Source: https://insuranceclaimsbadfaith.typepad.com/insurance_claims_badfaith/exclusions/
Timestamp: 2019-04-25 12:17:19+00:00

Document:
BAD FAITH: REDACTING CLAIMS FILES, MAKE PRIVILEGE CLEAR OR DISCLOSE.
In Apex Mort. Corp. v. Great N. Ins. Co., No. 17 C 3376, 2018 WL 341661 (N.D. Ill. January 9, 2018) (Weisman, USMJ), a U.S. Magistrate Judge was confronted with numerous discovery requests in a bad faith case.
As anyone involved with any other bad faith case would have reason to expect in this case, one of the requests in this particular bad faith case asked for production of the insurance carrier's claims file.
This bad faith case was brought by a mortgagee, Apex. Apex took control of a property after it foreclosed on it. During the time that Apex controlled the property, a fire broke out. Firefighters responded and two were killed. Their estates sued the mortgagee.
Apex Mort. Corp. v. Great N. Ins. Co., No. 17 C 3376, 2018 WL 341661, at *1 (N.D. Ill. January 9, 2018).
During discovery in its insurance bad faith case, Apex requested production of Federal's claims file "and documents relating to the coverage decision, this case, or ... underlying lawsuits." Federal actually did not object. Instead, Federal produced documents it claimed were responsive, but "with privileged information redacted." The Court had previously determined that the privilege assertion was an assertion of attorney-client privilege, that the assertion of attorney-client privilege was governed by Pennsylvania law, and that the privilege had not been established on the record of this particular case.
In redacting documents that it produced, however, Federal neglected to mention whether they were necessarily all of the documents requested or even what particular "privilege" Federal was asserting in redacting these documents, saying only that the redactions resulted from some unspecified "privilege" in this regard. That is how the Magistrate Judge saw it.
Accordingly, the Court orders Federal to produce: (1) any non-privileged documents responsive to these requests that have not already been produced; and (2) any portions of the claims file Federal has designated as privileged that this opinion makes clear are not privileged.
Apex Mort. Corp. v. Great N. Ins. Co., No. 17 C 3376, 2018 WL 341661, at *6 (N.D. Ill. January 9, 2018) (Weisman, USMJ).
If a party to a federal lawsuit is going to conceal evidence, including during discovery, it must disclose its reasons for redaction or disclose the evidence. Or suffer the consequences if that party completely ignores the Rules and the rulings.
Insurance Claims And Issues: SETTLEMENT UNDER SEAL IN ARKANSAS.
OHIO VOTES FOR GOOD FAITH!
Grange Mutual, an Automobile Liability Insurance Company in Ohio, offered a $30,000.00 settlement to an injured claimant named Darlene Stephens. Ms. Stephens rejected the offer, proceeded to Trial against the Policyholder, Leslie Daniel, and obtained a Judgment against him. The Jury awarded compensatory damages in the amount of $31,478.50 and assessed $20,000.00 in Punitive Damages against the Policyholder, Mr. Daniel.
Mr. Daniel assigned his rights against Grange to the injured claimant, Ms. Stephens. Both Ms. Stephens and Mr. Daniel together sued Grange for Bad Faith in failing to settle the underlying case. Stephens v. Grange Mut. Ins. Co., 2012 WL 5296019 *1, ¶¶ 2-3 , 2012-Ohio-4980 ¶¶ 2-3 (Ohio 2d DCA October 26, 2012).
The Appellate Court observed that any assessment of Punitive Damages in this case was not insurable. First, Punitive Damages are not insurable in Ohio as a matter of public policy. Second, Mr. Daniel's Policy "excludes coverage for punitive or exemplary damages, and [third,] in their responses to Grange's request for admissions [in the Bad Faith case], Stephens and Daniel admit that Grange 'had no contractual obligation to pay punitive damages under the terms of the insurance policy issued to' Daniel." Stephens v. Grange Mut. Ins. Co., 2012 WL 5296019 *6, ¶ 28 , 2012-Ohio-4980 ¶ 28 (Ohio 2d DCA October 26, 2012).
The official opinion of the unanimous Court did not say so, but it appears that the panel unanimously concluded that since the Auto Liability Insurance Carrier had no Coverage for Punitive Damages in this Ohio case, therefore the Carrier had no duty to attempt to settle the Punitive Damages claim against its Policyholder in the underlying case.
The Appellate Court construed the evidence most strongly in favor of Ms. Stephens and Mr. Daniel on their Bad Faith claim against Grange, and concluded "that there is no evidence that it acted in bad faith in negotiating Stephens' compensatory damages." Grange's offer of $30,000.00 before Trial compared favorably to the Jury Verdict for compensatory damages of $31,478.50 in the eyes of the Appellate panel, "an amount only $1,478.50 more than Grange's final offer." Stephens v. Grange Mut. Ins. Co., 2012 WL 5296019 *7, ¶ 29 , 2012-Ohio-4980 ¶ 29 (Ohio 2d DCA October 26, 2012). Under these facts in the record in this appeal, the Appellate Court affirmed the Trial Court's entry of Summary Judgment in favor of Grange. Under Ohio law, a Liability Insurance Company's Bad Faith in settlement takes place where there is a double negative, apparently; i.e., where the Insurance Company's refusal to pay the claim is not predicated on circumstances that provide a reasonable justification for not settling the claim. Stephens v. Grange Mut. Ins. Co., 2012 WL 5296019 *6, ¶ 25 , 2012-Ohio-4980 ¶ 25 (Ohio 2d DCA October 26, 2012).
The majority of the panel did not mention, however, that the Jury Verdict was well within Grange's Policy Limits even if compensatory damages were lumped together with the Punitive Damages assessment. The Court stated at the outset, and as a fact in the record, that Grange's Policy Limits in this case were $100,000.00/$300,000.00. Stephens v. Grange Mut. Ins. Co., 2012 WL 5296019 *1, ¶ 3 , 2012-Ohio-4980 ¶ 3 (Ohio 2d DCA October 26, 2012). The majority of the Appellate Court did not mention the Policy Limits again.
Whether as a matter of settled law, or of clear record facts, the Auto Liability Insurance Company in this Ohio case absolutely was held not liable for Bad Faith in Settlement.
Dennis Wall is a featured speaker at this year's National Forum on Bad Faith Litigation in Orlando, Florida on November 28 and 29, 2012. I will be speaking both days. On November 28, 2012 I will be on a panel which will address Innovative Litigation Strategies in Bad Faith Cases. My presentation in particular will focus on Expert Witnesses in Insurance Cases. On November 29, 2012, I will also be leading a Florida Workshop on Bad Faith, all at Disney World in Orlando, Florida. I am told that if you mention my name should you choose to register for this Forum, discounts may be available from the ACI. Tell the ACI at the time of registration that I told you to ask about discounts. The ACI contact information is on the American Conference Institute's website at www.americanconference.com/badfaith.
Two Heads Shaking From Louisiana: One Court's, One Party's.
In two decisions rendered in the last two days, two Louisiana Appellate Courts issued head-shaking judgments. Neither case involved reported allegations of Insurer Bad Faith. Insurance practitioners will appreciate knowing about both of these decisions in any case.
In State of Louisiana Patricia Bourque v. Essex Insurance Co., 2012 WL 832748 (La. Ct. App. 3d Cir. March 14, 2012), Download State of La. Patricia Bourque (La. Ct. App. 3d Cir. Opinions Filed 03.14.12) PUBLIC ACCESS, a Louisiana Appellate Court was fractured in its differing views. Two judges dissented, and a third wrote a special concurrence. The case was the fourth appearance on appeal; there were three previous Jury Trials. In the present appeal, the Jury found against the Plaintiff.
Do you find, by a preponderance of the evidence, that an accident occurred on or about August 19, 2002, injuring the plaintiff, Patricia Bourque?
The deciding majority of the appellate panel in this case held that this was fundamental error, so that the Plaintiff's failure to object did not preclude appellate review. Having reviewed the quoted Interrogatory Verdict, the majority, as noted, held in effect that it was a nullity and that it furnished no assistance in divining the Jury's intent.
So the Appellate panel majority issued its own Judgment in this case.
Next, given that the record was complete, we conducted a de novo review to adjudicate this matter. We found that Patricia Bourque carried her burden to prove that an accident occurred on August 19, 2002, that Donald Lack improperly installed the kitchen light fixture, and that she suffered damages as a result of that improper installation. We rendered judgment that awarded Patricia Bourque $452,689.78 in medical expenses, $250,000.00 in lost wages and future medical expenses, and $500,000.00 in pain and suffering and loss of enjoyment of life. All costs of these proceedings are assessed to Lack Construction, Inc. and Essex Insurance Company.
JURY VERDICT VACATED AND JUDGMENT RENDERED.
In another case decided in a second Louisiana Court of Appeals, Mason v. Bankers Insurance Group, 2012 WL 833364 (La. Ct. App. 5th Cir., March 13, 2012), Download Mason v. Bankers Ins. Grp. (La. Ct. App. 5th Cir. Opinion Filed 03.13.12) PUBLIC ACCESS, a Homeowner's Insurance Company defended a Coverage case brought on account of damages and expenses caused to and by ruptured plumbing.
First, the Defendant contended that there was no Coverage under the Homeowner's Policy in the first place, because the Policy only covers damage to a structure attached to a dwelling and a covered attached structure does not include plumbing, it said. The Appellate Court disagreed. Id. at *2-.
Returning to a position presenting greater lucidity, the Defendant also argued that an Exclusion should apply to preclude all Coverage under the Homeowner's Policy in that case. The Louisiana Appellate Court held that there were factual issues to be tried concerning the application of that Exclusion, and reversed the Trial Court's entry of a Summary Judgment of no Coverage accordingly. Id. at *3-*4.
As noted, neither of these decisions involved reported allegations of Insurer Bad Faith. They are posted here because you will certainly find them interesting and you will also likely find them useful in any case.
When Facts Destroyed Defense: No Title Insurance For Unpaid Liens.
A recent decision illustrates the holdings reached by some Courts that where there is no Duty to Indemnify, there cannot be any Duty to Defend either. The case of Home Federal Savings Bank v. Ticor Title Insurance Co., 2011 WL 4479080 (S.D. Ind. September 27, 2011) involved an unpaid Lien of 6 Million Dollars. The Policyholder of a Title Insurance Company was the party which allegedly had a duty to pay the lien, which was perfected through the forum State's Mechanic's Lien Law. Id. at *3.
Ordinarily, a Title Insurance Policy will exclude liabilities arising from Mechanic's Liens. So did the Policy at issue in this case. Id. at *2. However, the Policyholder, Home Federal, protected its financing on the particular commercial construction project at issue in this case, by purchasing "a mechanic's lien endorsement," reprinted below for convenience.
Home Federal brought the present lawsuit against Ticor Title on three alleged Claims, including an alleged breach of the Duty to Defend, an alleged breach of the Duty to Indemnify, and alleged Bad Faith. The parties both filed Motions for Summary Judgment "specifically addressed to the duty to defend and the duty to indemnify." Id. at *4.
The Federal Judge in this case first looked at the issue of whether there was a Duty to Indemnify under the undisputed facts. The Court determined that there was none, and that ruling otherwise would provide Home Federal with a '$6 Million windfall,' in the Court's words, for not paying the lien in question. See id. at *5 - *6.
Then the Federal Judge addressed the question of whether a Duty to Defend existed. Ordinarily, the existence of a Duty to Defend is determined by comparing the underlying allegations against the Insured, with the provisions of the Policy at issue. Here, once the Federal Court determined the separate issue of no Duty to Indemnify based on the undisputed record facts, the Court determined in one sentence that Ticor Title therefore "necessarily had no duty to indemnify Home Federal either." Id. at *6.
Two rulings of consequence are inherent in this one holding. First, it bears repeating that the Court's decision in this case is not unique. There are many decisions in which Courts have determined that once there is no Duty to Indemnify, there is no Duty to Defend either. In doing so, however, they seem to ignore the distinction between determining the existence of a Duty to Indemnify based upon the actual facts, versus the ordinarily separate question of determining the existence of a Duty to Defend based upon the underlying allegations compared with the Policy provisions at issue. In this particular case, the Court's holdings seem to have been totally correct for the parties involved. The result, however, is less interesting to an outsider than the way in which the Court got there.
Second, the Federal Court in this case took a holding generated in standard-form Liability Insurance Policy Declaratory Judgment Actions, namely, in DJA's involving Commercial General Liability Insurance Policies with standard, widely used forms and endorsements, and without discussion applied that holding -- where there is no Duty to Indemnify, there cannot be a Duty to Defend -- to this case involving a Title Insurance Policy, which has its own unique Policy provisions and which may or may not be based on standard, widely used Forms and Endorsements.
Anything contained in said policy to the contrary notwithstanding, the Company insures against loss or damage incurred by the insured by reason of the enforcement or attempted enforcement of any statutory lien for labor or material arising from construction contracted for and/or commenced on the land prior to, at, or subsequent to the effective date of said policy, and any extension of said date, as having priority over, or sharing on a parity with, the lien of the insured mortgage for that portion of the proceeds of the loan secured thereby advanced for the purpose of paying the costs of the acquisition of the land and the development of and the construction of improvements on the land, including by [sic] not limited to the cost of labor or materials incurred in connection therewith. At the time of each disbursement of the proceeds of the loan, the title must be searched by Royal Title Services, Inc., down to such time, for possible liens or objections intervening between the date hereof and the date of such disbursement.
This endorsement is made a part of the policy or commitment and is subject to all the terms and provisions thereof and of any prior endorsements thereto. Except to the extent expressly stated, it neither modifies any of the terms and provision of the policy or commitment and prior endorsements, if any nor does it extend the effective date of the policy or commitment and prior endorsements or increase the face amount thereof.
Does "Automobile Business" Exclusion Violate Public Policy in Your Jurisdiction?
It does in most jurisdictions, as the Louisiana Supreme Court joins the majority view on this question.
In Sensebe v. Canal Indemnity Co., 2011 WL 259929 (La. January 28, 2011)(authorized password required to access Westlaw), the Louisiana Supreme Court firmly placed Louisiana among the majority of Courts which have addressed the issue of whether an Exclusion under a motor vehicle Insurance Policy violates public policy, which "purports to exclude coverage for a driver who is engaged in the 'automobile business.'" Id. at *1.
The Court also listed jurisdictions following the majority and minority views on this question. Id. at *7.
While it is true that an insurer may violate public policy by taking a position contrary to the interests of the insured after a claim has been made,FN9 the public policy we must observe here lies at the origin of the insurance relationship, i.e., within the insurance policy itself. As we have noted above and in [previous case law], LSA-R.S 32:900(B)(2) requires that insurance policies provide coverage for permissive drivers.
FN9. See, e.g., LSA-R.S. 22:1973(B) (describing bad faith settlement practices).
Katrina CatClaims Revisited: State Farm Settles, Is Sued Again.
It appears that State Farm may have been sued again for Bad Faith as a result of Hurricane Katrina Catastrophe Claims -- indirectly, this time.
There was once a settlement agreement, among many policyholders and State Farm, in Mississippi. The proposed settlement agreement was subject to Federal Court approval. The Federal Judge was confronted with more questions than answers when he was presented with the proposed settlement for his approval. The Federal Judge refused to approve it, at least until the many questions were answered.
State Farm then reportedly reached a settlement agreement of many of the same claims with the Mississippi Insurance Commissioner's Office. This lengthy previous history was summarized in "Update to the Update: New Settlement in Mississippi," posted on March 20, 2007 on "Insurance Claims And Issues".
It is now reported that the State of Mississippi, through the Mississippi Attorney General, filed a new Complaint on Monday, June 11, 2007 in Mississippi State Court. The new Complaint contains allegations, it is reported, that State Farm breached the (first) settlement agreement and thus breached a contract. The new Complaint contains demands for compensatory and punitive damages. More will be posted as the Complaint becomes available. As of the night of June 11, 2007, there was a momentary silence on the subject on the web sites of both the Mississippi Attorney General and the Mississippi Insurance Commissioner.
Here is a link to State Farm's Press Release of June 11, 2007,which State Farm entitled "Mississippi Attorney General's Lawsuit Threatens to Disrupt Hurricane Katrina Settlement Process with MIssissippi Insurance Department".
Here is a link to the whole available story on "Insurance Claims And Issues".
Partial Payment of Claims ... UPDATED!
Punitive Damages, Katrina and the Insurance Contract: Lessons Revisited and a Tale Told in Pieces or in Parts.
On January 31, 2007 Federal Judge L.T. Senter, Jr. entered an Order reducing the Punitive Damages Assessment in the Broussard case. The Federal Judge reduced the Punitive Damages assessment in that case to 40% of what the Jury assessed, reducing the assessment from $2,500,000.00 to $1,000,000.00. Here is a link to the Order: Norman J. Broussard & Genevieve Broussard v. State Farm Fire & Cas. Co. (S.D. Miss. Case No. 1.06CV6, Order entered January 31, 2007) . For another report on this same decision, go to the February 1, 2007 post on Insurance Claims And Issues.
The Federal Court's ruling on January 31, 2007 adds to the facts coming in about the bases for this lawsuit, about the Bad Faith allegations in it, and about the reasons behind the Jury's finding of entitlement to Punitive Damages under Mississippi law.
The Homeowner's Policy involved in the Broussard case was "an 'all perils' policy in the case of the dwelling and a 'named peril' policy as to contents, i.e., windstorm."
Second, the initial investigation by the Homeowner's Insurance Company showed clearly that the Policyholders' home "was reduced to a slab by Hurricane Katrina" and that the damage was caused more by flood than by wind, the Federal Judge wrote.
The Insurance Company "did not obtain any expert opinion on this particular loss."
Rather than obtaining any expert opinion, as the Federal Court noted, the Insurance Company instead established a procedure for homes reduced to nothing remaining except the slab, a procedure which it applied in the Broussard case. The subject procedure was to use "the debris line" and declare that in the instance of only a slab remaining, all damage would be presumed to be caused by FLOOD which was NOT a covered loss, thereby leaving it to the Policyholders to bear the burden of proving damages caused by a covered loss such as WIND.
Although not repeated at any length in the January 31, 2007 Order, the Federal Court had PREVIOUSLY RULED in that same case that the burden of proof was INSTEAD on the Insurance Company to prove at Trial in Court that all or part of the damages claimed by the Policyholders were EXCLUDED.
The Homeowner's Insurance Company "relied on its flood exclusion to totally deny the claim."
The Federal Judge held that there was clear and convincing evidence in the Broussard case supporting a finding by the Jury of entitlement to Punitive Damages. There was in other words clear and convincing evidence, the Federal Judge wrote, "that Defendant acted in such a grossly negligent way as to evince willful, wanton, or reckless disregard for the rights of the Plaintiffs."
That ruling affirmed the issue of Mr. and Mrs. Broussards' entitlement to Punitive Damages under the facts of this case. As to the amount of Punitive Damages, to $1,000,000.00, the Mississippi Federal Court reduced them as noted, doing so both under Mississippi State law and under "due process considerations under the United States Constitution."
An Insurance Company has been assessed $2,500,000.00 in Punitive Damages by a Jury in Federal Court in Mississippi. Here is the Punitive Damages Verdict that was filed on Thursday, January 11, 2007: Download Broussard_v. State Farm Fire & Casualty Co. Verdict January 11, 2007 (S.D. Miss. Case No. 1.06.cv6).pdf.
The Federal case involves Claims for Damages following Hurricane Katrina. News outlets began broadcasting the report on the evening of the day this Punitive Damages Verdict was filed, and news outlets continued to report on this Verdict the next day, as expected. An insightful article is published online at Bloomberg.com. Here is a link to it: Lawrence Viele Davidson & Erik Holm, "State Farm Must Pay Couple $2.7 Million for Katrina (Update4)" (www.bloomberg.com/apps/news, dateline Jan. 11, 2007 (Bloomberg)). The Punitive Damages Verdict was also blogged. See for example Insurance Claims and Issues Blog. This post will suggest some missing information that may be needed in order to understand how this Verdict was rendered and to explain something of what it means.
As was noted at the beginning, the Broussard case is one of many Hurricane Katrina-related lawsuits. It involves Insurance Coverage Claims for Damages to a Home. It clearly also involves a claim for Punitive Damages under Mississippi law since that Punitive Damages Claim went to a jury. Although the Complaint does not appear to be accessible in the Federal Court's online docket as the case was removed to Federal Court from Mississippi State Court, piecing together various reports about this particular case with established Mississippi case law yields the following possible scenario.
"At its core, Plaintiffs' cause of action is based on an alleged breach of contract. The Complaint does not even contain separate counts." Download Broussard_v. State Farm Fire & Casualty Co., Order on Motion for Partial Summary Judgment entered November 6, 2006 (S.D. Miss. Case No. 1.06cv6).pdf. The Federal Court's November 6, 2006 Order also provides the information that the Court itself did not have a lot of allegations and exhibits to go on. Although the Complaint attached a specimen Homeowner's Policy, it was not the policy issued to Mr. and Mrs. Broussard. "This attachment does not disclose the policy limits. The Plaintiffs' residence apparently was reduced to a slab by the storm, although it takes a lot of reading to reach that conclusion. The tension in the record is between the damages sustained by Plaintiffs and the manner in which their claim was handled by Defendant." Id.
In a later Order, the Federal Court repeated that "Plaintiffs' cause of action at its core is based on an alleged breach of contract." The Federal Judge also acknowledged a very important Claim: "Plaintiffs also assert that they are entitled to punitive damages and/or extra-contractual damages due to the Defendant's alleged bad faith conduct in handling and denying their claim." Download Broussard_v. State Farm Fire & Casualty Order on Motions In Limine entered on December 28, 2006 (S.D. Miss. Case No. 1.06cv6).pdf.
The Policyholders' Insurance Company never made an offer for any part of the Claim. A spokesperson for the Insurance Company is reported as stating that it was sued by the Policyholders after it had refused to pay anything on their Claim. See the news report by Joseph B. Treaster, "State Farm Told to Pay Gulf Claim" (New York Times, Friday, January 12, 2007).
However, according to the Federal Judge's Law Clerk and reported in the same article in The New York Times, Experts for the Insurance Company stated in unspecified documents filed in the Court File, that some damage to Mr. and Mrs. Broussard's home was caused by Wind, a Covered Peril.
Further, before Trial of the Broussard case, the same Federal Judge ruled in other cases pending before him, that (1) presumably similar Flood or Water Exclusions will exclude Coverage for all damage caused by Flood or Water, in part here pertinent, but that (2) the Policy does not exclude all Coverage if part of the Damages are caused by Flood. These rulings were certainly generally known, as previously noticed by a Federal Judge in the Eastern District of Louisiana, for example, and in a post on December 5, 2006 here and in Insurance Claims and Issues Blog.
Thereafter, the Insurance Company could defend against Punitive Damages only by (1) paying or perhaps at least making an offer to pay the clearly covered part of the Claim or (2) successfully arguing the total applicability of the Flood or Water Exclusion to exclude all damages.
Mississippi standards for assessing Punitive Damages in First-Party Bad Faith cases have been pretty clear for a very long time. Mississippi requires more than proof of First-Party Bad Faith and certainly requires more than proof of carelessness, for example. "Carelessness, however, does not rise to the level of bad faith required for plaintiff to prevail on her [Punitive Damages] claim." Mixon v. Provident Life & Accident Insurance Co., 616 F. Supp. 139, 142 (S.D. Miss. 1985), aff'd mem., 783 F.2d 1061 (5th Cir. 1985). Mississippi Punitive Damages law requires more than a finding that a credit life insurer, for example, in another First-Party Bad Faith case "lacked an arguable reasonable basis for denying the claim.... A further finding is required showing malice or gross negligence or disregard of the insured's rights." Barber v. Balboa Life Insurance Co., 747 So. 2d 863, 868 (Miss. Ct. App. 1999). These and similar rulings are further addressed at much greater length in, for example, Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith (2nd Ed. 1994), published by West Publishing Company online and in print.
Further, as early as 1979 the Mississippi Supreme Court held that a Punitive Damages instruction is properly given to a Jury, and a First-Party Insurance Company is properly assessed Punitive Damages, where the First-Party Insurance Company declines to pay all of its Policy Coverage where some of its Coverage applies. See Travelers Indemnity Co. v. Wetherbee, 368 So. 2d 829, 833-35 (Miss. 1979) and the cases discussed by the Supreme Court of Mississippi in that decision. These Mississippi rules of law were visited by the same Federal Judge assigned to the Broussard lawsuit, in an earlier case in which he also cited to Travelers Indemnity Co. v. Wetherbee (Miss. 1979), for example.
The same Federal Judge who submitted a Punitive Damages Claim to a Jury in Broussard similarly submitted a Punitive Damages Claim to a Jury several months earlier in another First-Party Bad Faith case -- which also involved a similar Claim that "Hurricane Katrina completely destroyed Plaintiffs' home" and unresolved "issues related to claim handling", particularly handling the Claim after "a report in November, 2005, indicated that damage was due in part to something other than water." In that earlier decision, the Homeowner's Insurance Company did tender payment "in August 2006" -- and the Policyholders' Punitive Damages Claim still went to a Jury: Download Odom_v. Armed Forces Insurance Co. (S.D. Miss. Case No. 1.05cv669, Order entered on August 31, 2006 on Defendant's Motion for Partial Summary Judgment).pdf.
The Policyholders' lawyers in the Odom case are also the Policyholders' lawyers in the Broussard case.
Back to the Broussard case and January 11, 2007. At Trial, there was reportedly evidence that, at the least, the Flood or Water Exclusion did not exclude all damages.
The Federal Trial Judge directed a verdict on Compensatory Damages, awarding Mr. and Mrs. Broussard $233,292 under their Insurance Policy, it is reported in both of the news articles linked above. The Federal Judge also thereby directed a verdict on entitlement to Punitive Damages. The Jury in that case then unanimously returned its Punitive Damages Verdict less than three hours later.
Mississippi is not, of course, the only State that requires payment of clearly covered Claims in Good Faith under First-Party Insurance Policies. Almost all do, and recent examples always seem to be at hand, such as in Florida. See the post entitled, "CatClaims, Coverage, Part Disclaimer With Part Payment .... And Florida Statutory Bad Faith" on November 17, 2006, for example, in Insurance Claims and Issues Blog. The same lessons apply in one State as in another, and in one reported case as in another with the same result. The law applied by the Mississippi Federal Court in the Broussard case is not new law, and neither is the result, it appears.
Contamination Exclusion in First-Party Policy Held Ambiguous to 911 Damages.
On December 21, 2006, the Federal Second Circuit Court of Appeals reversed Summary Judgment and remanded for the Federal Trial Court to take evidence on the intent of a First-Party Property Insurance provision. Here is a link to the Second Circuit Web Site, where you can reach this case by clicking on "Decisions": Parks Real Estate Purchasing Group, et al. v. St. Paul Fire & Marine Insurance Co., et al. (Second Circuit Case No. 05-5890, Opinion Filed December 21, 2006). Here is a brief summary why.
Parenthetically, the insurance company's Motion for Summary Judgment also presented arguments that the Policy's "Mechanical Breakdown" and "Wear and Tear" Exclusions applied. (Id. at 6.) The Federal District Court held however that these particular Exclusions did not apply (id. at 11), and they were not otherwise addressed by the Second Circuit.
Who Rebuilds and Repairs Where No Insurance Exists.
It is a fact that mold covers homes. It is held under a standard Exclusion that insurance does not cover mold in Fiess v. State Farm Lloyds, 2006 WL 2505995 (Tex. Case No. 04-1104 Opinion Filed Aug. 31, 2006, answering this Question Certified by the Federal Fifth Circuit Court of Appeals) (subscription required), public access provided by Texas Supreme Court.
The Fiess case in Texas involved a standard Exclusion used throughout the United States for "ensuing loss". In a homeowner's policy, including the one in Fiess, water damage is ordinarily listed as a covered peril. An Exclusion for "ensuing loss" excludes all coverage, however, for damage that ensues from an otherwise covered peril. The modern homeowner's policy adds "mold" to the list of excluded ensuing loss.
The legal holding is clear. The factual result is, well, a little more moldy and unclear. The practical, if not legal question that remains, is: Who will repair and replace when no insurance exists?

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