Source: https://insuranceclaimsbadfaith.typepad.com/insurance_claims_badfaith/coverage_defenses/
Timestamp: 2019-04-25 11:53:21+00:00

Document:
... add up to summary judgment for a homeowner's carrier. But actually either of the policyholder's violations of the insurance contract would have sufficed in this Connecticut case.
In Discuillo v. Allstate Ins. Co., NO. 3:17-CV-234 (KAD), 2019 WL 499255 (D. Conn. February 8, 2019), a Connecticut homeowner sustained her alleged loss in February 2015.
She advised her homeowner's insurance carrier of the loss fourteen months later, in April 2016.
She filed suit after the 18 months limitations period provided in her homeowner's policy, in January 2017.
The Federal Judge took the easy question first and entered summary judgment for the carrier because the contractual limitations period had clearly been violated in this case. Discuillo v. Allstate Ins. Co., NO. 3:17-CV-234 (KAD), 2019 WL 499255, at *2 (D. Conn. February 8, 2019).
Then the Federal Judge addressed the lack of "prompt notice" issue. This was a little more difficult to deal with because after all, what is "prompt notice" of a loss under a homeowner's policy can be subject to interpretation. In this case, notice was clearly delayed for 14 months. The undisputed lack of "prompt notice" clearly prejudiced the carrier in this case because it was also undisputed that it was deprived of an adequate opportunity to inspect the property so as to determine the cause of the loss by the time notice was given. The Federal Judge entered summary judgment against the policyholder on this additional ground as well. Discuillo v. Allstate Ins. Co., NO. 3:17-CV-234 (KAD), 2019 WL 499255, at *3-*4 (D. Conn. February 8, 2019).
Suit limitations provisions tend to be applied more often in the decided case law than "prompt notice" policy provisions. But in some cases either provision will suffice to adjudicate a coverage claim without needing to reach the substance of the claim.
It is settled Florida law that "implications of bad faith should not form a basis to determine liability in a first party insurance coverage action." Homeowners Choice Prop. & Cas. Ins. Co. v. Kuwas, 251 So. 3d 181, 184 (Fla. 4th DCA 2018). The appellate court granted the carrier's motion for new trial "grounded on [the policyholder's attorney's] improper arguments and questioning of HCI's litigation manager[.]" Homeowners Choice Prop. & Cas. Ins. Co. v. Kuwas, 251 So. 3d 181, 183 (Fla. 4th DCA 2018).
HCI argues that a new trial is warranted because Kuwas presented his theory of the case in such a way as to improperly imply HCI's bad faith in the handling of the claims in this case and other cases in general. In particular, HCI points to [the policyholder's attorney's] remarks that HCI was “playing the odds” in deciding to deny a claim “in the hope that the party who is seeking to be paid under a policy will not sue them.” HCI argues that [the policyholder's attorney] improperly used this phrase in his opening statement, closing argument, and his examination of HCI's litigation case manager.
Homeowners Choice Prop. & Cas. Ins. Co. v. Kuwas, 251 So. 3d 181, 184 (Fla. 4th DCA 2018). The appellate court gave a few details about these questions and implications, but not very many. Not until they reached the policyholder's attorney's closing argument.
Homeowners Choice Prop. & Cas. Ins. Co. v. Kuwas, 251 So. 3d 181, 184 (Fla. 4th DCA 2018) (emphasis added by the Fourth District Court of Appeal).
And so, on the basis of all these implications, arguments, questions, and statements, the appellate court granted the carrier a new trial in this first-party insurance coverage case because the remarks implied bad faith as a basis for the jury to determine the carrier's liability on an insurance coverage claim.
And you know, this case was filed last year. And we're litigating for—it's an early case, the number 500 case last year probably is 14 months old. We're litigating for 14 or 15 months. And we're fighting like the dickens over whether or not a sewer backup is excluded. And then we come to court after all this litigation, after all of this depositions, and motions, and whatnot—... Right? After depositions and whatnot, and [HCI] comes in and says oh, by the way, we just were kidding about that one. We're just kidding about that. That one doesn't apply. You know the plaintiff's right, that doesn't apply, okay, but let's try something else, right?
Homeowners Choice Prop. & Cas. Ins. Co. v. Kuwas, 251 So. 3d 181, 186 (Fla. 4th DCA 2018) (again, emphasis added by the Fourth District Court of Appeal).
We agree that a new trial is warranted because the comments made by [the policyholder's counsel] in closing argument improperly denigrated HCI's defenses and were so highly prejudicial and inflammatory such that it was denied its right to a fair trial.
Homeowners Choice Prop. & Cas. Ins. Co. v. Kuwas, 251 So. 3d 181, 188 (Fla. 4th DCA 2018).
The moral of the story is not so much to keep your mouth shut, for what else is a lawyer hired to do, except represent her or his client? Rather, the moral of the story is summed up in the title of this article: Dude, you overdid it.
DELAWARE INSURANCE JUDGE REJECTS ANOTHER DELAWARE JUDGE'S "INTENTIONAL AND BAD FAITH" FRAUD RULING.
In an insurance case, a Delaware judge reportedly ruled on March 1, 2018 that Delaware law should apply to an insurance case. The Delaware judge in the insurance case reportedly ruled that "'[a]lthough it may strain public policy to allow a director to collect insurance on a fraud, it does not appear to be explicitly prohibited by Delaware statutory law.'"
Don't strain yourself judge. Another Delaware judge already determined that the fraud involved was "intentional and in bad faith."
The insurance case in Delaware grew out of an earlier fraud case in Delaware. The fraud case involved the same individuals who are apparently claiming Directors and Officers Coverage in the insurance case. Their fraud was actually proven in a trial in the Delaware fraud case. The fraud was that the individuals gave the board of directors of Dole Food Co. false estimates of "how much money the company could save" from accepting a buyout offer from one of the individuals. James Rufus Koren, "A Court Found That an L.A. Billionaire Duped Dole Investors. Now He Wants to Stick Insurers With The Bill" (Los Angeles Times Online, Friday, March 9, 2018).
After the trial of the Delaware fraud case concluded, the Delaware judge presiding wrote that the defendants' "'actions were not innocent or inadvertent, but rather intentional and in bad faith.'" James Rufus Koren, supra, quoting the 2015 opinion of Delaware Chancery Court Chancellor J. Travis Laster.
Stop and reflect with me for a moment. Has an insurance coverage trial lawyer ever been born who would not be really happy with Judge Laster's quoted ruling, if you had to prove intentional and bad faith conduct that barred all coverage for it? Now back to the rest of the story so to speak.
Judge Laster held in the Delaware fraud case that the two individuals who would later claim coverage as directors' and officers' policy "insureds" should accordingly pay $148 million. Apparently before judgment was entered in that amount, the individuals settled -- for that amount together with interest.
The Directors and Officers Carriers Raise the Fraud Ruling as a Defense to Coverage.
The Directors and Officers Carriers filed an action in Delaware to declare that their insurance policies did not cover the "intentional and bad faith" fraud. They argued in particular that their position was a "slam dunk" under California law, but the judge in the Delaware insurance case declined to bar the coverage claim under any State's law. As noted, the Delaware judge in the insurance case reportedly ruled that Delaware law should apply, and anyway, "'[a]lthough it may strain public policy to allow a director to collect insurance on a fraud, it does not appear to be explicitly prohibited by Delaware statutory law.'"
So there you have it. Where are the "fortuity" ideologues when they might do some good? The fortuity ideologues are people who claim, at least when they have a dog in the fight and it is to their advantage, that insurance does not apply unless the covered risk was fortuitous and, moreover, that the party claiming coverage has a burden to prove that the risk involved was fortuitous. There can be no judicial declaration of coverage, the fortuitous ideologues continue, unless the risk is fortuitous.
A trial in the insurance case in Delaware is reportedly currently scheduled for July, 2018.
Please Read The Disclaimer. ©2018 by Dennis J. Wall. All Rights Reserved.
"WRONGFUL EVICTION" AS A CGL PERSONAL INJURY OFFENSE.
In order to qualify as covered "Personal Injury" under a Comprehensive General (or Commercial General) Liability policy (CGL), "wrongful eviction" requires a possessory interest or there is no Personal Injury Coverage and so no duty to defend or duty to indemnify either, the District Court held under West Virginia law in Grand China Buffett & Grill, Inc. v. State Auto Prop. & Cas. Co., 260 F. Supp. 3d 616, No. 1:16CV159, 2017 WL 2129307 (N.D. W. Va. May 16, 2017), appeal dismissed upon stipulated motion to dismiss, 2017 WL 6345716 (4th Cir. September 25, 2017).
Please Read The Disclaimer. ©2017 by Dennis J. Wall. All Rights Reserved.
Only Homeowners Are Barred From Negotiating in Mortgages.
California's "Genuine Dispute," "Genuine Issue" Rule Continued.
I wrote a previous article this week about a helpful opinion from a California DCA concerning California's "genuine dispute" or "genuine issue" rule: Zubillaga v. Allstate Indem. Co., 12 Cal. App. 5th 1017, 219 Cal. Rptr. 3d 620 (Cal. 4th DCA, Div. 3, 2017). The opinion reads like a law review article on the topic.
The genuine dispute rule applies in bad faith cases. It depends on good faith. "'A genuine dispute exists only where the insurer's position is maintained in good faith and on reasonable grounds.'" Zubillaga v. Allstate Indem. Co., 12 Cal. App. 5th 1017, 1027, 219 Cal. Rptr. 3d 620, 628 (Cal. 4th DCA, Div. 3, 2017) (citation omitted; emphasis in original).
Perfection is not required from the insurance carrier, even in California. If the dispute is genuine, it does not seem to matter if the insurance company was wrong in disputing coverage or liability. The essence of the determination required by the rule in whether "'a reasonable and legitimate dispute actually existed[.]'" Zubillaga v. Allstate Indem. Co., 12 Cal. App. 5th 1017, 1028, 219 Cal. Rptr. 3d 620, 628 (Cal. 4th DCA, Div. 3, 2017) (citation omitted).
Please Read The Disclaimer. Copyright 2017 by Dennis J. Wall. All Rights Reserved.
CALIFORNIA'S "GENUINE DISPUTE" OR "GENUINE ISSUE" RULE: NOT JUST COVERAGE ANYMORE.
Zubillaga v. Allstate Indem. Co., 12 Cal. App. 5th 1017, 1027, 219 Cal. Rptr. 3d 620, 628 (Cal. 4th DCA, Div. 3, 2017) (emphasis added).
Coblentz AGREEMENTS IN FLORIDA EXPLAINED AND APPLIED.
"Coblentz agreements" are named after Coblentz v. American Surety Co., 416 F.2d 1059 (5th Cir. 1969). In many other jurisdictions they have other names, including generic titles such as consent judgments, but particularly in South Florida they are called Coblentz agreements, and they are special. They are valid only after a liability carrier has denied all coverage.
Moreover, in order to prevail under one of these agreements for a recovery in excess of liability policy limits, the crucial issue in the resulting "bad faith" case is whether the carrier's denial of coverage was wrongful.
Coblentz agreements permit an insured to “enter into a reasonable settlement agreement with the [plaintiff] and consent to an adverse judgment for the policy limits that is collectable only against the insurer.” Perera v. United States Fid. & Guar. Co., 35 So. 3d 893, 900 (Fla. 2010). If a plaintiff wishes to recover in excess of the policy limits, the plaintiff must establish that the insurer acted in bad faith in wrongfully denying coverage.
Garcia v. GEICO General Ins. Co., 807 F.3d 1228, 1230 n. 1 (11th Cir. 2015).
Since the crucial issue in the case was whether the carrier's denial of liability insurance coverage was wrongful, the panel held that the carrier was entitled to put on evidence that its coverage decisions were reasonable, and to put on evidence, specifically, of coverage decisions by the Florida Courts that supported the carrier's coverage decisions at the time the carrier made those decisions.
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). The Garcia case is a good illustration of the rule predicted in § 5.26 that a defense of "Fairly or reasonably debatable claim" for an allegedly wrongful denial of coverage should be permitted by the Courts on the overall issue of "wrongful" denial of coverage, i.e., on the issue of "bad faith" in a Coblentz context. As the appellate panel decided in Garcia, evidence should be admitted on the central issue of whether the liability insurer's resolution of an uncertain legal conflict over policy interpretation was reasonable at the time the coverage decision was made, even though the liability carrier's resolution of that issue is judicially determined later to be the wrong answer to the question. All rights reserved.
INSURANCE FOR "BAD FAITH" BREACHING CONTRACTS TO END PENALTY DISCRIMINATION?
"The legal system doesn't have any magic cure."
Alex Karakatsanis, Esquire, founder of Equal Justice Under Law, quoted by http://nyti.ms/1Kz5rJK Shaila Dewan, "Fighting Court by Court to End Judicial Policies That Fall Heavily on Poor" p. 16, col. 1 (New York Times Nat'l ed., Sunday, October 25, 2015).
In response to charges and to lawsuits over the use of fines and penalties by cities and counties in States as diverse as Alabama, Mississippi, Ohio and Pennsylvania, allegedly to raise money without regard to the defendant's ability to pay, many cities and counties settle. Later, some end up breaching their pre-suit and litigation settlement contracts. "Time and again, governments large and small have failed to follow through on their agreements, leading in some cases to renewed legal battles." Shaila Dewan, "Fighting Court by Court to End Judicial Policies That Fall Heavily on Poor" p. 16, col. 1 (New York Times Nat'l ed., Sunday, October 25, 2015).
Seems like these "bad faith" breaches might be an appropriate time and place for carriers to invoke and, if necessary, for Courts to litigate uniform exclusions of liability coverage for breach of contract. Exclusions of liability for breach of contract are found for example in virtually every commercial general liability policy as well as in many other types of insurance policies under which the allegedly breaching munis might make a coverage claim.
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.
When The "No Settlement Without Consent" Provision is NOT Waived.
In this case, . . . the plain language of the insurance policy does not allow the insured to settle a claim without the insurer's written consent. It also provides that the insurer shall only be liable for a loss which the insured is “legally obligated to pay.” Finally, the policy contains a “no action” clause which stipulates that the insurer may not be sued unless, as a condition precedent, the insured complies with all of the terms of the policy and the amount of the insured's obligation to pay is determined by a judgment against the insured after a trial or a written agreement between the claimant, the insured, and the insurer. In light of these unambiguous policy provisions, we hold that Piedmont is precluded from pursuing this action [an alleged breach of an excess insurance contract and a statutory claim of bad faith failure to settle] against XL because XL did not consent to the settlement and Piedmont failed to fulfill the contractually agreed upon condition precedent.
Reprinted with the permission of Thomson Reuters from the manuscript of the author's 2015 Supplement chapters, and in particular Section 5:15, in “Litigation and Prevention of Insurer Bad Faith, 3d” ©2015 by Thomson Reuters.
INDEMNITY FOR THE UNIVERSITY OF MIAMI'S ADDITIONAL INSURED DEFENSE EXPENSES: NEW FLORIDA LAW? Continued.
This is the conclusion of an article that began with the post here on Sunday, February 24, 2013.
The dissenting Judge on this 3-Judge Panel emphasized for a good reason that there was no conflict over Insurance Coverage in this case. In Florida, by Statute only, independent Counsel is required to be provided to an Insured under a Liability Insurance Policy only when the Liability Carrier asserts a statutory "coverage defense," meaning that the Carrier is required to provide mutually agreeable, independent counsel under the Florida Statute only when the Carrier asserts a defense to Coverage that otherwise exists. See Fla. Stat. § 627.426. Parenthetically, even when the Florida Statute is not complied with, the statutory sanction is that the Liability Carrier will not be permitted to raise the statutory "coverage defense" in question.
Or, as the dissenting Judge put it in the University of Miami v. Great American case: "Similarly in the case before us, the University of Miami has not alleged (or shown) how the disparity in potential liability between it and Magicamp affected in any way the joint defense provided it under the Great American policy." University of Miami v. Great American Insurance Co., 2013 WL 616156 *7 (Fla. 3d DCA February 20, 2013)(Shepherd, J., dissenting).
The Majority's holding in this case therefore appears to be based on one of two reasons. Either the holding represents the making of new law in Florida, or it represents a determination that the Liability Carrier in the case acted in "Bad Faith". The latter determination could not, in this case, include a failure to settle or a poorly provided defense, certainly, or either event would have been mentioned in the Majority Opinion and in the Dissent, but there is no mention of them by either the Majority or by the Dissent. If there is a determination of "Bad Faith" inherent in the holding in this case, it therefore has to be the equivalent of a holding that the Liability Carrier in this case wrongfully refused to defend the Additional Insured-University of Miami.
If the holding in this case represents new law in Florida, nothing more needs to be said here.
If the holding in this case is based on a wrongful refusal to defend, Attorney's Fees and Costs are ordinarily recoverable in such a case in Florida and in many other jurisdictions. 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 13:13, "Attorney's Fees--Settlement or Defense of Third Party's Claim" (THIRD EDITION WEST PUBLISHING CO., 2013 SUPPLEMENT IN PROCESS).
In neither case does it mean that either the two Judges in the Majority were correct in their holding, or that the one dissenting Judge was correct in his dissent. It means only that the holding was based either on making new Florida law, or on a determination that in this case the Additional Insured, the University of Miami, was wrongfully denied a defense by the Named Insured's Liability Carrier when the Carrier refused to provide the University with separate, independent defense counsel given potentially conflicting legal positions of the two Insureds, if presented in defense to individual active negligence claims against the Named Insured and against the Additional Insured.
YOU DECIDE: TWO CASES WITH SIMILAR RESULTS, BUT DIFFERENT RATIONALES.
(3) Prior to the policy period, no insured listed under Paragraph 1. of Section II-Who Is An Insured and no “employee” authorized by you to give or retrieve notice of an “occurrence” or claim, knew that the “bodily injury” or “property damage” had occurred, in whole or in part. If such a listed insured or authorized “employee” knew, prior to the policy period, that the “bodily injury” or “property damage” occurred, then any continuation, change or resumption of such “bodily injury” or “property damage” during or after the policy period will be deemed to have been known prior to the policy period.
Bad Faith in Florida: Southern District "subsumes" and "Dictas" Too.
First-Party Policies: EXAMINATION UNDER OATH AND PRODUCTION OF DOCUMENTS.
(3). submit to examination under oath, while not in the presence of any other insured, and sign the same.
Provisions of the Insurance Contract.
A recent Supreme Court of Washington en banc decision added the holding, which may or may not represent the coming majority view, that if an Examination Under Oath is not material to the claim, it is no defense to the Insurance Carrier if the Insured does not provide an EUO. "Given the quasi-fiduciary nature of the insurance relationship, we hold that if an EUO is not material to the investigation or handling of a claim, an insurer cannot demand it." Staples v. Allstate Insurance Co., 2013 WL 258877 ¶ 26 *5 (Wash. January 24, 2013).
EXPERTS APPOINTED BY THE COURT, PARTIES PAY ... WHO SELECTS?
Judges are saying recently that in particular kinds of cases, Experts are helpful to them in resolving those cases. Since these recent judicial observations were apparently not recorded and there was no expectation of attribution of particular views to particular Judges, their remarks will be reported anonymously in this article.
The kinds of cases in which Experts are helpful to Judges in resolving the issues are cases involving backgrounds which most Judges simply do not have, such as in cases which involve scientific and other technical issues. To these cases may be added many Insurance Coverage and Insurance Bad Faith cases which also often present technical, complex issues.
One Judge observes that a case has often gone down the road for a long ways before a Judge appreciates the technical advice that an Expert can bring to bear. Many Judges admit that it is a signal of when a Judge may need the help: When the Experts already retained by the parties have a legitimate dispute among themselves and there is difficulty in understanding their Opinions and how they reached them.
Most Judges, perhaps all Judges, would treat the Court-appointed Expert like they treat the relationships they have with their own Law Clerks.
The parties play a huge role. They can suggest to the Trial Judge that an Expert appointed by the Court -- selected or at least suggested by the parties -- may assist the Court in addressing the issues and resolving the case. The parties will pay the Court-appointed Expert's fees. That procedure is usually far less expensive to the client than being forced to appeal an unfavorable outcome which could (and should) have been avoided by the Trial Court's reliance on the advice of an Expert.
In short, as one Judge observed, if the issue is complicated, uncomplicate it. If you cannot uncomplicate it, the Judge probably needs the technical advice of the Court-appointed Expert.
(a) Appointment Process. On a party’s motion or on its own, the court may order the parties to show cause why expert witnesses should not be appointed and may ask the parties to submit nominations. The court may appoint any expert that the parties agree on and any of its own choosing. But the court may only appoint someone who consents to act.
(4) may be cross-examined by any party, including the party that called the expert.
(2) in any other civil case, by the parties in the proportion and at the time that the court directs — and the compensation is then charged like other costs.
(d) Disclosing the Appointment to the Jury. The court may authorize disclosure to the jury that the court appointed the expert.
(e) Parties’ Choice of Their Own Experts. This rule does not limit a party in calling its own experts.
Note that under FRE 706, the Court-appointed Expert Witness can be deposed by any party and can be called by any party or the Court to testify at Trial. Ordinarily in human experience across the United States, most Insurance Bad Faith cases settle after Expert Witnesses are deposed. It will be interesting to see if that holds true after Court-appointed Expert Witnesses are deposed.
Also check out the outstanding Cavalcade of Risk at http://www.workerscompinsider.com/2013/01/cavalcade-of-ri-94.html, hosted by Julie Ferguson.
INADEQUATE DEFENSE OF INSURED CLAIMED BAD FAITH: TAKEOVER NOT JUSTIFIED.
A U.S. Magistrate Judge confronted several "hot topic" issues of Bad Faith in the Third-Party Bad Faith case of Doe v. Onebeacon America Insurance Co., 2012 WL 5876566 (N.D. Fla. November 21, 2012)(Jones, USMJ). The background of the case is significant.
The Court faced competing Motions for a Protective Order, and to Compel, in a discovery dispute in a Third-Party Bad Faith case. One of the Defendants in the underlying liability case was the Diocese of Savannah. The Liability Insurance Carrier defended the Diocese under a Reservation of Rights. However, apparently without communicating the fact beforehand to its Liability Insurance Carrier, the Diocese settled with the Injured Claimant (referred to in the style of the Bad Faith case and in the opinion as, "Doe"), without the Carrier's consent. The Diocese also gave the Injured Claimant an assignment of certain rights. Exactly which rights were assigned was unclear to the Court, but the assignment certainly included the Bad Faith rights of the Diocese against the Liability Carrier. Doe v. Onebeacon America Insurance Co., 2012 WL 5876566 *1 (N.D. Fla. November 21, 2012).
The biggest "hot topic" issue addressed by the Magistrate Judge concerned the Plaintiff Doe's argument that "Defendant's failure to provide an adequate defense justified the insured acting independently to settle the case." Doe v. Onebeacon America Insurance Co., 2012 WL 5876566 *1 (N.D. Fla. November 21, 2012)(Jones, USMJ). This is a "hot topic" issue in the case law. See generally Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" § 3:50 ("Settlement by or Judgment Against Insured") (Third Edition West Publishing Co., 2012 Supplement).
If the insured, as here, does accept a defense under a reservation of rights, the insured must cooperate with the insurer throughout the course of the litigation. The insurer may not take advantage of the insurer-provided defense, then later reject that defense and attempt to control the litigation itself. This is so even if the defense provided by the insurer is less than adequate. [Citations omitted.] The only narrow exception to this principle is where the insurer has provided a defense which the insured accepts, but the insurer then changes the terms of the defense in a material way. In that instance, the insured may then be justified in rejecting the defense.
Doe v. Onebeacon America Insurance Co., 2012 WL 5876566 *5 (N.D. Fla. November 21, 2012). The Plaintiff in this case did not claim that there was any material change in the terms of the defense which the Diocese accepted in the underlying case. Accordingly, the Magistrate Judge denied discovery from and after the time that the Diocese rejected the defense, apparently by entering into the settlement and assignment, "even with regard to the issue of coverage." Doe v. Onebeacon America Insurance Co., 2012 WL 5876566 *6 (N.D. Fla. November 21, 2012)(Jones, USMJ). The moral: In Florida and in other jurisdictions following the Florida view, the consequences of an Insured first accepting a defense under a Reservation of Rights and then being provided an allegedly inadequate defense, may go beyond even the entry of an Excess Judgment against the Insured.
All documents, whether in paper form, computer data format or any other medium, which relate in any way to the facts that form the basis for the affirmative defenses in the Defendant's Answer.
The Defendant Liability Carrier in this case seems to have objected only on the ground that this Request is "overbroad." The Court overruled this objection and granted Plaintiff's Motion to Compel as to this Request for Production, holding that "Defendant may not assert an affirmative defense and then decline to produce documents that would support those defenses. The Court finds that all documents that will support a factual basis for any affirmative defense must be produced." Doe v. Onebeacon America Insurance Co., 2012 WL 5876566 *7 (N.D. Fla. November 21, 2012). [Emphasis added.] The moral: Defendants don't let your words grow up to be Affirmative Defenses unless you are prepared to provide fact discovery about them.
In two further rulings, the Court in this case also equated the personal attorney of the Insured with the retained defense counsel in terms of the Carrier's standing to legitimately assert the Attorney-Client Privilege against discovery from the Insured's personal lawyer, where among other things the Insured's personal attorney was also paid by the Liability Carrier to defend the underlying case. Doe v. Onebeacon America Insurance Co., 2012 WL 5876566 *3 (N.D. Fla. November 21, 2012)(Jones, USMJ).
In addition, the Magistrate Judge's opinion seemed to equate discovery into Insurance Coverage issues with discovery in First-Party Bad Faith cases, see Doe v. Onebeacon America Insurance Co., 2012 WL 5876566 *4 (N.D. Fla. November 21, 2012)(Jones, USMJ), although this analogy does not seem to have been necessary to the Court's ruling that discovery into "communications between counsel and the insurer" was premature at this stage of the litigation.
The American Conference Institute's 23rd National Advanced Forum on Bad Faith Litigation begins with a workshop today, Tuesday, November 27, 2012 at the Hyatt Regency Grand Cypress Hotel at Disney World in Orlando, Florida, and continues over the next two days. I will be speaking on both of the following days. On Wednesday, November 28, 2012 I will be part of a panel addressing the handling and litigation of a typical Bad Faith Claim. I will address in particular the permissible proffers and uses of Expert Witnesses before and at Trial of the Bad Faith Case. On Thursday, November 29, 2012 I will be a co-presenter of an afternoon-long Florida Workshop. Please plan on attending. I would prefer to present these issues with you in the audience!
When Policyholder Settles and Assigns Claim to Injured Claimants, Arbitrate?
There could not be many more interesting decisions in August, 2012 than the officially unpublished opinion by a panel of the Ninth Circuit in Allied Professionals Insurance Co. v. Kong, 2012 WL 3525353 (9th Cir. Opinion Filed August 16, 2012), Download Allied Professionals Insurance Co. v. Kong (9th Cir. No. 10.56968, Opinion Filed August 16, 2012) UNPUBLISHED.
Apparently the case involved a denial of all Coverage by Allied Professionals Insurance Company when its Policyholder, anonymous in the panel's opinion, was sued by Ms. Joanne Kong. Kong settled with the Policyholder "purportedly awarding Kong $1,115,000 compensatory damages and assigning Kong the right to enforce the award against Allied." Allied Professionals Insurance Co. v. Kong, 2012 WL 3525353 *1 (9th Cir. Opinion Filed August 16, 2012).
The panel's opinion is also silent on whether this sum was within Allied's Policy Limit.
Suit was filed first in Florida State Court. It was removed to the United States District Court for the Middle District of Florida, representing a second suit, and in which the Florida Federal Judge denied Ms. Kong's Motion to Remand and granted Allied's Motion to Compel Arbitration in Orange County, California. Allied Professionals Insurance Co. v. Kong, 2012 WL 3525353 *1 (9th Cir. Opinion Filed August 16, 2012). The Ninth Circuit panel refused to review this Florida District Court decision.
A third lawsuit was apparently then filed in California after an Arbitration was held in California, and after the Arbitrators ruled in favor of Allied. (It is of interest that in Florida, Insurance Coverage is not an issue for Arbitration, but for a Court.) The California Federal Judge entered an Order affirming the Arbitration Award in favor of Allied. Allied Professionals Insurance Co. v. Kong, 2012 WL 3525353 *1(9th Cir. Opinion Filed August 16, 2012).
When all Coverage is denied, if the Liability Insurance Company believes strongly enough in its Coverage position then the result of decisions in cases like Kong will inevitably be that further cases will be reported (both those officially published and those officially unpublished alike) involving Liability Insurance Companies' demands for Arbitration of resulting Settlement Agreements between Policyholders and Injured Claimants for which the Carriers contend there is no Coverage in the first place.
Personal Knowledge Requirement for Affidavits Not Met, No Summary Judgment.
It is just so totally straight-forward that the Rules of Procedure and of Evidence require that Affidavits be made on personal knowledge. Without personal knowledge, an Affidavit is not worth the internet link used to upload it to the Electronic Court File.
Recently, a Federal Court provided practitioners with a reminder of this. In that Federal Case, a Plaintiff who represented herself in a lawsuit against Liberty Mutual Group defeated the Defendant's Motion for Summary Judgment for exactly this reason. Ms. Martha Akers was issued a Homeowner's Insurance Policy by Liberty. Her property suffered a fire loss. She made a claim under the Homeowner's Policy. Liberty denied her claim.
In its Denial Letter, Liberty told Ms. Akers that she had failed to comply with two Conditions in her Insurance Contract. Liberty wrote that (1) Ms. Akers had failed to fulfill her duties after loss and (2) she affirmatively engaged "'in concealment, fraud, material misrepresentation, false statements, and non-cooperation' thereby rendering the policy void." Akers v. Liberty Mutual Group, Download Akers v. Liberty Mutual Group (D.D.C. Case No. 08.1525, Memorandum Opinion Filed September 28, 2010) PUBLIC ACCESS, also published as 2010 WL 3832051 *1 (D.D.C. September 28, 2010)(authorized password required to access Westlaw).
Ms. Akers filed a Lawsuit against Liberty alleging "breach of contract and demanding specific performance." Akers v. Liberty Mutual Group, 2010 WL 3832051 at *1. Liberty filed a Motion for Summary Judgment. In support of its motion, Liberty filed an Affidavit of one Gould, who worked in Liberty's "SIU" or Special Investigative Unit. Id. at *2.
In her Affidavit, Gould attempted to testify to what other people told her about Akers and Akers' claim. Liberty suggested to the Federal Court that Gould's testimony was based upon her own personal knowledge, as it was required to be. The Federal Judge did not agree.
"Gould's affidavit is replete with statements made by and information learned from third parties other than Gould.... The court presumes, as the defendant has not argued otherwise, that these statements are being offered by the defendant for their truth.... The defendant does not argue that these hearsay statements would be otherwise admissible because they fall under a hearsay exception." Accordingly, the Federal Court ruled that the statements of and information obtained by Gould from third persons, all related by Gould in her Affidavit, "cannot be considered for their truth." Id. at *4.
There being no record evidence tending to display that there were no genuine issues of material fact surrounding the Plaintiff's allegations in the Lawsuit, Liberty's Motion for Summary Judgment was, summarily, denied (but without prejudice to properly support the Motion). Id. at *5.
No "Bad Faith," Still Florida Attorney's Fees Awarded to Policyholder.
In a recent holding in a case previously commented on here in several posts, and in which the Defendant Insurance Company prevailed on an alleged First-Party Statutory Bad Faith Claim, the Insurance Company was still responsible for the Plaintiff's-Insured's Attorney's Fees under 2 Florida Statutes: Kearney v. Auto-Owners Insurance Co., Download Kearney v. Auto-Owners Insurance Co. (M.D. Fla. Case No. 8.06cv00595, Order Awarding Attorney's Fees Filed August 4, 2010) PUBLIC ACCESS also published as 2010 WL 3119380 (M.D. Fla. August 4, 2010)(Westlaw subscription required to access Westlaw).
The Insurance Coverage Claim involved Uninsured Motorist Coverage in that case under primary Policies issued by Zurich and by Auto-Owners, and under an Umbrella Policy issued by Auto-Owners, to the Plaintiff's father and to the father's business. Auto-Owners prevailed on the Statutory Bad Faith Claim. The Plaintiff, Mr. Clayton Kearney, then filed a Motion for Attorney's Fees under two Florida Statutes, Fla. Stat. § 627.428, which applies generally to actions between Insurers and Insureds in which the Insured prevails on even one claim or count against the Insurance Company, and Fla. Stat. § 627.727, which specifically provides in its subsection (8) that Section 627.428 does not apply in an action against a UM Insurer "unless there is a dispute over whether the policy provides coverage for an uninsured motorist proven to be liable for the accident." Kearney v. Auto-Owners Insurance Co., 2010 WL 3119380 at 4 & n. 29. [Emphasis by the Court.] The holdings by the Federal Court in this case concerning the two Florida Statutes are both instructive and predictable.
Coverage disputes, therefore, are disputes about risk -- and what kind of risk an insurance company took on in exchange for a premium.... Hence, the dispute over the stacking clause in the Zurich primary policy was, in essence, a dispute over how much risk Auto-Owners had assumed.
Id. at *5. The "stacking dispute" which Mr. Kearney had with Zurich in this case in turn determined Auto-Owners' UM Coverage position under its own Policy. "Both disputes involve how much risk the insurer agreed to take on." Id.
But simply calling a legal dispute by a different name does not change the underlying nature of the dispute. A McDonald's hamburger is still a McDonald's hamburger even if you call it a sirloin sandwich.
Second, an award of an Insured's Attorney's Fees under Section 627.428 is not governed by the same standard as First-Party Statutory Bad Faith in Florida. Florida Courts "have made clear that the standard for awarding attorney's fees under § 627.428 is not tantamount to a bad faith standard." Id. at *7. [Emphasis by the Court.] "Therefore, the jury's determination that Auto-Owners did not commit bad faith does not prevent this Court from awarding Kearney attorney's fees." Id.
Attorney's Fees Awards in Cases filed by Insureds against Insurance Companies are addressed in Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" §§ 13.12 - 13.14 (Shepard's/McGraw-Hill First Edition/West Publishing Co. Second Edition and 2010 Supplement).
Jury Pools in the Wake of Katrina in Mississippi.
Bad Faith Cases receive careful attention. Part of the focus in every Bad Faith Case is the potential Jury Pool, or the Venire. They are the people deciding issues of fact and who they are is clearly important.
Before Katrina struck Mississippi, most Mississippians were like most residents of the rest of the Gulf Coast. Few people carried Flood Insurance. However, the focus on Insurance Coverage for Katrina Damages Claims can divert attention from the fact that many people did not have Property Insurance Coverage or Homeowner's Insurance either.
They are the people who make up the Venire for Mississippi Bad Faith Cases like the recent case reported in newspaper articles and in a post here on January 15, 2007.
Briefly, the recent case in Mississippi involved First-Party Bad Faith Claims including Punitive Damages Claims. A Federal Judge directed a verdict for the full Policy Limits available under a Homeowner's Policy. The case went to the Jury on the question of Punitive Damages under Mississippi law, which is fully discussed in the January 15, 2007 post. Without repeating all of that post here, in general terms Mississippi law allows the assessment of Punitive Damages for Bad Faith Breach of Contract and it can be Bad Faith not to pay any part of Damages which are covered.
It is reported that the Homeowner's Insurance Company in that case never made an offer.
The Jury assessed $2,500,000.00 in Punitive Damages.
See the detailed discussion of the situation in which these potential Jury members live today, Peter Whoriskey, "As Aid Lags, Volunteers Shoulder Rebuilding on Gulf Coast/Local Gratitude Mixes With Frustration Over Government's Failures" (Washington Post, Sunday, January 28, 2007, p. A03), and the discussion generally of Venires available for Katrina Cases across the Gulf Coast, in Insurance Claims and Issues.
A Federal Judge in Louisiana is faced with a special set of claims. The Consolidated Case of all of these claims would be special by reason of the claims alone. There is another reason the Consolidated Federal Case is special. The Federal Judge just issued an 85-page Opinion ordering the Coverages of almost as many Insurance Companies. Here is a link to this Order which is now "attached" to this post: In re: Katrina Canal Breaches Consolidated Litigation Pertains to Insurance (E.D. La. Case No. 05-4182 et al., Opinion Filed Mon., Nov. 27, 2006).
Each of the Claimants in that Consolidated Insurance Coverage Case has sued her and his own Insurance Company for Insurance Coverage for Damages after Hurricane Katrina in the City of New Orleans. However, the claims they allege are not alleged for Damages caused by the Hurricane . The claims are for Damages allegedly caused by the alleged negligence of People, i.e., the members of the Board of Commissioners for the Orleans Levee District. Parenthetically, the Federal Judge kept all the Insurance Coverage Claims for disposition in Federal Court, but remanded all Damages claims against the Orleans Levee District to Louisiana State Court.
"This case began the stream of complaints that have been filed as a result of damages arising out of all levee breaches which occurred in the aftermath of Hurricane Katrina." So begins the very recent Order on various motions by the U.S. District Judge in In Re: Katrina Canal Breaches Consolidated Litigation/Pertains to Insurance" (Eastern District of Louisiana).
This is a summary of the 85-page Order of the Federal Court. It is a summary of some of the significant Insurance Coverage Issues addressed by the Federal Judge.
1. All of the Policies involved in this Consolidated Federal Case were Homeowners Policies and they all provided "all-risks" Coverage, said the Federal Court. That means that, in the face of many Federal Rule 12(b) Motions to Dismiss in particular, said the Federal Judge, "under Louisiana law, unless there is a specific exclusion for the type of water damage that an insured has incurred, coverage is presumed under these policies. The focus of a court's inquiry then is on the relevant exclusions to coverage." (The Federal Judge, it should be pointed out, also confronted and resolved Motions for Judgment on the Pleadings and Motions for Summary Judgment, although most of the Motions were Rule 12(b) Motions to Dismiss.) The quoted ruling is found on page 9. The Homeowners Policies are quoted in pertinent part in the opinion. "ISO Policies" are quoted by the Court on page 15; State Farm Policy language is published on page 16, and Hartford Policy language is found on pages 16-18.
2. The State Farm and Hartford Policies are held to Exclude Coverage for "flooding" regardless of cause, in this Federal Order under Louisiana law. After consulting and analyzing numerous authorities, the Federal Judge ruled that a disaster caused by the alleged negligence of Human Beings regarding levee breaches and ensuing water damage is not an otherwise undefined "flood" in the first place. Hurricane Katrina may have caused a "flood", but the Claimants in this case did not sue for alleged Katrina Damages -- they sued for Damages that resulted after Katrina was all or almost totally gone.
The Federal Judge in part analyzed case law from other Gulf Coast States in the course of reaching the ruling of ambiguity, such as case law from Alabama and from Florida, as well as from North Carolina, an Atlantic Coast State which has had some experience too with Hurricanes (page 13). Of particular interest to Florida Attorneys, the Federal Judge's attached Opinion focuses at one point on a decision of the Supreme Court of Florida (pages 35-36).
A Notice of such Appeal is expected on or before Thursday, December 7, 2006. Further known developments, if any, in this Consolidated Insurance Coverage Case will be posted here.
REMINDER: THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP. ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE, THE JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.
Late Notice: Not good ground to support Total Denial of Coverage.
Late notice is a coverage defense that ordinarily involves prejudice to the insurance company. In some jurisdictions, the liability carrier must prove prejudice. In other jurisdictions, late notice raises a rebuttable presumption of prejudice. In cases involving a reubuttable presumption, legally there is a presumption of prejudice which the policyholder is free to rebut with evidence (and of course the insurance company is free to support with evidence). Florida follows a presumption of prejudice following late notice, but that did not help the Commercial General Liability (CGL) carrier in Donovan Construction, Inc. v. Vacker, Essex Insurance Co., & Ocampo & Assoc's, Inc., 31 Florida Law Weekly D2440 (Fla. 4th DCA Case No. 4D05-4105 Opinion Filed September 27, 2006)(subscription required), free access available through the Fourth District Court of Appeal public web site (click on opinions released September 27, 2006 and then follow the above case number).
Donovan Construction and its president, Mr. Thomas Donovan, obtained a CGL policy from Essex. Allegedly, a construction project on which Donovan was working incurred a modern problem: Mold.
The standard liability insurance policy generally requires two types of notice to the insurance company, although the opinion in the Donovan case does not discuss them. First comes notice of occurrence likely to result in a claim that will involve the liability policy, in basic terms. Without discussing whether the Essex policy required this type of notice in the Donovan case, the Fourth District wrote: "On May 3, 2004, Thomas Donovan, directed his insurance agent, Associated Underwriters of Florida, to notify Essex of Vacker's 'possible' claims. At no time did Essex contact Donovan regarding the potential claim nor, to DCI's [Donovan Construction, Inc.'s] knowledge, take any actions as a result thereof."
The other type of notice required under the standard liability insurance policy involves notice of a claim in suit. In other words, the other type of notice involves notice that an insured has been brought into a lawsuit. On January 7, 2005 DCI was served with a complaint in a lawsuit filed as a result of the alleged mold. Notice was again given, apparently: "On January 25, 2005, AXA Corporate Solutions, DCI's other insurer [this is the only time AXA is mentioned in the appellate opinion], wrote to Essex advising them .... Also on this date, Essex notified DCA of its denial of said claims. DCI tendered the defense of this matter to Essex and requested that they be indemnified. Essex refused to defend and indemnify" for many reasons including alleged late notice.
The trial judge entered a summary judgment for Essex on the ground of no coverage due to late notice. The Fourth District Court of Appeal reversed, holding that on the above and similar facts, "there is a genuine issue of material fact concerning when DCI knew of the mold problems and whether it failed to timely notify Essex."
Late notice is just not a particularly good ground to support Total Denial of All Coverage, as this new case reflects.
REMINDER: THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP. ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

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