Insurance Claims And Issues

"Terrorism Risk Insurance Expanded, Hurricane Risk Insurance Almost Nonexistent": UPDATE.

                             AN UPDATE THREE MONTHS FURTHER OUT:
                         UPDATING OUR POST ON SEPTEMBER 23, 2007.

     One of the co-sponsors of the 2007 "Homeowners' Defense Act," Rep. Ron Klein of Boca Raton, Florida, defends his bill in a short article in the South Florida Sun-Sentinel.com on Friday, Dec. 28, 2007.    Mr. Klein's supporting grounds for the bill include requirements in it to mitigate damage, and authority in it to allow "state-sponsored insurance funds to voluntarily join together to bundle their catastrophe risk, and transfer that risk to the private markets.  In times of crisis, federal loans would also be provided to ensure homeowners' claims will be paid."

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"And A Little Child With Autism, Shall Lead Them" UPDATE.

     Three Months Later --This is an update of a post here on September 26, 2007.

      The Florida Legislature and the Florida Governor, Charlie Crist, will soon be hearing from  Mr. Donald Trump and a group based in New York that advocates Insurance Coverage for Autistic Children called Autism Speaks.  Both want Florida to mandate that Insurance Policies remove an Exclusion that is directed to Autism treatments, which can cost the children's parents upwards of $50,000.00 a year without Insurance Coverage.

     It is reported by the South Florida Sun-Sentinel.com  that 17 States mandate some form or another of Insurance Coverage for autism treatment.  Mr. Trump, the Billionaire and Bankruptcy survivor who will deserve praise for this good deed if as now appears it will bring him no personal gain, and Autism Speaks, plan to lobby officials in three high-profile States with large numbers of autistic children and their parents -- Florida, California and Michigan -- in an effort to provide Coverage for such autism treatments as speech therapy.

     It is also reported that unnamed Insurance Companies oppose mandated Insurance Coverage for autism treatments on the ground that all of their Policyholders would pay higher Premiums if that happened. 

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Enhanced Penalties Amendments Did Not Yet Apply, Louisiana Court Holds.

     After many complaints of delays and denials of Insurance Coverage Claims for damages in Louisiana after Hurricanes Katrina and Rita, the 2006 Louisiana Legislature passed amendments to the Louisiana Penalties (or 'Bad Faith') Statute, La. R.S. § 22:658.  "Effective August 15, 2006, La. R.S. 22:658(B) was amended to provide for a fifty percent, rather than a twenty-five percent penalty, and to provide for reasonable attorney's fees and costs."  Aronson_v. State Farm Fire & Casualty Co. (La. Ct. App. 4th Cir. Case No. 2007CA0573, Opinion Filed October 10, 2007).pdf, also available by subscription, at 2007 WL 3015571 *7.

     These statutory amendments have been held to apply to the Insurance Company's conduct at the time of its action, and not simply at the time that it may ultimately pay or deny Coverage.  Aronson, see attached Official Opinion and, by subscription, see 2007 WL 3015571 at *9.

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Sector Snapshot of "Insurance" December, 2007.

     Here is another elusive Market Gauge with a Sector Snapshot of "Insurance".  This is usually an interactive graphic when published online by The New York Times.  For reasons given the last time I tried to provide you with a Sector Snapshot, that is just not possible.  Impossible, even.  Certainly elusive.  Here is a scanned copy of it from The New York Times National Edition of Friday, Dec. 21, 2007, p. C8, col. 1:  Download marketgauge_122607.rtf.

     Note that once again the Property and Casualty Insurance Companies shown in this Sector Snapshot are clustered in comparative failure, either "Lagging" or barely "Improving," while Life Insurance Companies are making a killing (pun intended).  Our scan is apparently 7.1 MB, so be patient -- and enjoy!

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Mortgagee-Bought Insurance and Coverage Claims.

     Claims to covered damages under insurance policies that are placed by a mortgage company on the homeowner-claimant's property, present specialized Insurance Coverage situations.  Whether those cases feature subprime mortgages or not, courts in those cases have not often allowed homeowners to claim coverage under insurance policies placed by their mortgage companies.  E.g., Graphia_v. Balboa Insurance Co. (E.D. La. Opinion Filed Sept. 28, 2007),.pdf , available by subscription at 2007 WL 2903250 *4; In_re_Saunders_(Estate_of_Saunders_v. State Nat'l Insurance Co.) (E.D. La. Opinion Filed July 24, 2007),.pdf, available by subscription at 2007 WL 2127574 *2.

     On the other hand, where the courts see a "lender" with a "mortgage contract" which allegedly acted like an "insurer" or other fiduciary, they have also held that a complaint "states sufficient allegations that [it] acted in such a manner as to breach a duty owed to its mortgagor, raising a genuine issue of material fact" which can defeat a defendant lender's motion for summary judgment.  Colvon_v. Novastar Mortgage, Inc. (E.D. La. Opinion Filed Oct. 10, 2007),.pdf, also available by subscription, at 2007 WL 2991818 *2.  Accord, Jones_v. Proctor Fin. Insurance Corp. (E.D. La. Opinion Filed November 28, 2007),.pdf, available by subscription at 2007 WL 4219342 *2.   

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Elder Law and Insurance Contracts.

 The law protects people who are at the beginning of life, in special ways.  In many situations, minors cannot make enforceable contracts.  The law protects them from their own vulnerability to other people who might prey, and those who would not affirmatively hurt children but who nonetheless would not lift a hand or a voice to shield them from their own folly such as entering into an agreement that does not really benefit them but benefits some other party that wants to enforce it.

     It is a concept worth the attention of the law, whether people who are at the ending of life should similarly be protected, in special ways.  In many situations, for their own good, elders should not be making enforceable contracts.  Should the law protect elders from their own vulnerability to other people who might prey?  From their vulnerability to those who would not affirmatively hurt elderly people, but who would nonetheless not lift a hand or a voice to shield them from entering into a harmful agreement that would benefit instead only some other contracting party that seeks to enforce it?

     The current president of the American Council of Life Insurers makes the point that if the law goes the length of incapacitating everyone over the age of 65, then elders will face obstacles in "buying homes or cars or country club memberships or insurance policies."  (Mr. Frank Keating, quoted by Charles Duhigg in "Fine Line:  Shielding Elders' Money, and Independence" p. A1, col. 1 (New York Times Nat'l Ed., Monday, December 24, 2007).  On this Christmas Eve, or at any other time in the rolling Year for that matter, it does not seem as important in the great scheme of things that elders might then have trouble buying country club memberships, as compared to the very real concerns that can arise when elders buy homes or cars or insurance policies.

     However, there is a spectrum of remedies available to consider, and declaring people automatically incapacitated at any age is at an extreme.  Somewhere along the way, the willingness of responsible adults to guarantee performance and to review benefits and obligations, as is the case in many situations with minors, is without doubt worth the attention of the law where elders are concerned.  The linked newspaper article, above, explores the situations faced by elders at which the law ought to look and in which, having looked, the law might decide to take a hand.

    Happy Holidays To All!

Profits Up, Payments Down: Hurricane Winds Still Blow -- Part 2.

     The second reason for a large increase in profits for Property Insurance Companies, besides the reductions in Insurance Coverage discussed in Part 1 of this post, is an increase in Premium charges.

     Increased Premiums are abetted by Computer Models that project Catastrophic Losses on a more frequent basis than they occur.  As posted here previously, these Computer Models are not authorized by State government, and Florida is an example, in part because they are often wrong.  The Computer Models are, in addition, predicated more on opinions and projections than on demonstrated facts.   Nonetheless, these Computer Models favor the imposition of high Premiums because they are used to predict more Catastrophes which trigger CatClaims in greater numbers and for more dollars.

     Again, for a comprehensive newspaper report which summarizes trends in Insurance Coverage Reductions and Insurance Premium Increases, an excellent report is by Joseph B. Treaster, "Insurers Shift Cost Burdens to Homeowners" p. C1, col. 2 (New York Times Business Day Nat'l Ed., Fri., Nov. 23, 2007).

     Premium Increase trends may be leveling off if predictions are accurate for 2008.  This is the conclusion of Dr. Robert P. Hartwig, CPCU, President of the Insurance Information Institute, in his "Special Report: Earlybird Forecast 2008" posted online by the III on December 17, 2007.  Dr. Hartwig averaged various forecasts and arrived at an average among them of a 0.3 percent decline in Property/Casualty Insurance Premiums.  Newspaper reports have reprinted this average projection.  See, e.g., Lavonne Kuykendall, writing for Dow Jones/Associated Press on Dec. 18, 2007, published online by South Florida Sun-Sentinel.com.  Dr. Hartwig's conclusion is that premium growth is "Stuck in Neutral," if these projections are accurate.

     "Neutral" is of course a relative term.  As Dr. Hartwig points out in his post, in 2007 Property and Casualty Insurance Companies are on track to post one of their best underwriting results since about the time of the Stock Market Crash year of 1929.  If industry predictions reflected in the post are accurate, Dr. Hartwig also points out that 2008 Premiums would decline for the first time since the middle year of America's involvement in World War II, or since 1943.

     The "Earlybird Forecast 2008" includes a table listing 10 analysts and their projections.  The average of a 0.3 percent decline in 2008 P/C Premiums does not account for the weight of their projections.  For example, Tillinghast and Fitch forecast increased Premiums, at 1.1 and 0.1 percent respectively.  Merrill Lynch and Standard & Poor's are shown in the table as forecasting a continuation of the level of Premiums from 2007 to 2008 without projecting increases at this time.

     Time will tell. 

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Profits Up, Payments Down: Hurricane Winds Still Blow -- Part 1.

    In 2005, Property Insurance Companies paid out $41,000,000,000.00 in Claims resulting from Hurricane Katrina.  After that, Property Insurance Companies reported a then-record profit of $44,000,000,000.00.

     In 2006, Property Insurance Companies set a new record for profit, eclipsing the record for profit they set in 2005.  Property Insurance Companies reported a profit of $64,000,000,000.00 in 2006.

      To begin with, Insurance Companies are in business.  They exist, like other businesses, to make profits.  That is sometimes seen by some as the beginning and the end of their current business model as an industry or business sector.  Nonetheless, many people who run Insurance Companies pursue practices that come from a long-held view of the Insurance business as a business that is infected with a public trust.

     News of the current intersection of Insurance Companies and Profits is told by Joseph B. Treaster, "Insurers Shift Cost Burdens to Homeowners" p. C1, col. 2 (New York Times Nat'l Ed., Friday, Nov. 23, 2007).  In this comprehensive and thoughtful report, the reasons for Insurance Companies' current financial success with Property Insurance are laid out.

     Things have not always been so profitable for Insurance Companies.  In 1992-- the year of Hurricane Andrew -- Homeowner's Insurance Companies paid out $1.27 on Catastrophe Claims for every $1.00 of Premium they collected.  Comparisons can aid in understanding.  The same figures for 2005 compare very well, for example:   In the year of Katrina, Homeowner's Insurance Companies paid out $0.715 in Catastrophe Claims for every $1.00 of Premium they collected.   What did they do different to increase profits and reduce costs in the 13 years in between Hurricane Andrew and Hurricane Katrina?  They began to do the same things they are doing now.

     Basically, Insurance Companies have increased their profits in that time in two ways.  They have reduced Coverage and increased Premiums.

     To avoid too great a length in one place at one sitting, this post will be broken into two parts.  This first part will take a look at some of the things that Property Insurance Companies are doing to decrease the amount and kinds of Coverage they offer.

Investigation! Florida Insurance Companies Do Not Lower Premiums.

                                    

           On the Third Day of Christmas, my Florida Taxpayer Dollars gave to me:
                  Three lawyers investigating Insurance Company Premiums.

     Upset with Insurance Companies apparently not reducing Premiums by as much as he had hoped, Florida Governor Charles Crist turned to 3 lawyers to lead an investigation.    See Robert Deslatte, "Governor Taps Attorneys to Review Firms' Compliance With Insurance Law" (South Florida Sun-Sentinel.com, Wed., Dec. 19, 2007).   2 are ex-members of a large group that Mr. Crist put in place to oversee the transition from the previous Republican Governor to Mr. Crist, also a Republican:  Robert Hackleman of Ft. Lauderdale and Roberto Martinez of Miami, who chaired the group.  The third lawyer is Dexter Douglass of Tallahassee.

Postscript of Thursday, December 20, 2007:
The Associated Press reports now in a story published in the Orlando Sentinel, here, that Governor Crist wants the 3 to consider whether a class action lawsuit is a good idea for the State of Florida to file against Insurance Companies.  Is Mr. Crist really a Republican?

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Holiday Reduction in Louisiana Rentals Does Not ...

                   ... Reduce Catastrophe Claims on Insurance Which
              Poor Renters Did Not Have Anyway but Reduces the Poor. 

     This is a Holiday story for the people who say and for the people who hear that there is no room at the inn.

     Hurricane Katrina destroyed many rental apartments and rental homes.  The current Federal government has plans to (1) replace some but not all of those rental properties in the City of New Orleans,  plans which have the effect of reducing the number of places that can be rented by people receiving public assistance, and (2) turn out the people who have been living in trailers provided by the Federal government since Katrina passed through New Orleans.  People are less likely to stay in New Orleans if they have no place to live in New Orleans.

     At first, the Federal government was proceeding with its plans regardless of protests.  See Leslie Eaton, "In New Orleans, Plan to Raze Low-Income Housing Draws Protest" p. A22, col. 1 (New York Times Nat'l Ed., Fri., Dec. 14, 2007).  The next day, however, the Associated Press reported that the Federal government has now decided to wait for the results of a New Orleans City Council meeting, as its response to a lawsuit asking a court to make it do just that.  "Housing Demolition is Halted," p. A19, col. 5 (Associated Press, published in New York Times Nat'l Ed., Sat., Dec. 15, 2007).

    It is reported that one of the agenda items for the City Council meeting is a one-for-one plan to build one new rental unit before one old rental unit is demolished.

     Timing is everything.  As this post was being finalized, another newspaper report addressed the question of many people who cannot return to New Orleans here. 

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