Source: https://insuranceclaimsbadfaith.typepad.com/insurance_claims_badfaith/2018/05/index.html
Timestamp: 2019-04-25 17:41:05+00:00

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NDAs, DISCRIMINATION AND HARASSMENT vs. PUBLIC POLICY.
You can sit at the computer all day and search legal data bases until the cows come home as they say. At the end of the day, you will not find reported decisions in lawsuits that address the legal validity of nondisclosure agreements (NDAs), with one huge exception. You will likely be overwhelmed by the number of decisions you will find in the traditional business context in which NDAs began, such as to protect trade secrets.
It has been said that the closest authority we have on whether NDAs are valid is in decisions like the one in Gulliver Schools, Inc. v. Snay, 137 So. 3d 1045 (Fla. 3d DCA 2014). That case involved one Patrick Snay, his daughter who was not given a name in the appellate court's opinion, and Gulliver Schools, Inc. Mr. Snay was the headmaster at Gullliver and his contract was not renewed. Snay filed a complaint in Florida Circuit Court against Gulliver in two counts, in which he alleged age discrimination and retaliation under Florida's Civil Rights Act.
Confidentiality ... [T]he plaintiff shall not either directly or indirectly, disclose, discuss or communicate to any entity or person, except his attorneys or other professional advisors or spouse any information whatsoever regarding the existence or terms of this Agreement ... A breach ... will result in disgorgement of the Plaintiffs portion of the settlement Payments [which totaled $80,000.00, the Court said].
What happened is that after settlement my wife and I went in the parking lot, and we had to make some decisions on what we were going to tell my daughter. Because it’s very important to understand that she was an intricate part of what was happening. She was retaliated against at Gulliver. So she knew we were going to some sort of mediation. She was very concerned about it. Because of what happened at Gulliver, she had quite a few psychological scars which forced me to put her into therapy.
So there was a period of time that there was an unresolved enclosure for my wife and me. It was very important with her. We understood the confidentiality. So we knew what the restrictions were, yet we needed to tell her something.
Gulliver Schools, Inc. v. Snay, 137 So. 3d 1045, 1048 n.5 (Fla. 3d DCA 2014). Snay also testified that “[m]y conversation with my daughter was that it was settled and we were happy with the results[.]” Gulliver Schools, Inc. v. Snay, 137 So. 3d 1045, 1048 (Fla. 3d DCA 2014).
Gulliver Schools, Inc. v. Snay, 137 So. 3d 1045, 1046 (Fla. 3d DCA 2014). Faced with this evidence, the trial judge ruled that neither Mr. Snay's comments to his daughter, nor the Snay daughter's Facebook post, breached the nondisclosure agreement quoted above. Accordingly, this behavior was no obstacle to Snay's motion to enforce the settlement agreement Gulliver Schools appealed to the Third District Court of Appeal, which disagreed and reversed.
At this point I would like to tell you an anecdote from a hearing I attended in Florida Circuit Court in Pensacola some years ago. Another lawyer cited a Third DCA case while arguing a motion. The Judge said: "That case was decided by the Third DCA? It is distinguishable on that ground alone." We all laughed nervously. The Judge denied the motion.
The Third District's decision in the Gulliver appeal does not seem to turn on the Facebook posting, although the opinion included the rather testy observation that the confidentiality provision or NDA quoted above was clearly significant because "Snay’s entitlement to a significant sum of money is expressly conditioned on his compliance with this provision. It is also highlighted by the ramifications visited on Gulliver as a consequence of Snay’s breach/disclosure when his daughter communicated to 1200 people, many associated with Gulliver, that Snay had been justified in his discrimination and retaliation claims." Gulliver Schools, Inc. v. Snay, 137 So. 3d 1045, 1048 n.4 (Fla. 3d DCA 2014) (emphasis added). The appellate opinion called this provision "[c]entral to this agreement[.]"
Because Snay’s deposition testimony that “[m]y conversation with my daughter was that it was settled and we were happy with the results,” establishes a breach of this provision, the court below should have denied his motion for enforcement of the agreement.
Gulliver Schools, Inc. v. Snay, 137 So. 3d 1045, 1048 (Fla. 3d DCA 2014).
That was it. For all that appears from this opinion, the central issue in the case concerned Snay's revelation to his daughter that the parents were happy with the results and that a settlement agreement existed.
There was never any other issue presented on appeal, at least so far as can be seen from any fairly exhaustive reading of the appellate opinion, such as this article has provided here. But what if other issues had been argued on appeal? What about public policy, for instance?
Could the appellate panel have upheld the agreement and denied Snay's motion to enforce the settlement agreement if they had confronted an issue of whether it is against public policy to conceal the existence of a settlement of Snay's claims for age discrimination and for retaliation under the Florida Civil Rights Act?
Or that it is against public policy to conceal one or more of the terms of that settlement?
It is against public policy in Florida to permit liability insurance coverage for intentional religious discrimination. Ranger Ins. Co. v. Bal Harbour Club, Inc., 549 So. 2d 1005 (Fla. 1989). The reasons are instructive.
In Bal Harbour, the Supreme Court of Florida observed that the rationale underlying the insurance industry's rule ordinarily barring liability insurance coverage against a person's own intentional misconduct "is that the availability of insurance will directly stimulate the intentional wrongdoer to violate the law." There are exceptions to this rule, the Court noted, but there is no "blanket exception for intentional religious discrimination[.]" Ranger Ins. Co. v. Bal Harbour Club, Inc., 549 So. 2d 1005, 1007 (Fla. 1989).
Similarly, there is no exception to the rule barring contracts against public policy for alleged age discrimination or for discriminatory retaliation -- nor for alleged sexual harassment. And manifestly there is no "good cause" to permit concealment of predation in any of these forms or in any other form for that matter.
It will undoubtedly be argued that making alleged discriminatory conduct a secret will not encourage it. That argument too was made by the proponents of liability insurance coverage for the alleged intentional racial discrimination in the Bal Harbour case. "This supposition is lacking in empirical support and defies human experience," the Supreme Court of Florida replied. Intentional religious discrimination "is not a crime," and so it is not deterred by the criminal laws. Neither does it bring a "risk of injury" to the perpetrators, and so risk of injury is not a deterrent, either.
Similarly, in matters of concealed allegations of age discrimination and discriminatory retaliation, and in many matters of alleged sexual harassment such as allegedly creating a hostile workplace environment, there is no crime involved and there is once again no risk of injury to the perpetrators, and so there is no deterrent apart from exposing those allegations and that conduct to the public who can then take steps to protect themselves from the possible dangers.
A final argument made in favor of extending liability insurance coverage to the alleged intentional religious discrimination in the Bal Harbour case, was that if there were no insurance, there would be no capacity to collect on damage awards for proven infractions. Similarly, it will no doubt be argued in favor of concealing alleged age discrimination and alleged discriminatory retaliation, as it is argued in favor of nondisclosure agreements for sexual misconduct, harassment, and more -- that if nondisclosure is not permitted, then there will be no settlements and therefore these claims will not be paid.
We disagree. The bulk of discrimination cases are brought against commercial enterprises that have discriminated in the marketplace or workplace. These businesses generally have far greater resources than do individuals and to hold the acts of such parties uninsurable would result in relatively few instances where the injury would go uncompensated. Such was the case in the present claim.
Ranger Ins. Co. v. Bal Harbour Club, Inc., 549 So. 2d 1005, 1009 (Fla. 1989).
So, there you have the central arguments pro and con on the issue of whether a nondisclosure agreement should be held valid or invalid in the face of public policy. The only way we may be able to see how the Courts rule on these and similar arguments in actual cases is if these arguments are actually made.
Next: What does the U.S. Constitution have to say? What do State Constitutions have to say as well?
ALI'S RESTATEMENT OF LIABILITY INSURANCE LAW AND THE JURY SYSTEM.
This message was so good, we had to say it again!
The American Law Institute's Restatement of Liability Insurance Law is up for approval at the ALI's Annual Meeting this year. I believe the vote will come up on Tuesday, May 22nd.
Controversy, and may I say confusion, have been generated by some insurance industry interpreters on the issue of liability carriers' exposure for liability beyond their policy limits in a very narrow set of circumstances. You might not know that the area of controversy is limited unless you were paying pretty close attention.
The issue that is controversial to these people is simply whether bad-faith-in-settlement cases can go to the jury when the facts include a liability insurance carrier's failure to initiate settlement negotiations, but there was no settlement demand from the claimant within policy limits.
The draft Restatement up for approval reflects simply that, yes, a bad-faith-in-settlement case can go to the jury when the facts include a liability insurance carrier's failure to initiate settlement negotiations, but there was no settlement demand from the claimant within policy limits. It depends on all the circumstances.
It does not require that any such case ever go to the jury. Whether a given bad-faith-in-settlement case actually goes to the jury depends on other factors under the Restatement and under the prevailing case law, including such factors as the strength of the underlying liability case against the policyholder and the size of a damages verdict if any against the policyholder.
But you would not necessarily know this from the confusion and the controversy generated around this small set of cases from a large set of corporations and their lawyers.
So, read all the articles that have been written about this narrow issue, and all the blogs, and definitely read the cases. Then vote your conscience. And if you are at the ALI Annual Meeting, approve the ALI's Restatement of the Law of Liability Insurance.
This article was previously published on Claims and Issues Blog on Monday, May 21, 2018.
Author's Note: The original article republished here was encoded in a software program that just did not transfer well. Page numbers have been re-inserted by hand here, in a way that avoids breaking up paragraphs.
c Texas. As I noted earlier several times, “Texas addressed this issue seemingly head-on in its 5-2-2 decision in Rocor Int'l, Inc. v. National U. Fire Ins. Co., 77 S.W.3d 253, 261-62 (Tex. 2002).” Wall, “The American Law Institute and Good Faith Settlement Duties of Liability Carriers,” 37 Ins. Lit. Rptr. at 603 n.34.
d. Kentucky. To these three cases from three different States, I would now add a probable fourth case and State, Kentucky, because the Supreme Court of Kentucky wrote that “[a]n insurer is liable for a judgment against its insured in excess of the policy limits only if it refused in ‘bad faith’ to pay a settlement demand within its policy limits.” American Physicians Assur. Corp. v. Schmidt, 187 S.W.3d 313, 318 (Ky. 2006). However, that decision actually stands for the separate proposition that unless the liability carrier has a reasonable opportunity to settle within policy limits, it cannot be held liable for bad faith in settlement. In American Physicians, the policyholder controlled the settlement decisions under the policy and although the claimant “was willing to settle for the policy limits,” the policyholder refused to consent to settlement and so the liability carrier could not be held liable for bad faith in settlement. American Physicians Assurance Corp., 187 S.W.3d at 317 (emphasis added).
I have been invited to include two cases decided in the 1990’s in the “Con” column. That is, to include two cases for the ostensible reason that the Courts involved in those cases also take a contrary position on the proposition that there can be extracontractual exposure for a liability insurance company’s failure to initiate settlement negotiations in the absence of a settlement demand. Again, I appreciate the opportunity. This time, however, I must completely decline the opportunity. The reason is that in these cases the facts do not support that citation: Iowa, in Wierck v. Grinnell Mut. Reins. Co., 456 N.W.2d 191, 194 (Iowa 1990) (liability insurance company in that case did offer policy limits, even without a demand for a sum certain), and New York, in Pavia v. State Farm Mut. Auto. Ins. Co., 82 N.Y.2d 445, 454-55, 626 N.E.2d 24, 28, 605 N.Y.S.2d 208, 212 (1993) (policy limits demand was made in that case during insurance company's investigation of insureds' liability; no bad-faith-in-settlement claim could be established, the Court held, because it was not bad faith not to accept the demand while the carrier was still in the course of investigating whether its insured would likely be held liable at trial).
The lineup of the Courts in these decided cases is 9 or perhaps 10 cases decided in as many Courts under the laws of just as many States, in which the Courts recognized that claims of bad faith in settlement alleged against liability carriers would ordinarily be allowed to go to the jury when the carriers involved did not initiate settlement negotiations and there was no settlement demand from the claimant within policy limits.
Four Courts in the United States take even arguably a contrary position.
That ratio is decidedly and clearly in favor of recognizing that claims of bad faith in settlement alleged against liability carriers are ordinarily allowed to go to the jury when the carriers involved did not initiate settlement negotiations and there was no settlement demand from the claimant within policy limits.
Clearly, the “majority view” in this slice of case law is that a settlement demand is not required and that a jury question was nonetheless presented in a case of alleged bad faith in settlement including whether a liability carrier should have initiated settlement negotiations to protect its insureds, particularly where the insured’s liability is probable and the claimant’s likely damages are great.
Still, I choose not to relitigate the issue of whether the Restatement should explicitly state this clear majority view. It is enough that the Restatement, as written, is supported by the clearly emerging majority view from all of the available case law on this issue.
RESTATEMENT SECTION 24 AND THE DECIDED CASES.
The same cases previously examined here, which support extracontractual liability when the liability carrier fails or refuses to initiate settlement negotiations in the absence of a demand for settlement within policy limits, necessarily also simultaneously support the view that a settlement demand is not required in order for extracontractual liability to attach. Since none of those cases, which I have listed in the “Pro” column, required a demand within policy limits and still recognized that the issue of extracontractual liability was a jury question in a bad-faith-in-settlement case which included the carrier’s failure to initiate settlement negotiations, the determinative fact in the liability carriers' extracontractual exposure was not the claimants' demand but the carriers' own settlement conduct. The proposed Restatement characterizes this conduct as a duty to make reasonable settlement decisions.
“To be clear, there should not be an absolute rule that an insurer can never be liable for failure to settle if the claimant never made a within-limits offer. Such arguments have sometimes been made by insurers, but have properly been rejected. Insurers have other duties regarding defense or settlement which, if breached, can subject them to liability for failure to settle.” William Barker, “Insurers Ought Not to be Required to Initiate Settlement Negotiations,” 38 Ins. Lit. Rptr. 77, 78 (March 3, 2016).
To be clear, it is proper to recognize that a liability carrier sometimes will have a duty to initiate settlement negotiations even when the claimant does not make a settlement demand, particularly but not only when the insured’s liability is probable and the claimant’s likely recoverable damages are greater than the liability policy limits. Whether and how the liability insurer fulfills that duty in any given case will ordinarily depend on all the facts including whether the carrier had a reasonable opportunity to settle within policy limits.
As the Courts in several of these cases have pointed out, the fact that in most cases claimants make settlement demands does not mean that a settlement demand is necessary before the liability carrier must act in good faith or bear the consequences. The risk of bad faith, extracontractual liability may exist in cases where there has been a demand within policy limits, but that risk can also be present in cases when there has been no such demand. In the end, the liability insurer’s risk of exposure to bad faith, extracontractual liability depends on whether its settlement conduct was reasonable under all the circumstances.
WHO AM I TO JUDGE? BAD FAITH CONDUCT AND ALI'S RESTATEMENT.
We must struggle to free ourselves of bias. This is not easy, particularly in scholarship. But without the struggle, there can be no progress.
There has been an ongoing controversy over what a liability insurance company's exposure to "bad faith" looks like. With regard to settlement behavior in particular, my support of the American Law Institute Restatement's Section 24 has come under attack. I too have come under attack.
I have not responded to the attack before now because it is beneath me. I will not respond in kind now. However, the ALI's Restatement comes up for a vote at the ALI Annual Meeting which runs from May 21 through May 23 this year in Washington, D.C. I believe the Restatement is scheduled for consideration by the ALI Membership on Tuesday, May 22. Therefore I write here to again express my support for the Restatement before the vote.
In succeeding articles to be posted here and on Claims and Issues Blog, I will republish my article that occasioned a challenge both to the Restatement and to me personally. I broke down the cases and jurisdictions into three camps on the issue of settlement conduct when there is no settlement demand, more or less: Pro, Maybe, and Con. The issue will be understood all the better if I briefly display the depth of the research in their article here. If you have the time, read their article for yourself.
How the Courts line up on a liability carrier's exposure to extracontractual liability for not initiating settlement negotiations in the absence of a settlement demand.
In my article, I wrote about ten (10) jurisdictions from which cases have been reported and found in which the Courts have recognized that bad-faith-in-settlement cases usually go to the jury when the facts include a liability insurance carrier's failure to initiate settlement negotiations, but there was no settlement demand from the claimant within policy limits.
I went on to analyze three (3) other cases, which for reasons I stated I would not include in the "Pro" camp, but if they were included then there would be not less than thirteen (13) cases in the Pro camp based on these decisions alone.
Of these ten to thirteen (10 to 13) cases from jurisdictions as diverse as Arizona, Florida, Kansas, Michigan, New Jersey, New Mexico, Oklahoma, Oregon, Tennessee, and Washington, and perhaps including also Louisiana, West Virginia, and Wisconsin, their article challenged only one (1).
That leaves nine to 12 (9 to 12) cases they did not address, even if theoretically they could have. Which they did not.
2. "Maybe, but not in this case".
I continue to put what I call "iffy cases" in this category. These are six cases and States for certain in which the Courts in a given jurisdiction -- California, Idaho, Illinois, Ohio, Pennsylvania, and Texas, with the possible addition of a seventh, Georgia, as I wrote -- have acknowledged that liability insurance companies at least might have a legal duty to initiate settlement negotiations in the absence of a settlement demand. Because these cases are all iffy (in each one, the Courts went on to say basically, "maybe, but not in this case"), I expressly declined to include them in the "Pro" column.
I do not say that their article took my words out of context. I say that I did not say those words. Their article charged for example that I made "the claim that [California, Idaho, Illinois, Pennsylvania, fill in the blank in the word processor] offers support for the possibility of imposing an affirmative duty." So, let me say again, in boldfaced italics as I did before, but now putting my words into a bigger pitch so that they more easily see the words: Because these cases are all iffy (in each one, the Courts went on to say basically, "maybe, but not in this case"), I expressly decline to include them in the "Pro" column.
They did not challenge a single one of the cases in this category.
Before concluding, I point out that they claim to be misquoted. The difference is that they said what they said. To say again, read their article for yourself. Then vote your conscience. And vote as I will in favor of the ALI Restatement of the Law of Liability Insurance.
Now on to the further articles in this series this coming week, ending on Friday on Claims and Issues Blog with "The ALI Liability Insurance Restatement Reporters Get the Last Word."
Next: The Beginning, opening up on Claims and Issues Blog.
Please Read the Disclaimer. This article © 2018 Dennis J. Wall. All Rights Reserved.
 My article was originally published as Dennis J. Wall, "Section 24 of the Law of Liability Insurance Restatement Draft No. 4 (August 4, 2017), Reporter's Notes F And H, And The Decided Cases," 39 Ins. Lit. Rptr. 473 (October 5, 2017). Their article was William T. Barker, Dentons US LLP, "Insurers Ought Not to Be Required to Initiate Settlement Negotiations, Redux," 39 Ins. Lit. Rptr. 597 (December 15, 2017).
GINA HASPEL: IN BAD FAITH THEN? IN BAD FAITH NOW?
There are times when questions of bad faith go beyond insurance. This is such a time. Some people are supporting Ms. Gina Haspel's nomination to become the next Director of the Central Intelligence Agency with what used to be called The Nuremberg Defense: "I was just following orders." That defense did not work at Nuremberg and it should not work now.
If you were ordered to commit torture, did it ever occur to you to say "No"?
No, what I would like to know is whether it ever occurred to her to say "No" if and when she got orders to torture people. That will tell us what we need to know about how she will respond to other orders when she is confirmed as Director of the CIA, if an order to torture people is no impediment to her.

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