Claims And Issues

PARDON ME: SO WHAT? STAY FOCUSED. SENTENCE HIM ANYWAY.

Roger Stone may get "the full Rod Blagojevich" pardon.  So what?

Sentence him anyway.

(Image via Florida Department of Agriculture and Consumer Services)

Rule 1:  "Do not obey in advance."  Timothy Snyder, On Tyranny / Twenty Lessons From the Twentieth Century (2017).

Please read the disclaimer. ©2020 Dennis J. Wall.  All rights reserved.

VINDICTIVENESS IS FOR LOSERS. RESIST THEM. DON'T HATE THEM.

Today is Abraham Lincoln's Birthday.

  February 5, 1865.

 (Alexander Gardner /

National Portrait Gallery,

Washington, D.C.)

The Department of Homeland Security is effectively making New Yorkers stand in line at airports now.  The bar is expected to affect 50,000 people now and another 175,000 people by year's end.

The ban was announced by the current Acting DHS Secretary because, he said, New York State enacted a driver's license law that hinders the Federal Government from accessing the New York State Government's motor vehicle databases without a court order.  New York is one of about a dozen States plus the District of Columbia that require ICE to get a court order before the Feds start rifling through State databases without a warrant.  The whole story is laid out, for example, in the Washington Post here and here, and New York State is filing suit to block the ban.  See Luis Ferre-Sadurni, New York Will File Lawsuit Over Traveler Program Ban, NEW YORK TIMES, Saturday, February 8, 2020, at A23 (online access controlled by The New York Times).

Net result:  People who can afford not only to pay for airline tickets and baggage fees etc. plus pay the program fees, are now going to have to wait in TSA lines with everyone else.  I too have waited in TSA lines.  It's not so bad.

In a similar way, Lt. Colonel Alexander Vindman was fired from the National Security Council staff on February 7 after he testified in the House Impeachment Proceeding under subpoena.  He had already given or was in the process of giving notice that he was leaving at the end of February.

                                       (Andrew Harnik / AP)

Net result:  Colonel Vindman will be leaving his position about 3 weeks earlier than he otherwise would have.

Colonel Vindman's brother was a lawyer with an ethics portfolio at the National Security Council.  He did not testify about anything but he too was fired on February 7.  This is all reminiscent of the greater vindictiveness levelled against Andrew McCabe who was terminated a day or so before his Federal pension would have vested.  It is true that the thread that is common to all these incidents is the desire to inflict harm regardless of whether other reasons exist, or not.

However, the incidents highlighted in the media over the uproar in New York and repeated in the media over the departure of Colonel Vindman have not really inflicted all that much harm.  Not really.  They display a disgusting vindictiveness but they do not carry real harm as their consequences.  The people that indulged their vindictiveness in these cases have shown themselves to clearly be losers.

Net result:  They are vindictive and they are losers.  Resist them.  Don't hate them.  If you hate them, you become them.

Please read the disclaimer. ©2020 Dennis J. Wall.  All rights reserved.

"INSURANCE CLAIMS AND ISSUES," THE BOOK: COMING IN 2016!

 

 Storm Clouds lined up over the Gulf of Mexico.  Photograph and text copyright 2015-2016 by Dennis J. Wall.

I am hard at work on an anthology of the best blogs from "Insurance Claims and Issues."  The anthology I submit to my publisher will keep all hyperlinks intact, including links to the Insurance Claims and Bad Faith Law blog.  When articles posted on Insurance Claims and Bad Faith Law blog are important to the anthology of "Insurance Claims and Issues," I am including them in the anthology too.

As each previously posted article is updated, the posted articles will remain just as available here as they always have been.  New articles will benefit from me being better informed and better equipped to discuss future insurance claims and issues.

I have contracted with Thomson Reuters (West Publishing Company to those fortunate to have the experience) to publish "Insurance Claims and Issues," the Book, in the late Spring or early Summer of 2016.  Best wishes to everyone for a joyous and Happy New Year!

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of "Insurance Claims and Issues" (forthcoming Thomson Reuters 2016).  All rights reserved.

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FLORIDA'S WAR ON EQUITY, CONTINUED?

In Florida Peninsula Ins. Co. v. Ken Mullen Plumbing, Inc., 171 So. 3d 194 (Fla. 5th DCA 2015), a panel of Florida's Fifth District Court of Appeal reinstated a first-party insurance company's third-party complaint against a plumber.  The third-party complaint included an alleged cause of action in equitable subrogation.

The insurance carrier paid on a water damage claim under a homeowner's policy.  Thereafter, the insurance carrier filed a third-party complaint against the plumbing company which allegedly caused the water damage.  However, the kicker was that the homeowner's damage was not fully paid at the time that the carrier filed its third-party complaint.

The trial judge granted the plumbing company's motion to dismiss the equitable subrogation count in pertinent part, on the ground that the insured homeowner had not been fully compensated for the water damage.  On appeal, the Florida appellate panel reversed and reinstated the third-party claim for equitable subrogation, in pertinent part.

The basis for the appellate panel's decision seems a bit murky.  In allowing the cause of action in equitable subrogation to go forward, the panel's opinion seems to have relied on the language of Florida's third-party practice rule.  That rule allows a third-party complaint to be filed against a nonparty who "is or may be liable" to the defendant/third-party plaintiff for all or a part of the original plaintiff's complaint against it.  Florida Peninsula Ins. Co. v. Ken Mullen Plumbing, Inc., 171 So. 3d 194, 197-98 (Fla. 5th DCA 2015).  In so ruling, the panel joined other Florida district courts of appeal on one side of a split among Florida's district courts of appeal.

However, the panel's opinion also included language summarizing the approach collectively taken by other DCA's "which permits pleading a third-party action for equitable subrogation before the underlying debt has been paid."  Florida Peninsula Ins. Co. v. Ken Mullen Plumbing, Inc., 171 So. 3d 194, 197 (Fla. 5th DCA 2015).  [Emphasis added.]  To the extent that this panel's opinion mirrors the ruling of two judges on a different panel in an opinion explored on Insurance Claims and Issues Bad Faith Blog on Sunday, October 4, 2015, perhaps there is a "war" in Florida on equity's requirement that the victim, i.e., the one which is the creditor in a subrogation action, must be fully compensated before subrogation will be available in equity.

Allowing a subrogation action to go forward in favor of the party which paid money to the creditor because the subrogation plaintiff had an obligation to pay under an insurance contract or for any other reason, does nothing for equity or for the creditor-victim.  Certainly, judges may have the power to order subrogation to go forward even when the creditor has not been fully compensated but they have no right if that is how they rule, to call their rule "equitable" subrogation.

Rather, equity clearly would seem to require that if the requirement of full compensation of the creditor-victim is discarded, that an appropriate substitute be put in place.  An appropriate substitute might include requiring that any recovery in the subrogation action, in which the subrogation plaintiff "stands in the shoes" of the creditor-victim, to be paid first to the creditors-victims until they are fully compensated.  Any remaining proceeds would be paid to the subrogation plaintiff only after the victim is fully compensated.  Under such an arrangement, that might be an equitable way to "punch" the subrogation plaintiff's "ticket" to claim standing to sue because it "stands in the shoes" of the victim.

Please Read The Disclaimer.  ©2015 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with 2015 Supplements), including Section 7:9, Actions by Excess Carriers -- Subrogation.  All rights reserved.

 

MAKING FLORIDA WHOLE.

Sometimes the desire to see perceived equity performed makes judges do unusual things.  In Allstate Ins. Co. v. Theodotou, ___ So. 3d ___, 2015 WL 4486578 (Fla. 5th DCA July 24, 2015)(stated not released for publication in the permanent law reports), notice of certified question filed in Supreme Court of Florida 08.21.15, mandate issued by the Fifth District Court of Appeal on 08.25.15, a panel of one of Florida's intermediate appellate courts dispensed with the requirement of equitable subrogation that the injured party be made whole before there can be any equitable subrogation.

In that case, the majority concentrated on the equities in favor of the party seeking equitable subrogation, an automobile liability carrier which paid its policy limits to the injured claimant who recovered a judgment against the carrier's insured.  The judgment ultimately entered in favor of the injured claimant and against the insured was over $11 Million.  The carrier's policy limits were $1.1 Million.

In Allstate v. Theodotou, the Florida appellate court allowed the auto carrier's equitable subrogation claim against alleged subsequent tortfeasors, namely, medical care providers who allegedly caused or increased the injuries of which the injured claimant complained in his suit against the carrier's insured.  To say again, the injured person had not been made whole; some $10 Million of his injuries remained ascertained but unpaid.

In trying to reach a result which the panel perceived as the result that equity required, it is respectfully submitted that the panel concentrated on the wrong person.  The rule that requires an injured person to be made whole before equitable subrogation will be allowed, focuses on the injured person, not on the party seeking equitable subrogation.  If the auto carrier in this case is to be allowed a cause of action for equitable subrogation, one better alternative might be to require the injured person to be made a party plaintiff in the subrogation suit until her, his or its damages are paid in full, or if the injured person refuses to be joined in the subsequent lawsuit against alleged subsequent tortfeasors, then to document that fact, and in either case only then allow the equitable subrogation action to proceed thereafter.  Parenthetically, in this case, after obtaining judgment against the initial tortfeasor and her auto insurance carrier, the injured person filed his own subsequent lawsuit against alleged subsequent tortfeasors.  Allstate v. Theodotou, ___ So. 3d ___, 2015 WL 4486578, *1 (Fla. 5th DCA July 24, 2015).

The panel in Allstate v. Theodotou, ___ So. 3d ___, 2015 WL 4486578, *5 (Fla. 5th DCA July 24, 2015), wisely and unanimously certified the following question to the Supreme Court of Florida as a question of great public importance:

Is a party that has had judgment entered against it entitled to seek equitable subrogation from a subsequent tortfeasor when the judgment has not been fully satisfied?

Speaking of being made whole, if a major storm visits Florida in the near future -- and the hurricane season never ended before November 30 even before climate change took over -- there is a real question "Would Insurers Survive Storm?"  See Robert Trigaux, "On Business," p. 1D, col. 6 (Tampa Bay Times, "Business" Section, Sunday, May 24, 2015).

 

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

Voluntary Payment 'Doctrine' Applies Only When Payment is Voluntary.

The Voluntary Payment Defense was addressed in yesterday's post on Insurance Claims and Bad Faith Law Blog.  Today, a very recent example of how that affirmative defense is (not) applied comes in the case of Rapp v. Green Tree Servicing, LLC, 2013 WL 3992442 (D. Minn. August 5, 2013), a case previously posted for another ruling here on Monday, August 12, 2013, "'Common sense' reason for dismissal of FPI claims is neither."  When a case offers many good opportunities for discussion, take the opportunities.

          GTIA is Green Tree Insurance Agency, Inc.  It is the captive insurance agency of Green Tree Servicing, LLC which serviced the mortgage on Jared Rapp's condominium in Michigan.  Rapp v. Green Tree Servicing, LLC, 2013 WL 3992442 *1 (D. Minn. August 5, 2013).  Green Tree force placed insurance on Rapp.  In the process, GTIA received what it labeled a "commission" from the insurance company, American Bankers Insurance Company ("ABIC").  Rapp v. Green Tree Servicing, LLC, 2013 WL 3992442 *5 (D. Minn. August 5, 2013).

          Mr. Rapp sued GTIA and others as a result of the FPI, the force-placed insurance.  Unjust enrichment was one of several claims he alleged against GTIA.  In turn, GTIA requested dismissal of the unjust enrichment claim, in part on the basis of the so-called voluntary payment doctrine.  Rapp v. Green Tree Servicing, LLC, 2013 WL 3992442 *8 (D. Minn. August 5, 2013).  GTIA contended that Mr. Rapp was notified of the FPI, that he was notified that Green Tree had used GTIA to purchase the insurance, that Rapp was also notified that  ABIC paid GTIA a commission, and that "Rapp permitted Green Tree to withdraw the premium payments from his bank account for several months."  Rapp v. Green Tree Servicing, LLC, 2013 WL 3992442 *8 (D. Minn. August 5, 2013).

          The Minnesota Federal District Court, applying Michigan law, held that the doctrine of voluntary payment was simply inapplicable here as a matter of law.  Accepting Mr. Rapp's allegations in his amended complaint as true in deciding GTIA's motion to dismiss, Mr. Rapp did not have full knowledge of the facts of the transaction as required in order for voluntary payment to be a recognized defense under Michigan (and generally applicable) law:

According to Rapp, the money taken from his bank account was used to pay not only for insurance, but for a kickback.  Obviously, no one ever informed Rapp that his money was being used to finance a kickback scheme involving Green Tree, GTIA, and ABIC.  [Citation to Michigan law omitted.]  The voluntary-payment doctrine therefore does not bar Rapp from pursuing his unjust-enrichment claim against GTIA.

Rapp v. Green Tree Servicing, LLC, 2013 WL 3992442 *9 (D. Minn. August 5, 2013).

          The voluntary payment 'doctrine,' such as it is, requires that payment be voluntary.  If payment is not made voluntarily, payment is not a defense.  No good will come of making the idea more complicated than that.

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

No Subrogation For Surety Against CGL For Defense, Expert Expenses.

    In the case of Hartford Accident & Indemnity Co. v. Crum & Forster Specialty Ins. Co., 2012 WL 2260915 (S.D. Fla. June 15, 2012), Download Hartford v. Crum and Forster (S.D. Fla. June 15, 2012) PUBLIC ACCESS, a Federal Judge decided that a Performance Bond Surety could not claim equitable subrogation for certain defense expenses against a General Contractor's Commercial General Liability Insurance Carrier.

    The bond contained no duty to defend.  Hartford, the Surety, sued Westchester, a CGL Carrier for a General Contractor for defense expenses.  Hartford retained Carlton Fields to defend the g.c. and Hartford also retained Expert Witnesses on behalf of the g.c. which was sued for Damages allegedly resulting from the construction of a condominium in South Florida.  Hartford alleged its right to recover $762,753.23 "in costs and fees incurred by the law firm" and bills submitted by two Expert Witnesses which totaled, respectively, $93,271.29 and $67,147.98.  Id. at *1.

    Hartford based its claims on equitable subrogation.  The Federal Court denied Hartford's claims, denied Hartford's Motion for Summary Judgment, and granted the CGL Carrier's, Westchester's, Motion for Summary Judgment.  Hartford failed in its claim to equitable subrogation, the Court ruled, for several reasons.  In part, Hartford could not claim equitable subrogation in this case because it made its payments as a volunteer.  Hartford had no duty to defend under the Performance Bond it issued.  Id. at *5.

    Please Read The Disclaimer.   

When Doctrines Decide ... Are These the Results We Want?

   A unanimous panel decision in Illinois' Second DCA provides two examples of "Doctrines" at work.

   First, the decision has an interesting twist on equitable subrogation when it is sought by an Insurance Company.  In Iliniois, the Second District held, equitable subrogation generally arises when one party pays a debt for which another party is primarily liable and seeks to be repaid, the debt being one which "in equity and good conscience" should have been paid by the latter party.  Except when it comes to Plaintiff Insurance Companies claiming equitable subrogation, apparently:

   A plaintiff insurance carrier claiming a right to equitable subrogation must establish that:  (1) the defendant carrier is primarily liable to the insured for a loss under a policy of insurance; (2) the plaintiff carrier is secondarily liable to the insured for the same loss under its policy; and (3) the plaintiff carrier discharged its liability to the insured and, at the same time, extinguished the liability of the defendant carrier.

Download State Farm Mut. Auto. Ins. Co. v. DuPage County (Ill. 2d DCA Case No. 2.10.0580, Opinion Filed June 16, 2011) PUBLIC ACCESS, also published as State Farm Mutual Auto. Insurance Co. v. DuPage County, 2011 WL 3422800 *5  ¶ 34 (Ill. 2d DCA June 16, 2011)(authorized password required to access Westlaw).  [Emphasis added.]  The emphasized word, "carrier," was essential to the panel's decision in this case.  Among other things, the Court held that a self-insured municipality like the Defendant in this case could not be a "defendant carrier," and so there could be no equitable subrogation available to the Plaintiff Insurance Carrier.

   The panel's equitable subrogation decision may or may not be appropriately based on an apparent Illinois "Doctrine" of equitable subrogation in cases in which it is invoked by Plaintiff Insurance Carriers.  However, most if not all other jurisdictions follow the view that Equitable Subrogation applies in cases in which the facts show a primary liability on the part of the Defendant who (or which) in equity and good conscience should have paid the debt which in reality was paid by the Plaintiff -- regardless of who or what the Plaintiff is, and regardless too of who or what the Defendant is.  Courts in other jurisdictions accordingly do not discriminate among either Plaintiffs or Defendants whenever Plaintiffs seek the remedy of equitable subrogation, even if at least one of them is an Insurance Carrier.  See generally Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith  § 7:9, "Actions by Excess Carriers--Subrogation"   (West Publishing Third Edition 2011).

    The Illinois Second DCA's decision in this case reads more like a "Doctrine of Insurer Contribution," see generally id. § 7:14, "Actions by Excess Carriers--Doctrine of Insurer Contribution," or perhaps "Equitable Indemnity" which is a specific remedy recognized in Illinois and perhaps nowhere else.

   There is not enough time or room here to mention the panel's second invocation of a "Doctrine" in this decision.  It involves relationships and ordering of Coverages between Primary Carriers and Excess Carriers, and it is a doozy.  To be continued on the next post .......

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.

 

Bond Insurance Company Sues Insured it Issued Credit Default Swaps.

    MBIA issued a press release dated April 30, 2009 announcing a lawsuit which it and its subsidiary, LaCrosse Financial Products, LLC filed against their insured.  The defendant is Merrill Lynch, their Insured-Counterparty.  See also Jody Shenn, "MBIA Sues Merrill Lynch Over Sub-Prime Debt Protection (Update 2)" (Bloomberg.com, Thursday, April 30, 2009).

    Although MBIA posted that the Complaint itself was available on its web site, it was not yet located there the last time I personally tried to find it there.  A search this date on the "SCROLL" or "Supreme Court Records On-Line Library" site provided by the New York State Supreme Court, where the suit was filed, reveals that "no documents have been scanned" on this case as yet.

    The alleged claims or causes of action identified in the press release are Misrepresentation and Breach of Contract.  MBIA and LaCrosse allege that they were fraudulently induced to issue Credit Default Swaps and other Insurance Policies to Merrill.  The Bond Insurance Company seeks the remedy of Rescission for all CDS's and Insurance Policies which were issued to Merrill, and Damages "where the CDS Contracts and related policies were issued to third party counterparties [insureds] other than Merrill Lynch."

Please Read The Disclaimer.

"Unclean Hands" Bar to Advancement and Payment.

    A former officer of a corporation sued the corporation for its allegedly wrongful refusal to advance the officer's defense expenses under the bylaws of the corporation in  Download Tafeen v. Homestore, Inc. (Del. Ch. April 27, 2004)..  (Director's and Officer's Insurance Policies also usually provide for advancing the officers' defense expenses, although under the typically worded "fraud" Exclusion in such Policies the Insurance Company raising that Exclusion may have to await the outcome of the underlying litigation.)  The corporation defended these allegations with the defense of unclean hands among other defenses.

    The officer's complaint contained allegations that the underlying litigation in which the officer incurred defense expenses including attorney's fees included 6 listed lawsuits in California in which he and the corporation were sued by insurance companies.  Testimony in the Court File "revealed that [the corporation] had overstated its revenues" during the period that the officer was employed there, and that while other officers were "being prosecuted in connection with similar overstatements," the officer (who was then no longer only an employee but had apparently assumed a corporate office) "purchased a home in Florida" with a purchase price of $1.45 Million.  Id.  The Court of Chancery Judge in this case held that the facts in the record presented a triable issue of fact on the officer's "intent in buying the house" which was central to the corporation's defense of unclean hands.  Id.

    Unclean hands has even more recently been held a good defense to a Count for alleged breaches of a Settlement Stipulation and Order entered as part of a divorce decree.  The defendants included an ex-husband and a corporation.  The Settlement Stipulation and Order included personal guarantees from the ex-husband who thereby also agreed to obtain corporate guarantees (apparently later given to the plaintiff) and also a consulting agreement between the corporation and the plaintiff in  Download Medek v. Medek (Del. Ch. Sept. 10, 2008)..

    The defendants alleged "an undisclosed agreement" between the plaintiff and her ex-husband defendant, whereby the plaintiff allegedly was paid $150,000.00 "to focus her efforts to recover her claimed damages on" the other defendants.  Id. In this case, the Vice Chancellor of the Court of Chancery of Delaware ruled that the resulting defense of unclean hands was "closely interrelated" to these allegations and presented a triable issue of fact there, too.  See id.

    In addition to equitable remedies previously outlined here against persons allegedly receiving Federal Taxpayer Funds in inequitable ways, equity provides defenses to not paying such persons in the first place.  Equity has always provided those defenses.  One of them is the equitable defense of unclean hands.  Clearly, that equitable defense is alive and well.

Please Read The Disclaimer.