Claims And Issues

MANDATORY ARBITRATION PROVISIONS IN INSURANCE CONTRACTS? CLASS ACTION WAIVERS?

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

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

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

Related articles

U.S. Consumer Bureau Moves to Restrict Mandatory Arbitration Clauses

Failed by Law and Courts, Troops Come Home to Repossessions

Forced arbitration's harmful impact on servicemembers

CFPB Shows That Arbitration Doesn't Work for Consumers

FEDERAL COURT ABDICATES SUBJECT-MATTER JURISDICTION TO ARBITRATOR.

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

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

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

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

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

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

"FORTUITY?" "DOCTRINE"? HOW FORTUITOUS! "DOCTRINES FOR EVERY OCCASION" COMING SOON.

    Every so often, you will read an assertion that a claim is barred by something called "the fortuity doctrine".  The idea that there is something called "fortuity" that acts like an exclusion except that the burden of proof is on the policyholder rather than on the carrier, is baseless.  "Fortuity" is not a "doctrine".  It is inherent in the concept of insurance, and there are many things inherent in the concept of insurance which are not written in insurance policies.  Policyholders do not have to put on proof about those things, either.

    The idea of "fortuitousness" or "fortuity" first appeared in the case law in dicta in a North Carolina Supreme Court opinion in 1973, so far as it has been traced to date.  The North Carolina Supreme Court cited an A.L.R. article and an Am. Jur. article as its authorities that the claimed "loss" or the "event" in question (two different things, of course) must be "fortuitous".  Avis v. Hartord Fire Ins. Co., 283 N.C. 142, 148, 195 S.E.2d 545, 548 (1973).

    In 1984, one Federal Judge in one case in Connecticut imposed "fortuitousness" or "fortuity" as a requirement that the policyholder put on proof and show that the claimed loss was "fortuitous".  In pertinent part, the Connecticut Federal Judge's legal authorities were the 1973 North Carolina Supreme Court's dicta, and again an A.L.R.  See Standard Structural Steel Co. v. Bethlehem Steel Corp., 597 F. Supp. 164, 191 (D. Conn. 1984).

    Substituting  a maxim or a phrase for thought is not a good substitute for lawyers and judges, to rephrase a saying of Justice Oliver Wendell Holmes.  Or, to put it another way, off-hand judicial comments sometimes make bad law.

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

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FLORIDA A.G. TAKES THEIR FREEBIES BUT DOES THEM NO FAVORS, ...

... SAYS FLORIDA ATTORNEY GENERAL PAMELA BONDI.

    You have got to wonder what is the situation with State Insurance Commissioners  and other State officials after reading the news about State Attorneys General that has been reported this morning.

    This morning's New York Times reports on many of the ways in which State Attorneys General are courted by lawyers representing parties to  lawsuits in which the State Attorneys Generals' clients -- their States -- are also parties, among other things.  The courting and lobbying are described in a huge article by Eric Lipton, "Lobbyists, Bearing Gifts, Pursue Attorneys General" p. A1, col. 5 (New York Times Nat'l ed., Wednesday, October 29, 2014).

    I especially did not know many of the facts uncovered by the New York Times about Florida Attorney General Pamela Bondi.  I did know that she was once an Assistant State Attorney in, I believe Pinellas County (St. Petersburg), and that right before her first race for A.G., she was a television personality for Fox.

    However, if some of the facts reported by The Times' investigation have previously been reported by newspapers in Florida, I have missed them.  For example, The Times reports based on State disclosure records about the amounts of money the Florida A.G. either received in gifts or charged Florida taxpayers to fund her travel to various gatherings where lawyers and lobbyists eagerly sought her attention.

   (Curiously, Ms. Bondi apparently charged Florida taxpayers to attend, among other resort meetings, a meeting of something called "the Conference of Western Attorneys General" at a resort in Hawaii.  Florida is not in the West and Florida does not have a Western Attorney General.  So why did the Florida Attorney General charge Florida taxpayers for her Hawaii expenses?)

    Perhaps the business of the people of Florida simply cannot be done in an office or even in Tallahassee.  The meetings for which the Florida Attorney General disclosed gifts and charges to the Florida taxpayers were apparently all at resorts, each and every one:

   Ms. Bondi, the Florida attorney general, for example, received nearly $25,000 worth of airfare, hotels and meals in the past two years just from events sponsored by the Republican Attorneys General Association, state disclosure reports show. That money came indirectly from corporate donors.

   She has charged Florida taxpayers nearly $14,000 since 2011 to take additional trips to meetings of the National Association of Attorneys General and the Conference of Western Attorneys General, including travel to Hawaii. Those events were also attended by dozens of lobbyists. Ms. Bondi, in a statement, said the support she had received — directly or through the Republican Attorneys General Association — had not had an impact on any of her actions as attorney general.

Lipton, "Lobbyists Bearing Gifts, Pursue Attorneys General," New York Times, supra.

     The Times report largely bases its findings on personal observations noted by the reporter and on document disclosures including under the Freedom of Information Act.  For example, EMails reportedly reveal that more than once Ms. Bondi's office has declined to investigate corporations involved in the lobbying activities described in this report, announcing that the Florida Attorney General's Office has received few complaints about the corporations' activities.  In at least one case, "several Florida counties have continued to pursue the matter, taking it to the State Supreme Court."  Lipton, "Lobbyists Bearing Gifts, Pursue Attorneys General," New York Times, supra.  [Emphasis added.]

    Further, the large law firm of lobbyists which represents many of the corporations in question have in the words of the report, also taken "unusual steps to promote Ms. Bondi's political career."  The law firm reportedly arranged for Ms. Bondi to be the subject of a feature article in a trade publication for corporate lawyers, and to speak in Washington, D.C., and to hold a fund-raising event at their expense at a resort in Palm Beach, Florida "owned by Donald J. Trump, which is considered one of the most opulent mansions in the United States."  Lipton, "Lobbyists Bearing Gifts, Pursue Attorneys General," New York Times, supra.

    Any relationship between these facts and the people's business is imaginary, the Florida Attorney General's Office says:

    Ms. Bondi, in a statement, said none of these efforts had affected her decisions.

   “My office aggressively protects Floridians from unfair and deceptive business practices, and absolutely no access to me or my staff is going to have any bearing on my efforts to protect Floridians,” she said.

Lipton, "Lobbyists Bearing Gifts, Pursue Attorneys General," New York Times, supra.

    Skip the newsletter talk, Ms. Bondi.  Keep answering those Freedom of Information Act requests.  Just do your job.

    The Florida experience with its Attorney General makes you wonder about how the State Insurance Commissioner and other State officials are treated by corporations and their representatives who seek their favor, too.  There is very little record that I am aware of, reflecting those activities if any.

    Without much of a record, what can you do except wonder?

I am going to EMail a link to this post to the major newspapers in Florida.  I intend to ask them if they have ever reported on these matters and if they intend to report on them now.  I will publish the newspapers' EMail addresses In a future postscript here, in the event that you want to contact the newspapers yourself.  Before then, if you want to EMail the Florida Attorney General's Office, I have provided a link to it at the top of this article.

Postscript of a little later this same morning:

I have sent the Emails:  To Mr. Scott Maxwell, a well-respected reporter at the Orlando Sentinel newspaper, [email protected], and to "letters to the editor" at the Tallahassee Democrat newspaper, [email protected], and at the Tampa Bay Times newspaper, [email protected].

I have also contacted The Florida Bar News, [email protected]

When I visited the website of the Florida (Jacksonville) Times-Union, I received a message that their site is down this morning.

Lastly, I visited the website of The Miami Herald but without much success I am afraid.  I could not get through all the advertising there to find anything like a "letter to the editor" link.  I did note that The Herald is apparently linking to or saying something about the New York Times report on The Herald's blog.

You can contact any of these newspapers yourself, either at the links I have given you or at their own websites.  Again, if you want to contact Florida Attorney General Pamela Bondi about these matters, I have put in a link at the top of this article for your ease of use.

Please Read The Disclaimer.  Copyright 2014 by Dennis J. Wall.  All rights reserved.  No claim to Original New York Times Works.

"ASK, DON'T TELL": NO AFFIRMATIVE DISCLOSURE OF LIMITATIONS IN INSURANCE.

   The Iowa Supreme Court has ruled that there is no affirmative duty to disclose a contractual limitations period to policyholders.  The policyholders have to ask if there is one, apparently.  This is the view in the "prevailing caselaw," they say.  Osmic v. Nationwide Agribusiness Insurance Co., 841 N.W. 2d 853, 862 & n.3 (Iowa 2014).

    Careful readers of Court opinions will note that the Court's observations in the Osmic decision referred to additional insureds.  The only rationale for this decision was because the same rule applies to policyholders, however.

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

 

 

 

PRIVATIZING PRISONS FOR PROFIT? REPORTS ....

Who has the Coverage?

 

          Reports of despicable conditions in for-profit prisons contain opinions.  These reports also contain evidence of facts.  Photographs and eyewitnesses have recorded these conditions in a private prison in Mississippi recently:

• "Dirt, feces and, occasionally, blood are caked on the walls of cells."
• Prisoners with treatable medical conditions, like glaucoma, do  not receive medical treatment.  When these individuals are released, their condition has deteriorated to the point where the condition is untreatable.
• Guards, who are paid a small hourly wage, spend little time in the solitary-confinement block.  Prisoners in solitary confinement sometimes set fires to their bedding in order to get the guards' attention and, even then, the guards sometimes do not respond.

These eyewitness accounts and photographic evidence and more are reported for example by Erica Goode, "Seeing Squalor and Unconcern in Southern Jail," p. 1, col. 1 (New York Times Nat'l ed., Sunday, June 8, 2014).  The Mississippi prison in question is run by Management and Training Corporation from Utah.

           Management and Training Corporation made one comment for publication.  They blamed these problems on the corporation they replaced in 2012, one GEO Group.  Otherwise, they declined to comment, saying they would not comment because they have been sued.  This is unusual.  Even aside from the fact that due diligence probably revealed these conditions before Management and Training Corporation took over the running of this Mississippi prison, this is 2014.  It has now been two years since CEO Group was in charge, and this is still unusual.  Many large corporations stage large press campaigns to "push back" against lawsuits.

           Management and Training Corporation is entitled to a defense.  Questions abound about how they will defend themselves.  Which of their carriers will fund their defense?  What sort of insurance coverage will provide them indemnity if their defense fails?  Who will cover these people against such reports?  And what sort of exclusions could apply, intentional damages exclusions for example?  So much depends on what Management and Training Corporation has to say about its prison-keeping.  When they start talking we will know more.  Until then, questions continue to pile up.

 

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

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Related articles

Allocation, Indemnity, Defense Insurance Coverage Issues: Part Two.

Seeing Squalor and Unconcern in Southern Jail

ASSERTED ANTI-CONCURRENT CAUSE EXCLUSION HELD "INSUFFICIENT" IN FLORIDA CASE.

SO, FLORIDA COURT REFUSES TO APPLY ACCC IN CASE AT BAR.

           In the first-part case of American Home Assurance Co. v. Sebo, 2013 WL 5225271 (Fla. 2d DCA September 18, 2013), a Florida appellate court refused to align Florida with the many jurisdictions invalidating the so-called anti-concurrent cause exclusion.  However, the court reached the same result in the case before it.  The Florida appellate court held that the exclusion relied on by the carrier in that case was not enforceable in that case:

AHAC argues that the anti-concurrent cause language in its exclusion for defective work entitled it to a summary judgment on all of Sebo's claims except for the $50,000 it tendered for ensuing mold damages. We note that some states reject the application of these clauses....  [Citations omitted.]  But Florida courts have not definitively weighed in on this topic. It is not necessary for us do so here because the language relied upon by AHAC was insufficient to exclude losses arising from concurrent causes.

* * *

Contrasted with the other exclusionary clauses in the same policy, AHAC's defective work exclusion simply did not exclude losses arising from concurrent causes.

American Home Assurance Co. v. Sebo, 2013 WL 5225271 *6 (Fla. 2d DCA September 18, 2013).

          This appellate finding of ambiguity makes one thing clear:  Insurance companies in Florida relying on "anti-concurrent cause exclusions" must at the least point to language in their policies that excludes concurrent causes of loss.

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

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COLORADO NONASSIGNMENT PROVISION DID NOT BAR COVERAGE, BAD FAITH CLAIMS.

          In City Center West, LP v. American Modern Home Insurance Co., 741 F.3d 1338 (10th Cir. 2014), a mortgagee assigned claims against the mortgagee's excess carrier to the mortgagor after a loss.  After the carrier declined to pay the post-loss claim, the mortgagor-assignee sued on the policy for coverage and also for bad faith, among other claims.

          The excess carrier defended on the ground of a nonassignment provision in the policy.  In its holding under Colorado law in this case, the Tenth Circuit panel held that the blanket excess policy's nonassignment provision was never meant to address post-loss assignment of individual claims under or as a result of the excess carrier's policy.

          The assignment involved in this case did not transfer all claims on account of all properties, or even transfer more than the rights resulting from one burglary claim at this particular piece of property.  The assignment instead left all claims but the one burglary claim concerning the one property in the hands of the excess carrier's policyholder, the mortgagee.

          Accordingly the appellate panel reversed the District Court's order dismissing the complaint for failure to state a claim because it did state a claim upon which relief can be granted.  "The assignment was only the assignment of one claim for a specific piece of property."  City Center West, LP v. American Modern Home Insurance Co., 741 F.3d 1338, 1340-42 (10th Cir. 2014).

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

 Please Read The Disclaimer.

NOTICE IN AFFIRMATIVE DEFENSES, FACTS IN COMPLAINTS.

          Federal Courts are of two minds about many things.  One of those things is the standard required for pleading affirmative defenses to complaints in Federal Court.

          Two recent decisions in insurance cases illustrate the points of division on this issue.  In both recent decisions, and both as noted came in insurance cases, it was held that affirmative defenses are governed by a notice pleading standard, but complaints are reviewed by the facts they allege.  E.g., Clarendon America Insurance Co. v. All Brothers Painting, Inc., 2013 WL 5921538 *4-*5 (M.D. Fla. November 4, 2013)(Smith, USMJ); Guarantee Insurance Co. v. Brand Management Service, Inc., 2013 WL 4496510 *2-*4 (S.D. Fla. August 22, 2013)(Rosenbaum, USDJ).

          The Guarantee Insurance Company decision sets out a detailed explanation of the differences among the Federal Courts on this issue:

 

   Courts have developed two schools of thought regarding the pleading standard required for affirmative defenses, and the Eleventh Circuit has not yet resolved the split in opinion. Some courts have held that affirmative defenses are subject to the heightened pleading standard of Rule 8(a) set forth in the Supreme Court cases of Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555–56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 677–78, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).  [Further citations omitted.]  To meet the requirements of Twombly and Iqbal, an affirmative defense would have to contain factual allegations sufficient to “raise a right to relief above the speculative level.” See Twombly, 550 U.S. at 555.

Guarantee Insurance Co. v. Brand Management Service, Inc., 2013 WL 4496510 *2 (S.D. Fla. August 22, 2013).  On the other hand:

 

   Other courts, however, have held that the heightened pleading standard of Twombly and Iqbal does not apply to affirmative defenses.  [Citations omitted.]   These courts have pointed to the differences between Rule 8(a), which governs the pleading of claims, and Rules 8(b) and(c), Fed.R.Civ.P., which apply to affirmative defenses.

 

Guarantee Insurance Co. v. Brand Management Service, Inc., 2013 WL 4496510 *3 (S.D. Fla. August 22, 2013).  And so this particular Federal Judge resolved the conflict among the Courts in this way:

 

   Although this Court finds the reasoning behind the cases applying the Twombly standard to the pleading of defenses to be inherently more appealing from a policy standpoint, in the end analysis, this Court is ultimately convinced of the correctness of the cases holding that the clearness in the difference in the language between Rule 8(a) and Rules 8(b) and (c) requires a different pleading standard for claims and defenses.

* * *

Therefore, so long as Defendants' affirmative defenses give Plaintiffs notice of the claims Defendants will litigate, and vice versa, the defenses will be appropriately pled under Rules 8(b) and (c).

 

 Guarantee Insurance Co. v. Brand Management Service, Inc., 2013 WL 4496510 *3 (S.D. Fla. August 22, 2013).

  

© 2013 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

Please Read The Disclaimer.

"MERE STATEMENTS OF LAW" AS AFFIRMATIVE DEFENSES: INSURANCE POLICY INTERPRETATION.

   Where "'mere statements of law'" provide notice of a defendant's interpretation of an insurance policy, they comply with the current Federal Rules of Civil Procedure and so they should not be stricken from the defendant's affirmative defenses in an answer filed in a declaratory judgment action, it was held in Clarendon Am. Ins. Co. v. All Bros. Painting, Inc., 2013 WL 5921538 (M.D. Fla. November 4, 2013)(Smith, USMJ).

    It may be a good time for the Federal Rules of Civil Procedure to be amended to encourage "plausible" allegations of fact in an affirmative defense, just as they have been held to require plausible allegations of fact in a complaint.

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Coverage for ALL Claims, Because Insured Condominium Not Provided Policy?

"NAHH," says Court, "it doesn't work that way."

   In Raintree Village Condominium No. 11 Ass'n v. Great Am. Ins. Co., 2013 WL 5304054 (M.D. Fla. September 20, 2013), the policyholder, Raintree, a condominium association, contended "that it was not provided anything related to the subject policies."  Raintree Village Condominium No. 11 Ass'n v. Great Am. Ins. Co., 2013 WL 5304054 *6 (M.D. Fla. September 20, 2013).  Accepting this contention as true (although the Court in that case pointed out that the condominium association cited to the policy language in its Civil Remedy Notice of Insurer Violations), the Court considered Raintree's legal argument based on this assertion of fact:  Florida Statute Section 627.421 (1) requires delivery to the insured, and since Raintree's liability insurance policy assertedly was not delivered to Raintree, then Raintree's liability insurance company should therefore be liable for "all possible claims" under the policy.  Raintree Village Condominium No. 11 Ass'n v. Great Am. Ins. Co., 2013 WL 5304054 *6 (M.D. Fla. September 20, 2013).

  The Court stated two reasons when it rejected this contention in that case.  First, the Court could not locate any Florida case that ever agreed with that contention.  Second, said the Court, that contention makes no sense.  Raintree Village Condominium No. 11 Ass'n v. Great Am. Ins. Co., 2013 WL 5304054 *6 (M.D. Fla. September 20, 2013).

To have a chance of success in Court, insurance coverage contentions should make sense.  Just saying.

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THE DOCTRINE OF REASONABLE EXPECTATIONS UNDER A STANDARDIZED INSURANCE CONTRACT.

          The doctrine of reasonable expectations under a standardized insurance contract was recently explained by a Ninth Circuit panel in a case arising under Arizona law:

    In Arizona, courts apply the reasonable expectations doctrine to claims based on standardized insurance contracts.  [Citations omitted.] Arizona courts generally limit the application of the doctrine to four contexts:

1. Where the contract terms, although not ambiguous to the court, cannot be understood by the reasonably intelligent consumer who might check on his or her rights, the court will interpret them in light of the objective, reasonable expectations of the average insured;

2. Where the insured did not receive full and adequate notice of the term in question, and the provision is either unusual or unexpected, or one that emasculates apparent coverage;

3. Where some activity which can be reasonably attributed to the insurer would create an objective impression of coverage in the mind of a reasonable insured;
4. Where some activity reasonably attributable to the insurer has induced a particular insured reasonably to believe that he has coverage, although such coverage is expressly and unambiguously denied by the policy.

Gordinier v. Aetna Cas. & Sur. Co., 742 P.2d 277, 283-84 (Ariz. 1987) (internal citations omitted).

Gregorio v. GEICO General Ins. Co., 2013 WL 3890517 *1-*2 (9th Cir. July 30, 2013).  Unfortunately for the Plaintiff in that case, Ms. Cecilia V. Gregorio, "Gregorio's claim falls into none of these categories."  Gregorio v. GEICO General Ins. Co., 2013 WL 3890517 *2 (9th Cir. July 30, 2013).

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

One No Coverage Reason Proven, Enough: Affirm Carrier's Summary DJA.

          In Abraham v. Universal Ins. Co. of N. Am., 2013 WL 4081030 (Fla. 4th DCA August 14, 2013)(STATED NOT FINAL), the appellate court applied what is often called "the tipsy coachman rule" of appellate jurisprudence:  Where there is even one ground to affirm the trial court's judgment, even though the trial court entered judgment for the wrong reason, affirm the judgment.

          In that case, the carrier contended in pertinent part that the insured came within an exclusion for operating the premises for commercial purposes, and that coverage was excluded anyway because there is no coverage for construction defects and mold damage resulting from them.

          The appellate court noted that there was no record evidence of a commercial enterprise being operated by the policyholder.  However, the record evidence concerning the excluded construction defects and resulting mold damage, presented different stories:

The insurance company presented undisputed evidence that there was no water leak, and the policy did not cover mold unconnected to a peril covered by the policy. Defects in the construction process, as the expert testified was how the mold occurred, are not covered by the policy. Therefore, the summary judgment was appropriately entered.

Abraham v. Universal Ins. Co. of N. Am., 2013 WL 4081030 *1 (Fla. 4th DCA August 14, 2013).  The tipsy coachman rules again.

 

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

Exclusion a is an Intentional INJURY Exclusion.

          In the case of New Hampshire Indem. Co. v. Scott, 910 F. Supp. 2d 1341 (M.D. Fla. 2012), the Court ruled consistently with Florida insurance law, New Hampshire Indem. Co. v. Scott, 910 F. Supp. 2d 1341, 1347 (M.D. Fla. 2012), and with the language of the insurance policy in the case before it, New Hampshire Indem. Co. v. Scott, 910 F. Supp. 2d 1341, 1342 (M.D. Fla. 2012), to hold that the insured driver of a two-ton truck who drove up to a pedestrian, and pulled the truck alongside her, and then proceeded to snatch the pedestrian's purse as a result of which she was injured, was excluded from coverage because the insured driver intended to cause the injuries as a matter of law applied to these facts and allegations.

          More concisely, the Court granted the insurance company's motion for summary judgment and summarized its holding in that case as follows:

Neither the policy language, nor public policy, nor precedent, nor prudence tolerates the notion that an “auto accident” includes Scott's criminal attack and that the result of an attack with a two-ton truck (or the operation of a “motor vehicle as a means to commit a robbery by sudden snatching”) is not “intentional.”

New Hampshire Indem. Co. v. Scott, 910 F. Supp. 2d 1341, 1349-50 (M.D. Fla. 2012).

 

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THE BASIS OF ALL LEGAL OPINIONS MUST BE THE ACTUAL EVIDENCE:

PART TWO.

This completes an article begun here on Wednesday, April 3, 2013.

 "There's considerable disagreement among sociologists as to what the consequences of raising a child in a single-sex family, whether that is harmful to the child or not."

Associate Justice Antonin Scalia, quoted during oral argument at the United States Supreme Court in the case of Hollingsworth v. Perry/United States v. Edith Schlain Windsor.

 No, there isn't:

"The social science consensus is both conclusive and clear:  children fare just as well when they are raised by opposite-sex parents."

Amicus Brief of the American Sociological Association, the opening sentence of the CONCLUSION on page 31 of  their Brief filed in the United States Supreme Court in the case of Hollingsworth v. Perry/United States v. Edith Schlain Windsor.  [Emphasis added.]

 http://www.asanet.org/documents/ASA/pdfs/12-144_307_Amicus_%20%28C_%20Gottlieb%29_ASA_Same-Sex_Marriage.pdf

 

          Judges are not the only ones who sometimes provide legal opinions basically by ignoring or even contradicting actual evidence to the contrary.  Other people besides Judges sometimes also offer legal opinions despite all the actual evidence to the contrary.  The author is frequently retained as an expert witness on disputed insurance issues.  At the trial of one such case, it came to light that a particular insurance company, its adjusters, claim managers, and counsel were all convinced that its insurance policy did not provide coverage because of a particular exclusion which is often found in policies of the kind at issue in that case.  However, there was no such exclusion in the policy at issue.   See also Claims Management Magazine (August 2012), available for free access on the Publications page of my website.

          In conclusion, there are both definite and also immeasurable costs associated with legal opinions which are not supported or which are even contradicted by the actual facts in the situation.  Lawyers understandably charge their clients more for protracted litigation than they do for early resolution of legal disputes.

         The legal system followed in every known jurisdiction in the United States is based on proof of facts, and there is a good reason historically:  Judgments and opinions have less value to people other than the people who issue the judgment or render the opinion if the judgments and opinions are based on fantasy or foregone conclusions rather than on proven facts.  As the Iowa Supreme Court observed in their unanimous opinion in a recent case, in which the Iowa Supreme Court recognized that statutory restrictions on same-sex marriage are valid only when supported by the actual evidence in the case:

Plaintiffs presented an abundance of evidence and research, confirmed by our independent research, supporting the proposition that the interests of children are served equally by same-sex parents and opposite-sex parents. On the other hand, we acknowledge the existence of reasoned opinions that dual-gender parenting is the optimal environment for children. These opinions, while thoughtful and sincere, were largely unsupported by reliable scientific studies.

 Varnum v. Brien, 763 N.W.2d 862, 899 (Iowa 2009).

           The costs of lives ruined by baseless legal opinions are also immeasurable consequences of this failure.  Just because these costs cannot be calculated does not mean that there are no costs.  There are.

Please Read The Disclaimer.

WHY WE NEED ACTUAL EVIDENCE FOR LEGAL OPINIONS, INCLUDING COVERAGE:

 

PART ONE.

"There's considerable disagreement among sociologists as to what the consequences of raising a child in a single-sex family, whether that is harmful to the child or not."

Associate Justice Antonin Scalia, quoted during oral argument at the United States Supreme Court in the case of Hollingsworth v. Perry/United States v. Edith Schlain Windsor.

 No, there isn't:

 

"SCHOLARLY CONSENSUS IS CLEAR:  CHILDREN OF SAME-SEX PARENTS FARE JUST AS WELL AS CHILDREN OF OPPOSITE-SEX PARENTS."

 Amicus Brief of the American Sociological Association, reproduced here from the first page of their Brief in the original all-caps typeface and font, filed in the United States Supreme Court in the case of Hollingsworth v. Perry/United States v. Edith Schlain Windsor.

  

         The author is an insurance coverage lawyer who for thirty-five years has read and listened to Judges and lawyers and their legal opinions.  I have seen legal opinions which have been reached only by ignoring or even contradicting the proven facts.  In many of those instances the legal opinions naturally enough concerned insurance coverage. 

          Judges often provide examples of  this procedure.  For example, "all risks" property insurance policies contain a broad coverage agreement followed by many exclusions.  When guiding a client or a Court through the provisions of an all-risk policy, it is critical for insurance coverage lawyers to advise that the list of excluded causes of loss in an all-risk property policy guides the determination of coverage, whether for damage incurred during a catastrophic event like Katrina or Sandy, or in a fire or sinkhole collapse.

          The effect of this framework is to place the burden of proving an exclusion on the property insurance company after the policyholder meets the considerably lesser burden of proving coverage in the first place.  Still, some Courts occasionally twist the applicable burdens of proof to require an all-risk property insurance policyholder to prove that exclusions do not apply to the claim.  In such cases, the Courts involved do not quote the insuring agreement in the actual policy in front of them, and they cannot quote it to support a legal opinion that the policyholder under such a policy (or under any policy, for that matter) must prove that exclusions do not apply.  There is no such language written in the standard actual all-risks policy.  See Dennis J. Wall, § 7:1, "Introduction and Interpretation," in JOHN K. DiMUGNO, STEVEN PLITT  & DENNIS J. WALL, et al., CATClaims:  Insurance Coverage for Natural and Man-Made Disasters (West November 2012 ed.).

          Another example of legal opinions that are not supported or are even contradicted by the actual facts, is provided by Courts which hold that a policyholder claiming a covered loss must prove that the loss was "fortuitous"-- even though the policy of insurance is not written to  require it.  Every claimed insurance loss must be accidental and not intentional; that has been a no-brainer as it were for a very long time.  So, it is nothing new for policyholders to prove that their insurance claim is not for a loss that they intentionally caused, lest insurance pay not for a loss but for a crime or the equivalent.

          What is new is for Courts to require that property insurance claimants meet some legal burden of proof, selected and shaped only by the Courts involved, that "all risks" means "fortuitous loss" -- even though the insurance policy does not say anything of the kind.  See  Dennis J. Wall, § 7:4, "'Fortuitous,'" in JOHN K. DiMUGNO, STEVEN PLITT & DENNIS J. WALL, et al., CATClaims:  Insurance Coverage for Natural and Man-Made Disasters (West November 2012 ed.).

To be continued .....

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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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Northeast Digs Out From Blizzard as More Snow Is Forecast - Bloomberg

ALLOCATING COVERAGE WHEN DAMAGES PAYABLE BY INSURED ARE NOT ALLOCABLE.

... Is "Time on the Risk" a Defensible Way to Allocate Insurance Coverage?

 

"The principle underlying our decision is a straightforward one:  an insurance company cannot be held liable for periods of risk it never contracted to cover."

 

        In Pennsylvania National Mutual Casualty Insurance Co. v. Roberts, 668 F.3d 106 (4th Cir. 2012), Download Pennsylvania Natl Mut. Cas. Ins. Co. v. Roberts (4th Cir., Opinion Filed Feb. 3, 2012) PUBLIC ACCESS, the Court readily applied Maryland law to allocate Insurance Coverage.  Under Maryland law, "in lead paint or 'continuous trigger' cases such as this, Maryland courts determine an insurer's liability through a 'pro-rata allocation by "time on the risk."'"  Id. at 111.

        The Roberts case involved an infant who ingested lead and was poisoned by it.  She was born on January 17, 1991.  Twenty (20) months later, she was diagnosed with lead poisoning.  Id. at 109.  Using a cutoff of "August 1995" when the child apparently stopped "exhibit[ing] elevated blood levels," id., the District Court concluded that the period during which damages occurred was "55 full months," id. at 111, a finding accepted by the Federal Appellate Court in this case.

        The underlying liability case went to a jury verdict in Maryland State Court, which reduced the verdict amount to a Judgment of $850,000.00 "following an application of Maryland's noneconomic damages cap."  Id. at 110.

        "It is undisputed that [the Policyholder and another Tortfeasor Defendant] are jointly and severally liable for this amount."  Id.  [Emphasis added.]  The fact that the Damages award could not be allocated -- which is evident because there could not be joint and several liability, if the damages could be allocated -- seemed to be inconsequential to the Insurance Coverage allocation made by the Federal Appellate Court in this case.

        The Fourth Circuit panel's opinion, written by Judge J. Harvie Wilkinson, III, first applied Maryland law, which was directly on point of course, and held that "time on the risk" allocation of indemnity required allocation of Penn National's policy limits pro rated by time on the risk, of course.  Penn National's time on the risk was only 22 months, in an apparent finding of fact by the Appellate panel, and so Penn National was held liable by the Appellate Court to pay only 22/55 months' worth of the $850,000.00 Judgment here.  See id. at 113.

        But the opinion contained more words than that, in this case.

        The panel also ruled that even if Maryland law did not require this result, then the Federal panel's interpretation of contract law would also require this result.  Like most Policies in its class, the Penn National Bodily Injury/Property Policy -- which was never described as such, but looks from the opinion an awful lot like standard CGL or Commercial General Liability Policy or Landlord's Liability Policy language -- provided Coverage for Bodily Injury or Property Damage which "'occurs during the policy period.'"  Id. at 110, 112.

        The panel's opinion never once addressed the language of the insurance contract itself, namely that it provided  Coverage for damages occurring during the policy period and not simply Coverage for some abstract period of time unconnected with the determination of the Policyholder's liability to pay Damages.

        As a third reason for its decision, the Federal Appellate panel also wrote that a result other than 'pro rata allocation by time on the risk'  would be "disruptive for insurance markets as well."  Id. at 114.  There is so much that could be said in direct contradiction of this dictum.  That is enough to say about it here.

        The concluding observations of the panel in the Roberts case are quickly summarized:  Stuff happens.  See id. at 115 ("It is a dispiriting but inescapable fact that sometimes really bad things happen ....).  

        That concluded the panel's handling of the Roberts direct appeal.  Penn National Mutual Casualty Insurance Company cross-appealed, as well.  Penn National complained on appeal that although the District Judge was correct in applying Maryland's law of allocating Penn National's liability to pay the underlying Damages Judgment by pro rating Penn National's 'time on the risk,' still the District Court erred in the eyes of Penn National by allocating to it two (2) months too many on the risk.

        The Federal Appellate panel in this case agreed with Penn National on this point also.  Penn National's time on the risk was reduced by two (2) months on appeal.  Id. at 118-19.  As the opinion put it:  "Roberts' misfortune cannot be laid at Penn National's feet ....  To place the entire judgment on the insurer would be chaotic ...."  Id.

        If the little girl's lawyers argued that her life after lead poisoning was "chaotic," or if the Policyholder's lawyers argued that joint and several liability for the entire Damages was "chaotic," none of the Courts involved including this Federal Appellate panel appeared to be moved.

        Insurance Coverage under an Insurance Contract should never be determined by the extent of the damages which the claimant alleges in its claim against a Policyholder.  That is or should be true in all United States jurisdictions.  However, that is not nearly the same thing as deciding that a contract which provides Insurance Coverage for Damages, is somehow the same as a contract which provides Insurance Coverage based not on the Damages which occurred during the policy period, but based instead on the Insurance Company's 'time on the risk' regardless of what is written in the contract.

         

 

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Robichaux Rulings, Redux (Part 2 of 2).

This continues a post here from January 4, 2012.

 

   The winds and waters of 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.

 1.  The Anti-Concurrent Cause Clause Does Not Apply Every Time That Water Appears.

    The Mississippi Supreme Court first held in pertinent part that the Homeowner's Policy at bar is not ambiguous.  The joint appearance in the same Policy of both a Hurricane Endorsement and an Anti-Concurrent Cause Clause does not provide an ambiguity, the Court held.  Id. at *4, ¶ 17.

   However, neither that ruling or the evidence in this particular case answers the question whether wind damaged the Robichauxes' property before Hurricane Katrina's flood left behind only the slabs of their home and their detached  garage:

However, the trial court erred in concluding that no genuine issue of material fact existed as to whether wind damaged the property prior to its destruction by storm surge.  Whether Nationwide had a duty of indemnity under the policy for wind damage, if any, occurring prior to the storm surge presents a triable issue of fact.

Id. at *5, ¶ 18.

  This ruling was applied not only to the Dwelling Coverage Claim under Coverage A, but also to the "Other Structures" Coverage under Coverage B, id. at *6, ¶ 24, and to the Personal Property Coverage Claim under Coverage C.  Id. at *7, ¶ 25.  However, before the Supreme Court could determine whether the Trial Court's Summary Judgment should be reversed on any of these issues, it needed to address another issue:  whether the Policyholders in this case were recovering two times for the same damages. 

 2.  The Anti-Concurrent Cause Exclusion Only Applies in Mississippi, the Mississippi Supreme Court Continues to Hold, When Wind and Noncovered Causes Concur to Cause Damage, Not Just Because There is a Noncovered Cause in a Case.

   The Robichaux Court adhered to its earlier ruling in Corban v. United States Automobile Association, 20 So. 3d 601 (Miss. 2009), and to other settled Mississippi law concerning All Risks Coverage, Named Peril Policies, and Anti-Concurrent Cause Clauses.  Here is how it did so.

   As noted, the Homeowner's Policy which Nationwide issued to Mr. and Mrs. Robichaux contained "All Risks" Coverage for the Dwelling and Other Structures, and "Named Perils" Coverage for their Personal Property.

   In virtually all American jurisdictions, the burden of proof that an Exclusion applies to a claim under an Insurance Policy is a burden belonging to the Insurance Company.  This rule of law applies in Mississippi as in other States, and it was applied to Anti-Concurrent Cause Exclusions by the Mississippi Supreme in Corban.

   As in Corban, the Mississippi Supreme Court in Robichaux held that the burden of proof belongs to the Homeowner's Insurance Company that its Anti-Concurrent Cause Exclusion applies.   Here, however, the Anti-Concurrent Clause does not apply, according to the Court:

The evidence in the present case shows that not all of the damage to the Robichaux residence was caused by the simultaneous convergence of wind and water; accordingly, the ACC clause was inapplicable.

Id. at *5, ¶ 19.

   In sum, in this case, in accordance with universally accepted rules the Policyholder bears the burden of proof on Insurance Coverage in the first place, and the Insurance Company bears the burden of proving that its Exclusions apply:

[U]pon remand, Nationwide has the burden of proving that the other structures under Coverage B were damaged by an excluded peril.  The converse is true with regard to the Robichauxes' burden of proving that personal property under Coverage C suffered accidental, direct, physical loss as a result of one of the enumerated perils, namely windstorm.

Id. at *7, ¶ 28.

 

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Title Insurance Coverage for Access to Lake Michigan.

   Title Insurance Policy Exceptions were at issue in Plastow v. Lawyers Title Insurance Corp., 2011 WL 6370570 (W.D. Mich. December 20, 2011), Download Plastow v. Lawyers Title Insurance Corp. (W.D. Mich. Case No. 1.10cv703, Opinion Filed December 20, 2011) PUBLIC ACCESS.  The Federal District Judge applied the law which is generally applicable to interpreting Insurance Policies, and held in favor of Coverage under the Title Insurance Policy at bar.

   Mr. and Mrs. Plastow owned property with access to Lake Michigan since 1980.  At first, they built a summer cottage on the Property, which they used until 2006.  In 2006, they began using the Property as their primary residence and in 2007 they completed construction and took occupancy of a new house on the Property.  Id. at *2.  Back when they bought the Property in the first place -- the Title Insurance Policy at issue bears a "'Date of Policy'" of December 18, 1979 -- the Plastows bought Title Insurance from the Defendant, Lawyers Title.  Id. at *1.  As is usual and ordinary, this particular Title Insurance Policy contained certain stated "exceptions" to Coverage.  Id. at *2.

   Over time, local inhabitants of a subdivision called Timberlane Terrace used the beach which the Plastows thought they owned exclusively.  In 2008, one of the Timberlane Terrace property owners wrote the Plastows a letter asserting rights to use the beach.  The Plastows sent this letter to the Title Insurance Company and demanded both a defense and indemnity.  Defendant acknowledged receipt of the information but stated no position on Insurance Coverage.  Id. at *3.  Making a long story short, so to speak, some Timberlane Terrace property owners retained an attorney who sent the Plastows a letter.  Thereafter, the Plastows sued all 87 Temple Terrace property owners asserting exclusive rights to the beach on Lake Michigan.  Twenty-five of the defendants from Temple Terrace counterclaimed against Mr. and Mrs. Plastow, who again put the Title Insurance Company on notice.  Once again the Plastows demanded a defense and indemnity.  This time, the Title Insurance Company denied all Coverage, not because the claims from Temple Terrace were not covered in the first place, but because of two of the exceptions in this Title Insurance Policy.  Id. at *5.

   In an interesting application of Insurance Policy rules of interpretation, the Federal Court treated the exceptions as Exclusions are treated under Michigan Insurance Law:  These Title Insurance Policy exceptions were not "clear or specific" and Exclusions which are not clearly and specifically stated raise doubts about their application which, under Michigan law, are to be resolved in favor of the Policyholders.  Accordingly, in this case the Federal Court declared "as a matter of law" that neither exception applied to exclude the Defendant's Duty to Defend or its Duty to Indemnify, and held that the Plastows' Motion for Partial Summary Judgment should be granted accordingly, and further held that the Defendant was guilty of a Breach of Contract.  Id. at *9 - *11.  The Federal Judge concisely summarized her holding in this case as follows, as the Court entered Judgment for the Plastows:

     In sum, the claims asserted against Plaintiffs by the Timberlane Terrace property owners were covered by the general terms of the Policy, and the coverage was not negated by the coverage exceptions on which Defendant relies.

Id. at *10.

    Please Read The Disclaimer.

 

Collapsing Ethanol Production: No Business Interruption Found, New Collapse Trial.

     KAAPA Ethanol owned and managed an ethanol production plant.  KAAPA bought an "All Risk" Property Insurance Policy from Affiliated FM Insurance Company.

   Right after ethanol production began, the KAAPA plant stopped producing ethanol.  "[S]torage tanks began to lean, their foundations began showing visible signs of distress, and their supporting concrete walls sunk into the ground."  KAAPA Ethanol, LLC v. Affiliated FM Insurance Co., 2011 WL 5217207 *1 (8th Cir., Opinion Filed November 3, 2011), Download KAAPA Ethanol, LLC v. Affiliated FM Insurance Co. (8th Cir. Case Nos. 10.1929, 10.2071, Opinion Filed Nov. 3, 2011) PUBLIC ACCESS. KAAPA claimed Insurance Coverage including Business Interruption Coverage.  Affiliated denied the entire claim, "citing the faulty workmanship and settling exclusions."  Id. at *2.

   At Trial, a Jury awarded KAAPA $4 Million for its repair costs and other claimed losses, but gave KAAPA a zero on the Business Interruption Claim.  Id. at *1.

   Both KAAPA and Affiliated appealed to the Eighth Circuit Court of Appeals.  The Federal Appellate Court addressed only "collapse" issues of Insurance Coverage under All Risks Property Insurance Policies governed by Nebraska law.

   The District Judge instructed the Nebraska Insurance Coverage Jury in that case as follows:

   16. The insurance policy provides coverage for loss or damage caused by collapse. “Collapse” means substantial impairment of the structural integrity of a building or any part of a building. A structure or part of a structure does not need to fall down or be in imminent danger of falling down in order for it to have “collapsed,” nor do you need to find that the structure was either abandoned or taken out of use.

Id. at *2.  [Emphasis added.]  Affiliated objected to the italicized sentence in the Trial Court's Jury Instruction 16.  Affiliated argued that this was not a correct statement of Nebraska law on the subject of when a covered collapse takes place.   The appellate court agreed that this Jury Instruction was erroneous.  Further, the appellate court held that the Trial Court's error "prejudiced Affiliated's defense of this critical coverage issue; therefore, a new trial is necessary."  Id. at *4.

   According to the Eighth Circuit panel in this case, Nebraska already follows the majority view that a covered "collapse" under an All Risks Property Insurance Policy requires "material impairment."  Id.  Noting that collapse coverage has appeared in First-Party Insurance Policies for more than half a century, Courts have split over whether collapse coverages should include an "imminence" requirement.  The Courts that impose an "imminence" requirement on collapse coverage hold that "that requirement 'is consistent with the policy language and the reasonable expectations of the insured' and 'avoids both the absurdity of requiring an insured to wait for a seriously damaged building to fall and the improper extension of coverage' that would convert the policy 'into a maintenance agreement.'”   Id. at *5, quoting a California Court and thereafter citing to cases decided in New Jersey, the Ninth Circuit, the Third Circuit, and Delaware.

   In KAAPA Ethanol, a diversity case, the Eighth Circuit predicted that the Nebraska Supreme Court "would adopt some sort of imminence requirement in applying the material impairment standard" to determine whether there was a covered "collapse" under All Risks Property Insurance Policies.  Accordingly, the Appellate Court reversed and remanded for a New Trial on Collapse Coverage Issues in that case.  Id. at *6.

   PACER, the Online Docket of the Federal Courts, reflects that both a Motion for Rehearing and a Motion to Certify Question of State Law have been filed and are pending since this decision was entered.

Please Read The Disclaimer.

 

Reconsideration Motion Okay When Reasonable Expectations Doctrine Was Arguably Misapplied.

   In Dare Investments, LLC v. Chicago Title Insurance Co., 2011 WL 5513196 (D.N.J. November 10, 2011) Download Dare Investments, LLC v. Chicago Title Insurance Co. (D.N.J. Case No. 10.6088, Order Filed November 10, 2011) PUBLIC ACCESS, STATED NOT FOR PUBLICATION Download And Opinion Filed of even date (November 10, 2011) ALSO PUBLIC ACCESS, the Federal Court held that a Motion for Reconsideration was correctly filed and argued, because it was based on an arguable misapplication of law by the Court the first time.

   The legal doctrine applied in that case is the Doctrine of Reasonable Expectations for Insurance Coverage in New Jersey.

   The Federal Court in that case also held, however, that it was right the first time.  The Motion for Reconsideration was denied.

 

   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

Please Read The Disclaimer.

 

California Title Insurance First-Party Coverage: ...

,,, Held:  Not for Perfect Title, No Estoppel.

   In Dollinger Deanza Assoc's v. Chicago Title Insurance Co., 2011 WL 405915 *7-*8 (Cal. 6th DCA September 9, 2011),  Download Dollinger Deanza Associates v. Chicago Title Insurance Co. (Cal. 6th DCA Case No. H035576, Opinion Filed Sept. 9, 2011) PUBLIC ACCESS, NOT OFFICIALLY PUBLISHED IN CALIFORNIA, the California Sixth District Court of Appeal held that Title Insurance is not issued in California for perfect Title but for Indemnity vs. a defect in Title.

   Further, there is no exception that applies to Title Insurance Companies from the rule that Insurance Coverage cannot be made to exist by Estoppel or Waiver.  Title Insurance is a First-Party Coverage and there is no exception to the general rule for Title Insurance, the California Appellate Court held.  Id. at *14-*15.

Please Read The Disclaimer.

DJA Discovery of Other Lawsuits Involving Same Policy Language.

   If your client is at a loss in Declaratory Judgment litigation over the opposing party's involvement in other lawsuits involving the same Insurance Policy language, ask the opposing party.  You may be able to compel an answer to your question, at least if the opposing party actually has such information in the first place.

   An answer to the following Interrogatory was compelled in Clean Earth of Maryland, Inc. v. Total Safety, Inc., 2011 WL 4832381 *5 (N.D.W. Va. October 12, 2011)(Seibert, USMJ), Download Clean Earth of Maryland, Inc. v. Total Safety, Inc. (N.D.W. Va. Case No. 2.10.cv.119, Oct. 12, 2011)(Seibert, USMJ):

With respect to any policy language relied upon by you in your coverage counsel's letter dates [sic] April 14, 2010 to Total Safety, please list any and all suits filed by or against you in the last ten years involving a dispute over that same language.

   In practice, of course, getting an answer to such a question means that the opposing party is capable of answering it.  In other words, there can only be an answer to such a question where the opposing party in fact has been a party to lawsuits "filed by or against you in the last ten years involving a dispute over that same language."  Compelling an answer to a question of this kind is in practice limited to Insurance Companies, or perhaps large Corporate Policyholders.  It is not for everyone.

   The online docket of this lawsuit on PACER reflects that Westchester Surplus Lines Insurance Co., "Total Safety's liability insurer," has filed objections to the U.S. Magistrate Judge's decision.  Westchester's objections are pending at the time of this post.

Please Read The Disclaimer.

Three Rules and a Fact: Florida Declaratory Judgments of Insurance.

   Two rules of law were applied and one additional rule of law was observed by the Federal District Judge in Ocean's 11 Bar & Grill, Inc. v. Indemnity Insurance Corp., 2011 WL 3843931 (S.D. Fla. August 26, 2011).  This is an action filed by Ocean's 11 under an otherwise unidentified "liability policy" providing Coverage for assault and battery according to the Policy terms.  Ocean's 11 filed a complaint in which it alleged two counts in Florida State Court as Indemnity's Policyholder:  (1) Declaratory Judgment and (2) Breach of Contract.

Two rules of law were applied; one was noted and after that, was applied in silence.

   The first rule of law applied after removal to Federal Court was that a Declaratory Judgment Action in Florida is valid over an unambiguous Insurance Contract and to determine facts in some cases, whether the DJA is filed by an Insurance Company or, as here, by a Policyholder.  Id. at *2-*3.

   Indemnity presented this case for decision on a Motion to Dismiss.  Indemnity next argued that the DJA should be dismissed based on a rule known to all experienced Insurance lawyers, which is that a DJA requires allegations of "doubt" about the meaning of the Insurance Policy at issue, whereas a count or claim for alleged Breach of Contract requires an allegation of, essentially, 'no doubt at all.'  In this peculiar case, the Federal Court noted that DJAs are ordinarily filed as DJAs with no accompanying Breach of Contract claim, as in this case.  Id. at *4.  Here, "if the Court dismissed the declaratory-relief claim, Plaintiff's relief request [for what the Court labeled "an injunction or specific performance"] will be wiped out in part....  As a result, at this point, the Court will allow the two claims to move forward in tandem."  Id.  [Emphasis added.]

   A third rule of law was noted but not expressly applied by the Federal Court in this case.  The Federal Judge noted that recently, "federal courts in Florida have declined to apply Florida's Declaratory Judgment Act -- declaring it to be procedural only -- and have instead applied the Federal Declaratory Judgment Act."  Id. at *2 n.2.  The Federal Judge further noted that "Florida, however, states the relevant statutes, those contained in Chapter 86, are substantive."  Id. citing Fla. Stat. § 86.101.  The Federal Court proceeded to address the present DJA under Chapter 86 of the Florida Statutes.

"That's a Fact, Jack."

   Indemnity Insurance attempted to unilaterally rescind the Policy before Ocean's 11 filed suit.  When Ocean's 11 filed suit, it asked for "an injunction or specific performance" in a Declaratory Judgment count, and for money damages in a Breach of Contract count.  Its complaint apparently presumed the existence of an Insurance Contract for a Court to declare.  The Federal Court in this case apparently agreed.  After mentioning the Indemnity Insurance Company "rescission by letter," id.  at *1, the Court proceeded to declare the Contract and to simultaneously entertain the Breach of Contract action as well.

Please Read The Disclaimer.

 

 

When Facts Destroyed Title Insurance Defense For Unpaid Liens.

   A recent decision illustrates the holdings reached by some Courts that where there is no Duty to Indemnify, there cannot be any Duty to Defend either.  The case of Home Federal Savings Bank v. Ticor Title Insurance Co., 2011 WL 4479080 (S.D. Ind. September 27, 2011) involved an unpaid Lien of 6 Million Dollars.  The Policyholder of a Title Insurance Company was the party which allegedly had a duty to pay the lien, which was perfected through the forum State's Mechanic's Lien Law.  Id. at *3. 

   Ordinarily, a Title Insurance Policy will exclude liabilities arising from Mechanic's Liens.  So did the Policy at issue in this case.  Id. at *2.  However, the Policyholder, Home Federal, protected its financing on the particular commercial construction project at issue in this case, by purchasing "a mechanic's lien endorsement," reprinted below for convenience.

   Home Federal brought the present lawsuit against Ticor Title on three alleged Claims, including an alleged breach of the Duty to Defend, an alleged breach of the Duty to Indemnify, and alleged Bad Faith.  The parties both filed Motions for Summary Judgment "specifically addressed to the duty to defend and the duty to indemnify."  Id. at *4.

   The Federal Judge in this case first looked at the issue of whether there was a Duty to Indemnify under the undisputed facts.  The Court determined that there was none, and that ruling otherwise would provide Home Federal with a '$6 Million windfall,' in the Court's words, for not paying the lien in question.  See id. at *5 - *6.

   Then the Federal Judge addressed the question of whether a Duty to Defend existed.  Ordinarily, the existence of a Duty to Defend is determined by comparing the underlying allegations against the Insured, with the provisions of the Policy at issue.  Here, once the Federal Court determined the separate issue of no Duty to Indemnify based on the undisputed record facts, the Court determined in one sentence that Ticor Title therefore "necessarily had no duty to indemnify Home Federal either."   Id. at *6.

   Two rulings of consequence are inherent in this one holding.  First, it bears repeating that the Court's decision in this case is not unique.  There are many decisions in which Courts have determined that once there is no Duty to Indemnify, there is no Duty to Defend either.  In doing so, however, they seem to ignore the distinction between determining the existence of a Duty to Indemnify based upon the actual facts, versus the ordinarily separate question of determining the existence of a Duty to Defend based upon the underlying allegations compared with the Policy provisions at issue.  In this particular case, the Court's holdings seem to have been totally correct for the parties involved.  The result, however, is less interesting to an outsider than the way in which the Court got there.

   Second, the Federal Court in this case took a holding generated in standard-form Liability Insurance Policy Declaratory Judgment Actions, namely, in DJA's involving Commercial General Liability Insurance Policies with standard, widely used forms and endorsements, and without discussion applied that holding -- where there is no Duty to Indemnify, there cannot be a Duty to Defend -- to this case involving a Title Insurance Policy, which has its own unique Policy provisions and which may or may not be based on standard, widely used Forms and Endorsements.

   Here, before closing, is the Mechanic's Lien Endorsement under which Home Federal argued for Coverage from Ticor Title in this case:

 Anything contained in said policy to the contrary notwithstanding, the Company insures against loss or damage incurred by the insured by reason of the enforcement or attempted enforcement of any statutory lien for labor or material arising from construction contracted for and/or commenced on the land prior to, at, or subsequent to the effective date of said policy, and any extension of said date, as having priority over, or sharing on a parity with, the lien of the insured mortgage for that portion of the proceeds of the loan secured thereby advanced for the purpose of paying the costs of the acquisition of the land and the development of and the construction of improvements on the land, including by [sic] not limited to the cost of labor or materials incurred in connection therewith. At the time of each disbursement of the proceeds of the loan, the title must be searched by Royal Title Services, Inc., down to such time, for possible liens or objections intervening between the date hereof and the date of such disbursement.

This endorsement is made a part of the policy or commitment and is subject to all the terms and provisions thereof and of any prior endorsements thereto. Except to the extent expressly stated, it neither modifies any of the terms and provision of the policy or commitment and prior endorsements, if any nor does it extend the effective date of the policy or commitment and prior endorsements or increase the face amount thereof.

 

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Four For Other Insurance: Recent Primary vs. Excess Cases.

    An "other insurance" clause is found in an Insurance Policy that would otherwise be Primary.  The purposes of an other insurance clause are many, and its language changes depending on the purpose it was intended to serve in the Policy at issue.

    Entire Books and chapters of Books have been written on the subject of "other insurance" clauses.  See, for example, Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith Ch. 6 "Relation of Primary Insurer With Excess Carriers and Reinsurers" (West Publishing Co. Third Edition 2011).  In general terms, language of an "other insurance" clause as distinct from an "escape clause," for example, will be something like the following language which is adapted generically from the specific language appearing in published cases:

   This policy is primary except when certain other insurance applies.  When there is other primary insurance written on the same terms or basis as this policy, we will share pro rata with that other insurance to pay the covered amounts you may be legally obligated to pay as damages.

     However, when certain types of other insurance are available to you as an insured under them, we will be excess of all such other insurance.

    Insurance Companies which issue Policies with "other insurance" clauses contest their interpretation all the time.  This may be one reason why Books, and Chapters of Books, have been written about them.  Recently, four newly decided cases have contributed to the continuously growing collection of reported judicial interpretations of "other insurance" clauses.

 1.  DIFFERENT TYPES OF COVERAGES, SAME INSURED.

    In Federal Insurance Co. v. Firemen's Insurance Co., 2011 WL 2710458 (D. Md. July 11, 2011), the Court followed Fourth Circuit case law in a conflict situation.  The Court recognized that there is a conflict of authority over the issue of whether "other insurance" clauses need to be compared when the Policies containing them cover different risks, i.e., afford different types of coverages.  The Court in this case followed Fourth Circuit holdings that require the different Policies to cover the same risk in order for courts to apply the Policies' "other insurance" clauses.  Id. at *4 - *5.  Here, the Court refused to compare two Policies' other insurance clauses, having previously found one to be a CGL or Commercial General Liability Policy, and a second to be a D & O or Directors and Officers Liability Policy, even though both Policies were issued to the same Insured.  Id. at *3.

  2.  SAME TYPES OF COVERAGES GENERALLY, SAME OR DIFFERENT INSUREDS, BUT ONE INSURANCE POLICY IS AN UMBRELLA.

    In California and in this country, it is settled law that where one of the Policies to be compared is an Umbrella or True Excess Policy, all bets are off.  There is nothing to compare.  Umbrella Policies are simply not on the same level of Coverage as Primary Policies which have an other insurance clause, and the Courts will not compare the two.  See Continental Casualty Co. v. St. Paul Surplus Lines Insurance Co., 2011 WL 1103345 *6 (E.D. Cal. March 22, 2011).  In pure and simple terms, wrote the Federal Court, in previous California State case law, the California Courts settled the issue that

 ... the umbrella carrier was entitled to full reimbursement from a primary insured [sic] for sums paid out on behalf of a mutual insured regardless of the terms of the underlying indemnity agreement between the insureds.  This holding is conclusive with respect to the present matter.

 Id. at *8.  Parenthetically, this decision is rich with rulings on Insurance Coverage issues related to Primary - Excess Carriers.  Future posts will address them here.

3.  WHERE UMBRELLA EXCLUSION APPLIES, NO NEED TO COMPARE ANYWAY:   NO UMBRELLA POLICY COVERAGE AT ALL.

    In some cases, the outcome is determined not by a Primary vs. Excess Carrier contest over levels and layers of Coverage, but the outcome may be determined after such an altercation simply by applying an Umbrella Policy Exclusion.  If an Exclusion in the Umbrella Policy appears to the Court to apply, then the Court will apply it regardless of whether there is a Primary Policy in the case.  Such was the case in Amerisure Insurance Co. v. Scottsdale Insurance Co., 2011 WL 2446277 *4, * 9 (S.D. Ind. June 15, 2011)("Having concluded that the cross liability exclusion applies and renders the Scottsdale umbrella policy inapplicable, the Court need not address these other arguments herein.').

 4.  WHETHER INSURANCE POLICY APPLIES IN FIRST INSTANCE UNDER ITS INSURING AGREEMENT, IF A QUESTION OF FACT, THEN THERE WILL BE A TRIAL.

    The heading was the holding in Employers Mutual Casualty Co. v. Arbella Protection Insurance Co., 24 A.3d 544, 554, 2011 WL 2693228 *10 (R.I. July 12, 2011).  In this case, the Supreme Court of Rhode Island reversed a Partial Summary Judgment in favor of the Plaintiff.

    The Supreme Court pointedly noted the Trial Court's observation that there was no Expert Testimony to guide the Court, although the Trial Court held that the Plaintiff had no legal duty to introduce Expert Testimony in this "declaratory judgment action related to issues of coverage."  Id. at 552, 2011 WL 2693228 at *8.

 5.  ONE MORE HOLDING OF INTEREST, FROM THE FOUR RECENT CASES:

DIFFERENT RULES OF INTERPRETATION WHEN THE COVERAGE CONFLICT IS BETWEEN TWO INSURANCE COMPANIES?

   Under Indiana law, even apparently where an Insurance Policy is arguably ambiguous, "when the dispute is between an insurance company and a third party (or between two insurance companies), the policy is construed from a neutral stance."  Amerisure Insurance Co. v. Scottsdale Insurance Co., 2011 WL 2446277 at *3 (S.D. Ind. June 15, 2011).

    Whether and when this rule will be applied in other cases by other Courts in other jurisdictions remains to be seen, and will definitely be the subject of future posts here.

 The 22nd Annual Bad Faith Litigation Conference of the American Conference Institute is being held in 2011 in Orlando, Florida.  The author will be speaking.  Here is a link to the American Conference Institute Website Page which features this Conference including registration, if you or someone you know would like to attend.

Please Read The Disclaimer.

Insurance Exclusions Ambiguous, Unambiguous May All Apply.

   Florida's Supreme Court has upheld the standard so-called "Household Exclusion" in an Auto Liability Insurance Policy.  It is not ambiguous, the Court held, and so it can be applied to Exclude all Coverage for Bodily Injury Damages claimed by members of the Additional Insured's household.  State Farm Mutual Auto. Insurance Co. v. Menendez, 2011 WL 3715044 *1 (Fla. Case No. SC10-116, Opinion Filed August 25, 2011; STATED NONFINAL)(authorized password required to access Westlaw).

    Ambiguity in an Exclusion, however, does not necessarily mean that the Exclusion at issue in a given case does not apply.  An interpretation of ambiguity only means that the Insurance Policy provision will be interpreted strictly against the Insurance Company which drafted it.  It may still apply, as in the case of Download Certain Underwriters at Lloyd's, London v. Abundance Coal, Inc. (Ky. Ct. App. Case No. 2009.CA.001283, Order Reversing, Vacating and Remanding) PUBLIC ACCESS, also published as 2011 WL 2496203 *3 - *5 (Ky. Ct. App. June 24, 2011; case involved Commercial General Liability Insurance Policy's standard "Absolute Pollution Exclusion" in this regard)(authorized password required to access Westlaw).

 The 22nd Annual Bad Faith Litigation Conference of the American Conference Institute is being held in 2011 in Orlando, Florida.  The author will be speaking.  Here is a link to the American Conference Institute Website Page which features this Conference including registration, if you or someone you know would like to attend. 

Please Read The Disclaimer. 

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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AHIP Not Hip on Plain Language Health Insurance.

   American Health Insurance Plans, a trade organization, demands that the United States Government block the implementation of so-called simple, easier-to-understand Policy Forms and Endorsements, at least for awhile yet.  The industry does not have the time to provide consumers with plain language Health Insurance forms, AHIP says.  See Susan Jaffe, "Health Insurers Seek Delay of New Consumer-Friendly Coverage Forms" (Kaiser Health News, Thursday, August 18, 2011).

   If AHIP announces that Insurance Policies cannot be written in plain language, you have got to wonder.

The Author is Co-Chair of the Health, Life and Disability Insurance Subcommittee of the American Bar Association's Insurance Coverage Litigation Committee.

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