Claims And Issues

MAKE A BUCK, MANIPULATE FLOOD MAPS, MANIPULATE FLOOD INSURANCE NOTIFICATIONS.

Flooded homeowners near Houston are learning after Harvey left the area that so did their illusions about the need for flood insurance.

Because their lots were built as little as one inch above the standards for flood plains, and sometimes a couple of inches higher than the standards, the homeowners were not required by federal law to buy flood insurance. 

In the case of at least one planned upscale suburban "community," these buyers "would never have bought here otherwise."

Not only was flood insurance not required, but the developer was not even required to notify the buyers of their risk so that the buyers had the option to purchase flood insurance.

They were on their own when the land was dry.

They are on their own now.

"Houston:  the profound vulnerability of a metropolis with an ethos of untrammeled development built, essentially, on a swamp," in the words of John Schwartz, "Revised Flood Maps Paved Way for Homes Before Harvey Hit," published on Sunday, December 3, 2017 in the New York Times and republished by The Boston Globe on the same day.

With all due respect to Mr. Schwartz and the Times, this is a tale that is not told in Houston only.  A representative of the current developer is quoted by Mr. Schwartz as emphasizing what developers everywhere like to emphasize, which is "'our strict adherence to standards and our commitment to our communities.'"

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

Related articles

Video Displays "Lender Force-placed Insurance Practices".

IS FLOOD INSURANCE A "MORAL HAZARD"?

I was not picked for a jury this week, but reporting for jury duty was fascinating.  I will write about it soon, probably on an upcoming Insurance Claims and Bad Faith blog post.

Flood insurance has always provided coverage to people who live and work in areas at risk to flood damage.  The risk of flood damage has increased a lot in recent years.  Corresponding to the increased risk of flood damage, the premiums for flood insurance -- and the taxpayer-funded subsidies for flood insurance premiums -- have increased a lot too.

By some estimates, there is $1.1 Trillion worth of risk from flood damage to coastal properties at this time.  And that is just for the East Coast.  And based on current tides and water levels.  Water levels are rising everywhere including on the East Coast.

So with more money at stake more attention is being paid to the so-called "moral hazard" that has always been a part of the flood insurance scheme.  People who live in dry areas subsidize the choices of people who choose to live in areas that are now more and more frequently under water.  Some say that they prefer the policy choice of not subsidizing those choices at all.  See generally Brooke Jarvis, "When Rising Seas Transform Risk Into Certainty / Along Parts of the East Coast, the Entire System of Insuring Coastal Property is Beginning to Break Down" (New York Times Magazine Online, posted on April 18, 2017), also accessible although subscription may be required at https://www.nytimes.com/2017/04/18/magazine/when-rising-seas-transform-risk-into-certainty.html?hpw&rref=magazine&action=click&pgtype=Homepage&module=well-region&region=bottom-well&WT.nav=bottom-well.

That would be a sea change in policy, no pun intended.

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

FLOOD INSURANCE, ANYONE?

Premiums are not always the subject of conversation among insurance coverage lawyers and claim reps.  But they are always the subject of conversation among their clients.  Check out this article for example on the rise in flood insurance premiums by Ann Carrns, "Flood Insurance:  Pricier This Year, and May Go Higher" (New York Times Online, posted on Friday, April 7, 2017), also available at https://nyti.ms/2p9QnQ8.

Please Read The Disclaimer.  ©2017 by 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.

Related articles

Convincing Anyone Yet? Coverage, Contraception, and the Court.

CYBERINSURANCE:  MANY DATA-LESS RISKS TO UNDERWRITE & PREMIUMS TO CHARGE.

THE ALI RESTATEMENT PROJECT OF THE LAW OF LIABILITY INSURANCE.

Majority Holds No Negligence Cause of Action by Insured Against I.A.

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.

WILL CITIZENS BRIDGE THE FORCE PLACED "GAP"?

"It's probably not addressed as much as it needs to be, but it is a real problem."

Mr. Archie Grant, South Broward (Florida) Board of Realtors, quoted by Dan Sweeney, Sun Sentinel (Ft. Lauderdale), December 16, 2014.

    Mr. Grant was testifying before Florida State Representatives from Broward County, Florida (Ft. Lauderdale) who are members of an insurance subcommittee in the Florida House of Representatives.  He told them about people whose homeowner's insurance policies supposedly lapsed and whose lenders force-placed insurance on them with much higher premiums.   In some cases, Mr. Grant observed, the lenders controlled the force-placing insurance carriers.

    A member of the Broward delegation to the Florida House (and a very scarce commodity in Broward County, a Democrat), reportedly suggested that perhaps Citizens Property Insurance Corporation "'can help bridge that gap until that person can get back into the private marketplace'."  Id.

    The lawmakers are planning to meet with Citizens' representatives this month to discuss their ideas about the increasing costs of wind and flood insurance for Florida residents.

The author is at work on a book on "Lender Force-Placed Insurance" which the American Bar Association has scheduled for publication this Spring. 

The author wishes to thank Mr. Dan Luby of Orlando for alerting me to this story.  Mr. Luby is an avid reader of this insurance blog and his input is always gratefully appreciated.

Copyright 2015 by Dennis J. Wall.  All rights reserved.

A MODEST PROPOSAL: COMMENTS ON NEW FLOOD INSURANCE RULES—

 

BUT FIRST – TODAY IS CHRISTMAS EVE, SO

MERRY CHRISTMAS AND HAPPY HOLIDAYS TO ALL!

 

PART 3.

           On Monday, I submitted Comments to proposed joint rulemaking by five (5) Federal agencies.  Flood Insurance is the topic of their proposed Rules.  The period for public Comments closes on Monday of next week, on December 29, 2014.

          Specifically, the five agencies jointly requested Comments on their proposed Rules regarding “Loans in Areas Having Special Flood Hazards”.  What follows is the first of my Comments.

          If you disagree with my Comments I urge you to tell the agencies so, by leaving your own Comments.  If you agree with my Comments I urge you to tell the agencies so, by leaving your own Comments.

          Everything you need is here.  You can leave your Comments at the Federal eRulemaking Portal.  The web address is given below.  Or you can send a joint EMail to the five agencies.  Their EM Addresses are listed below too.  In either case, the “subject line” or “re clause” information that you need for your Comments is also set out below for your ease of use.

 

December 22, 2014

BY FEDERAL eRULEMAKING PORTAL AND VIA EMAIL

 

Federal eRulemaking Portal:

www.regulations.gov

 

OCC EMail Add.:       regs.comments@occ.treas.gov

Board EM Add.:         regs.comments@federalreserve.gov

FDIC EM Add.:          comments@FDIC.gov

FCA EM Add.:           reg-comm@fca.gov

NCUA EM Add.:        regcomments@ncua.gov

 

Re:      “Loans in Areas Having Special Flood Hazards”.

            OCC:               Docket ID OCC-2014-0016

            Board:             Docket No. R-1498

                                    RIN 7100-AE22

            FDIC:              “Loans in Areas Having

                                     Special Flood Hazards”.

            FCA:               “Law & Regulations”/“FCA Regulations”

                                    /“Public Comments”

            NCUA:            RIN 3133-AE40

 

To the Agencies:

 

            SUMMARY OF MY COMMENTS IN THIS LETTER:

* * *

 

(3)  The proposed Rule sets forth a new Notice which mortgage lenders or servicers will be required to send to borrowers concerning the limits of flood insurance coverage required by the Act and the Rule.  If the lender or servicer wants to obtain limits of flood insurance coverage greater than the required minimum, then the lender or servicer, as the case may be, may purchase the difference between the required minimum and the maximum which the lender or servicer desires.

  

            These Comments are in response to your Joint Notice of Proposed Rulemaking published beginning at 79 Federal Register 64518 (Oct. 30, 2014).

  

* * *

 

            (3)  My final Comment at this time would add a provision to be appended to the end of the following language in the new Notice required by the proposed Rule:

At a minimum, flood insurance purchased must cover the lesser of:

(1)   The outstanding principal balance of the loan; or

(2)    The maximum amount of coverage allowed for the type of property under the NFIP.

Your lender may require, at its own expense, additional amounts of flood insurance to cover the greater of these two amounts.

            This new language would clarify for the mortgage lender or servicer, and the borrower alike, that what the requirement of the “lesser,” means that the “lesser” is what is required.  Or, put another way, that “minimum” means “minimum,” not “maximum.”  If the lender or servicer wants the “greater” or “maximum” flood insurance coverage, it may purchase the amount which is the difference between the required minimum and the maximum which the lender or servicer desires.

           This provision proposed in my third Comment would set forth a new sentence in the following Rules of the five (5) respective joint Agencies involved, specifically, the Appendixes to the following Rules which set forth the text of the Notice which lenders and servicers would now be required to send to borrowers:

1. OCC:       This would add one new sentence to Appendix A to Part 22.
2. Board:     This would add one new sentence to Appendix A to § 208.25. 
3. FDIC:      This would add one new sentence to Appendix A to Part 339.
4. FCA:        This would add one new sentence to Appendix A to Part 614.
5. NCUA:    This would add one new sentence to Appendix A to Part 760.

 

          I would like to conclude by respectfully pointing out that none of the provisions proposed in my above Comments would change the Agencies’ joint conclusion that the estimated total costs associated with this NPRM excludes “costs specifically related to requirements set forth in Biggert-Waters and HFIAA”.  79 Federal Register at 64528.

         Thank you for your consideration of these Comments.  Should you have any questions or concerns, I would be glad to address them.

End of the last Comment in “A Modest Proposal: Comments to New Flood Insurance Rules.”  Leave your own Comments on the New Flood Insurance Rules.  If not you, who else?  If not now, when?

Please Read The Disclaimer.  ©2014 by Dennis J. Wall.  All rights reserved. 

Related articles

A Modest Proposal: Comments to Proposed Flood Insurance Rules -

A MODEST PROPOSAL: COMMENTS TO PROPOSED FLOOD INSURANCE RULES –

PART ONE.

 

            Today I submitted Comments to proposed joint rulemaking by five (5) Federal agencies.  Flood Insurance is the topic of their proposed Rules.  The period for public Comments closes one week from today, on December 29, 2014.

          Specifically, the five agencies jointly requested Comments on their proposed Rules regarding “Loans in Areas Having Special Flood Hazards”.  What follows is the first of my Comments.

          If you agree with my Comments I urge you to tell the agencies so, by leaving your own Comments.  If you disagree with my Comments I urge you to tell the agencies so, by leaving your own Comments.

          Everything you need is here.  You can leave your Comments at the Federal eRulemaking Portal.  The web address is given below.  Or you can send a joint EMail to the five agencies.  Their EM Addresses are listed below too.  In either case, the “subject line” or “re clause” information that you need for your Comments is also set out below for your ease of use. 

 

December 22, 2014

BY FEDERAL eRULEMAKING PORTAL AND VIA EMAIL

 

Federal eRulemaking Portal:

www.regulations.gov

 

OCC EMail Add.:       regs.comments@occ.treas.gov

Board EM Add.:         regs.comments@federalreserve.gov

FDIC EM Add.:          comments@FDIC.gov

FCA EM Add.:           reg-comm@fca.gov

NCUA EM Add.:        regcomments@ncua.gov

  

Re:      “Loans in Areas Having Special Flood Hazards”.

            OCC:               Docket ID OCC-2014-0016

            Board:             Docket No. R-1498

                                    RIN 7100-AE22

            FDIC:              “Loans in Areas Having

                                     Special Flood Hazards”.

            FCA:               “Law & Regulations”/“FCA Regulations”

                                    /“Public Comments”

            NCUA:            RIN 3133-AE40

 

To the Agencies:

 

            SUMMARY OF MY COMMENTS IN THIS LETTER:

 (1)  The Agencies’ Joint Notice of Proposed Rulemaking makes clear that flood insurance required under the National Flood Insurance Act and Flood Disaster Protection Act, as amended by the Homeowner Flood Insurance Affordability Act of 2014, is not required for any structure that is part of any residential property but is detached from the primary residential structure of such property and does not serve as a residence.  This is not clear in the Agencies’ Joint Proposed Rule however.  The proposal in my first Comment would make this clear in the proposed Rule and, since compliance with the Act and Rule does not require flood insurance for such structures, then a lender’s or servicer’s requirement that a borrower obtain flood insurance for such structures is not immunized either by the Act or by the Rule.

 * * *

             These Comments are in response to your Joint Notice of Proposed Rulemaking published beginning at 79 Federal Register 64518 (Oct. 30, 2014).

 (1)   My first Comment is in response in particular to your joint solicitation for comment on whether Section 13 of HFIAA should be clarified.  Section 13(a) of HFIAA in particular amends Section 102 of the Flood Disaster Protection Act of 1973 (found at 42 USC § 4012a(c)), by adding the new paragraph which appears in the proposed Rule at this time.  In order to clarify the proposed Rule, I would also add the following language which is consistent with Section 13 of HFIAA in this regard.  I have printed the language I propose in boldfaced type for your ease of reference:

 

Borrowers may still wish to obtain, and mortgage lenders may still require borrowers to maintain, flood insurance even when it is not required by the National Flood Insurance Act or National Flood Insurance Plan or Flood Disaster Protection Act, all as amended.  However, if a mortgage lender requires a borrower to maintain flood insurance even when it is not required, the mortgage lender is not immunized from liability in that respect since flood insurance is not required by the NFIA or by the NFIP or by the FDPA and no basis for extending immunity from any liability exists in the event that a mortgage lender requires a borrower to maintain flood insurance even when it is not required.

  

          The Agencies’ Joint Notice of Proposed Rulemaking makes it clear that flood insurance is not required for any structure that is part of any residential property but is detached from the primary residential structure of such property and does not serve as a residence, as do the Agencies’ proposed Rules.  The Agencies’ Joint Notice of Proposed Rulemaking also makes it clear that mortgage lenders may require borrowers to obtain additional flood insurance even when it is not required by the Act, but the proposed Rules do not make this clear.  Consistent with both of the two Subsections of Section 13, Subsections 13(a) and (b) of HFIAA, the language proposed above clarifies that mortgage lenders may require borrowers to obtain additional flood insurance even when it is not required by the Act.

 

            Further, where the Act, as amended, does not apply, of course neither do its provisions or authorizations for immunity regarding compliance with its provisions apply, since the Act by definition does not require any conduct in that situation.  The proposed language makes that equally clear to borrowers and mortgage lenders alike.

 

            This provision would set forth a new subparagraph in the following Rules of the five (5) respective joint Agencies involved:

 

1. OCC:        This would add a new 12 CFR § 22.4(d).
2. Board:      This would add a new 12 CFR § 208.25(d)(4). 
3. FDIC:        This would add a new 12 CFR § 339.4(d).
4. FCA:         This would add a new 12 CFR § 614.4930(c)(4).
5. NCUA:       This would add a new 12 CFR § 760.4(d).

 

Part Two of “A Modest Proposal: Comments to New Flood Insurance Rules” will be published tomorrow on Insurance Claims and Bad Faith Law Blog.  Please Read The Disclaimer.  ©2014 by Dennis J. Wall.  All rights reserved.

 

FEDERAL COURT IN NEW YORK INVESTIGATES SANDY ADJUSTING.

    Mr. George Hernemar is a licensed engineer.  His employer, an engineering firm, sent Mr. Hernemar to inspect approximately 50 homes for damage Sandy may have caused to them in 2012.

    The engineering firm that Mr. Hernemar worked for was retained by the policyholders' insurance company to investigate their claim of damage.  The policyholders owned a rental house adjacent to their own home.  Upon inspection of the rental house, Mr. Herneman affirmatively wrote that he observed among other things that Sandy structurally damaged the building.

    "However, plaintiffs never received this report from their insurance carrier."  Instead, the policyholders received a report written afterward, which contained the conclusion that, among other things, "the subject building was not structurally damaged".  In re Hurricane Sandy Cases (Raimey v. Wright National Flood Insurance Co.), 2014 WL 5801540 *3 (E.D.N.Y. November 7, 2014)(Brown, U.S.M.J.).  [Emphasis by the Court.] 

    Although Mr. Hernemar took responsibility for both reports and contended that the first one was only a draft and not a real report, the Court noted Mr. Hernemar's testimony that the "'rewrote my report'" and that the second report did not exist until after Mr. Hernemar had a telephone conversation with a representative of his employer.

    The first Hernemar report surfaced in the case only by "happenstance," the Court said.  It was apparently not produced in discovery.  The second Hernemar report was produced in discovery and, as noted, the policyholders received the second Hernemar report, but not the first one.

      "Based upon this [second] report, defendant refused to pay for any structural damage to the home."  In re Hurricane Sandy Cases (Raimey v. Wright National Flood Insurance Co.), 2014 WL 5801540 *3 (E.D.N.Y. November 7, 2014)(Brown, U.S.M.J.).

    Under all the evidence before it in this case, the Court concluded that adjustment of Sandy claims is apparently ripe for investigation:

   Against this backdrop arises the instant dispute, which has exposed reprehensible gamesmanship by a professional engineering company that unjustly frustrated efforts by two homeowners to get fair consideration of their claims. Worse yet, evidence suggests that these unprincipled practices may be widespread.

 In re Hurricane Sandy Cases (Raimey v. Wright National Flood Insurance Co.), 2014 WL 5801540 *1 (E.D.N.Y. November 7, 2014)(Brown, U.S.M.J.).

    In addition to adjusting practices in all of the consolidated Sandy-claim-cases, the Court considered the case before it, concluding that in the case at bar (1) the defendant insurance company "is prohibited from supporting its defenses or opposing plaintiffs' claims with any expert testimony other than that of George Hernemar," and (2) the plaintiffs' counsel may file a motion "for reimbursement from defendant's counsel for all reasonable costs associated with this motion, the hearing and all related briefing, including attorneys' fees, travel costs and transcription costs".

    With respect to this case and all of the other pending consolidated Sandy cases, the Court further ruled: 

3. Within thirty days of this Order, defendants in all Hurricane Sandy cases shall provide plaintiffs with copies of all reports described in CMO 1 not previously produced—plus any drafts, redlines, markups, reports, notes, measurements, photographs and written communications related thereto—prepared, collected or taken by any engineer, adjustor or other agent or contractor affiliated with any defendant, relating to the properties and damage at issue in each and every case, whether such documents are in the possession of defendant or any third party.

In re Hurricane Sandy Cases (Raimey v. Wright National Flood Insurance Co.), 2014 WL 5801540 *15 (E.D.N.Y. November 7, 2014)(Brown, U.S.M.J.).

    Clearly, the Court in this case was not pleased.  Yet no-one who reads this opinion and considers this ruling on the evidence can reasonably second-guess the decision.  The ruling, like the unpleasant taste left by the apparent conduct at issue here, was a result of the evidence in the record.

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

AFFORDABLE OCEANFRONT LIVING PAID FOR BY FLOOD TAXES.

          Ever-increasing damages from floods mean increasing Flood Insurance taxes if the prospect of flood damages remains unaltered.  "That poses substantial risks to taxpayers, who subsidize the National Flood Insurance Program, which has already been put more than $20 billion in the red by storms of recent years.  Coastal property owners have fought attempts by Congress to charge premiums reflecting the true hazard."  Justin Gillis, "Bipartisan Report Tallies High Toll on Economy From Global Warming," p. A18, col. 1 (New York Times Nat'l ed., Tuesday, June 24, 2014).

          To say again, if these shadows of always increasing flood damages remain unaltered, the shadows of ever-increasing flood taxes will follow.  The insurance industry knows this.  Even reports in the popular press reflect this.

          So, who can ever truthfully say again, "Who knew?"

 © 2014 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

 Please Read The Disclaimer.

Related articles

After Sandy: Facing Limits on Public Policy and Insurance Policies.

SANDY AND THE A.L.E.

          Sandy repairs are reportedly taking so long in the New York City area, that Additional Living Expense is coming into play.  In insurance parlance, this is "A.L.E." Coverage, and not everyone has it.

          Those that do not have A.L.E. insurance coverage may have to apply to private resources including charities for assistance after all this time,  since reportedly New York City and other government repair and rebuild programs are into their second summer of not accomplishing much since Sandy struck 20 months ago.  See Liz Robbins, "After the Storm, 20 Months in Limbo," p. 26, col. 1 (New York Times Nat'l ed., Sunday, June 22, 2014).

 © 2014 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

 Please Read The Disclaimer.

Related articles

Hurricane Sandy Damage Claims: Whether Homeowners Hurricane Deductibles Apply.

"MISSING" SANDY MONEY, NEW JERSEY? WHAT DOES CHRIS CHRISTIE KNOW?

         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.

© 2014 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

Please Read The Disclaimer.

 

Computer Models, Catastrophe Predictions, Premiums, and Claims.

    Continuing the trend toward Federal involvement in Insurance issues, the Government Accountability Office ("GAO") was asked by several U.S. Senate and U.S. House Members to prepare a report on what would be involved for private insurance companies to take on the additional risks of Flood Insurance.  (Private insurance companies avoid Flood risks; actually, private insurance companies refuse to cover them.  That is why the National Flood Insurance Program was enacted.)

    The GAO reported back that private insurance companies still do not want to wade into Floods, so to speak.  In general, if private insurance companies were going to take on risks in addition to those which they already cover, then private insurance companies would of course have to evaluate those risks, the GAO reported.  Here is the GAO report:  "Flood Insurance / Strategies for Increasing Private Sector Involvement" (released under date of January, 2014).

   At the same time as the GAO released the report, private insurance companies announced that they are establishing their own computer modeling platforms for evaluating catastrophic risks including Hurricanes and other 'weather events' which cause catastrophic damage including from floods.  Charles E. Boyle, "21 Insurers, Brokers Launch Oasis 'Open Source' Cat Model," posted online in "Carrier Managment", January 29, 2014.  Parenthetically, "Carrier Management" is a relatively new newsletter which apparently belongs to the same publishing group as the more widely known "Insurance Journal" and "Claims Journal" publications. 

© 2014 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

Please Read The Disclaimer.

CANUTE STOPS THE TIDE AGAIN. For the first time. A POSTSCRIPT.

This is a postscript to an article posted here on January 22, 2014, "CANUTE STOPS THE TIDE AGAIN.  For the first time."

   THE UNRAVELING OF PUBLIC POLICY ON FLOOD INSURANCE, or, FOUR DAYS IN JANUARY.

JANUARY 28-30, 2014:

   The U.S. Congress is poised to repeal the policy reforms that would have made it more expensive for buyers to purchase Flood Insurance coverage for properties in Flood Zones, and less expensive for Federal Taxpayers by reducing subsidies of Flood Insurance in Flood Zones.

  To put it another way, Congress is ready to restore the Federal Taxpayer subsidy in the National Flood Insurance Program for buyers who choose to buy properties located in Flood Zones, and who need Flood Insurance to buy properties there  -- and who will continue to buy their Flood Insurance for properties in Flood Zones using subsidies provided by Congress from the Federal Taxpayers.  See, e.g., Coral Davenport, "Popular Flood Insurance Law is Target of Both Political Parties" (New York Times Online, posted January 28, 2014).

JANUARY 31, 2014:

   The Senate passed the Flood Insurance Premium bill of delay on January 30, 2014 by a vote of 67 to 32.  The bill now goes to the House of Representatives.  "National Briefing," "WASHINGTON Flood Insurance Bill Moves to House," by Coral Davenport, p. A17, col. 5 (New York Times Nat'l ed., Friday, January 31, 2014).

   By the time this article is posted, the House too may have voted for the bill of delay.  Or the House may have delayed voting on the bill, no-one can tell.  Whatever happens, this blog will be here to post the news.

   Is the House in Session before February 5th?

 

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 © 2014 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

 

CANUTE STOPS THE TIDE AGAIN. For the first time.

   As a part of the Omnibus Spending Bill or current U.S. budget, the House and Senate included a provision which halts premium increases in Flood Insurance for one year.  Flood Insurance is a Federal Taxpayer-funded program available to those voters, er, people who live and work and own properties in flood-prone areas such as on the Atlantic, Pacific, and Gulf coasts, for example.  See Jordan Blum, "Delay in Flood Insurance Premium Increases Finally Passed" (The Advocate Online, Baton Rouge, Louisiana, Friday, January 17, 2014).

   Apparently some three-fourths of Property and Casualty Insurers who were polled recently, want a delay too.  See Chris McMahon, "75% of P&C Insurers Expect NFIP Reform to be Delayed" (Insurance Weekly News Online, Thursday, January 16, 2014).

    Delaying the unstoppable is a middle ground between public policy and no policy at all.  It is not a substitute for public policy itself.  See the article and links posted here on January 6, 2014, "Federal Flood Insurance Premiums Slow Home Sales in Flood Zones".

© 2014 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

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Federal Flood Insurance Premiums Slow Home Sales in Flood Zones.

   As a national policy to deal with catastrophic relief payments to property owners in flood zones, Federal Flood Insurance Premium hikes took effect recently.  The Flood Premium increases were in effect even before the latest round of hurricane and other weather-related damage.  The increases and the national policy creeping behind them, were reported here in the categories of Flood Insurance and Hurricanes, among other categories.  Representative articles on these trends emerging over the past year include "Sandy Makes Landfall on Tax Bases Three Months Later," posted here on January 30, 2013; and "Bad Faith Votes Against Flood Insurance for Sandy Claims," posted here on January 16, 2013 with links to other articles posted here and on Insurance Claims and Bad Faith Law Blog.

   Now the Federal Flood Insurance Premium hikes are reportedly a major brake on sales of homes in flood zones.  See, e.g., Drew Harwell, "Flood-Insurance Hikes Ravage Tampa Bay Neighborhood Home Sales" (Tampa Bay Times Online, posted Sunday, December 29, 2013).

   This is another weather-related catastrophe, there is no doubt.  It may be inflicted on a smaller number of people, there is no doubt about that either, but there is no doubt that for the people affected, the effects will be catastrophic.  It will be interesting to see what effect if any Federal laws have on sales of commercial property located in flood zones.  Federal Flood Insurance is certainly available at a cost to commercial property owners.  See Download FEMA.NFIP.Summary of Commercial Flood Coverage.F778.  However, the costs do not fall alike on owners of residential property and commercial property.

   In general terms, owners of commercial property can treat increases in any insurance premiums as a cost of doing business which they can and do pass on to their customers.

   However, there is more than that.  Federal laws affect the security of sales of commercial property located in flood zones because Federal laws including the Stafford Act (see the articles previously published here) provide for Federal taxpayer subsidies of government or nonprofit property damaged by weather including floods.  See the articles previously published here, again in several categories including Flood Insurance.  If you need to sell your warehouse, you need not fret about road repair for example after a hurricane.  You can depend on your bailout so long as you are the owner of that commercial property.

   On the other hand, you may not be able either to afford your insurance rates or sell your residential property if you are the owner of residential property serviced by that same road.

   Public policy by insurance premium.  And by bailout.  Catastrophic.

 © 2014 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

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BAD FAITH: DENYING MORTGAGOR'S REASONABLE EXPECTATIONS.

          There are many ways in which bad faith manifests itself, apart from so-called insurer bad faith.  A list is never going to be complete.  It is in the nature of the beast of bad faith.  See generally Dennis J. Wall, 1 Litigation and Prevention of Insurer Bad Faith §§ 2:1 - 2:9 (various Contrasting Good Faith Requirements) (Thomson Reuters West, Third Edition and 2013 Supplement).  "No statement about these terms expresses greater truth than this:  '[T]he terms "good faith" and "bad faith" mean different things in different contexts."  Id., volume 2, §9:3, "The Question of Bad Faith".

          "While a comprehensive listing of the examples of bad faith is not possible," a Federal Court in Pennsylvania recently pointed out, nonetheless "the Pennsylvania courts have recognized that certain patterns of conduct may evidence bad faith."  Jackson v. Wells Fargo Bank, N.A., 2013 WL 5945732 * 14 (W.D. Pa. November 6, 2013).  The patterns of conduct that have been recognized by Pennsylvania (and many other) Courts as evidencing bad faith include:

• Evasion of the spirit of the bargain.
• Lack of diligence and slacking off.
• Willful rendering of imperfect performance.
• Abuse of a power to specify terms; and
• Interference with or failure to cooperate in the other party's performance.

          To this list-in-progress may be added the recognition in that same case of "allegations that give rise [to] a plausible showing that W.F. Bank [Wells Fargo Bank] charged a SFHD [Standard Flood Hazard Determination] fee that significantly was above actual cost and not entirely consumed by the specific services provided at closing."  Jackson v. Wells Fargo Bank, N.A., 2013 WL 5945732 * 15 (W.D. Pa. November 6, 2013).  That case revolved around a central issue of whether flood insurance was required under the mortgage loan for the particular home involved in the transaction.  The Federal Court's quoted holding was to deny Wells Fargo Bank's motion to dismiss the plaintiffs' bad faith claim (in Pennsylvania, included within a breach of contract claim) that they were charged for a flood hazard determination which included the cost of an illegal kickback or markup.

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Flood Insurance Policy Changes on the Ground.

   In the Category of "Flood Insurance" in this space, we have been addressing the shifting priorities behind flood insurance.  In this update, changes on the ground in one place, New York, are summed up in the headline of this report:  Kia Gregory, "Deciding Whether It's Lights Out / Homeowners Agonize Over Accepting Hurricane Sandy Buyouts" p. 24, col. 1 (New York Times Nat'l ed., Sunday, October 27, 2013).

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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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NEW YORK: REINSURANCE EXCLUDES BAD FAITH. NORTHEAST: BLIZZARD OF '13 COVERAGE?

          Most Reinsurance Policies do not cover Bad Faith of the ceding insurance company or Policyholder.  So it is written in the Reinsurance Policy at issue, for example, which is reproduced in pertinent part under the heading of  "The Bad Faith Claims" in the case of United States Fid. & Guar. Co. v. American Re-Ins. Co., 2013 WL 451666 (N.Y. February 7, 2013)(page numbers not available at the time of publication).  The New York Court of Appeals held that questions of fact exist concerning why a ceding insurer paid certain claims particularly whether it did so to pay off Bad Faith Claims against itself, the ceding insurer, rather than simply paying off claims against the cedent's own insured. The Court reversed a Summary Judgment on two issues of Bad Faith, and affirmed the Summary Judgment on the other issues on which the Trial Court entered Summary Judgment in favor of the ceding insurer. United States Fid. & Guar. Co. v. American Re-Ins. Co., 2013 WL 451666 (N.Y. February 7, 2013)(page numbers not available at the time of publication).

          In an occurrence that so far as I know is totally unrelated, the Blizzard of 2013 struck the Northeastern United States causing great damage to Connecticut and Massachusetts and New England especially, and causing lesser damage to New York but catastrophic damage nonetheless.  See, e.g., N.R. Kleinfield and Marc Santora, "Storm Leaves Northeast Reeling and Digging / Snow Tops 3 Feet / Biggest Punch Felt in Connecticut,  Boston and Long Island" p. 1, col. 6 (New York Times Nat'l ed., Sunday, February 10, 2013); Nate Schweber and Vivian Yee, "Cold, Hungry and Stuck on a Long Island Road" p. 1, col. 4 (New York Times Nat'l ed., Sunday, February 10, 2013); Katharine Q. Seelye, "Heavy Snow and High Winds Bear Down on Northeast / Emergencies Are Set in 5 States [New York, Massachusetts, Connecticut, New Hampshire and Rhode Island] as Travel Stalls" p. A1, col. 6 (New York Times Nat'l ed., Saturday, February 9, 2013).  Coming on the heels of Sandy, well, not exactly on the heels of Sandy herself but coming on the heels of the House of Representatives' slow awakening from some kind of stupor, i.e., inability to function, the people in the Northeastern United States deserve better.

          However, if they have to look to the U.S. House of Representatives for assistance, they will be forced to attract the attention of people in power there who do not come from States that are cold, who do not know the devastation that winter storms can bring let alone when the storms come back-to-back, and who do not feel that they are a part of the same United States that the Blizzard victims live in -- any more than they feel that they are a part of the same United States that Sandy struck.  See, e.g., "Refusing to Pay Valid Sandy Claims is Just Bad Faith" posted on Insurance Claims and Bad Faith Law Blog on January 17, 2013; "Bad Faith Votes Against Flood Insurance For Sandy Claims" posted on Insurance Claims and Bad Faith Law Blog on January 13, 2013.

 

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SANDY MAKES LANDFALL ON TAX BASES THREE MONTHS LATER.

          Craig Fugate, the FEMA Administrator, says that he likes to ask municipal and county and other local government officials in areas prone to flooding, to think about the resiliency of their tax base.   Remarks of W. Craig Fugate on January 15, 2013 on The Effects on the Environment of Natural and Man-Made Disasters, at a symposium in Washington D.C.  The symposium was broadcast live on television on C-Span 3.

          The idea is a simple one, really.  It is designed to attract the attention of local government officials in terms very familiar to them.  If a storm like Sandy washes away a town's tax base, for example, then the local officials are likely to understand immediately what this means to future services and other operations of government.

          This idea is explored in a newspaper report and captured in a headline, reported by Alison Leigh Cowan, "Towns' Next Hit From Hurricane Is to Tax Bases" p. A1, col. 6 (New York Times Nat'l ed., Friday, January 25, 2013).

          The public policy effects of Sandy on matters including but not limited to Flood Insurance are explored in a series of posts here and on Insurance Claims and Bad Faith Law Blog, ending here on December 12, 2012.  There are links to the preceding articles throughout the series, and the last post has links to all of them.

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AFTER SANDY: FACING LIMITS ON PUBLIC POLICY AND INSURANCE POLICIES.

The first two articles in this series were posted on Thursday, December 6, 2012 and Sunday, December 9, 2012 on Insurance Claims and Bad Faith Law Blog.  This is the third article in this series.  The fourth and final  article will be posted here, on Insurance Claims and Issues Blog, on Wednesday, December 12, 2012.

             There are alternatives to the existing National Flood Insurance Plan and to the public policy it serves.

ALTERNATIVES TRIED:  PRIVATE RISKS, PUBLICLY FUNDED.

W. Craig Fugate, Federal Emergency Management Agency ("FEMA") Administrator, on public funding for the private risks in constructing buildings in areas that are frequently under water from floods:

  "But if we find that we as taxpayers are assuming that risk without benefit, then we need to rethink that."

  Quoted in an interview by Justin Gillis and Felicity Barringer, "As Coasts Rebuild and U.S. Pays, Repeatedly, the Critics Ask Why" (New York Times Online,  posted November 18, 2012).

 

             The Stafford Act is a publicly funded alternative to Flood Insurance.  Like Flood Insurance, it underwrites private risk with public funds.  And like Flood Insurance, it, too, has come under criticism:

            Across the nation, tens of billions of tax dollars have been spent on subsidizing coastal reconstruction in the aftermath of storms, usually with little consideration of whether it actually makes sense to keep rebuilding in disaster-prone areas....  Tax money will go toward putting things back as they were, essentially duplicating the vulnerability that existed before the hurricane.

Gillis and Barringer, New York Times, November 18, 2012, supra.

            The Government Accountability Office, or GAO, reports that Federal subsidies of "disaster recovery" between 2004 and 2011 have cost Federal Taxpayers over $80 Billion.   Of that amount, approximately one-half has come from payments made under the Federal law known as the Stafford Act:  "While billions of dollars went to relieve immediate suffering, including cash payments to families left homeless by storms, nearly half of the money was spent helping state and local governments clean and restore damaged areas and rebuild infrastructure."  Gillis and Barringer, New York Times, November 18, 2012, supra.

            Where the National Flood Insurance Program is concerned with private reconstruction, in essence, the Stafford Act is concerned with public reconstruction by municipalities and other governments.  At least one researcher in this area has charged that such Federal subsidies "enabled repetitive risk taking."

            The Stafford Act authorizes Federal subsidies of 75% or more of the costs of rebuilding infrastructure damaged by storms, such as "roads and utilities."  Gillis and Barringer, New York Times, November 18, 2012, supra.  See FEMA "Overview of Stafford Act Support to States," a pdf available on the website www.fema.org.  An example of the use of these Federal funds is provided by Dauphin Island, Alabama, a place in which permanent residents mix with the owners of vacation homes who visit from New Orleans, Atlanta, and other places.  It is reported that bulldozers were seen there recently depositing sand to be smoothed out for new beachfront on Dauphin Island, after previous storm damage largely took the previously existing beachfront to other locations than the beach, including back to the ocean.  See Gillis and Barringer, New York Times, November 18, 2012, supra. 

Next:  Private Risks, Privately Funded.

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Double Recovery is a Matter of Proof, Not Opinion.

The winds and waters of Hurricane Katrina have spawned more than one blog post, article, book.  So it is with a recent decision by the Supreme Court of Mississsippi.  The new decision has so many features that it has been the subject of commentary on Insurance Claims and Bad Faith Law Blog, and in this continuing post as well.

   Hurricane Katrina struck Michael and Mary Robichauxes' home, detached garage, shed and personal property.  Their home, which had been located one block north of the Gulf of Mexico, was destroyed.  Mr. and Mrs. Robichaux made a claim on their Homeowner's Policy with Nationwide after the resulting destruction and damage.

   The Robichauxes' Homeowner's Policy with Nationwide provided limits, in pertinent part, of $131,000.00 for Coverage A for their Dwelling, $13,100.00 for Coverage B for Other Structures, and $97,405.00 for Coverage C, or Personal Property Coverage.  Robichaux v. Nationwide Mutual Fire Insurance Co., 2011 WL 6224472 *1, ¶ 4 (Miss. December 15, 2011), Download Robichaux v. Nationwide Mutual Fire Insurance Co. (Miss. Case No. 2010CA00109, Opinion Filed December 15, 2011) PUBLIC ACCESS.  Their Nationwide Homeowner's Policy carried "a hurricane rider," said the Mississippi Supreme Court, "which covered damage occurring as a result of a 'windstorm during a hurricane.'...  The hurricane endorsement covered damage to the dwelling and other structures, as well as personal property."  Id. 

   The Homeowner's Policy provided coverage for damage to the dwelling and to other structures caused by "all risks," while coverage was extended to damage to personal property which was caused by named perils.  Id. at *7, ¶ 26.

   Finally, the Policy also contained a Flood Exclusion and an Anti-Concurrent Cause Exclusion as well.  See id. at *4, ¶ 16.

   Nationwide at first denied the Robichauxes' claim "based on a finding that the loss was caused by water or water-borne material as defined by the policy."  Id. at ¶ 5.  Nationwide's denial of all coverage was based on various investigative reports "as well as the flood exclusion and anti-concurrent language in the subject policy ...."  Id.

   On an unreported date, Nationwide changed its mind and offered small amounts to settle the Robichauxes' claims "for potential dwelling damage" and for "potential damage to other structures".  The reasons for Nationwide's change of position are not given by the Mississippi Supreme Court in its opinion.  In any event, Mr. and Mrs. Robichaux returned the checks to Nationwide, uncashed.  Id. at *2 ¶ 6.  Instead, they sued Nationwide for "declaratory and injunctive relief, including indemnity under the insurance contract, compensatory and punitive damages, specific performance of the insurance contract, attorneys' fees, and ... [for] fraud and bad faith by the insurer and its agent."  Id. at *1, ¶ 1.

   Following a peripatetic journey from Mississippi State Court to Federal Court and back to State Court again, the Trial Court entered Summary Judgment for Nationwide.  The Robichauxes appealed.

Apparent Overpayment of Flood Insurance for a Dwelling is Not a Double Recovery For Uncompensated Damage to Other Structures.

    Dwelling Coverage.  Mr. and Mrs. Robichaux had a Flood Insurance Policy in addition to their Homeowner's Policy.  "The flood policy paid $136,500 for flood damage to the dwelling and $70,400 for flood damage to the contents of the home, amounts which constituted the policy limits."  Id. at *2, ¶ 6.  Even assuming the highest possible value of the Robichauxes' home which was supported by the evidence in the amount of $185,000.00, the Trial Court found that the land value was $53,860.00, resulting in a difference of $131,140.00 in the best possible case for the Policyholders here.  Since there could be no claim for Dwelling Coverage under the Nationwide Policy without double recovery here, the Summary Judgment for Nationwide was affirmed in this regard.  Id. at *6, ¶ 22.

   Other Structures Coverage.  The Trial Court found that the Robichauxes' shed and garage had a value of $5,000.00.  Given that the Robichauxes received $136,500.00 from their Flood Insurer for a dwelling with a value of at most $131,140.00, the Trial Court also "found" that the Robichauxes were effectively over-compensated for their Other Structures as well.

   This ruling was reversed on appeal.  "However, the record does not show that the payment of $136,500 for flood damage was intended to compensate for losses to other structures.  In fact, the estimate prepared by the flood insurance adjuster was described as an 'estimate to replace the dwelling,' with no mention of other structures."  Id. at *6, ¶ 24.  Accordingly, the issue of "whether wind damaged the other structures prior to their destruction by storm surge" was remanded for "a jury determination".  Id.

   Personal Property Coverage.  As noted, the Flood Insurance Carrier here paid its Contents Coverage Policy limits of $70,400.00.  The total damage to the Robichauxes' Personal Property was claimed to be $186,144.00.  Reversal on this issue was required in this case, wrote the Mississippi Supreme Court.  "Since the Robichauxes have not been compensated for the full value of their personal property, we remand this case to the trial court for a jury trial on the issue of whether wind damaged the Robichauxes' personal property prior to the flood damage."  Id. at *7, ¶ 25.

That concludes the holdings of the Mississippi Supreme Court in the Robichaux case on the issue of pleading and proving "double recovery" of insurance benefits.  The Court also addressed Insurance Coverage interpretation issues in this case.

  To be continued ..............

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Counting All Hurricanes! Forecasters Fumble, Rockies Crumble, Florida Humble.

   One of the enduring legacies of the George W. Bush Administration was its award of lucrative (no-bid?) contracts to meteorologists located at Colorado State in the Rocky Mountains to issue Hurricane forecasts for Florida.

   Now it is reported that Hurricanes were, shall we say, 'under-reported' in past years.  See Ken Kaye, published in the Orlando Sentinel on Sunday, November 6, 2011 under the headline, "Storm of Controversy:  Did Experts Miss 75 Hurricanes?" p. B1, col. 1, published online at Florida Sun-Sentinel on Saturday, November 5, 2011 as "Hurricane Center:  More Than 240 Tropical Systems Missed". 

   If Hurricanes and other Weather Disasters are not forecast accurately, how can Homeowners, Property Owners, Landlords, Tenants, and their Insurance Companies reasonably be expected to adequately prepare for Claims which follow these Disasters?

   The author will co-present "Disasters in Insurance:  The Sequel" on Friday, November 18, 2011 live from Noon to 1:00 PM ET via the West Legal Education Center website.  Thereafter the Webinar will be available on demand, 24/7, on the website.  Here is a handy link to the prequel Webinar broadcast live on October 21, 2011:  http://westlegaledcenter.com/program_guide/course_detail.jsf?courseId=41335829

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Irene Brings Flood Exclusions Along With Winds.

   The concurrence of Flood Exclusions and Wind Coverage is in many ways a specialized subject.  See, e.g., Dennis J. Wall, § 7:5, "ACCC or 'Lead-in Language'," and § 7:6, "Water and Flood," in John K. DiMugno, Steven Plitt, and Dennis J. Wall, "CATClaims:  Insurance Coverage for Natural and Man-Made Disasters" (West Publishing 2008; 2011 Supplements).

   The Catastrophe called Irene has left a growing awareness in her wake that out of the great Damage she inflicted while she was among us, much may be Excluded.  See Michael Cooper, "Hurricane Cost Seen As Ranking Among Top Ten / Limits on Insurance / Many Policies Exclude Payment for Losses Caused by Flood" p. A1, col. 6 (New York Times Nat'l ed., Wed., August 31, 2011).

   This is one of the lessons Hurricane Katrina left us.  Having lived through Hurricanes Charley, Frances, and Jeanne myself, I can definitely say that it is better to have such problems, than to have nothing at all.

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Handicapping Huge Hurricanes, Catastrophe Claims Climbing.

    Damage from "storms, tornadoes, flooding and heat waves" in the United States so far in 2011 adds up to an estimated $35 Billion or $35,000,000,000.00, says the National Oceanic and Atmospheric Administration.  This includes all Insured and Uninsured Loss estimates.  This figure has the dubious distinction, as they say, of tying a record set in 2008.  See Katharine Q. Seelye, "Year Packed With Weather Disasters Has Brought Economic Toll to Match" p. A13, col. 1 (New York Times Nat'l ed., Saturday, August 20, 2011).

   The NOAA estimates do not include what has not yet happened, including Damages yet to come from Hurricanes for example.

    "Normally, three or four weather disasters a year in the United States will cause at least $1 billion in damages each. This year, there were nine such disasters....  The disasters were responsible for at least 589 deaths, including 160 in May when tornadoes ripped through Joplin, Mo."  Id.  Regarding Catastrophe Claims, see generally John K. DiMugno, Steven Plitt, and Dennis J. Wall, "CATClaims:  Insurance Coverage for Natural and Man-Made Disasters" (Thomson Reuters West, with 2011 Supplements).

   These observations apply to a full calendar year for the most part, except as noted.  This year is not over.

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More Computer Models Print Out In Put: This Time, Coverage?

   The U.S. Senate Banking, Housing and Urban Affairs Committee is considering whether Computer Models can be used to predict how much of a Hurricane Loss is due to Wind vs. how much is due to Flood.  See Lydia Mulvaney of McClatchy Newspapers, "Models Can Determine Wind and Water Damage, Panel Told" posted in political blog on MiamiHerald.com on Thursday, June 23, 2011.

   There is a major drawback:  Bad Faith.  Although it has been held by the Courts that it is not Bad Faith simply to use Computer Models as tools to determine Coverage for all or part of a Loss, Courts have also held that Insurance Companies expose themselves to liability beyond their Policy Limits if they abdicate to Computers their responsibility to determine whether all or part, if any, of a Loss is Covered.  See the post on Sunday, June 26, 2011 on Insurance Claims and Bad Faith Law Blog where this issue is addressed, and see the related post on Tuesday, June 28, 2011.

   There is a second drawback:  These Models are not necessarily as accurate as they are advertised to be.  There is no such thing as "Garbage In, Gospel Out".  See the post on Insurance Claims and Bad Faith Law Blog on Tuesday, June 28, 2011.  The people selling these Computer Models have a right to sell us this software, if we let them, but they have no right to call their Computer Models "the Gospel Truth".

   There is a third strike:  The way in which these Models are being sold is suspicious, although it may be sincere.  Predictions by people who profit from the predictions are inherently suspect predictions, whether the predictions are made by people who will profit by selling the software or by trying to sell a lower payment.  Advertising of these particular computer programs seems often to be based on the same marketing playbook that has been used recently in financial transactions and natural gas schemes:

"They want to bend light to hide the truth."

  Anonymous retired Unocal geologist writing in a February, 2011 E-Mail "about other companies invested in shale gas," quoted by Ian Urbina, "Insiders Sound an Alarm Amid a Natural Gas Rush" p. 1, col. 5 (New York Times Nat'l ed., Sunday, June 26, 2011).

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"Forced Flood Insurance": New Parable for Wise and Foolish People.

   Give your bank the power over you to force you to pay Flood Insurance Premiums, and they apparently will.

   Whether you need it or not.

   Whether you live in a flood plain or high and dry. 

   Whether you are like the wise person of the well-known Parable who built your house on rock so that it stood fast when the storm and the floods came, or whether you are like the foolilsh person in that same Parable and you built your house on sand so that when the storm and the floods came, your house fell.

   "And what a fall that was."

   The lesson appears to be to respond right away to the Mortgagee Bank's demand letter for you or your clients to obtain Flood Insurance, or the Bank may force you buy it and send you the bill.  

   Regardless of whether your house is built on rock or on sand.

   P.S.  This lesson applies whenver you give your bank the power to force you to buy any type of Insurance.

See also the post here on Monday, March 28, 2011.

 Please Read The Disclaimer.

"Something Old, Something New; Something Borrowed, Something Blew"... Florida Hurricane.

   Three important points were made by Florida's First District Court of Appeal in this Hurricane Ivan Coverage Case:  Citizens Property Insurance Corp. v. Ashe, Download Citizens Property Insurance Corp. v. Ashe (Fla. 1st DCA Case No. 1D09.1546, Opinion Filed November 17, 2010) PUBLIC ACCESS, STATED NOT FINAL, also published as 2010 WL 4628915 (Fla. 1st DCA November 17, 2010)(authorized password required to access Westlaw).  Although this case involves many interesting issues, including the application or not of Florida's Valued Policy Law, the three important points summarized here do not address them all.

   First, the reason for the Appellate Court's decision was the same as the reason for the Trial Court's main ruling challenged on appeal, which the Appellate Court reversed:  the "other insurance" clause in a Wind Policy when the Policyholder or other Insured also has a Flood Policy.  "It is not applicable when the insured has a wind policy and a flood policy, each covering a different peril."  Citizens Property Insurance Corp. v. Ashe, 2010 WL 4628915 at * 4.

   Second, the Florida Appellate Court went beyond its self-described "dispositive" reason for decision in order "to assist the trial court and the parties on remand."  Id. at *5.  The Court adroitly side-stepped "the total loss recovery rule" applied in some other jurisdictions.  (Individual holdings or a handful of rulings is and are sometimes described, by lawyers, judges, or litigants, as a "rule".  This appears to be one of those occasions.)  This "total loss recovery rule" is "applied in other jurisdictions."  Id. at *3.  "The total loss recovery rule limits the insured to recover the lesser of either the pre-storm value of the insured property or the total policy limit for perils that led to the property's destruction."  Id. at *5.  [Emphasis added.]  Instead of explicitly adopting or rejecting such a rule in Florida, the First District panel announced a potentially much farther-reaching decision.

   In the Ashe case, Mr. Ashe's house was damaged during Hurricane Ivan.  Mr. Ashe requested and received Flood Insurance proceeds.  (Mr. Ashe was not asked by the Flood Insurer, however, to submit a Proof of Loss, and he did not submit a Proof of Loss to the Flood Insurer.)  The First District panel ruled that the amount was irrelevant, but the fact of requesting and receiving Flood Insurance proceeds was relevant to Mr. Ashe's Insurance Coverage Claim upon the Citizens Property Insurance Policy at issue in this case:

Evidence that such flood insurance benefits were received was relevant to the issue of whether flood or wind caused the total loss of the home, and the trial court abused its discretion in excluding such evidence.  Where Ashe now claims that his house was totally destroyed by wind, the jury can and should be allowed to hear evidence that he sought and accepted payment from his flood insurer, which by contract only provided compensation in the event of losses from a flood peril.

Id. at *7.  [Emphasis by the First District Court of Appeal.]

   Third and finally, the Appellate Court announced a second ruling on Evidence Law that will have effects on many other Insurance Claims in suit.  In this case, the First District panel also addressed Mr. Ashe's argument that evidence he requested Flood Insurance benefits, was inadmissible as evidence of compromise or settlement, prohibited by Section 90.408 of Florida's Evidence Code.  The Court rejected this argument.

   For one thing, even if the statute applied on its face to this case, the statute did not apply to exclude evidence of "settlement discussions between ... Ashe and his flood insurer," only to exclude "evidence of settlement discussions between Ashe and Citizens," the Appellate Court ruled.  "Furthermore," the Court noted, "Ashe presented no evidence that his receipt of flood insurance proceeds was the result of a compromise or settlement negotiation, rather than simply a payment of insurance benefits.  For this court to accept his argument here, every payment of insurance benefits would constitute a settlement rather than simply fulfilling a contractual duty."  Id. at *9.  [Emphasis added.]

 Insurance Questions including how to handle Catastrophe Claims Investigation and Evaluation, have in general terms been addressed by many Courts, many Insurance Companies, and lots of Insureds, in many decided Cases.  Dennis Wall is Co-Author of the leading book on Insurance Coverage for Catastrophe Claims, "CATClaims:  Insurance Coverage for Natural and Man-Made Disasters" (West Publishing Company 2008; 2010 Supplement in process).  An experienced Expert Witness in Insurance Cases himself, Mr. Wall will speak on a panel at the American Conference Institute's Bad Faith Litigation Conference in Orlando, Florida on November 30, 2010 on "Dealing With Catastrophic Disasters:  How to Properly Investigate and Handle Overwhelming Claims".  The author has been advised by the American Conference Institute that the ACI is continuing to offer its discount to readers of this Blog:  Download ACI Advises Readers of the Insurance Claims and Issues and Insurance Claims and Bad Faith Law Blog are entitled to a discount.

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Wind Insurance Claim, Hurricane Ivan, Home Destroyed: Insurance Coverage Issues.

   In 2004, Hurricane Ivan destroyed Mr. and Mrs. Hamilton's mobile home in Milton, Florida.  The Hamiltons made a Flood Insurance Claim on their Flood Insurance Policy, which was paid on the basis of a covered "flood loss".  Mr. Hamilton returned a sworn Proof of Loss to the Hamiltons' Flood Insurance Company that "he was claiming under the policy for the full value of the home and its contents, based on the 'flood loss' of September 2004."  Citizens Property Insurance Corp. v. Hamilton, Download Citizens Property Insurance Corp. v. Hamilton (Fla. 1st DCA Case No. 1D09.4128, Opinion Filed July 7, 2010) also published as 2010 WL 2671808 *1 (Fla. 1st DCA July 7, 2010)(Westlaw subscription required to access Westlaw; STATED NOT RELEASED FOR PUBLICATION IN PERMANENT LAW REPORTS AND SUBJECT TO REVISION OR WITHDRAWAL).  The Flood Insurance Claim was paid for the mobile home.  (The Hamiltons sustained losses to other structures which are not the subject of this post, although they were involved in other parts of the decision than those commented on here.)

   The Hamiltons thereafter filed a Wind Insurance Claim.  A flood of Insurance Coverage Issues ensued.  Among them, the Florida Appellate Court first dealt with Citizens' argument that it should have been allowed to put on evidence of the amount of the Flood Insurance payment.  (The Trial Court permitted Citizens to put on evidence that there was Flood Coverage, that there was Flood Damage, and that the Hamiltons made a Flood Loss Claim on their Flood Insurance Policy, "except as to dollar amount."  Hamilton, 2010 WL 2671808 at *3.)   Citizens was thus arguing that it should have been allowed to put on evidence of the amount of the Flood Insurance Claim despite the Collateral Source Rule.

   "As applied, the common law collateral source rule militates against evidence of the dollar amount of flood insurance payments, disbursed by an entity wholly independent of appellant, under a plainly distinct contractual obligation, and paid for entirely by premiums remitted by the Hamiltons, Accordingly, we find no abuse of discretion in the ruling on this matter."  Id. at *4.  [Emphasis added.]  The Appellate Court pointed out that with respect to this 2004 loss, "under the statute in effect at the time of the loss, the common law collateral source rule had not been legislatively altered.  See § 627.702(1), Fla. Stat. (2004)."  Id.  Section 627.702(1) has since been legislatively altered:  See Fla. Stat. § 627.702(1) (2009).

  Another Insurance Coverage Issue of interest in this case involves determining an "actual total loss" vs. a "constructive total loss".  "A building is considered an actual total loss, under the identity test, if it 'has lost its identity and specific character as a building, and becomes so far disintegrated, it cannot be possibly designated as a building, although some part of it may remain standing.  [Citation omitted.]  '[A] building is considered a constructive total loss when the building, although still standing, is damaged to the extent that ordinances or regulations in effect prohibit the building's repair, such that the building has to be demolished.'"  Id. at *5.  [Emphasis added.]  In this particular case, the Appellate Court held that the Trial Court's ruling on "the constructive total loss instruction" was not error and, even if it was error, Citizens was not prejudiced by it here.

   A third and final Insurance Coverage Issue of interest involves the Appellate Court's rejection at common law of a doctrine legislatively enacted, at least in part, into the relevant Statute:  the total loss recovery rule.  "The total loss recovery rule is a theory of damages based on indemnity principles, limiting an insured's recovery as between two or more insurers to the pre-loss value of the subject structure."  Id. at *7.  The Florida Appellate Court pointed out in its Hamilton decision that Florida Courts had rejected this rule before, and it rejected it at common law again, in this case.  In an echo of its ruling on the Collateral Source Rule, the First District held in this case:  "Accordingly, where the covered peril causes a total loss, the insurer has no equitable plea to reap a windfall from, in effect, a total set-off for unrelated insurance payments."  Id. at *8.

   The Florida Legislature's subsequent limited enactment of "the total loss recovery rule" did not affect the outcome in the Hamilton case:  "That the Legislature in 2005 amended the VPL [Florida's Valued Policy Law] to incorporate the spirit of the total loss recovery rule further supports our conclusion that this doctrine was not previously part of our canon of common law.  See § 627.702(1)(b),  Fla. Stat. (2005)....  In light of these decisions and the subsequent amendment to the VPL, we find no error in the court's refusal to apply the total loss recovery rule."  Id.   Here is a link to the current version of the Statute cited by the Hamilton Court.

   In many respects, losses incurred from Hurricanes in 2004 -- which included Hurricanes Charley, Frances and Jeanne, in addition to Ivan -- swept legislation into place in 2005 which had not previously existed in Florida.  The outcomes of decided cases may be different since then if the statutory changes apply to the given loss.

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