Claims And Issues

WORK PRODUCT DOES NOT CONCEAL COMMUNICATIONS UNLESS "NEED TO KNOW."

In Baxter Int'l, Inc. v. AXA Versicherung, 320 F.R.D. 158 (N.D. Ill. 2017), the issue was discoverability in the insured's action for indemnification.  The defendant insurer failed to show in that case that correspondence with its co-insurers and reinsurers was protected by the work product doctrine.  More specifically, the carrier's correspondence at issue was concerned with how much coverage was available to the insured with respect to the underlying claims.

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"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.

HELD: NO PRIVILEGE, NO WORK PRODUCT OVER REPORTS TO REINSURER.

          Two requests for production to a Director's and Officer's Liability Insurance Company, Progressive, were at issue in a recent decision by a U.S. Magistrate Judge, Progressive Casualty Insurance Co. v. Federal Deposit Insurance Corp., 2014 WL 4168477 (N.D. Iowa August 22, 2014)(Strand, U.S.M.J.).  They were requests for production of:

 

12.  All documents relating to the purchase, placement or ceding of any reinsurance by you [the liability insurance carrier] that relate to the Policy, including all status reports provided by you to such reinsurance companies and memoranda relating to meetings with reinsurers.

 

23.  All documents relating to any communications with any reinsurer about the Claims.

The discovery pleading defined "Policy" as the liability insurance policy at issue in the case, and "Claims" as "'any and all demands for insurance coverage and/or payment made by the FDIC and/or any officers or directors of Vantus Bank."  Progressive Casualty Insurance Co. v. Federal Deposit Insurance Corp., 2014 WL 4168477 *1 (N.D. Iowa August 22, 2014)(Strand, U.S.M.J.).

          The liability insurance company that received these requests contended that it could redact (black out) parts of reinsurance communications on the grounds of either attorney-client privilege or work product immunity or both, after a previous Order directing production of  the requested documents.

          The Court overruled objections based on work product immunity from discovery.  First, the Court agreed with FDIC, the plaintiff in this case and the party that propounded the requests, "because the information was created in the ordinary course of Progressive's business":

 The documents were prepared and distributed to the reinsurance companies and broker for business purposes. Progressive itself admits that the documents were provided for case updates pursuant to the reinsurance agreements, or in response to specific requests, and included the matter's history, its present posture, current activity, assessments of coverage and liability issues, amounts paid and reserve, and plans for future handling. Doc No. 75 at 10. Those are all typical business purposes for the reinsurance industry. Progressive has not met its burden of showing that these documents were “prepared or obtained because of the prospect of litigation.” [Citation omitted.]  Therefore, they are not subject to protection under the work product doctrine.

          The Court further overruled objections based on the attorney-client privilege, for two reasons.  First, "Progressive waived any applicable attorney-client privilege when it distributed the communications to its reinsurers and broker."  Progressive Casualty Insurance Co. v. Federal Deposit Insurance Corp., 2014 WL 4168477 *4 (N.D. Iowa August 22, 2014)(Strand, U.S.M.J.).

          Second, even assuming that the so-called "common interest doctrine" applied under the circumstances, still that doctrine as defined by the Court requires an identity of legal interests, not commercial interests.  "The relationship between Progressive and its reinsurers and broker is commercial and financial in nature, not legal."  Progressive Casualty Insurance Co. v. Federal Deposit Insurance Corp., 2014 WL 4168477 *4 (N.D. Iowa August 22, 2014)(Strand, U.S.M.J.).

          Based on the record before it, the Court granted the plaintiff's motion to compel production of the requested documents without redaction in this case.

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

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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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Related articles

Policyholder Attorney's Fees Award in a Florida "Confirmed Sinkhole Case".

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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Related articles

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

Derivative Investments Dive, Reinsurance Raises Warren Buffett Insurance Profits.

   In the past, Mr. Warren Buffett famously described derivatives as weapons of financial destruction.  Now, derivatives are partially accountable for a drop in 3Q 2011 Profit reported by Berkshire Hathaway, Mr. Buffett's huge conglomerate.  See "Derivatives Cut Into Berkshire Hathaway's Profit" p. B5, col. 1 (Reuters Report published in New York Times Nat'l ed., "Business Day" Section, Saturday, November 5, 2011).

   Other factors nibbled at the margins, however.  "But Berkshire was hurt, like many other insurance companies in particular, by sharp declines in a broad range of market values."  Id.

   Reinsurance provides Mr. Buffett's companies with protection against profit-killing policies, however (pun intended).  "Profits in the insurance business rose as a rebound in reinsurance results offset sharp declines at the auto insurer Geico."  Id.

 Please Read The Disclaimer.

Guest Blog: Disaster Preparedness as 911 Approaches, Including Insurance Issues.

   Madeline Meacham, Esquire, Deputy County Attorney in Boulder County, Colorado, is a Member of the ABA-TIPS Disaster Preparedness and Response Initiative.  She has requested that I post the following on this site.  For the first time in recorded history, I give you this Guest Blog on Insurance Claims and Issues, and I am happy to do it.

TEN YEARS AFTER 9/11

   Many of us remember exactly where we were on September 11, 2001. The tenth anniversary of 9/11 is an occasion for reflection on how our world has changed.  Planning for disaster relief and recovery, security, victim compensation, insurance practice, employment practices, are all dramatically different ten years later.  Since 9/11, the United States and most of the industrialized world have expended enormous resources to attempt to protect their citizens from terrorist attacks.  To what extent have these efforts succeeded?  At what cost?  Can they be improved?  Can they be sustained? How much are citizens willing to pay for this protection in terms of dollars out of their pockets and sacrifice of their civil liberties?   What are the elements of a good Disaster Plan for families, business and communities?   What injuries are compensable after a disaster? 

   What does the landscape look like, ten years later?  Join us in discussing these issues in a series of Commemorative September 11^th teleconferences, at http://www.americanbar.org/groups/tort_trial_insurance_practice/cle_programs.html

   The USAPATRIOT Act and the Department of Homeland Security, the much strengthened Foreign Intelligence Surveillance Act, preventive detention, military commissions,  use of military force to effect regime change, use of drones and special operatives to effect assassinations are well accepted.  https://www.stmarytx.edu/ctl/pdf/PaceLR.pdf

   The Cost of Wars since 2001 is in thirteen figures.  http://costofwar.com/en/

   Plaintiff Mary Bavis, on behalf of her son Mark who was in the United plane that struck the second tower, may be allowed to proceed to trial.  This would be the first case from September 11, 2001 to be tried. The lawsuit seeks to recover terror damages in addition to damages for his wrongful death. Judge Hellerstein, presiding, said his thinking is tending toward allowing terror damages. The Bavis lawsuit has been widely watched over the nearly 10 years since it was filed.  Scheduled for trial in November 2011, it would be the only wrongful death lawsuit to proceed to trial stemming from September 11, 2001. http://www.nytimes.com/2011/07/28/nyregion/family-in-911-suit-may-be-able-to-seek-damages-for-suffering.html

   In January 2011, this year, Congress enacted the Zadroga Act, a new act to provide compensation for the rescue workers, the cleanup workers, the construction workers, the volunteers, the workers on the barges carrying the debris, and workers at the Staten Island landfill where the twin tower rubble was entombed. This act also provides coverage for a larger geographic area than did the initial September 11th 2001 Victim's Compensation Act.  The Act, named after a police detective who took part in the rescue efforts and later developed breathing complications, provides $4.3 billion to compensate and treat persons with 9/11 related illnesses. Regulations governing the Act are in the process of being finalized.  http://cityroom.blogs.nytimes.com/2011/07/01/911-health-care-law-takes-effect/

   Emphasis on disaster preparedness, including insurance has increased dramatically.  Reinsurers are exquisitely tuned in to the shifting political forces that have potential to trigger, and the market responds accordingly.

http://www.fema.gov/plan/index.shtm

http://www.guycarp.com/portal/extranet/insights/reportsPDF/2011/Terrorism%20Report%202011.pdf?vid=

 

Replacing Cancelled Homeowners and Other Property Insurance Policies in Florida.

   Many Homeowners and some Commercial Property owners are receiving cancellation notices from their Homeowners and Property Insurance Carriers in Florida.  Mr. Tim Shaw, owner of Tim Shaw Insurance in Fort Myers, is quoted in a newspaper report providing this potentially sage advice:

   He said when looking for a new policy, a consumer should find out how much of a surplus a company has to pay claims and how many "events," such as hurricanes, its reinsurance policy will cover in a year.

Laura Layden, "State Farm Sheds 125,000 Florida Homeowner Policies, Some in Collier, Lee" (naplesnews.com, published Sunday, July 25, 2010).

   If I learn of any other way to find these things out, in addition to simply asking an insurance agent to tell me, I will post that information here, but right now I do not know of any other way to find out (1) how much surplus (reserves) is or are available to a given Homeowners or other Property Insurer, and (2) what the terms are of their Reinsurance Policies.

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).  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".

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"Unauthorized Insurer" Purchasing Reinsurance in Florida Can Sue As "Insured".

    Florida, like many jurisdictions, has a Statute which prohibits "suits by unauthorized insurers".  In Florida, the Statute in question is Florida Statute Section 626.903, accessible here.  Section 626.903 provides in essence that "no unauthorized insurer shall institute, file, or maintain, or cause to be instituted, filed, or maintained, any suit, action, or proceeding in this state to enforce any right, claim, or demand arising out of any insurance transaction in this state."

    The purpose and wording of this Statute are regulatory.  It is part of a scheme regulating unauthorized insurers in Florida, and encouraging them to become authorized.  The Florida Statute does not reach status in the sense that no unauthorized insurer can ever seek redress in the Florida Courts about anything simply because it, the Plaintiff, is an unauthorized insurer.

    Thus, it was recently held by Florida's Fourth District Court of Appeal that Section 626.903 did not bar an unauthorized insurer, Advantage General Insurance Co., from suing a Reinsurance Company for Coverage in Florida State Court after the Reinsurer denied all Coverage:  "However, when Advantage purchased reinsurance from KILN & QBE in Florida, Advantage was the insured.  In making this purchase of reinsurance, Advantage was not 'transacting insurance' within the meaning of the Florida Insurance Code ....  Since Advantage filed suit as an insured, not an insurer, we conclude that section 626.903 does not bar Advantage's claim against KILN & QBE."  Download Advantage General Insurance Co. v. KILN.QBE International (Fla. 4th DCA Case No. 4D08-1944, Opinion Filed April 29, 2009).  See attached slipsheet opinion at 2.  [Emphasis by the Fourth District Court of Appeal.]

Florida Statutes, Cases, and Administrative Agency Rules and Regulations, along with other authorities, are freely accessible through the portals at www.dennisjwall.com.

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Reinsurance Coverage Extends to North Korea.

    Reinsurance Coverage has a broad reach.  Recently, Korea National Insurance Company, owned by the government of North Korea, settled an Insurance Coverage case filed in London, in which reportedly 95% of a claimed loss will be paid by its Reinsurers.

    The real news here is that KNIC, which many would truly consider a "captive" Insurance Company, i.e., the government of North Korea, obtained and paid for Reinsurance Policies.

    The Reinsurance Policies obtained by North Korea were with Allianz, Generali, and several Lloyd's of London syndicates, among others.  However, one of KNIC's Reinsurers, Aviabel, reportedly did not join in the settlement.  See Sundeep Tucker, "N Korea State Insurance Group Wins Case" (Financial Times.com, Dec. 10, 2008).  [Note:  Despite the headline of this linked FT.com report, the matter was settled; the London case did not therefore result in a judgment of any kind as a result of that settlement, apparently.]

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Reinsurance Premiums Predicted to Rise With Exposure.

    Reinsurance Premiums are predicted to rise in double digits in the New Year.  Andrea Felsted, "Embattled Insurers Ready to Benefit From Lessons Learned" (Financial Times.com, Saturday, January 3, 2009).

    This prediction has peculiar force concerning Reinsurance Premiums that are widely expected to increase for Insurance Companies exposed to paying Claims following Hurricanes, including onshore Property and offshore Property which in turn includes oil and gas infrastructure.  See, e.g., id. among other recent news reports.

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Hurricanes Not Buffeting Florida, Benefits Both Florida and Mr. Buffett.

    After Hurricanes Charley, Ivan, Jeanne, Rita and Wilma et al. pummeled Florida properties in recent years, the Florida Legislature established a fund for the avowed purpose of enabling Florida Property Owners to purchase Property Insurance Coverage.  The fund was so large that there were warnings that with one Catastrophe, the Taxpayers of Florida would potentially be on the hook for more money to fund CatClaims than anyone had yet dreamed of.

    To its credit, the State of Florida purchased a reported "option agreement" from Mr. Warren Buffett's Berkshire Hathaway Inc.  In exchange for $224 Million, Berkshire Hathaway agreed in the event of a Catastrophe "to buy $4 billion of bonds to finance storm recovery".  That agreement expired as of December 31, 2008.  Although it has been characterized as another shrewd business move for Mr. Buffett, see, e.g., Hugh Son, "Buffett Wins $224 Million Storm Bet With Florida (Update 2)" (Bloomberg.com, Monday, December 29, 2008); Tom Petruno, "Buffett's Berkshire Scores on Florida Hurricane Season Bet" (Money & Co. Blog, Los Angeles Times Online, Monday, December 29, 2008), with all due respect to Mr. Buffett it was also a shrewed business move under the circumstances for Florida Taxpayers as well.

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Reinsurance Rates, Writedowns, and Catastrophe Claims -- or Not.

     The Reinsurance industry is in good shape reports Moody's Investors Service.  Reinsurance rates drop when there are fewer Hurricanes or other Catastrophe Claims, in basic terms, and increase when there is more demand for Reinsurance such as in years when there is more and greater damage from Hurricanes.  Reinsurance rates are in their second year of decline, at least until Hurricane Gustav arrived.  Moody's takes the declining two-year rate period into account in its report, noting that Reinsurance Companies have also taken the two-year rate decline into account.  They have the financial strength to earn Moody's expectation of a stable outlook despite lower rates for Reinsurance, and despite a recession in the United States, "and the credit market disruption."  Oliver Suess, "Strong Financials Let Reinsurers Weather Turmoil, Moody's Says" (Bloomberg.com, Friday, September 5, 2008).

    The world's two largest Reinsurance Companies are Munich Re and Swiss Re, measured by net Reinsurance premiums written.  Oliver Suess, "Munich Re and Swiss Re Top S&P's List of Largest Reinsurers" (Bloomberg.com, Saturday, September 6, 2008).  They both have a different story to tell.  Both reportedly want to raise rates to "reverse" the two-year "20 percent decline in rates".  Oliver Suess and Jon Menon, "Munich Re May See Higher Rates, Profits in Wake of 2008 Storms" (Bloomberg.com, Friday, September 5, 2008).  It is reported that Munich Re's share price is down 12% compared to 2 years ago, and that Swiss Re's share price is down 29% over the same two-year period.  Id.

    Further, a report recently issued by Standard & Poor's seems to support the Reinsurers and contradict Moody's.  S&P's report contains the opinion that Reinsurers may experience "material reduction" in Underwriting Profits if they are not allowed to raise their rates, now.  Oliver Suess, "Munich Re and Swiss Re Top S&P's List of Largest Reinsurers" (Bloomberg.com, Saturday, September 6, 2008).  The culprit seems to be increased claims costs.  Id.  More specifically, claims costs increased with a rising "frequency and severity of claims" apparently since 2006 and 2007.  Oliver Suess, "Reinsurers Need Higher Rates to Offset More Claims, S&P Says" (Bloomberg.com, Saturday, September 6, 2008).  Reportedly, Hurricane Gustav, for example, caused "insured damages of about $3 billion to $7 billion ... according to estimated [sic] by modeling firm Eqecat Inc."  Id.

    (Parenthetically, "insured damages of about $3 billion to $7 billion" is a very broad range indeed.  Until September, 2008, claims incurred and reported were listed in those terms, i.e., claims incurred and reported.  Claims are not shown nor reported "according to estimates by modeling firms".)

    Perhaps reflecting a truer reality, Swiss Re recently said itself, that its 2Q 2008 Profit declined 53% because of "writedowns related to credit-default swaps."  Oliver Suess and Jon Menon, "Munich Re May See Higher Rates, Profits in Wake of 2008 Storms" (Bloomberg.com, Friday, September 5, 2008).

    In fact, in the same linked newspaper report it is also reported that ceding Insurance Companies (inaccurately sometimes referred to in the report as "primary" insurers) themselves accounted for $77 Billion of such writedowns from 2007 through 1Q 2008.  Id.  American International Group ("AIG") alone accounted for about half of that amount, it is reported.  Id.

    In a related or unrelated development, AIG and General Reinsurance Corporation executives were recently convicted of criminal charges of fraud and conspiracy.  Federal prosecutors put the price tag to AIG shareholders "as much as $1.4 billion".  David Voreacos and Jane Mills, "Investors Lost $1.4 Billion in General Re, AIG Fraud, U.S. Says (Update 2)" (Bloomberg.com, Friday, September 5, 2008).

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Thanks for the Insurance and Your Service, Citizen Douglas!

     Thursday, July 31, 2008 is the last day that Mr. Bruce Douglas will serve as the Chair of Citizens Property Insurance Corporation.  Reportedly, Citizens is the largest Homeowner's Insurance Company in the United States that operates as an arm of State Government, and in this case, the State is Florida.

     Citizens also reportedly has 1,200,000 or 1.2 Million Policyholders.  In the 6 years that Mr. Bruce Douglas has been the Citzens Chair, "its exposure to storm damage" has more than doubled, "to $425-billion, but reserves have been rising, thanks to no recent storms."  Mr. Douglas is virtually everyone's dictionary definition of a fine human being.  His public service has been performed with honor.  Consistent peformance of his duties with honor, and a good sense of humor rarely found in those in modern public life, are both on display in this interview by Tom Zucco, "He Leaves Citizens More Stable" (St. Petersburg Times Online, Friday, July 25, 2008).

     Thank you, Bruce Douglas.

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Florida O.I.R. Lifted Suspension of New Allstate Policies...

... The Same Day Florida's First District Court of Appeal Denied Rehearing of its Opinion Upholding O.I.R.'s Order Suspending New Allstate Policies.

     Press reports published on Saturday, May 17, 2008 made it appear that the Florida Office of Insurance Regulation (O.I.R.) lifted its suspension on new Allstate Insurance Policies on Florida on the day before, or Friday, May 16, 2008.  As you will recall, the O.I.R. issued its Suspension Order in the first place because Allstate failed to comply with O.I.R. subpoenas for various groups of documents including unauthorized Catastrophe Computer Models purchased by Allstate in connection with its Premium Rate Increase requests.

     According to the O.I.R., it announced a stay of its Suspension Order on Wednesday, May 14, 2008, immediately after the Florida appellate court denied rehearing of its Opinion upholding the O.I.R. Order.  The reason given by the O.I.R. was its receipt of a sworn affidavit from Allstate "certifying that it has complied with Florida law by freely providing all documents requested" by the O.I.R.  See Florida Office of Insurance Regulation Press Release, "Florida Insurance Commissioner McCarty Stays Allstate Suspension, Continuing Compliance Required," Wed., May 14, 2008.

     Dennis Wall, Chair of the Insurance Law Committee, will speak at the Orange County Bar Association Center in Orlando, Florida about Preparing for Hurricane Insurance, on Wednesday, May 21, 2008 from Noon to 1:00 P.M.  The Orange County Bar Association Center is located at 880 North Orange Avenue in Orlando, Florida.

    You are cordially invited to attend this free public event.  Hope to see you there. 

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Preparing for Hurricane Insurance.

    Dennis Wall, Chair of the Insurance Law Committee, will speak at the Orange County Bar Association Center in Orlando, Florida about Preparing for Hurricane Insurance, on Wednesday, May 21, 2008 from Noon to 1:00 P.M.  The Orange County Bar Association Center is located at 880 North Orange Avenue in Orlando, Florida.

    You are cordially invited to attend this free public event.  Here  is a link to the "EVENTS" published about this presentation by the Orlando Sentinel on Monday, May 19, 2008 on page C3, col. 1, in "The Law & You" Section.

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Property Insurance and the Florida Legislature: Reforms or Risks?

    Property Insurance is a focus of the 2008 Florida Legislature.  This is not always to the good, according to an editorial on the subject in an influential Florida newspaper, "Insurance Risks Still Looming" (St. Petersburg Times Online, Thursday, March 27, 2008).

    The editorial highlights many areas of interest addressed by various bills passed or pending in the Florida Senate.  Some of these areas of interest are shared in varying degrees by the Florida House of Representatives and by other State officials such as Florida's current Chief Financial Officer.  Some were put in place by the 2007 Special Session of the Florida Legislature; some are new.  Here are the more significant areas of interest addressed in the editorial:

• Expanding Citizens Property Insurance Corporation.  Citizens is a public corporation owned by the Taxpayers of Florida.  A Senate bill, according to the editorial, would allow Citizens to issue Insurance Policies "insuring homes worth $1-million or more."
• Extending the current rate freeze through 2009.
• Providing incentives through "a $250-million state incentive program" for private Insurance Companies to remove and take over the risk on  Insurance Policies on which Citizens is currently on the risk.
• Reduce Florida's exposure to Reinsurance risk.
• "[R]esponsibly reduce exposure with both the CAT fund and Citizens, which can each assess policyholders when they run deficits."

Time, Hurricanes, the Florida Legislature, and Florida State officials will determine the outcome of these and other proposals.  That is, if there is enough Time.  And whether there is another Year of Hurricanes in Florida.  Much remains to be seen.

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Storm Clouds in Florida: Legislature Divided Over Rollback, Writedowns.

   The current credit crunch and crisis, problems with issuing and insuring the payment of Bonds, and at least one of the questioned credit rating corporations used in the Insurance industry, have recently made appearances together in the Florida Capitol.

   The current credit crunch has appeared together with the specter of a failure in the market for Florida Bonds.  "In light of the troubled housing and credit markets, state leaders have expressed doubt that they'd be able to sell $27 billion in bonds needed to pay storm claims if a Katrina-sized hurricane hit a major population center in Florida."  Julie Patel, "State Legislators Say Property Insurance Law Has Deep Flaws" (South Florida Sun-Sentinel.com, 10:24 PM EDT, Monday, March 24, 2008). 

   In addition, embattled credit rating company Fitch Ratings just issued a timely report.  In its report, Fitch reportedly takes the position that Homeowner's Insurance Coverage would "'effectively collapse'" if there is a Hurricane in Florida in 2008.  The Fitch report comes just as the Florida Legislature is debating whether to writedown and rollback, or extend, the emergency laws it passed in Special Session in January, 2007.

   A majority in the Florida Senate reportedly is in favor of extending and expanding the 2007 Special Laws on Hurricane Insurance.   For example, a majority of the Florida Senate reportedly supports extending a moratorium on Premium Rate Increases by Citizen's Property Insurance Company.  The moratorium or "freeze" on Rate hikes is due to expire on January 1, 2009.    Citizen's is owned and operated on behalf of Florida Taxpayers as a State agency offering circumscribed Homeowner's and other Property Insurance Coverages.  That its offerings became suddenly more popular in 2006 and 2007 was taken then as a sign of a desperate Homeowner's and Property Insurance Market in Florida.

   On the other hand, a present majority in the Florida House of Representatives reportedly opposes extending the moratorium on Citizen's Property Insurance Premium increases.  Further, a majority in the Florida House is reported to support "scaling back the catastrophe fund" that the Florida Legislature rushed into place in its 2007 Special Session.

   More to come in the struggle among and between Premium Rate Increases and the availability of credit, the performance and issuance of so-called Municipal Bonds such as the Florida Bonds in question in the Florida Capitol, and the very existence and availability of Homeowner's Insurance Coverage in Florida.

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Shopping For Alternative Home and Property Insurance.

   Surplus Lines and Condominium Windstorm Self-Insurance Trusts are reported by Julie Patel, in "South Floridians Turn to Alternative Home Insurance" (South Florida Sun-Sentinel.com, Monday, March 10, 2008).  This report is a potentially useful survey of alternatives for Homeowner's and other forms of Property Insurance Coverage in Florida.  The same is true of this handy reference of critical questions to ask regarding Surplus Lines Insurance and regarding Self-Insurance Trusts:  "Do Your Homework on Insurance Carriers" (South Florida Sun-Sentinel.com, Monday, March 10, 2008).

   Similar alternatives can be explored in other places where you or those you represent may be interested.

Please Read The Disclaimer.

Municipal and Other Bond Insurance Issues Affect Government Budgets.

    Many issues affect the issuance of municipal and other local government Bonds at the present time.  The rapidly descending financial ratings of some Bond Insurance Companies is only one of those issues.  Declining tax revenues is another, major issue.  See generally Joe Mysak, "Buffett Plan Saves Muni Market, Dooms Ambac, MBIA" (Bloomberg.com, Wed., February 13, 2008).

    In Florida, a great reduction of local government tax revenues was recently passed by a referendum that was understandably advertised as lowering property taxes.  Jennifer Liberto, "Property Tax Relief Makes Bonds Costly/Higher Rates Can Cost Millions in Interest" (St. Petersburg Times Online Corrected Feb. 9, 2008 Report).   Now, even the availability and purchase of Insurance by municipalities and other local governments may be in peril due to the effects of lowered tax revenue to support the prospects that if these local governments issue bonds now, that they will pay them back later, or ever.

    Questions about Fiduciary Duties of Bond Insurance Companies, or not, are arising at this time as well.  Some of those questions are posted on Insurance Claims And Bad Faith Law Blog, linked here.

Please Read The Disclaimer.

Another, Third Alternative to Bond Insurance at Risk.

    Reinsurance is another alternative to having Bond Insurance Policies and their Coverages currently at risk.  The current risk is not due to pending claims but instead to falling credit ratings of some Bond Insurance Companies.  The Bond Insurance Companies that issued the existing Policies also made other investments that have gone south.

     The "gone south" other investments have affected the Bond Insurers' financial ratings for the worse, not municipal or other local government bonds.  The local government bonds remain as safe as they ever were, and as profitable to insure.

    It should not be difficult to attract  Reinsurance now, to  provide present Coverage to Bond Insurance Companies for theoretically possible future losses on municipal and other local government  bonds (losses that based on past experience, the foundation of Underwriting, may never happen).  That would clearly seem to prevent the Bond Insurance Policies and their Coverages from being at risk.   That would also be an alternative to a "bailout" whether private or public funds are suggested.  See generally Tomoeh Murakami Tse, "Buffett Unveils Proposal to Bail Out Bond Insurers/Investor Would Insure Firms' Healthy Municipal Portfolios" (washingtonpost.com, Wed., February 13, 2008).

Please Read The Disclaimer.   

Florida to Fund Reinsurance Less, Promoting Private Re and Rise in Premiums.

   The Chief Financial Officer of Florida has a reported plan to "force insurers to purchase more insurance from the private market," rather than from the State of Florida.  (Previous reports reflected that the large insurers were not purchasing their Reinsurance from the State because their parent corporations purchased Reinsurance for them, on the so-called private market.)  The office of the CFO is said to point out that private Reinsurance Premiums have actually dropped. 

   A spokesperson for State Farm Florida, however, suggests that other Premiums will increase if Homeowner's and other Property Insurance Companies can only buy Reinsurance from Reinsurance Companies.  Jennifer Liberto, "Reinsurance Rehab on Table/CFO Sink Wants to Lower Florida's Exposure" (St. Petersburg Times Online, Fri., Feb. 8, 2008).

 Please Read The Disclaimer.

Sigma 2005 and 2006 Results From Swiss Re.

    Swiss Re has released "sigma" results for 2005 and, tentatively, for 2006 to date.  "Sigma" is the Greek codeword used by Swiss Re to identify its computer-based reports.  A link to both reports, released separately by Swiss Re, is here.   The information is revealing.  Here is some of it.

2005

    Total Insurance Policy Premiums in 2005 were $3,426,000,000.00 or 7.7 % of the World's "Gross Domestic Product".  About 56 percent of Insurance Premiums are for Life Insurance.  There is a definite link to commerce here.   Swiss Re notes further that "the growing loan market generated more mortgage-related life insurance policies."  The rest of the Premiums went to pay for what Swiss Re categorizes as "non-life" Insurance Policies.

2006

    So far in 2006, Swiss Re's computer results reveal the third-lowest "insured losses" in the last 2 decades.  The "loss events" studied by Swiss Re's computers show that this year, typhoons and earthquakes predominated among the Catastrophe list and they "hit mainly newly industrialising countries where insured losses are relatively low."  The irreplaceable loss of Life to Catastrophes appears to be proportionately higher than Property Losses to date.  The role of Insurance available to relieve worldwide Catastrophes in 2006 is not necessarily great, it appears.

    Economic losses worldwide in 2006, Swiss Re says, total $40,000,000.00 and so far $15,000,000.00 or 37.5% "were actually covered by insurance."  There is no word on how if at all, the remaining 62.5% or $25,000,000.00 of economic losses is and are addressed in the countries where this year's Catastrophes have struck.

    Remembering to give thanks for our blessings, and remembering to remember those who may not be as fortunate,  Happy Holidays to All!

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.