Claims And Issues

DOMINION AND ITS LAWYERS PLAYED ME. THEY GOT THEIR MONEY.

If you are feeling a bit like you were fooled before the Dominion-Fox settlement bargain, join the club.  I was too.

Dominion tried its case in the newspapers (and on cable TV and on the internet) before Fox paid Dominion to stop trying its case.  Dominion's public position was that Fox damaged Dominion's reputation.

Now we know that all Dominion was looking for, really, was money.  Behind the scenes of its public face, Dominion must have wanted Fox's money desperately.  It took less than half of what it had been demanding from Fox.

Civil cases settle for money all the time.  But they don't settle for less than half of the money all the time.

 And more importantly, they don't usually settle without an apology when the party claiming to be the victim, in this case Dominion, claims that its reputation was irretrievably damaged by the other party, Fox in this case.

The value that Dominion really put on its reputation was nil, nada, nothing.  Dominion did not even get an apology from Fox.  That's how important Dominion actually thought its reputation was, in reality.  Dominion's reputation was worth nothing to Dominion.  Yet publicly, Dominion built a following by convincing the public that Dominion was the victim of such horrible deeds that its reputation might never recover.

Looks like all it took for Dominion was less than half of the money it demanded from Fox in the first place.

And Dominion didn't even get an apology.

So I'm not going to feel bad about believing Dominion's hype.  Dominion intended for me and for you to believe it.  Dominion spent a lot of air time and newspaper space crafting that phony narrative so that we would fall for it.  Masters of deception, with loads of help.  Dominion was adamant in public about the damage to its reputation.

Until, in private,  it wasn't. 

So don't let them make you feel bad now.  I have to admit that I felt bad myself, for about a day.  But not now.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

THESE ARE YOUR FEDERAL CONTRACTORS NOW.

Felipe Gomez Alonso was eight years old when he died.  He died in the custody of the United States.

After Border Patrol agents looked him over and found no cause to be alarmed.  Until later.  Until they heard or saw Felipe coughing.  And the agents say his eyes then glossed over also.

Then they sent Felipe to a Regional Medical Center that contracts with the Federal Government.  The care Felipe received there is reported in today's newspapers.  The newspaper accounts are based on what the Federal Government itself says happened next to this eight-year-old boy.  Recall that the child was in their custody before, after, and during the entire time they sent him to the Regional Medical Center:

    Hospital workers diagnosed Felipe with a cold and gave him Tylenol, but held him for observation after determining that he had a 103-degree fever. They released him with prescriptions for antibiotics and Ibuprofen that afternoon.

Miriam Jordan, Migrant Boy Died After 6 Days Adrift in Crowded U.S. System, N.Y. Times Print Edition, Dec. 27, 2018, at A1 (emphasis added), published online under the headline, 'A Breaking Point':  Second Child's Death Prompts New Procedures for Border Agency.

So the Federal contractor, the Regional Medical Center or its employees, "determined" that the child had a 103-degree fever.

And then they released him back to the Border Patrol.  Where the boy was sent to another border facility that had no provisions for a child.  Or for illness, for that matter.

What is the name of the Federal contractor?  It is reported in the linked article and you could look it up if you want to know it.

The point here is that these are your Federal contractors now.  That message cannot, should not be obscured by the name of one Federal contractor.

If you are reading this, you are also paying for the Federal contractor.  And you are paying for the current Federal Government too.

So, soon you will undoubtedly be paying for a settlement for the death of this poor man's child.

And for the settlements of many more deaths just like his.

Please Read The Disclaimer.  ©2018 Dennis J. Wall.  All Rights Reserved.

Webinars Continue FREE for Florida Bar Consumer and Tenant Lawyers!

The third webinar is coming up soon in the Public Interest Law Section's (soon to be the Equal Justice Law Section) Consumer and Tenant Working Group’s 2018 Webinar Series. This third training in four is Lender Force - Placed Insurance Litigation on Tuesday, September 25, 2018 from noon to 1:00 p.m. EST.  These webinars offer Florida Bar-approved CLE credits and are intended for consumer and tenant attorneys.  Here is the link to register:   https://attendee.gotowebinar.com/register/6433230832791616514.

Did I mention that this webinar is free?

Thanks for your interest!

Please Read The Disclaimer.  ©2018 Dennis J. Wall.  All Rights Reserved.

SETTLEMENT NEGOTIATIONS UNDER SEAL.

In Chenault v. Randstad USA Mfg. & Logistics, No. 5:18-CV-276-KKC, 2018 WL 3964811 (E.D. Ky. August 17, 2018), Mr. Chenault represented himself in an action he brought under the Fair Labor Standards Act, successfully as it turned out.  Mr. Chenault made other claims, not so successfully as it turned out, all of which were dismissed.

Chenault also filed what he called a "Motion to Facilitate Settlement."  He attached what the judge described as "the settlement offer" and as "the settlement letter."  This letter apparently contained a settlement offer from the defendants.

The defendants were, in turn, apparently agitated by the filing of their settlement offer in open Court.  They asked the judge to seal the letter which, as noted, Mr. Chenault had attached as an exhibit to his settlement motion.

The judge did so, and ordered the parties to contact the Magistrate Judge for a settlement conference.

The reason that the judge gave for sealing the "settlement letter" in this case was not so pedestrian as it may appear at first glance.  In truth, it was revealing of how the law treats settlement negotiations as something only slightly short of sacrosanct.  She ruled:

Because “[t]here exists a strong public interest in favor of secrecy of matters discussed by parties during settlement negotiations,” the Court will Order the Clerk of the Court to place the settlement letter under seal in order to preserve the record. Goodyear Tire & Rubber Co. v. Chiles Power Supply, Inc., 332 F.3d 976, 980 (6th Cir. 2003). The Court will not consider the settlement letter for any purpose.

Chenault v. Randstad USA Mfg. & Logistics, No. 5:18-CV-276-KKC, 2018 WL 3964811, at *2 (E.D. Ky. August 17, 2018) (emphasis added).

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QUIET IN THE COURTS! GOOD FAITH ON DISPLAY.

Virtually all insurance bad-faith cases in litigation include fights over production of claims files.  If you are the claims representative for the insurance company who handled the underlying case against the policyholder, or who handled the claim of the policyholder for coverage, then it is your file that supposedly show your company's risk of bad-faith exposure.

Some cases are likely to lead to large verdicts against your company for bad faith.  Most are probably not so likely.  Consider an alternative.

Your claims handling shows your good faith.

Consider an alternative to concealing evidence and making secret settlements.

When you have handled this claim like so many other claims in good faith, your claim handling shows your good faith.

Consider putting good faith on display.

Please Read The Disclaimer.  ©2018 Dennis J. Wall.  All Rights Reserved.

ALI'S RESTATEMENT OF LIABILITY INSURANCE LAW AND THE JURY SYSTEM.

The American Law Institute's Restatement of Liability Insurance Law is up for approval at the ALI's Annual Meeting this year.  I believe the vote will come up on Tuesday, May 22nd.

Controversy, and may I say confusion, have been generated by insurance industry interpreters on the issue of liability carriers' exposure for liability beyond their policy limits in a very narrow set of circumstances.  You might not know that the area of controversy is limited unless you were paying pretty close attention.

The issue that is controversial to these people is simply whether  bad-faith-in-settlement cases can go to the jury when the facts include a liability insurance carrier's failure to initiate settlement negotiations, but there was no settlement demand from the claimant within policy limits.

The draft Restatement up for approval reflects simply that, yes, a bad-faith-in-settlement case can go to the jury when the facts include a liability insurance carrier's failure to initiate settlement negotiations, but there was no settlement demand from the claimant within policy limits.  It depends on all the circumstances.

It does not require that any such case ever go to the jury.  Whether a given bad-faith-in-settlement case actually goes to the jury depends on other factors under the Restatement and under the prevailing case law, including such factors as the strength of the underlying liability case against the policyholder and the size of a damages verdict if any against the policyholder.

But you would not necessarily know this from the confusion and the controversy generated around this small set of cases from a large set of corporations and their lawyers.

So, read all the articles that have been written about this narrow issue, and all the blogs, and definitely read the cases.  Then vote your conscience.  And if you are at the ALI Annual Meeting, approve the ALI's Restatement of the Law of Liability Insurance.

Please Read The Disclaimer.  ©2018 Dennis J. Wall.  All Rights Reserved.

THE ALI LIABILITY RESTATEMENT REPORTERS GET THE LAST WORD.

After a week of posts addressing the ALI Law of Liability Insurance Restatement that is coming up for a vote on or about Tuesday, May 22nd, it is more than appropriate to quote, with permission, from the current pending draft of the American Law Institute Law of Liability Insurance Restatement.  To say again, it is more than appropriate, it is the final word on the subject.  I have been told by the American Law Institute that although the ALI does not readily permit reproduction of parts of Council Drafts, they granted copyright permission in this instance to reproduce the following material here, in part because of my work on the Members Consultative Group for this project.  This is how the Reporters' Note f begins, and how the Reporters present the crux of the relevant authorities on the issue:

2. The insurer’s failure to make settlement offers and counteroffers. There is a split of authority on the question whether the duty to make reasonable settlement decisions can obligate the insurer to explore settlement negotiations should the claimant or claimants not come forward with a settlement offer. See 1 WILLIAM T. BARKER & RONALD D. KENT, NEW APPLEMAN INSURANCE BAD FAITH LITIGATION § 2.03[6][d][iii] (discussing the split of authority) (2d ed. 2017). At least one leading treatise has suggested that the view stated in this Section is a minority rule. See ROBERT H. JERRY, II & DOUGLAS R. RICHMOND, UNDERSTANDING INSURANCE LAW 840 (5th ed. 2012) (“In most jurisdictions, the insurer cannot be liable for breaching the duty to settle unless the plaintiff makes a settlement offer within policy limits. Without a settlement offer, it is not possible for the insurer to have breached its duty.”). But a more recent review of the authority concludes that many of the courts cited as requiring an offer by the plaintiff hold simply that the insurer did not breach the duty in the particular case, not that there must always be an offer by the plaintiff. See Dennis J. Wall, The American Law Institute and Good Faith Settlement Duties of Liability Carriers: The Scope of a Duty to Initiate Settlement Negotiations, What the ALI Restatement of the Law of Liability Insurance Has to Say About it, and the ALI Reporters’ Notes, 37 INS. LIT. RPTR. 597, 601 (Dec. 23, 2015).[1]

[Author's Note:  The quoted language was approved, unchanged, by the Council of the American Law Institute at its meeting on January 18-19, 2018.  Along with the rest of the Restatement of the Law of Liability Insurance, it now appears in Proposed Final Draft No. 2 released on or about April 13, 2018.  The complete Restatement will be submitted for approval by the full membership of the ALI at the ALI Annual Meeting to be held in Washington, D.C. on May 21-23, 2018.  I hope to see you there.]

Please Read The Disclaimer. This article  © 2018 Dennis J. Wall.  All Rights Reserved.

 

[1] The quotation comes from the beginning of the Reporter's note f to Section 24 of the Restatement of the Law, Liability Insurance, Council Draft No. 4 (December 4, 2017) copyright © 2017 by The American Law Institute. This Draft was submitted to the meeting of the Council of The American Law Institute on January 18-19, 2018. As of the date this Draft was printed, it had not been considered by the Council or membership of The American Law Institute, and therefore does not represent the position of the Institute on any of the issues with which it deals. All rights reserved. Reproduced with permission.

BAD FAITH BEHAVIOR EXPOSED TO THE SUNSHINE, CONTINUED ....

Author's Note:  Page numbers have been inserted by hand because the software in which the article was published did not transfer to this article at all.  Page numbers have been inserted here so as to avoid breaking up paragraphs of text. 

478

2.    “Maybe, but not in this case”

In my earlier article, I said that I made this category expressly for what might also be called iffy cases: “Cases in which the Courts of a given jurisdiction have recognized that at least there might be a legal duty on the liability carrier to initiate settlement negotiations without a settlement demand, particularly where the insured’s liability is probable and the claimant’s likely damages are great,” followed by my list of six States at the time. Wall, “The American Law Institute and Good Faith Settlement Duties of Liability Carriers,” 37 Ins. Lit. Rptr. at 602-03.

Those six States and the cases in which the Courts recognized that holding a liability carrier liable for bad faith in settlement because it did not initiate settlement negotiations was at least a theoretical possibility, but that the possibility was not open in those particular cases, are:

a.    California, Reid v. Mercury Ins. Co., 220 Cal. App. 4th 262, 278, 162 Cal. Rptr. 3d 894, 907 (Cal. 2d DCA, Div. 8, 2013), review denied (unreported) (Cal. January 21, 2014) (while allowing for the theoretical possibility that “a conflict may also arise, without a settlement offer, when a claimant clearly conveys to the insurer an interest in discussing settlement but the insurer ignores the opportunity to explore settlement possibilities to the insured’s detriment,” the Court concluded: “But nothing like that happened here.”);

b.    Idaho, Morrell Constr., Inc. v. Home Ins. Co., 920 F.2d 576, 581 (9th Cir. 1990) (recognizing that a duty to initiate settlement negotiations may arise under Idaho law in some situations, but not as here before suit is filed);

c.    Illinois, Haddick ex rel. Griffith v. Valor Ins., 198 Ill. 2d 409, 417 & n.1, 763 N.E.2d 299, 304-05 & 304 n.1 (2001) (recognizing what the Illinois Courts term an “exception” to a general rule in Illinois that liability carriers do not have to initiate settlement negotiations, but an “exception” would apply when liability insurers failed to initiate settlement negotiations even without a settlement demand where in general and basic terms the insured’s liability is clear and the claimant’s likely damages are great, holding that the exception did not apply in the case at bar), following with approval Adduci v. Vigilant Ins. Co., 98 Ill. App. 3d 472, 478, 424 N.E.2d 645, 649-50 (Ill. 1st DCA, 2d Div., 1981);

d.    Ohio, Miller v. Kronk, 35 Ohio App. 3d 103, 106, 519 N.E.2d 856, 860 (Ohio 10th DCA, Franklin County, 1987) (“Settlement negotiations were never initiated by plaintiff Miller and, considering the facts of this case, Buckeye Union had no duty to initiate negotiations.” [emphasis added]);

479

e.    Pennsylvania, Puritan Ins. Co. v. Canadian Univ'l Ins. Co., 775 F.2d 76, 77-78, 82 (3d Cir. 1985) (Pennsylvania law; in bad-faith-failure-to-settle case brought by excess carrier against primary carrier, the Federal Circuit Court refused to allow the excess carrier’s claim in the absence of a demand from the claimant, including refusing to recognize any claim that the primary carrier should have initiated settlement negotiations: “Nor do we agree that on this record Canadian [the primary liability carrier] had an affirmative duty to initiate settlement negotiations with Donahue [the injured claimant]. The same factors that militate against a finding of bad faith in refusing to settle are relevant in this instance as well. An insurance carrier may be required to broach settlement negotiations under some circumstances but this case does not present them.”).

f.    and Texas. As I previously stated, “Texas is a State in which the Supreme Court seems to have spent a great deal of time wrestling with this question. Texas is also listed in this Article as one of three ‘con’ jurisdictions due to a holding in another case, discussed below[.]” Wall, “The American Law Institute and Good Faith Settlement Duties of Liability Carriers,” 37 Ins. Lit. Rptr. at 603.

g.    It may be said that the Courts in these cases “talk the talk, but do not walk the walk.” To this list of “Maybe, but not in this case,” I would now add a seventh case and State, Georgia, moving it from the list of “Pro” cases because although Georgia law apparently recognizes the possibility of a jury considering a bad-faith-in-settlement claim when the liability carrier has not initiated settlement negotiations and there was no settlement demand, still the possibility appears to be recognized only as dicta in Georgia. Delancy v. St. Paul Fire & Marine Ins. Co., 947 F.2d 1536, 1550-51 (11th Cir. 1991) (“Georgia law does not clearly require the insured to show that the insurer refused an offer within the policy limits to establish liability for tortious failure to settle, but it does not foreclose the argument that such an offer is required before the insured may recover”; assuming without necessarily deciding that the insured could state such a claim “if the insured alleges facts showing that the insurer knew, or reasonably should have known, that the case could have been settled within the policy limits,” but affirming summary judgment in favor of the liability carrier on the record of this case, which does not appear to have ever been cited by a Georgia State Court).

Other observers have since agreed with my original assessment of these cases, firmly assigning them to the category I originally said they belong in, “Maybe, but not in this case.”

As I have repeatedly observed, these decisions are iffy at best on the proposition at hand, which to expressly state it again is whether Courts would allow a claim of bad faith in settlement to go to the jury on the strength of facts which include the liability carrier’s failure to initiate settlement negotiations and there has not been a settlement demand within policy limits. Once again, it may be said that they “talk the talk” without “walking the walk.” They could justifiably be placed either in the “Pro” column or in the “Con” column. I choose to place them in neither but instead continue to recognize that they could go either way.

If each and every one of these cases is placed in the “Pro” column, then the decided cases are in favor of letting a liability carrier’s failure to initiate settlement negotiations go to the jury in a bad faith case, regardless of whether there was a settlement demand or not.

If all of these cases are placed instead in the “Con” column, then the cases are probably fairly evenly distributed between “Pro” and “Con.”

That being the situation, for purposes of the present comments I will eliminate these cases from my analysis of the decided case law on the proposition at hand, namely, whether a Court would allow a jury to decide the question of whether a liability insurer’s failure to initiate settlement negotiations in a given underlying case against an insured amounts to bad faith in settlement, in a case in which the claimant did not make a settlement demand within policy limits. In the final analysis, since the cases in this category can be taken to go either way, they are probably not much help in figuring out nationwide “majority” and “minority” lineups on that question.

(Emphasis added.)

NEXT:  THE CONCLUSION OF BAD FAITH CONDUCT IN SETTLEMENT.  TO BE CONTINUED ON CLAIMS AND BAD FAITH LAW BLOG .... THEN THE ALI LIABILITY INSURANCE LAW REPORTERS GET THE FINAL WORD.

 This selection, "Section 24 of the Law of Liability Insurance Restatement, Draft No. 4 (August 4, 2017), Reporter’s Notes F and H, and the Decided Cases," 39 No. 17 Insurance Litigation Reporter 473 (October 5, 2017), is reprinted here with permission of Thomson Reuters.  Any further reproduction without the express consent of Thomson Reuters is prohibited.

 Please Read The Disclaimer.

THE BEGINNING: ALI'S RESTATEMENT AND BAD FAITH BEHAVIOR, OR NOT?

*Author's Note:  The American Law Institute is set to adopt the Restatement of the Law of Liability Insurance next week in Washington, D.C.  A certain controversy continues to be furthered by opponents of Section 24 concerning settlement behavior by liability carriers that may lead to bad-faith, extracontractual damages exposure.  In light of these recent statements including about the following article, republication of the following article is timely.  And those statements make  republication appropriate.  Here, readers can read what was actually written and review research actually done on this important issue.  Originally published in October, 2017 at Insurance Litigation Reporter, the following article is republished here in its entirety over the next several days with the permission of Thomson Reuters which holds the copyright to it.

Page numbers have been inserted by hand in this article to correct software transfer errors and to avoid breaking up paragraphs.

SECTION 24 OF THE LAW OF LIABILITY INSURANCE RESTATEMENT DRAFT NO. 4 (AUGUST 4, 2017), REPORTER'S NOTES F AND H, AND THE DECIDED CASES

by Dennis J. Wall

Dennis J. Wall, Attorney at Law, A Professional Association

Member of the American Law Institute. Trial lawyer, appellate practitioner, and Expert Witness. Author or coauthor of numerous articles on insurance law and of four books including “Litigation and Prevention of Insurer Bad Faith” (Third Edition Thomson Reuters West, in Two Volumes, with 2018 Supplements in process, analyzing over 5,000 cases and statutes and other authorities); "Lender Force-Placed Insurance Practices" (American Bar Association 2015); "Insurance Claims and Issues" (Thomson Reuters West); and co-author, "Catastrophe Claims: Insurance Coverage for Natural and Man-Made Disasters" (Thomson Reuters West July 2017 ed. in publication).

Contents.

            I.  THE ROLE OF INITIATING SETTLEMENT

                 NEGOTIATIONS, OR NOT,

                 UNDER  RESTATEMENT SECTION 24

                 AND THE DECIDED CASES.

              II.  INITIATE SETTLEMENT:              

A. How the Courts line up on a liability carrier’s exposure to extracontractual liability for not initiating settlement negotiations in the absence of a settlement demand.          476
	476
1. Pro                 476	476
a. Arizona        476	476
b. Florida          476	476
c. Kansas          477	477
d. Michigan     477	477
e. New Jersey  477	477
f. New Mexico  477	477
g. Oklahoma   477	477
h. Oregon       477	477
i. State of Washington      477	477

                                                         

 

j. Louisiana, Tennessee, West Virginia, and Wisconsin 477	477
"Maybe, but not in this case"     478                                                                   478	478
a. California                                  478                                                              478	478
b. Idaho                                          478                                                          478	478
c. Illinois                                         478                                                          478	478
d. Ohio                                            478                                                           478	478
e. Pennsylvania                             478                                                             478	478
f. Texas                                            479                                                          479	479
Con                                                  479                                                      479	479
a. Alaska                                         479                                                               479	479
b. Perhaps Mississippi                 480	480
c. Texas.                                          480	480
d. Probably Kentucky                  480	480
4.  Submitting the Lineup           480	480
5.  The Conclusion Regarding Initiating  481                                                                                                       III.  THE REQUIREMENT OF A SETTLEMENT DEMAND,	481
OR NOT, UNDER RESTATEMENT SECTION 24 AND THE DECIDED CASES                                   481
IV. CONCLUSION             481	481
	481

I. THE ROLE OF INITIATING SETTLEMENT NEGOTIATIONS, OR NOT, UNDER RESTATEMENT SECTION 24 AND THE DECIDED CASES

There are many views among the Courts on the nature of the liability carrier’s duty to settle.   What you are about to read was not written to set out all the possible ways of expressing a liability carrier’s duty to settle claims. Nor was it written to align all the cases in the United States, or even within a given jurisdiction. There were and still are majority and minority views on the nature of a liability carrier’s duty to settle claims. It is enough to recognize that there is a split of authorities, even as the existence of a split of authorities is recognized in the Comments and Notes to the Restatement of the Law of Liability Insurance, which concisely and accurately condenses the dispute into a single notion in Section 24 of the Restatement: "[T]he insurer has a duty to the insured to make reasonable settlement decisions."

475

There is clearly turmoil over whether Section 24 allows, or even imposes, a specific duty to initiate settlement negotiations. I understand that this turmoil bubbled to the surface at the 2017 Annual Meeting of the ALI when many insurance company advocates asked to relitigate Section 24, which had been around for about five years at that time. Parenthetically, I have searched through my own copies of past drafts of the Restatement and apparently substantially the same version of what is now numbered Section 24 was introduced in 2012.

Judging by comments left online at the American Law Institute, concerns about a mandate have continued after the Annual Meeting ended.

The language of Section 24 permits Courts to fashion a liability carrier’s duty to initiate settlement negotiations, but its clear terms do not mandate any such duty.   Full disclosure: I argued that the Restatement should impose a duty to initiate settlement negotiations, and I proposed additional language to that effect.

Nonetheless, the language of Section 24 remains unchanged.

Even though I personally would prefer a Restatement that expressly mandates a liability carrier’s duty to initiate settlement negotiations where the insured’s likely liability is clear and the likely damages are great (meaning in excess of policy limits), I do not find it appropriate to relitigate that matter.

Further, I also support and, more importantly, the case law supports the Restatement in refusing to include an (erroneous) declaration that a demand for settlement within policy limits is required before liability carriers are exposed to extracontractual liability for bad faith in settlement.

In the end, the case law supports Section 24 as it stands. And as it has stood for several years. The purpose of this article is to illustrate that the decided cases support Section 24 in its current form. With one request, which is that citations quoting a seemingly contrary source in Reporters’ Notes f and h be deleted. This request is because although the quoted material is cited in the Notes on the first issue, it does not address the first issue, initiation of settlement negotiations in the absence of a demand. Further, it does not support the supposed condition precedent of a demand within policy limits before a liability carrier can be exposed to the risk of extracontractual liability for bad faith in settlement.

 

This selection, "Section 24 of the Law of Liability Insurance Restatement, Draft No. 4 (August 4, 2017), Reporter’s Notes F and H, and the Decided Cases," 39 No. 17 Insurance Litigation Reporter 473 (October 5, 2017), is reprinted here with permission of Thomson Reuters.  Any further reproduction without the express consent of Thomson Reuters is prohibited.

 NEXT:  THE CASES AND THE JURISDICTIONS ON THE "PRO" SIDE OF THE QUESTION.  TO BE CONTINUED ON CLAIMS AND BAD FAITH LAW BLOG .......

SETTLEMENT UNDER SEAL IN ARKANSAS.

In Chaichian v. Sentinel Ins. Co. Ltd., No. 1:16-cv-01026, 2017 WL 4899232 (W.D. Ark. October 3, 2017) (Bryant, USMJ), a U.S. Magistrate Judge was confronted with three motions concerning settlement of the case.

First, the facts at the time the USMJ confronted these three motions.  The plaintiff, proceeding pro se or without a lawyer, signed a so-called "release agreeement" which set out the parties' settlement terms.

The "release agreement" was filed under seal.

The plaintiff was paid the money set out in the release agreement.

The plaintiff thereafter refused to sign a proposed stipulation of dismissal which the defendants had written for her.

The defendants' proposed stipulation of dismissal was also filed under seal.

The USMJ reviewed the sealed documents and then decided the three  motions.

One of the motions was filed by the pro se plaintiff.  She asked to enforce what she said was her settlement agreement with Sentinel Insurance Co. and SWBC Insurance Services, the only two defendants remaining at the time.

The second of the three motions confronting the USMJ was the defendants' motion to enforce "actual settlement."

The third and final motion which the USMJ confronted in that case was the defendants' motion to strike the first motion, i.e., to strike the pro se plaintiff's motion to enforce settlement agreement.

He granted the defendants' motion to strike the plaintiff's motion to enforce settlement, "because," he said, "Plaintiff's motion contains confidential information and is otherwise unmerited.

We will never know what was actually in the sealed materials, only what the USMJ said about them and in a footnote he remarked how careful he was not to reveal confidential information.

At no time did the U.S. Magistrate Judge report, let alone recommend, that any part of this secret material might not be confidential or that some or all of it might not merit sealing it from public view.

Nonetheless, he read the secret material, kept it sealed, announced his report and recommendation, and included a recommendation that the plaintiff's case be dismissed with prejudice.

To be continued with the U.S. District Judge's order approving the USMJ's Report and Recommendation on Insurance Claims and Bad Faith Law Blog.

Dennis Wall is currently at work on his fifth book, which will address how concealed evidence and secret settlements take our money, foreclose on our homes, and change our lives.

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RESISTING THE TIDAL WAVE UNDER TEXAS LAW.

Resisting the tidal wave of contrary opinions, a Federal appellate judge wrote for a unanimous court in Illinois that, under Texas law in a case of apparent first impression, an insured's assignment of claims against its insurance company in the insured's settlement agreement before adjudication on the merits in the underlying case was held to violate public policy.  Accordingly, the assignment was held invalid and unenforceable in Hendricks v. Novae Corporate Underwriting, Ltd., 868 F.3d 542 (7th Cir. 2017) (case involved Texas substantive law).

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

BREACH OF A CONDITION BARS "BAD-FAITH" INADEQUATE DEFENSE CLAIM …

But breach of which condition?

 

In Doe v. Onebeacon Am. Ins. Co., 639 F. App'x 627 (11th Cir. 2016), a panel of the Eleventh Circuit was confronted with many issues of Florida law surrounding a liability carrier's duty to defend and an insured's settlement without the carrier's consent.  The panel side-stepped all of those issues.

The Court held both that the insured breached a policy condition and also that there was insufficient evidence that the carrier provided a legally inadequate defense in the underlying case.  For either reason, the claim of a "bad-faith" or legally inadequate defense could not stand.  (In Florida, an inadequate defense is a breach of contract and cannot really be called "bad faith," although given the outcome in this case, the panel never had to reach this or any similar issue.)

It is difficult to determine from this brief opinion which condition the Eleventh Circuit panel was addressing.  The panel appeared to equate the policy prohibition on the insured's settlement without the carrier's consent, with the insured's duty to cooperate:

    As a matter of law, the insured—at the time it settled the case in advance of trial—breached its duty to cooperate with its insurer in the investigation and defense of the underlying tort claim.  So, the insurer has no duty to indemnify the insured in this case.

Doe v. Onebeacon Am. Ins. Co., 639 F. App'x 627, 628 (11th Cir. 2016).

In the final analysis, it does not matter which condition the insured breached in this case.  It may have breached one of them or it may have breached both of them.  In any case, there was no coverage and so there was no claim here, the Eleventh Circuit effectively held.

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

APPRAISAL, VALUE, SETTLEMENT "OFFER": CROP INSURANCE CARRIER'S ALLEGED CONTRACT BREACH.

Here is an example of how claims handling can affect the resolution of an insurance coverage question.

In an unusual move, a crop insurance carrier offered to pay its insured's claim without waiting for the insured to agree.  As things turned out, the insured did not agree with its carrier's offer.  The insured disputed value.  As noted by the Eighth Circuit in this case, the dispute over value was "likely sufficient" by itself to trigger an appraisal.

However, in this case there was evidence in the record that the carrier and the insured continued to negotiate settlement of the claim and that the insured was "led to believe" (presumably by the carrier) that the carrier might even up the value of its offer.

This evidence was summarized somewhat ambiguously by the Eighth Circuit but it was enough to foreclose summary judgment for the carrier when the insured in this case did not demand an appraisal as the policy allowed.

There was also a legal dispute about which one of these two parties had the burden to demand an appraisal -- the carrier or its insured -- but regardless of who bore the burden, the appellate court saw a genuine issue of material fact which prevented the entry of judgment for the carrier on the insured's breach of contract claim.  Bruhn Farms Joint Venture v. Fireman's Fund Ins. Co., 823 F.3d 1161, page numbers not provided by Westlaw but paragraphs falling within "Headnotes 7 and 8," which Westlaw has provided (8th Cir. 2016).

The Court also discussed and applied the Iowa law of insurer bad faith in this case which recognizes an insurance carrier's right to debate claims that are fairly debatable.  In this case, however, the same record raised genuine issues of material fact which prevented the entry of summary judgment in favor of the crop carrier at bar:  "Numerous instances of conduct by the insurance representative and adjusters at the very least raise jury issues on bad faith, most specifically the delay in adjusting the fields and then, for the next several months, leading Bruhn [the policyholder] to believe that the claim would be favorably settled without having to go through the hassle of a joint appraisal."

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

A NEW AND LIMITED SETTLEMENT WITHOUT CONSENT IN PENNSYLVANIA: REASONABLE?

In Babcock & Wilcox Co. v. American Nuclear Insurers, 131 A.3d 445 (Pa. 2015), the Pennsylvania Supreme Court fashioned a new and hybrid test to measure settlements made by the insured without the carrier's consent.  The new test does not require a showing of bad faith.  The most the insured can recover if successful is the policy limit.

The new test of reasonableness applies only where the liability carrier is defending the insured under a reservation of rights, and the insured reaches a settlement with the injured claimant for covered claims after the carrier refuses to settle.

In the light of previous decisions under Pennsylvania law, the Pennsylvania Supreme Court reworked a test established in Arizona in a case called Morris:

[W]e adopt a variation on the Morris fair and reasonable standard limited to those cases where an insured accepts a settlement offer after an insurer breaches its duty by refusing the fair and reasonable settlement while maintaining its reservation of rights and, thus, subjects an insured to potential responsibility for the judgment in a case where the policy is ultimately deemed to cover the relevant claims.

Babcock & Wilcox Co. v. American Nuclear Insurers, 131 A.3d 445, 462 (Pa. 2015).

Unlike an extracontractual or bad-faith-in-settlement claim, the maximum amount that the insured can recover in such a suit is capped at the policy limit:

In contrast, if an insurer breaches its duty to settle while defending subject to a reservation of rights and the insured accepts a reasonable settlement offer, the insured need only demonstrate that the insurer breached its duty by failing to consent to a settlement that is fair, reasonable, and non-collusive, as described above, rather than demonstrating bad faith by the insurer, as the damages sought are subject to the policy limits to which the insurer originally contracted.

Babcock & Wilcox Co. v. American Nuclear Insurers, 131 A.3d 445, 462-63 (Pa. 2015).

The Court immediately applied the new standard of liability to the case before it.  The insureds "ARCO and B & W, respectively in 2008 and 2009," presented settlement demands to the liability carrier which refused to give consent to settle.  The insureds went ahead and settled "with the class action plaintiffs for a total of $80 million, which was substantially less than the $320 million of potential coverage."  Babcock & Wilcox Co. v. American Nuclear Insurers, 131 A.3d 445, 448 (Pa. 2015).

The Court held that the settlement for the covered claims in this case was reasonable and reinstated the trial court's judgment in favor of the insureds' recovery of the sums they paid in settlement even without the carrier's consent.

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

INITIATING SETTLEMENT NEGOTIATIONS CAN AVOID EXTRACONTRACTUAL, "BAD FAITH" EXPOSURE.

The question of extracontractual exposure can be a jury question when the claimant's damages are great and the insured's likely liability is in excess of policy limits.  Extracontractual, "bad faith" exposure can be a claim that goes to the jury in this context, even if initiating settlement negotiations when there is no settlement demand may not be conceptualized by lawyers of a given jurisdiction as a "legal duty."   This is the majority rule and it plays out in many cases, in many places.  See, e.g., Stalley v. Allstate Ins. Co., No. 6:14-cv-1074-Orl-28DAB, 2016 WL 1752764, at *8-*9 (M.D. Fla. April 29, 2016) (denying liability insurer's motion for summary judgment because fact issues remained including whether carrier "should have resolved issues of damages and coverage" and whether it should have offered to settle claim within policy limits before it ultimately offered to do so, under Florida law which follows rule quoted by Court that "'[w]here liability is clear, and injuries so serious that a judgment in excess of the policy limits is likely, an insurer has an affirmative duty to initiate settlement negotiations.'"); Kleinsasser v. Progressive N. Ins. Co., No. CIV-16-102-M, 2016 WL 1583664, at *2-*3 (W.D. Okla. April 19, 2016) (denying liability insurer's motion for judgment on the pleadings as to plaintiff automobile driver's bad faith claim based on the carrier's settlement of the automobile passenger's claim under Oklahoma law, including quotation by the Court that Oklahoma law imposes "'an affirmative duty to initiate settlement negotiations if an insured's liability is clear and injuries of a claimant are so severe that a judgment in excess of policy limits is likely.'").

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

TOO SCARED TO TRY: FEDS BEG WALL STREET TO SETTLE …

…All the Big Cases.

This article is being posted simultaneously on Insurance Claims Bad Faith Law Blog and on Insurance Claims and Issues Blog.

HSBC was accused by the Federal Government of what amounts to laundering money for terrorists.  The Feds settled the HSBC matter although they had good chances of success if they went to trial against HSBC and especially against many of its officers and employees.  What trial lawyer would not want to have the prosecution side of a case against terrorists and their sympathizers?  Apparently the Feds.  See Gretchen Morgenson in her "Fair Game" column published in this morning's Sunday New York Times, "A Bank Too Big to Jail" (posted Online on July 15, 2016), which you can also post in your browser at http://www.nytimes.com/2016/07/17/business/a-bank-too-big-to-jail.html?ref=business&_r=0.  Ms. Morgenson's column features an unofficial report released by Republican staffers of the U.S. House Financial Services Committee without the Committee's approval.  Although obviously partisan, it appears that this investigative report offers a lot of actual evidence and not just opinions.

For example, after the Feds decided not to take the HSBC case to trial, they wanted so much to settle with HSBC that they offered immunity from prosecution to HSBC's officers and employees if only HSBC would settle.  The HSBC settlement apparently offers a lesson in settling on unfavorable terms.  Anyone who has ever settled a case knows that once the other side of a negotiation knows that your side wants to settle badly, that is exactly how your side will almost certainly end up settling, which is badly.

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

GOLDMAN ANNOUNCES GREAT DEAL IN ITS LATEST MORTGAGE PRACTICES SETTLEMENT.

Goldman Sachs announced that its latest mortgage practices settlement will cost it $1.5 Billion, or about as much as one (1) quarter's worth of revenue after taxes.  

That's a good deal, even if the task force of legal officers and their departments who are  once again on the other side of Goldman's latest mortgages settlement, have offered only "no comment."  E.g., Matthew Goldstein, "Dealbook Online / Goldman to Pay Up to $5 Billion to Settle Claims of Faulty Mortgages" (New York Times Online, posted on January 14, 2016); Ken Sweet Associated Press Copyrighted Report published in Washington Post Online, "Business / Goldman Sachs to Pay $5 Billion in Mortgage Settlement" (Online January 14, 2016).

Banks settle their mortgage practices exposure for about 2% of the money they take in from marketing, selling, and servicing their mortgages portfolio.  That would put Goldman's take was about $75 Billion for the period in question, which is 2005 to 2007.   

We have been posting articles on Goldman's great deal on Insurance Claims and Bad Faith Law blog.

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of "Lender Force-Placed Insurance Practices" (American Bar Association 2015).  All rights reserved.

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

 

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

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

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

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

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

Related articles

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

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

THE ALI RESTATEMENT PROJECT OF THE LAW OF LIABILITY INSURANCE.

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

FROM NO JURISDICTION OF M-J, TO NO JUDICIAL ESTOPPEL.

Christmas Pluto.  Image by NASA.

 

In Tennenbaum v. Arizona City Sanitary Dist., No.  CV-10-02137-PHX-GMS, 2015 WL 7731820 (D. Ariz. December 1, 2015), the plaintiff Tennenbaum sued the District and its lawyers including one Slavin.  The first issue disposed of by the District Court in the current ruling was the nature of what the District Judge called "an 'Order'" signed by the Magistrate Judge.  The District Judge wrote that the Magistrate did not have the authority to enter such an Order, but only a Report and Recommendation to the District Judge who would then dispose of the report with an Order.  The District Judge renamed the Magistrate Judge's "'Order'" a Report and Recommendation accordingly, and went on to address other issues in the case.  "The Court orders that the 'Order' entered by Magistrate Judge Mark E. Aspey (Doc. 242) shall be designated a Report and Recommendation (R & R). The Court adopts the R & R in part and rejects it in part."  Tennenbaum v. Arizona City Sanitary Dist., No.  CV-10-02137-PHX-GMS, 2015 WL 7731820, at *1 (D. Ariz. December 1, 2015).

The main issue presented in this case concerned the effects of a so-called Arizona "Morris agreement" on insurance coverage.  In Arizona, the insured has a right to settle its underlying liability when its liability carrier reserves rights to deny all coverage on certain grounds.  The resulting settlement agreement made between the policyholder and the claimant is called a "Morris agreement."

However, admissions and recitations of fact made in a Morris agreement are binding on the liability carrier when, among other things, the admissions and recitations of fact are necessary to establish the policyholder's underlying liability and not when they only affect the determination of insurance coverage.  In this case, the policyholder was sued for defamation and invasion of privacy torts which, the District Court held, require evidence of actual malice.

The insured denied both actual malice and intent in the settlement agreement here.  Under Arizona law applied by the District Court, this denial of intent and the agreement's recitation of facts simply established the actual malice necessary to underlying liability of the policyholder for actual malice in making the offensive statements.  The issue of whether the policyholder's conduct was an excluded intentional act remains open in that case and so the District Court denied competing motions for summary judgment on that coverage issue.  (Technically the District Court accepted the Magistrate Judge's recommendation to deny the parties' cross-motions for summary judgment.)   Tennenbaum v. Arizona City Sanitary Dist., No.  CV-10-02137-PHX-GMS, 2015 WL 7731820, at *4-*6 (D. Ariz. December 1, 2015) 

In the course of its opinion in this case, the District Court provided a treatise on the treatment of judicial estoppel in the case law:

• “Judicial estoppel, sometimes also known as the doctrine of preclusion of inconsistent positions, precludes a party from gaining an advantage by taking one position, and then seeking a second advantage by taking an incompatible position."

• “It is an equitable doctrine invoked by a court at its discretion.”

• Judicial estoppel “is intended to protect the integrity of the judicial process by preventing a litigant from playing fast and loose with the courts.”

• In determining whether to apply the doctrine, a court “typically consider[s] (1) whether a party’s later position is clearly inconsistent with its original position; (2) whether the party has successfully persuaded the court of the earlier position, and (3) whether allowing the inconsistent position would allow the party to derive an unfair advantage or impose an unfair detriment on the opposing party.”

Tennenbaum v. Arizona City Sanitary Dist., No.  CV-10-02137-PHX-GMS, 2015 WL 7731820, at *7 (D. Ariz. December 1, 2015).

Although the Magistrate-Judge ultimately rejected the argument that judicial estoppel applied here, the District Judge said that the Magistrate rejected it for the wrong reasons.  "The magistrate judge began with the premise that “Plaintiff vigorously argued in defending against the motions for [summary judgment] before Judge Snow that Defendant’s statements were defamatory" and made with actual malice.  The District Court pointed out that when as here a party contests that there was actual malice in the course of contesting the insured's underlying liability, is not the same as contending that there was, or was not, intent to harm the plaintiff.  Further, although the plaintiff did allege actual malice in the complaint at bar, he also alleged in the alternative that the policyholder acted with knowledge of falsity or with reckless disregard of whether the alleged statements were false.

That, said the District Judge, was the real reason that judicial estoppel did not apply here:  The record established that the issue of actual malice was litigated, but that the separate issue important to insurance coverage -- intent to cause injury, and to the plaintiff -- was not litigated.  Tennenbaum v. Arizona City Sanitary Dist., No.  CV-10-02137-PHX-GMS, 2015 WL 7731820, at *7 (D. Ariz. December 1, 2015).

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

SETTLEMENTS HAVE NOT STOPPED LENDER FORCE-PLACED INSURANCE PRACTICES OR LAWSUITS.

Copyright Maxx-Studio; Image by Shutterstock.

Not even the National Mortgage Settlement reached years ago has stopped lender force-placed insurance ("LFPI") practices or lawsuits involving LFPI practices.

Cases are still being filed.  The Court in the following case reported its decision on Friday, December 11, 2015, granting a defendant's motion to dismiss and affording the plaintiff the opportunity to replead.  This case was filed in June, 2015.  It involves alleged practices of a loan servicer through April, 2015:  Gail Bennett-Wofford v. Bayview Loan Servicing, LLC, No. 15-cv-02445-SI, 2015 WL 8527333 (N.D. Cal. December 11, 2015).

An old saying applies in December, 2015:  Everything is changing.  Nothing is new.

Please Read The Disclaimer.  ©2015 by Dennis J. Wall, author of "Lender Force-Placed Insurance Practices" (American Bar Association 2015).  All rights reserved.

Related articles

MORTGAGE SERVICERS' FORCE-PLACING INSURANCE NOT NEGLIGENCE … BECAUSE BREACH CONTRACT.

NO SUCH THING AS "DERIVATIVE" ACTION BARRED BY SOMEONE'S SETTLEMENT.

 

 Image of Indiana State House, by Library of Congress.

In Foster v. Principal Life Insurance Co., No. 14-3203, 2015 WL 7567512 (7th Cir. November 25, 2015), the Seventh Circuit reversed a District Judge's grant of a defendant's motion to dismiss.  The District Court ruled that the plaintiff's claim was "derivative" of a claim alleged in an earlier lawsuit which was settled.  The Seventh Circuit held that this ruling was made up and further that there was no bar to the instant claim on any recognized or recognizable ground:

On appeal, Foster contends that his claim against Principal was not derivative of his earlier claims against Pace. He notes that the district court cited no legal doctrine underlying its finding that the claim was barred as “derivative,” and so he postulates various legal bases on which the court might have relied, such as res judicata and collateral estoppel. Foster maintains, and we agree, that the requirements of res judicata and collateral estoppel cannot be met under the facts presented here. Indeed, Principal does not attempt to defend the district court's rationale that the claim was “derivative” and conceded at oral argument that neither res judicata nor collateral estoppel apply in these circumstances. Nor is there any indication that Principal was somehow released by the terms of Foster's confidential settlement agreement with Pace and Pace employees in the earlier litigation.

Foster v. Principal Life Insurance Co., No. 14-3203, 2015 WL 7567512, at *4 (7th Cir. November 25, 2015).  Sometimes the best offense is a good offense, as in this case.  After they dismantled the spurious "derivative" ground for the District Judge's ruling to bar Mr. Foster's claim, Mr. Foster's attorneys set out every possible valid reason for the District Judge's ruling and then dismantled them each and all in turn, one by one.

And Principal's lawyers in this case acted with integrity, too, in their behavior shown in the Court's opinion quoted above.

To say again, sometimes the best offense is a good offense.

 Please Read The Disclaimer.  ©2015 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with 2015 Supplements).  All rights reserved.  Listen to a special podcast of "Litigation and Prevention of Insurer Bad Faith" here.

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Res Judicata, Specifically Claim Preclusion, And How To Dismiss A Borrower’s Post-Foreclosure Case

And So, Shall a Magistrate Lead Them to Fairness?

BANKS CDS INSURANCE POLICIES IN SETTLEMENT … WHAT'S THE DEAL?

A $2 Billion lawsuit filed by investors against large banks is reportedly being settled.  See Nathaniel Popper, "Banks to Settle With Investors in Suit Over Crisis" p. B1, col. 1 (New York Times Nat'l ed., "Business Day" Section, Saturday, September 12, 2015).  The investors filed suit over the banks' use and alleged misuse of credit default swaps ("CDS"), a form of credit insurance unregulated by State Insurance Commissioners.  The plaintiffs alleged that the banks conspired to close the CDS market to competitors, thereby driving up prices paid by the investors-plaintiffs.

 One of the investors' attorneys claims that the banks are making changes which will make the CDS market more transparent as a part of the settlement.  Id.  However, the settlement terms are not reported.

 The operational manual for settlements involving investment banks and the Great Recession calls for secret provisions and sealed side-agreements.  It may be worth keeping a close eye on the Court File in this case.

 

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

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Video Displays "Lender Force-placed Insurance Practices".

Recoupment and Reimbursement of Covered Claims Defended and Negotiated.

          In 2001, the California Supreme Court gave its definitive answer (definitive certainly in California)  to a certified question concerning recoupment or reimbusement of settlement and defense of covered claims.  First, the California Supreme Court gave a fact-specific answer to the question as follows:

Here, at the time it accepted defense of the insureds, the insurer reserved its right to dispute coverage for any settlement contribution made to the injured third party. However, when a reasonable settlement offer was subsequently tendered, the insureds refused to agree the insurer could settle if the insureds would be liable for reimbursing the insurer for any noncovered claims. They also refused to either assume their own defense, or agree the settlement offer was unreasonable, and hence could not be the basis for a later bad faith action based on the failure to settle. Under such circumstances, we conclude an insurer may be reimbursed for a reasonable settlement payment made over the objection of its insureds.^FN1

             The California Supreme Court considered the matter thoroughly in the case presented, and concluded its answer once again much in the same fact-specific way:

   As noted, the issue here is whether Blue Ridge may seek reimbursement for the settlement paid on the Jacobsens' behalf even in the absence of the Jacobsens' express agreement. We conclude it may. Here, the Jacobsens were on notice both by the policy language and by Blue Ridge's express reservation of rights when it assumed the defense that Blue Ridge might seek reimbursement from them for what were ultimately determined to be noncovered claims. Moreover, Blue Ridge notified the Jacobsens of its intention to accept what was ultimately determined to be a reasonable settlement offer, and offered the Jacobsens the opportunity to assume their own defense. Under such circumstances, Blue Ridge satisfied the prerequisites for seeking reimbursement for noncovered claims included in a reasonable settlement payment: (1) a timely and express reservation of rights; (2) an express notification to the insureds of the insurer's intent to accept a proposed settlement offer; and (3) an express offer to the insureds that they may assume their own defense when the insurer and insureds disagree whether to accept the proposed settlement.^FN2

 

^FN1 Blue Ridge Ins. Co. v. Jacobsen, 25 Cal. 4th 489, 492-93, 22 P.3d 313, 314, 106 Cal. Rptr. 2d 535, 536 (2001).

 

^FN2 Blue Ridge Ins. Co. v. Jacobsen, 25 Cal. 4th 489, 502, 22 P.3d 313, 320-21, 106 Cal. Rptr. 2d 535, 544 (2001).  [Emphasis added.]

 

Reprinted with the permission of Thomson Reuters and the author from the manuscript of the author's 2015 Supplement chapters in “Litigation and Prevention of Insurer Bad Faith, 3d” ©2015 by Thomson Reuters.

ADVICE OF INSURANCE CARRIER’S COUNSEL PUT AT ISSUE BY CARRIER.

               Under Oklahoma law that mirrors the law of many other jurisdictions in this regard, it was held that an insurance company waived attorney-client privilege and work product immunity in a case in which the carrier sued an adjuster for indemnity and negligence.  The carrier contended that it would not have had to defend or settle an underlying lawsuit filed by the carrier's policyholder against the carrier, but for the alleged errors and omissions of the adjuster handling the policyholder's claim for the carrier.

              The Court’s opinion makes it clear that the carrier raised the privilege and immunity against discovery of certain advice given to the carrier by attorneys it consulted on whether the lawsuit filed by the carrier’s policyholder should be settled because of the carrier’s potential exposure to a bad faith claim and the value of the carrier’s exposure to a bad faith claim.  Seneca Ins. Co. v. Western Claims, Inc., 774 F.3d 1272, 1274-75 (10th Cir. 2014).

               So, the case that confronted the Court was a lawsuit filed by the carrier to recover indemnity and to recover damages for alleged negligence, in which the plaintiff carrier asserted privileges from discovery over the advice on which the carrier allegedly relied in paying the money which it now sought to recover from the adjuster it hired to handle the underlying hail damage claim made by its policyholder.  Because of the adjuster's handling of the policyholder's hail damage claim, the carrier alleged, the policyholder was dissatisfied and sued the carrier for "mishandling" the claim.

               The Tenth Circuit panel held that Oklahoma law would apply a waiver of the attorney-client privilege in this case because the carrier “affirmatively put at issue its attorney’s advice by invoking ‘advice of counsel’ to support its claims in this litigation.”  The plaintiff carrier had to prove the reasonableness of its underlying settlement in order to recover indemnity, and the carrier asserted that it relied on advice of counsel that the settlement was reasonable.  Seneca Ins. Co. v. Western Claims, Inc., 774 F.3d 1272, 1276-77 (10th Cir. 2014).  [Emphasis added.]  Of course, in order to recover the amount of its underlying settlement as damages under a negligence theory, the plaintiff would still have to prove that its settlement was reasonable.  Under both claims alleged by the carrier, implied indemnity and negligence, the reasonableness of the underlying settlement was an issue in the carrier’s suit against the adjuster.

               It is interesting that the carrier contended it did not waive attorney-client privilege because, the carrier contended, the adjuster could pursue discovery regarding the reasonableness of the carrier’s settlement from sources other than the communications of the attorneys for the carrier.  However, the carrier’s officers testified that they made their decision to settle the underlying case on the advice of counsel.  Seneca Ins. Co. v. Western Claims, Inc., 774 F.3d 1272, 1277 (10th Cir. 2014).

               For the same reasons, the Tenth Circuit panel held that Oklahoma law would apply a waiver of the work product qualified immunity “by putting the correspondence at issue.”    Seneca Ins. Co. v. Western Claims, Inc., 774 F.3d 1272, 1278 (10th Cir. 2014).

               The twin waivers were held to apply in this case not so much on account of the nature of the carrier’s suit for implied indemnity and negligence.  More to the point, the carrier’s own officers testified that there were no other sources from which to obtain evidence on the reasonableness of the carrier’s settlement, an issue in the carrier’s lawsuit whichever theory of liability was at issue, implied indemnity or negligence.

Please Read The Disclaimer.  ©2015 by Dennis J. Wall.  All Rights Reserved.  No Claim to Original U.S. Government Works.

 

ST. PATRICK’S DAY, 2014: THE DAY THAT BARRED ALL CLAIMS, supposedly.

               St. Patrick’s Day, 2014 was the day a Federal Judge signed an order submitted by the parties to preliminarily approve their class action settlement of the plaintiffs’ claims arising from the defendants’ lender force-placed insurance practices.   Fladell v. Wells Fargo Bank, N.A., Case No. 13-cv-60721, Dkt. No. 168 (S.D. Fla. Order filed March 17, 2014).  Even before the Federal Judge signed the Order submitted by the parties in the Miami case, Federal Courts in other jurisdictions stayed or dismissed other pending lawsuits arising from the defendant bank’s alleged lender force-placed insurance practices.  See “They Were Against It Before They Were For It:  Fladell” in Three Parts, on Insurance Claims and Issues Blog, December 29, 2014; Insurance Claims and Bad Faith Law Blog, December 30, 2014; and on Insurance Claims and Issues Blog, December 31, 2014.

               The class certified for settlement purposes in Fladell included many more people than the Florida, Arkansas, and Oklahoma plaintiffs before the Court in South Florida.  It swept across the entire United States to include anyone who had a claim against the bank and its co-defendants anywhere, in basic and simple terms.   Fladell v. Wells Fargo Bank, N.A., Case No. 13-cv-60721, Dkt. No. 168, ¶ 4 (S.D. Fla. Order filed March 17, 2014).   The claims alleged by the actual plaintiffs in the Fladell case included alleged claims for unjust enrichment, breach of fiduciary duty, and breach of the implied covenant of good faith and fair dealing.

               The Order preliminarily approving the Fladell settlement has been replaced with an order submitted by the parties for final approval, and by a judgment.  However, even now, Fladell is not final.  It is on appeal as of this writing.

                Far from being dispositive in precluding other claims in other jurisdictions, Fladell may not be dispositive even in its own District.  It has been held in the Southern District of Florida – as it has been held elsewhere – that the requirement of “predominance” of common issues in a purported nationwide class action is simply not satisfied in the face of a predominant need for an individualized inquiry “based upon the class member’s location.”  Florida’s law on unjust enrichment in particular is different from many other States.  Florida is not alone.  Courts in many jurisdictions “have found variation in unjust enrichment laws to preclude a finding of predominance for multistate classes asserting unjust enrichment claims.”  Karhu v. Vital Pharmaceuticals, Inc., No. 13-60768-CIV, 2014 WL 815253, *8-*9  (S.D. Fla. March 3, 2014)(holding that putative class action plaintiff did not meet burden of establishing that common issues predominate “with regard to the unjust enrichment claims of the Proposed Classes”; same holding with regard to Unfair Trade Practices claim), dismissed without prejudice by Order filed on March 27, 2014, notice of appeal filed on April 15, 2014 regarding denial of class certification and dismissal.  (As of this writing, the appeal in Karhu is still pending.)

               It is unclear why the Fladell plaintiffs’ unjust enrichment claims should be given any greater weight simply because the parties in Fladell stipulated that everyone else’s claims of any kind anywhere in the nation would be included in their settlement once a Court approved it.  Certainly no reason appears why the Fladell plaintiffs’ claims for unjust enrichment should preclude the unjust enrichment claims of anyone else, nor why any of the claims alleged by the Fladell plaintiffs should preclude the claims of other people which Courts have held not to constitute a certifiable class action, such as deceptive and unfair trade practices laws, breach of the implied covenant of good faith and fair dealing, or alleged breach of fiduciary duties.  Each and every one of these claims necessitates individualized determinations of facts which do not allow even common questions to predominate and so preclude not the claims, but preclude a certifiable class.

               Although the Fladell class action settlement has been arguably reduced to a judgment, in the first place that judgment is not final; as noted earlier, it is on appeal.

               Second, even if the Fladell class action settlement eventually involves a final judgment, class settlement certification can be collaterally attacked including on the ground of inadequate representation on common issues.  See Hecht v. United Collection Bureau, Inc., 691 F.3d 218, 221-24 (2d Cir. 2012), and cases cited in it.  See generally the outstanding article by Georgene Vairo, “Is the Class Action Really Dead?  Is That Good or Bad for Class Members?” 64 Emory L.J. 477 (2014).

               The issue seems to boil down to whether a Court lacks subject-matter jurisdiction.  That the issue involved is at bottom a potential lack of jurisdiction is shown, for example, by the history of the Karhu case cited above.  In that Southern District of Florida case, once the District Judge denied certification of the alleged nationwide class, the Judge was impelled to dismiss the entire case without prejudice because the Court lacked jurisdiction as a result of denying the nationwide class certification.

              Attorneys in Fladell were thus justifiably concerned with the issue of jurisdiction because they provided a proposed order which the District Judge signed in Fladell that recited it would preclude all other claims filed anywhere in the United States because it barred all claims that were or supposedly could have been filed in Fladell.  See Fladell v. Wells Fargo Bank, N.A., Case No. 13-cv-60721, Dkt. No. 168, ¶¶ 13 & 15 (S.D. Fla. Order filed March 17, 2014).   The fact that these provisions were written into the preliminary class settlement certification order proposed in Fladell, which were carried forward when the class settlement was finally approved, reflect an understandable concern that the Fladell class action settlement may not apply anywhere outside of South Florida and, depending on the forthcoming resolution by the Eleventh Circuit Court of Appeals, may not apply anywhere including in South Florida.

The author’s forthcoming book on “Lender Force-Placed Insurance Practices” is scheduled for publication this Spring by the American Bar Association.

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

Happy St. Patrick’s Day Eve, 2015!

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SECRET INSURANCE CASES: THE RULES AND THE OPPORTUNITIES FOR REBUTTAL.

    The rules which allow for secrecy in insurance and other cases are not inflexible.  Although the presumption is that openness is the default rule, the presumption is rebuttable.  The rules and the opportunities for rebuttal are explored in these articles posted on Legal Solutions Blog and linked here for your ease of reference: 

Presumption that court records are open to the public: The default rule January 28, 2015;  

The default presumption of public access to court records is rebuttable February 3, 2015; and

The default presumption of public access to court records is rebuttable (Part 2 of 2) February 5, 2015.

Please Read The Disclaimer.  Copyright 2015 by Dennis J. Wall.  All rights reserved.  No claim to Original Works of the Legal Solutions Blog or Thomson Reuters and West.

NEW JERSEY, CHRIS CHRISTIE, EXXON AND ... INSURANCE?

    The State of New Jersey is the plaintiff in a lawsuit against Exxon which has been going on for 11 years.  The suit is about environmental contamination caused by Exxon at more than one site in New Jersey.  Exxon's liability has already been determined at trial.  All that remains is to determine damages in the next trial phase.  New Jersey has for years been seeking damages of $8.9 Billion or $8,900,000,000.00.

    However Governor Christie reportedly derailed that process.  His administration recently announced to the Trial Judge that the State of New Jersey and Exxon have reached a settlement for less than 3% of what New Jersey sought under its previous Governors who filed and maintained this successful lawsuit against Exxon:  They settled for a reported $250,000,000.00.

    The deal does not seem to be done yet, however.  Apparently the settlement agreement will be "submitted for public comment in April and would then be submitted for court approval in May," unless comments cause a change in the settlement.  See Benjamin Weiser, "Exxon Settles $9 Billion Pollution Case in New Jersey for Far Less" p. A15, col. 1 (New York Times Nat'l ed., Saturday, February 28, 2015).

    The announced settlement amount of $250,000,000.00 looks suspiciously like the amount of a self-insured retention or deductible on one of Exxon's presumably many liability insurance policies.  What role if any Exxon's insurance companies are playing and have played in this settlement is not yet reported.

    With respect to "public comment" on this settlement, how does that work exactly?  Can people who are not residents of New Jersey make comments, for example?  And what exactly is involved with "court approval" of this settlement, from why is it required to how is the process performed?  In short, "What's up, New Jersey?"

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

    

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Exxon Mobil settles New Jersey environmental case for a fraction of expected damages

FAIR AND REASONABLE SAME AS FAIR AND BALANCED?

         As you probably know by now, a panel of the Federal Second Circuit Court of Appeals has reversed and remanded to Judge Jed Rakoff in an SEC settlement case.  The SEC's settlement was with Citigroup.  See James B. Stewart, "Common Sense / Reassessing Reversal of Adversary to S.E.C.," p. B1, col. 1 (New York Times Nat'l ed., "Business Day" Section, Saturday, June 14, 2014).

         A Federal Statute requires District Judges to approve settlements in litigated cases in their Courts involving Federal administrative bodies like the SEC.  The statutory standard which a District Judge is required to determine in each such settlement is whether the given settlement is "fair and reasonable".

         Judge Rakoff declined to approve the SEC's settlement with Citigroup in this particular case until the Court was provided with facts upon which to make the "fair and reasonable" determination.  The only thing at all which was provided to District Judge Rakoff along with the parties' settlement papers was the SEC's complaint.

         The Second Circuit panel reversed this District Court Order for facts upon which to make the determination.  According to the Second Circuit panel, in essence the job of the District Judge is to rubber stamp every or nearly every settlement as "fair and reasonable" and close the file in every case involving the SEC and other administrative agencies.

         There is an issue here, however, which goes beyond the District Courts' need for facts to make a proper determination of whether a given settlement is fair and reasonable.  The Second Circuit panel's clear disregard for the facts necessary to make that determination invites settlements which are harmful to the public at large.  This result conflicts with State laws to the contrary, Florida's law for example.  See generally 1 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 3:107, "Settlement of Third Party Bad Faith Claims:  Confidentiality (Protected) or Concealment (Void)" (West Publishing Co. 3d ed. & 2014 supplement); 2 id. § 9:28, "Settlement of First Party Bad Faith Claims:  Confidentiality (Protected) or Concealment (Void)".

         In addition to overriding contrary State laws, one additional consequence of the panel's decision in the Second Circuit is that any and all contrary laws designed to protect the public from harm are preempted by one statute which on its face required Federal District Judges to determine whether settlements by administrative agencies such as the SEC are fair and reasonable.  From this point forward in the Second Circuit at least, "fair and reasonable" will never mean requiring facts that show that the settlement is fair and reasonable to the public at large.

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

 Please Read The Disclaimer.

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HELP WANTED: MUST HAVE EXPERIENCE PRACTICING INSURANCE, SETTLING CLAIMS.

Interested parties please apply to the United States Department of Justice.

          Investment banks are increasingly assigning contracts for mortgage servicing to "specialty" servicers, which are businesses which exist for the purpose of servicing mortgages.  In basic and simple terms, a mortgage servicer is a party which stands between the mortgagor-borrower and the mortgagee-lender.

          Borrowers have a lot more contact with the current servicer of their mortgage than they will ever have with the lender or the lender's current stand-in.  The servicer collects the monthly mortgage payments, applies proceeds from escrow toward taxes and insurance, force-places insurance at the borrower's expense and on the lender's behalf, and initiates foreclosure against the borrower on behalf of the lender.

          The spark that set off the so-called National Mortgage Settlement, was certain attention-getting conduct of the 5 investment banks which were released.  The conduct which drew national attention originally was how the 5 investment banks conducted themselves in their roles as mortgage servicers.

           In 2012, an election year, the idea of a national settlement agreement was pushed hard by the United States represented by the Department of Justice and HUD.  See, for example, the articles posted here on January 25, 2012, and the four-part series which concluded on February 2, 2012 on Insurance Claims and Bad Faith Law Blog with  links to the other articles in the series.

          The Department of Justice and HUD pushed an agreement to settle and release potential claims including claims involving lender force-placed insurance, which the Federal Government held against the 5 mortgage servicers.  (The settlement agreement eventually expanded to also include mortgage lending activities by the 5 investment banks.  See the article posted on Insurance Claims and Bad Faith Law Blog on July 26, 2012, for example, in addition to the articles linked above.)  The U.S. Attorney General and the Secretary of Housing and Urban Development pressured many States to join in settling and releasing potential claims held by the States.

          The DOJ, HUD, and the States all were represented by legal counsel in this effort.

          They may have forgotten to require that the settlement agreement should be binding on the released mortgage servicers' successors and assigns.

           The investment banks are selling their mortgage servicing contracts in greater numbers to specialty servicers, as noted above.  The specialty servicers are reportedly now doing the same allegedly bad things that drove the investment banks into the so-called National Mortgage Settlement.  The specialty servicers are not inhibited let alone restrained by that settlement, to which they were not parties and in which they were apparently never foreseen.  See Jessica Silver-Greenberg and Michael Corkery, "Loan Complaints by Homeowners Rise Once More / Old Abuses, New Front / Taking Over For Banks, Mortgage Servicers Sidestep Rules" p. A1, col. 6 (New York Times Nat'l ed., Wednesday, February 19, 2014).

          The reports have it that the successors or assignees to these mortgage servicing contracts are repeating the same alleged abuses as were supposedly settled by the investment banks, "because" the banks are regulated and the specialty servicers are not.  The reporters have it wrong.

          Specialty mortgage servicers are engaging in allegedly bad behaviors, including force-placing insurance abuses on behalf of lenders, simply and completely because they do not see themselves as bound by any agreements the investment banks made with the United States or the States which participated in the "National Mortgage Settlement".

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

 Please Read The Disclaimer.

DID MORTGAGE SERVICERS AGREE NOT TO REPEAT PREVIOUS INSURANCE TACTICS?

          "Specialty" mortgage servicers are businesses whose business purpose is to make their money by servicing mortgages. Specialty mortgage servicers are now reportedly engaging in the same allegedly unfair mortgage servicing practices which investment banks settled.  See Jessica Silver-Greenberg and Michael Corkery, "Loan Complaints by Homeowners Rise Once More / Old Abuses, New Front / Taking Over For Banks, Mortgage Servicers Sidestep Rules" p. A1, col. 6 (New York Times Nat'l ed., Wednesday, February 19, 2014).

          Investment banks have settled potential claims over their mortgage servicing activities in the so-called National Mortgage Settlement, and they have settled actual claims in suit in individual litigated cases over their allegedly unfair mortgage servicing practices including lender force-placed insurance.

          Did they agree not to do it again by other means?

          Did they agree to bind the parties to which they sold their contracts for mortgage servicing?

          Putting it another way, did the investment banks agree, when they settled their mortgage servicing practices, that their agreement would be binding on specialty mortgage servicers to which they sold their servicing contracts?

 

          This is a very important issue especially for future mortgage servicing activities involving lender force-placed insurance.  More to come on this subject.

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

 Please Read The Disclaimer.