed by force on her mortgage loan by the lender's mortgage servicer.  Ms. Levine's estate allegedly incurred legal fees of $2,565 in these disputes with the servicer and the lender over the lender force-placed insurance premiums.

Adele Levine opted out of a class action settlement with the mortgage servicer.  Her estate then filed its own lawsuit instead, for alleged violations of the Florida Consumer Collection Practices Act (FCCPA), for alleged violations also of the Florida Unfair and Deceptive Trade Practices Act (FDUTPA), and for what a federal judge called "tortious interference."

Unfortunately for the estate, the only "actual damages" it could allege was the $2,565 in attorney's fees caused by disputes over the LFPI.  This was not enough for federal court, the federal judge ruled, even after adding the potential recovery of an additional $1,000 under FCCPA.

Case dismissed.

The moral of the story is that there is more to the story that when class action rights are taken away to require that claims be arbitrated, then small claims will not be made because they are too small to litigate.  For federal courts, "small" claims can be less than $75,000 which for most people and particularly for those who cannot afford to litigate in federal court, is not a "small" amount by any stretch.  But in this federal case, anything less than $75,000 was, well, too small to litigate.

Dennis Wall is at work on a book about concealed evidence and secret settlements, including cases involving lender force-placed insurance, that take our money, foreclose on our homes, and change our lives. 

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.

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FREE PEOPLE FROM MANDATORY ARBITRATION!

Senate Joint Resolution 47 would force people to arbitrate their disputes even if they do not want to.

Joint Resolution 47 would delete the Consumer Financial Protection Bureau's rule prohibiting mandatory arbitration.  Understand that the CFPB rule does not require people to sue.  Instead the CFPB rule allows people to sue and allows people to arbitrate, but only if they choose either one.

Repealing the CFPB rule would require mandatory arbitration and take away people's right to join together with other people in any class action to sue.

Urge your United States Senators today to vote for FREEDOM and against Joint Resolution 47!

This is America, after all.

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.

ARBITRATION IS JURISDICTION? ARBITRATION DID NOT APPLY.

Arbitration was held to be an issue of jurisdiction, but having decided that, this Court also held that the arbitration clause in the insurance policy at bar did not apply in Halliburton Energy Serv's, Inc. v. Ironshore Specialty Ins. Co., NO. 4:17-CV-00752, 2017 WL 4536089 (S.D. Tex. October 10, 2017).

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DESPITE BAD FAITH, REPORTING:  HEALTHCARE COVERAGE IS REALLY STILL THERE.

Is Healthcare Coverage still available under the Affordable Care Act?  Absolutely.

Can you and can your clients still sign up?

Definitely.

Will you and will your clients be able to sign up now if you want?

Totally.

Answers to these and other important questions are reported in an excellent article by Haeyoun Park, "Yes, You Can Still Enroll in Obamacare:  Five Answers to Questions About Getting Covered" (New York Times online, posted on Saturday, October 14, 2017).

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.

CROPS, INSURANCE, AND THE YIELDS OF ARBITRATION.

Obeying current precedent of the U.S. Supreme Court, a State Supreme  Court held in a recent insurance case that if arbitration arises from a contract involving interstate commerce, it is governed by the Federal Arbitration Act.

That case involved the issue of arbitration of disputes arising under federally reinsured crop insurance contracts.  The Court held in that case that the issue plainly involves interstate commerce and, as such, is governed exclusively by the Federal Arbitration Act.  Karo v. Nau Country Ins. Co., ___ Neb. ___, ___ N.W.2d ___, No. S-16-810, 2017 WL 4185426 (Neb. September 22, 2017).

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LIFE INSURANCE AGENTS NOT BOUND BY "ARBITRATION" CLASS ACTION WAIVER.

"Plaintiffs in this action are former insurance agents for defendants New York Life Insurance Company and its related companies (collectively, N.Y. Life), all of which provide a variety of insurance products, including life insurance and annuities.  Plaintiffs brought this putative class action seeking recovery for allegedly illegal wage deductions and violations of overtime and minimum wage laws."  Gold v. New York Life Ins. Co., No. 2430, 2017 WL 3026906 (N.Y. App. Div., 1st Dep't, July 18, 2017).

On July 18, 2017, the Court held that the employees, who happened to be former insurance agents employed by life insurance companies in that case, were just not bound by class action waivers stuck into mandatory arbitration provisions in their employment contracts.

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INDIANA COURT SAYS NO TO SILENCING ARBITRATION OPPONENT, ...

... SAYS YES TO "FAIRNESS."

In Watts Water Tech., Inc. v. State Farm Fire & Cas. Co., 66 N.E.3d 983, 986 (Ind. Ct. App. 2016), State Farm sued in subrogation after paying its policyholder's water damage claim.  State Farm alleged a product liability claim against one Watts Water Technology arising out of a defective product.

The operative facts alleged by State Farm were that State Farm's policyholder purchased a water heater with defendant Watts's brand connector.  Watts's brand connector failed, "causing water damage" to the policyholder's "home and property."

Watts "defended" as it were by filing a motion to compel arbitration.  Unfortunately for Watts, as it turned out, the evidence showed that Watts's arbitration program expressly excluded arbitrating products liability claims arising out of defective products.

Watts's response to this fact was in part to show that trial judges in other States had ruled in its favor, requiring arbitration of certain claims allegedly arising out of its allegedly defective products.  The Indiana appellate court refused to allow Watts to do this.  The Indiana court ruled instead that Watts could not cut off the debate as it were on whether its product in this case would be defective.

The Indiana court said that it would not allow Watts to do this because it would not be fair.

P.S.

Also, although the court did not come out and say it in this case, very few arguments will succeed in any particular appellate court when those arguments are based on trial court decisions from other states.

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.

Shh! WELLS FARGO, INSURANCE CARRIERS, AND SECRET ARBITRATION.

What if an insurance carrier was sued for allegedly opening unauthorized accounts for its existing policyholders?  Say that this hypothetical carrier used its policyholders' private identifiable information (Social Security numbers and the like) that it already had on file because the people involved were its existing policyholders.  Suppose further that this imaginary insurance company issued policies for coverages the policyholders never agreed to pay for, such as if a particular policyholder had a homeowner's policy, for example, but the mythical carrier also issued policies in the name of that policyholder for property, auto liability, and CGL coverages?  Then maybe its employees closed down and cancelled these unauthorized policies after they, the employees (perhaps its captive agents), got on-the-job credit from the carrier for issuing so many policies?

Then suppose at last that the carrier's lawyers filed a demand for arbitration of the policyholders' understandable complaints, on the ground that even though the new policies were never authorized still they somehow 'arise out of' the policyholders' existing policies issued by that carrier?  What kind of publicity do you think that carrier or any carrier making such a demand would get for its trouble?

In a case in Utah, customers of Wells Fargo allege something very similar.  They allege that Wells Fargo opened unauthorized accounts in the customers' names using the customers' privately identifiable information, and that they, the customers, were damaged in various ways as a result.   Download Mitchell v. Wells Fargo, Second Amended Class Action Complaint. Filed (D. Utah No. 2.16-cv-00966-CW).

And for its part, Wells Fargo has filed a very similar motion to compel arbitration.  Wells in essence alleges that because its accounts all contain arbitration provisions (and waivers of class actions and jury trials), the allegedly unauthorized accounts must be arbitrated too.   Download Mitchell v. Wells Fargo, Wells Fargo M Compel ARBITRATION etc. Filed 11.23.16 (D. Utah No. 2.16-cv-00966-CW).  It is not entirely clear whether Wells's attorneys are arguing in this motion that the customers agreed to arbitration when they opened their pre-existing accounts, or that the customers somehow 'agreed' to arbitration when the accounts they did not authorize were opened at Wells.

Either way, just as for our hypothetical insurance carrier here, the publicity as expected has been lousy since this motion was filed.  Perhaps that is why Wells's lawyers filed it sometime on the day before Thanksgiving.

Please Read The Disclaimer.  Copyright 2016 by Dennis J. Wall.  All Rights Reserved.

 

 

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ARBITRATION OF INSURANCE COVERAGE?

Many States encourage the use of arbitration provisions in insurance policies.  Arbitrations rarely rely on a record.  They are mostly done in private (or in secret, depending on which moniker you prefer).

There is no transcript.  There is no record of the evidence.  The testimony and the documents are not recorded.

This can make for issues where courts are called upon to supervise the arbitration proceedings.   Whenever one party or another appeals an arbitration award and requests the review of a court, the court is effectively being asked to supervise the arbitration proceeding.

However, when there is no record there can be no review at least on the ground that the evidence was insufficient to support the award.  This is true even in an appeal from a trial to the court or bench trial, where there is no transcript nor any other record of the proceedings that the reviewing court can review.

Such was the ruling in a recent non-insurance-coverage case decided without a jury by a trial court.  Understandably, the appellate court simply could not review evidence when there was no evidence in the record:

Held: Judgment for the plaintiff was affirmed. This court did not reach the merits of the defendant's argument that the evidence was insufficient to establish negligence on its part. There was no transcript of the bench trial, and there was no evidence in the record that a stipulation by the parties' attorneys to the facts and testimony was submitted to the trial court.

Allstate Ins. Co. v. Wally's Auto Repair, 2016 IL App (1st) 142676-U, ¶ 1 at p. *1 (Ill. 1st DCA September 23, 2016) (UNPUBLISHED OPINION. Subject to citation in limited circumstances in Illinois).

The lesson is clear:  If you want any court to review the record in your proceeding, whether the court you ask to review the record is a trial court or an appellate court, make sure that they have a record to review.

Please Read The Disclaimer.  © by Dennis J. Wall.  All Rights Reserved.

INSURANCE, WAIVERS, AND THE CFPB'S PROPOSED ARBITRATION RULE.

What follows is a Public Comment I am submitting today to the Consumer Financial Protection Bureau concerning the CFPB's proposed Arbitration Rule and Interpretation.  Leave a Comment by sending the CFPB an EMail of your own.  The EMail Address is on my Comment below.  The deadline for Public Comments is August 22, 2016.

 

August 5, 2016

[email protected].

Re:      Docket No. CFPB-2016-0020 or RIN 2 3170-AA51.

Comment of Dennis J. Wall to Consumer Financial Protection Bureau's Proposed 12 C.F.R. § Part 1040; specifically, Comment adding text to proposed Rule and to Interpretation of Proposed 12 C.F.R. § 1040.2.

 To the Consumer Financial Protection Bureau:

     My proposed Comment offers brief additions to the CFPB's proposed Rule and Interpretation of 12 C.F.R. § 1040.2.  It will add a new "b" to proposed § 1040.2, so that the existing subsections/Definitions in § 1040.2 will each be renumbered by one, with "Consumer" now Definition (c), "Provider" becomes Definition (d), and "Pre-dispute arbitration agreement" ends the proposed  Definitions with subsection/Definition (e).

    Here is my proposed text addition to become §1040.2(b):

(b)  Business of insurance has the same definition as in 12 U.S.C.A. § 5481(3).

    Here is my proposed addition to the CFPB's Interpretation of § 1040.2--Definitions:

2(b) Business of Insurance

 Whenever a separate charge is made for the creditor's contractual agreement to cancel or waive all or part of any remaining amounts due on a finance agreement in the event that the subject of the sale or lease contract suffers a total physical damage loss or unrecovered theft, as a result of which the consumer does not maintain collateral protection insurance as required by the contract or fulfill guaranteed asset protection obligations assumed in the sale or lease contract, the inclusion of the charge for the waiver agreement in the sales or lease transaction is not the "business of insurance." 

This language is based partly on the prevailing and generally understood definition of "GAP (or guaranteed asset protection) Waiver" employed, for example, in Revenue Ruling 01-16-1 issued by the Nebraska D.O.R. on March 7, 2016.  As you know, GAP Waivers are most often found in automobile financing agreements.

            My proposed Interpretation is not limited to a GAP Waiver in an automobile financing agreement.

            I am offering this proposal as a result of my research into arbitration agreements in the context of insurance.  See Dennis J. Wall, "More Than Just Coverage Questions:  Preemption and Validity Issues of Arbitration Provisions and Class Action Waivers in Insurance Policies" (Lexis-Nexis New Appleman on Insurance, forthcoming in October, 2016).  Judges, lawyers, and litigants often conflate provisions with insurance that are nothing of the kind.  This occurs most often when the provision at issue carries within itself the word or the sound of "insurance."  Agreements to waive "collateral protection insurance" requirements and "guaranteed asset protection" obligations are not themselves insurance or the business of insurance.  The brief additions to the proposed Rule and Interpretation that are suggested in this proposal will leave no foothold for anticipated contrary contentions.

    To say again, what is at issue extends beyond simply GAP Waivers in automobile financing agreements, to reach any creditor's contractual waiver of creditor's rights upon a consumer-debtor's failure to maintain collateral protection insurance or to perform any guaranteed asset protection obligations under any loan agreement for the sale or lease of any financial product or service by a consumer, in any instance when the subject of the contract has suffered a total physical damage loss or unrecovered theft.  In addition to addressing the context of this broader issue, this proposal reaches beyond Waiver agreements made at the time of the originating/initial sale or lease agreement.  It addresses any contractual Waiver agreement, including one for which the creditor imposes a charge at any time during the sale or lease relation.

    This Interpretation applies whenever such a charge is included in the cost of "credit," see 12 U.S.C.A. § 5481(7), in connection with a sale or lease to a consumer-debtor, i.e., whenever such a charge is included in the cost of any "financial product or service" defined by 12 U.S.C.A. § 5481(15)(A).

     In sum, a creditor's waiver of a consumer's default in obtaining collateral protection insurance or of a consumer's failure to perform GAP obligations are not parts of "the writing of insurance or the reinsuring of any risks by an insurer" and so are not any part of the "business of insurance" as defined in 12 U.S.C.A. § 5481(3) and thereby excluded from the CFPB's jurisdiction.  See 12 U.S.C.A. § 5481(15)(C).  A creditor's waiver of a consumer's default in obtaining collateral protection insurance or of a consumer's failure to perform GAP obligations are instead well within the CFPB's jurisdiction.   This proposal leaves no opportunity for a reasonable contrary contention by offering brief additions to the CFPB's proposed Rule and Interpretation.

     Thank you for your consideration of these matters.

 

Please Read The Disclaimer.  Copyright by Dennis J. Wall.  All Rights Reserved.

 

COVERAGE DISPUTE NOT ARBITRABLE AS A DISPUTE OVER VALUE.

In an opinion recently released by Westlaw, U.S. Magistrate Judge Laurel Beeler ruled that a dispute over whether a claim is covered is not a dispute over value of the claim subject to an insurance policy's arbitration agreement.  This is one of many cases in which the parties have agreed to have Judge Beeler as their presiding Judge in cases pending in the Northern District of California.  This is by no means a reflection on the District Judges there, whose reputation as a group is also high.  It is instead a testimony to her very high reputation in the Northern District of California.

Matson Terminals, Inc. is an insured employer under an "Excess Workmen's Compensation and Employers' Liability Policy" issued by Insurance Company of North America.  The policy's Endorsement Number 6 relates to permanent total disability and death claims of Matson employees.  The dispute at bar involved a dozen disabilities claims which Matson submitted to INA for coverage, in effect, for reimbursement under the insurance policy of sums paid by Matson to the injured claimants.

Each claimant was a Matson employee who incurred compensable covered injuries during the policy period.  Matson paid out certain "statutory compensation and medical benefits."  INA paid all these claims submitted by Matson.  Matson Terminals, Inc. v. Insurance Company of N. Am., No. C 13-05571 LB, 2014 WL 1219007, at *2 (N.D. Cal. March 21, 2014).

In addition, a Special Trust Fund established under the Federal Longshore and Harbor Workers' Compensation Act paid out "compensation benefits to each of the Claimants, discharging Matson's legal liability for providing such benefits."  Matson and its employees were subject to the LHWCA at the time.  Matson was obligated to pay "annual assessment payments" for "more than half of the Special Fund's payments to the Claimants."  Matson Terminals, Inc. v. Insurance Company of N. Am., No. C 13-05571 LB, 2014 WL 1219007, at *2 (N.D. Cal. March 21, 2014).

INA denied coverage for the "Special Fund assessments."  Matson filed suit under the insurance policy seeking to compel INA to arbitrate the matter.  The policy contained an arbitration agreement that in the event Matson and INA disagreed over the value of a claim, they would arbitrate the value.  Matson contended that INA treated its claims as having a value of Zero.  INA contended that instead it had denied all coverage under the policy, and that the policy's arbitration agreement does not cover coverage disputes (pun intended).

The Court in this case agreed with INA. 

As Judge Beeler put it:  "Indeed, INA denied Matson's claims because it believes that Matson's payments to the Special Fund are administrative assessments and are not 'losses' that are covered by the Policy."  The Court agreed with INA's position "that a dispute over whether a claim is covered under the Policy is not within the narrow scope of the arbitration agreement, which requires arbitration only when the parties 'cannot agree upon the Annuity Value or Value of the Claim.'”  Matson Terminals, Inc. v. Insurance Company of N. Am., No. C 13-05571 LB, 2014 WL 1219007, at *5 (N.D. Cal. March 21, 2014).

Had the arbitration agreement in the insurance policy at issue in this case been written more broadly, there might well have been a different result.  However, the Court in this case began and ended its analysis by applying the touchstone of interpreting arbitration provisions, which is that the particular wording of the particular arbitration agreement at bar governs its interpretation.  The wording determined the outcome.

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FORCED ARBITRATION CLAUSES IN INSURANCE AGREEMENTS: “They’re HERE!”

               “PMG and Zurich have an insurance agreement pursuant to which Zurich is required to maintain a collateral trust to pay any amount due under any agreement PMG may have with Zurich or any of Zurich’s affiliates.”  Professional Mgt. Serv’s Grp., Inc. v. Zurich Am. Ins. Co., No. 8:14-cv-2180-T-36EAJ, 2015 WL 1310989, *1 (M.D. Fla. March 24, 2015).  Their insurance agreement contained a forced arbitration clause, which provided in pertinent part as follows:

Any dispute arising out of the interpretation, performance or alleged breach of this Agreement, shall be settled by binding arbitration administered by the American Arbitration Association (AAA) under its Arbitration Rules.

Professional Mgt. Serv’s Grp., Inc. v. Zurich Am. Ins. Co., No. 8:14-cv-2180-T-36EAJ, 2015 WL 1310989, *1 (M.D. Fla. March 24, 2015). 

               There came a time when PMG demanded that Zurich pay money out of the collateral trust which Zurich agreed to maintain under the insurance agreement, and Zurich refused.  Disputing Zurich’s denial, PMG sued Zurich, and Zurich filed a motion to stay PMG’s lawsuit and compel PMG to arbitrate its claims.

               PMG did not dispute that its claims “fall within the scope of the Program Agreement’s arbitration clause ….”  (That apparently removes any precedential value of this decision on the issue of applying forced arbitration clauses in insurance agreements, but there is more to this decision than that one issue.)  Neither did PMG dispute that any “legal constraints external to the agreement would otherwise foreclose arbitration of those claims.”  Professional Mgt. Serv’s Grp., Inc. v. Zurich Am. Ins. Co., No. 8:14-cv-2180-T-36EAJ, 2015 WL 1310989, *1 (M.D. Fla. March 24, 2015).

               On this record, the Court granted the insurance company’s requests to stay the lawsuit and to compel PMG to arbitrate its claims pursuant to the forced arbitration clause in Zurich’s insurance agreement.  In part, the Court based its ruling on what the Court said was “clear and unmistakable evidence” that the parties intended to arbitrate and that the parties intended for the arbitrator alone to determine the validity of the forced arbitration clause.  Professional Mgt. Serv’s Grp., Inc. v. Zurich Am. Ins. Co., No. 8:14-cv-2180-T-36EAJ, 2015 WL 1310989, *3 (M.D. Fla. March 24, 2015).  [Emphasis added to “clear and unmistakable evidence”.]

               Forced arbitration clauses may be viewed with favor by five of the current Justices on the U.S. Supreme Court.  But that is not the same thing as a holding that parties can deprive Federal Courts of jurisdiction just because one party or both parties insert a clause in their contract saying so, which was the effect of the holding in this case.

Please Read The Disclaimer.  ©2015 by Dennis J. Wall.  All rights reserved.  No claim to Original U.S. Government Works.      

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MANDATORY ARBITRATION PROVISIONS IN INSURANCE CONTRACTS? CLASS ACTION WAIVERS?

    Mandatory arbitration provisions in contracts generally are a huge issue. USAA reportedly “uses mandatory arbitration clauses in many of its financial services contracts with service members.” Jessica Silver-Greenberg and Michael Corkery, “Failed by Law and Courts, Troops Come Home to Repossessions” p. A1, col. 1 (New York Times Nat’l ed., St. Patrick’s Day, 2015). If USAA and perhaps other insurance companies are using mandatory arbitration clauses in financial services contracts, their inclusion in the type of financial services contracts known as insurance contracts seems likely.

   If mandatory arbitration provisions in insurance contracts become an accepted part of transacting the business of insurance, it must be remembered that class action waivers are ordinarily a part of mandatory arbitration provisions in contracts in general.

Please Read The Disclaimer. ©2015 by Dennis J. Wall. All rights reserved.

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FEDERAL COURT ABDICATES SUBJECT-MATTER JURISDICTION TO ARBITRATOR.

    In a decision with implications for insurance disputes, a Federal Court in New York City abdicated its decision of whether it has subject-matter jurisdiction in a case, to an arbitrator.  See CRT Capital Grp. v. SLS Capital, S.A., 2014 WL 6879099 (S.D.N.Y. December 5, 2014).

    The case involved a contract between two groups of investors.  Their contract contained a fairly standard arbitration clause in use in such contracts as well as in other contracts such as cable television subscriptions, consumer purchases, and commodities trading.  The arbitration clause provided that only an arbitrator is authorized to determine whether a dispute is subject to arbitration in the first instance.

    The determination whether a case or controversy is within a Court's subject-matter jurisdiction has until now been reserved to the Court to determine.  In this case, however, a Federal Court abdicated its subject-matter jurisdiction to an arbitrator because the parties' agreement provides that only an arbitrator can determine whether a dispute falls within the terms of a contract to arbitrate disputes. 

    I am not aware of reported cases in which Courts have faced this contention in the context of insurance.  There may be some cases but I am not aware of them.  If you know of reported insurance cases in which any party raised arbitration as an obstacle to prevent Court proceedings over the insurance dispute, I would appreciate your contacting me about them and thank you in advance.

    Regardless of whether you or I welcome or deplore this  development, it seems to be only a matter of time before a party defends against a lawsuit over insurance coverage or a case of alleged insurance bad faith on the ground that the parties in that case previously agreed to arbitrate the matter instead of pursuing rights and remedies in a Courtroom.

Please Read The Disclaimer.  Copyright 2014 by Dennis J. Wall.  All rights reserved.  No claim to Original U.S. Government Works.