Source: https://insuranceclaimsbadfaith.typepad.com/insurance_claims_badfaith/penalties/
Timestamp: 2019-04-25 11:54:53+00:00

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"INJURY IN FACT": WHAT HAPPENS TO BAD FAITH STATUTES? Continued.
This article is a continuation of the post on Insurance Claims and Issues on Monday, April 24, 2017.
As an example of lower federal courts actively seeking situations in which people simply cannot sue for alleged violations of State statutes, even though States have provided the statutory remedies alleged in the given case, the Eleventh Circuit Court of Appeals held after Spokeo that a borrower-mortgagor of real property located in New York State could not bring that particular lawsuit for an alleged violation of New York Real Property Law because now the United States Constitution forbids such a suit. Nicklaw v. Citimortgage, Inc., 839 F.3d 998, 1002-03 (11th Cir. 2016). The Eleventh Circuit's decision in this case has been rejected by name in other Circuits, see, e.g., Weldon v. MTAG Services, LL, No. 3:16-cv-783 (JCH), 2017 WL 776648, at *6 (D. Conn. Feb. 28, 2017), and it has been distinguished in the Eleventh Circuit based, perhaps ironically, on other Eleventh Circuit case law. See Tillman v. Ally Fin. Inc., No. 2:16-cv-313-FtM-99CM, 2016 WL 6996113, at *4 n.7 (M.D. Fla. Nov. 30, 2016).
However, this decision is by no means alone. In Spokeo itself, the Court deciding that case remanded for a determination of "plausibility," in effect, of whether Thomas Robins and persons like him had alleged injury in fact as the U.S. Constitution now apparently requires.
If the idea of "injury in fact" has been elevated surreptitiously from standing to the U.S. Constitution, it can certainly have an effect on claims based on State statutes providing remedies to 'private attorneys general' that the States rely on to enforce the laws. Time will tell whether State Unfair Claim Handling Practices Acts and Penalties Statutes governing the business of insurance will feel the effects and, if so, how.
BAD FAITH CASES: WHY COMMON LAW CLAIMS & STATUTORY CLAIMS ALLEGED TOGETHER.
I have written before about the insightful opinion by a District Judge in the case of Wahlert v. American Standard Ins. Co. of Wis., No. 14-cv-02744-RBJ, 2016 WL 1222944 (D. Colo. March 29, 2016). In that case, the District Judge dismissed a Colorado common law claim of insurer bad faith, and dismissed in part but retained in part a statutory claim for double damages plus policy benefits, attorney's fees, and costs.
The common law claim requires proof not only that insurer's conduct was unreasonable but also that the insurer knew or recklessly disregarded the fact that its conduct was unreasonable. [Citation omitted.] The statutory claim requires proof that a benefit to which the insured was entitled under the policy was unreasonably delayed or denied. If that is established, the plaintiff is entitled to receive a penalty payment of two times the benefit (in addition to the benefit itself) plus reasonable attorney's fees and costs. C.R.S. § 10-3-1116(1).
Because of the lesser liability burden and the onerous penalty provision, the statutory claim is “ ‘arguably ...more financially threatening’ ” to the insurer. [Citations omitted.] Nevertheless plaintiffs frequently assert both claims. Perhaps the motivator for including the common claim is that punitive damages can be recovered if the plaintiff establishes that the insurer's actions were accompanied by circumstances of fraud, malice, or willful and wanton conduct.
Wahlert v. American Standard Ins. Co. of Wis., No. 14-cv-02744-RBJ, 2016 WL 1222944, at *3-*4 (D. Colo. March 29, 2016).
PUNITIVE DAMAGES FOR BREACH OF DUTY TO DEFEND.
BAD ACTORS NO PROOF OF BAD FAITH.
"I am aware that [a particular insurance company] is a “frequent flier” in the universe of litigated insurance coverage disputes. But each case must be judged on its own facts, not on someone's perception that [particular insurance companies] or other related companies are bad actors in general." Wahlert v. American Standard Ins. co. of Wis., No. 14-cv-02744-RBJ, 2016 WL 1222944, at *8 (D. Colo. March 29, 2016).
In this case, the District Judge dismissed a Colorado common law claim of insurer bad faith, and dismissed in part but retained in part a statutory claim for double damages plus policy benefits, attorney's fees, and costs.
In Michigan, "Bad Faith" conduct is only relevant to a third-party tort claimant's claim to recover penalty interest under Michigan Compiled Laws § 500.2006(4). This is part of the holding in the case of Tyler v. Pacific Indemnity Co., 2013 WL 183931 *4 (E.D. Mich. January 17, 2013).
In a first-party case like Tyler, on the other hand, the statutory claim for penalty interest is made by the Insured, who or which only needs to prove that the Insurance Company "failed to pay benefits within sixty days of submitting satisfactory proof of loss to be awarded penalty interest. [Citation omitted.] Bad faith is thus irrelevant to Plaintiff's MUTPA [Michigan Uniform Trade Practices Act] claim." Tyler v. Pacific Indemnity Co., 2013 WL 183931 *4 (E.D. Mich. January 17, 2013).
As noted, the claim at issue is one for statutory penalty interest. In particular in what would be so-called "Third-Party Bad Faith" cases at common law in Michigan, the cause of action for breach of an insurance contract is simply breach of contract in the ordinary case, and presumably the same is true in First-Party Bad Faith cases under Michigan common law as well. See Tyler v. Pacific Indemnity Co., 2013 WL 183931 *4 (E.D. Mich. January 17, 2013)("Moreover, to the extent Michigan courts recognize an implied contractual duty to conduct a good faith investigation on an insurance contract, breaching that duty only enables the recovery of penalty interest, which is precisely what Plaintiff is already capable of recovering under the MUPTA." Tyler v. Pacific Indemnity Co., 2013 WL 183931 *4 (E.D. Mich. January 17, 2013). [Emphasis added.] See also Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 3:23, "Legal Bases of Liability in Settlement--Contract" (3d Edition West 2012, 2013 Supplement in process).
Foreclosure Lawsuits Problems Attempt Overcoming Courts: No. 1, With Solutions.
This is the second in an occasional series.
One problem with the attempt to overwhelm the Court System with Foreclosure Lawsuits, thus laying the groundwork for "reform" by making Foreclosures easier for Foreclosure Plaintiffs to sue, lies with the presentation of Affidavits and Testimony and other unsupported Evidence. See the previous posts for several years in those categories as applicable, and in the Category of "Foreclosures".
In presenting unsupported Affidavits, Testimony and other Evidence, Foreclosure Plaintiffs often present Affidavits or Testimony which does not rest on personal knowledge. Further, some Witnesses or Exhibits purport to offer "summaries" of other people's calculations or work. Unless the Homeowners are represented by counsel when they are sued as Defendants, there is no-one to object under the most-followed, current Court System model.
This system is well known to Foreclosure Plaintiffs. The response of Courts and Legislatures to the overwhelming number of filed Foreclosure Lawsuits has often been to engage in "reforms" suggested by Foreclosure Plaintiffs which will "speed up" the process of their Foreclosures.
A major problem with these "reforms" is when they require the acceptance in a Court proceeding, a lawsuit, of testimony and evidence which has not previously been found acceptable. I.e., Affidavits and Testimony and other unsupported Evidence.
Here are three possible solutions to the problems. These possibilities are offered here in the context of possible changes to Court and Bar Rules. Perhaps the involvement of Legislatures and statutes may be required in some jurisdictions. Further, the language in these proposals addresses the only problem before the Courts in Foreclosure Lawsuits at this time, which is the presentation by Plaintiffs of unsupported Evidence in those cases. If other problems arise, the language can be changed to address additional problems which may develop in the future.
As noted, thes following proposals address a problem currently posed by Foreclosure Lawsuits, which is the presentation of unsupported Evidence by or on behalf of Plaintiffs particularly against Defendants who have no Legal Counsel.
(a) In which the Defendant in a Foreclosure Lawsuit is not represented by Counsel, the Court is empowered and authorized to hold Hearings and take Testimony including in person from the signer of any Affidavit(s) submitted by the Plaintiff, for the purpose of determining compliance with these Rules, including but not limited to the purpose of a finding on the issue of whether the Affidavit was made on personal knowledge.
(1) Strike the pleadings of the Plaintiff.
In any Appeal from a Judgment of Foreclosure on the ground that the Judgment of Foreclosure is not supported by the Evidence, or is against the manifest weight of the Evidence, review of the Judgment with regard to such ground or grounds shall be de novo [brand new by the reviewing Court on appeal].
(1) Include representation of Foreclosure Lawsuit Defendants who do not qualify for Legal Aid.
(2) Include representation of Foreclosure Lawsuit Defendants who have qualified for Legal Aid and upon referral and certification by Legal Aid that Legal Aid is unable to handle the representation without the referral.
Do you have other solutions? If so, or if you want to comment upon these proposed Rule changes, please leave a Comment with your thoughts. Thank you.
Brits Levy Penalties For Trust Violations: Financiers' Fiduciary Obligations Scrutinized.
"Even if it's an oversight, the fact that it's such a large amount and it went on for seven years makes me scared stiff." Prof. Tamar Frankel, an authority on Fiduciary Law, quoted by Julia Werdigier, "JPMorgan Penalized By Regulator In Britain" p. B3, col. 6 (New York Times Nat'l ed., "Business Day" Section, Friday, June 4, 2010).
The United Kingdom requires futures and options securities dealers to keep client funds in separate accounts, protected from payments they make from their operating accounts. Parenthetically, this requirement sounds like a lawyer's trust account requirement and like the requirement to keep proprietary trading separate from the investment of client funds that is under consideration along with other financial reform proposals in the United States.
"J.P. Morgan failed to separate client funds worth $1.9 billion to $23 billion from 2002 until July 2009," according to the United Kingdom's Financial Services Authority. Julia Werdigier, JPMorgan Penalized, New York Times, supra. The Financial Services Authority levied penalties of $48.6 million on JP Morgan, a record penalty amount. Id.
The new Prime Minister, leader of Britain's Conservative Party, has targeted the F.S.A. for partial dismemberment, it is reported, which is better perhaps than totally barring the F.S.A. from penalizing financial failures to keep bank money segregated from client trust funds.
The author drew on the landmark work of Professor Frankel in Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" §§ 3:26 - 3:29 (Shepard's/McGraw-Hill First Edition; West Publishing Co. Second Edition and 2010 Supplement in process).
Pre-Judgment Interest Per Policy, Not As Penalty.
A Homeowner's Insurance Company was held liable to pay pre-judgment interest on an Appraisal Award for Hurricane Damage from Hurricanes Katrina and Wilma, from the date that payment became due under the Policy rather than the date on which the Insured's Property was damaged, in Download Sunshine State Insurance Co. v. Davide (Fla. 3d DCA Opinion Filed July 15, 2009), attached slipsheet Opinion of the Court at 2.
The Insured argued in that case "that withholding a portion of the arbitration award constituted a denial of coverage" such that the Homeowner's Insurer in that case should pay pre-judgment interest from the Date of Loss, an argument which the Florida Appellate Court rejected. Download Sunshine State Insurance Co. v. Davide (Fla. 3d DCA Opinion Filed July 15, 2009), attached slipsheet Opinion at 3.
Note that the Court referred interchangeably to the "arbitration award" and to the "appraisal award" in that case. There was one award, and in the eyes of the Court, in that case "arbitration" was as appropriate an adjective as "appraisal".

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