Insurance Claims And Issues

Insurance Coverage and Other Issues for Homeowners and Condominium Associations.

           Troublesome issues over Insurance Coverage for Homeowners and Condominium Unit Owners may come from failed Insurance Coverage lawsuits or from Members not kept advised by the Board.  Sometimes both:  See "Associations/Homeowner Association Members Face Huge Assessment for Legal Fees" by Stephen Glassman and Donie Vanitzian (Los Angeles Times Online, Sunday, May 31, 2009).  The linked newspaper report prints this sound thought:  Even with the limited alternatives, the board needs to perform due diligence in obtaining at least a second legal opinion on its options and the proposed settlement.

 

Please Read The Disclaimer.

The Hurricanes Are Coming, The Hurricanes Are Coming!

    Is your Insurance Coverage prepared for Hurricanes?  The Hurricane Season officially begins on Monday, June 1, 2009.  Ready?  Explore the issues addressed in this report from Slate, by Martha C. White, "Hurricane Prudence/Is the Battered Insurance Industry Ready for the Storm Season?" (Sunday, May 31, 2009).

    The two main issues addressed in this report are the reasons why Property and Casualty Insurance Companies are so much sounder financially than Life Insurance Companies, and some of the changes in Florida Insurance since the 2004 and 2005 Hurricane Seasons struck the State.

    Speaking of Florida and incoming Hurricanes, President Barack Obama reports that Federal Government statistics reflect that "a huge percentage of people" has not experienced a Hurricane.  The statistics reflect that nearly half of the population on the Eastern Seaboard have recently moved to cities there, without experiencing a Hurricane.  See Steven Thomma, "Obama:  Hurricane Readiness is Residents' Responsibility" (McClatchy Newspapers Online, Friday, May 29, 2009).   The Federal Government has provided a potentially useful web site for information and/or planning for Hurricanes:  www.ready.gov.

    Florida newspapers are providing their Hurricane guides at about this time.  Check out in particular "What You Should Know About Your Insurance" in the Orlando Sentinel Hurricane Guide (Sunday, May 31, 2009).  And see also this piece in the Orlando Sentinel's Guide, "How to File an Insurance Claim After the Storm," or contact one of the many Florida State Government agencies, and Private Insurance Companies, listed at "Hurricane Central" on the web site of the Florida Insurance Council, www.flains.org.

Please Read The Disclaimer.

Property Insurers Dovetail With Environmentally Concerned Coalitions.

     The Travelers and Fireman's Fund Insurance Companies are reportedly pressing for innovations to meet climate changes that would alter forever the face of Property Insurance Coverage in the United States.  See, e.g., Cornelia Dean, "Groups See Added Risks From Change in Climate" (New York Times Online, Friday, April 24, 2009);   NU Online News Service, "Group Unveils Blueprint to Save Billions From Hurricanes" published by P & C/National Underwriter, Thursday, April 23, 2009.

    Among the innovations backed by an increasingly broader array of supporters:

• Adopting local land-use policies that deter people from construction in high-risk flood-prone areas.  An example is reportedly provided by City and County officials working together in or about Charleston, South Carolina to restrict development on Johns Island to its interior.
• Enacting more realistic Construction Codes and, at the same time, encouraging existing homeowners and commercial property owners to make their buildings more resistant to storms in storm-prone areas. 

While the members of the coalition were apparently reluctant to endorse the use of Property Insurance Premiums as a planning tool, clearly where Property Insurance in such areas is available at all the Premiums will be very high -- and the Property values are likely to increasingly become lower than they are even now.  See generally John K. DiMugno, Steven Plitt & Dennis J. Wall, "CAT Claims:  Insurance Coverage for Natural and Man-Made Disasters" (Thomson-West Publishing 2008).

Please Read The Disclaimer.

"We Were Only Following Orders, er, Lawyer Memos": Lawyer Insurance?

    Newspapers report in greater detail than was previously available, that C.I.A. operatives inflicted torture in reliance on legal cover provided by Memorandums from government lawyers.  See, e.g., Mark Mazzetti and Scott Shane, "Memos Spell Out Brutal C.I.A. Mode of Interrogation" p. A1, col. 5 (New York Times Nat'l Ed., Friday, April 17, 2009).

    There are so many reactions and questions.  Some of the questions:  What type of Insurance Coverage, if any, would apply to the lawyers in question?  If any type of Insurance Coverage might apply to these lawyers, what Exclusions in those Policies, if any, may strip them of all Coverage?

Other reactions and questions are addressed in the "Insurance Claims and Bad Faith Law Blog" at www.insuranceclaimsbadfaith.typepad.com.

Please Read The Disclaimer.

LIFE Insurance Companies Seek TARP Cover For Bad Securitization Bets.

    At least one of the Life Insurance Companies that made poor bets on securitization and has tried to apply for Federal Bailout Money by buying a bank, has been turned down.  Genworth Financial, Inc. also reportedly sells Mortgage Insurance.  Lu Wang, "Boeing, Boston Scientific, Genworth, MEMC: U.S. Equity Preview" (Bloomberg.com, Friday, April 10, 2009).

    It may be that Genworth has failed to qualify for the Troubled Asset Relief Program ("TARP"), or Bailout, because the Office of Thrift Supervision finally acted in response to a deadline that Genworth did not meet in order to buy a bank in the first place.  See, e.g., Andrew Frye, "Genworth Fails to Qualify for TARP; Shares Plunge (Update 2)" (Bloomberg.com, Thursday, April 9, 2009); David S. Hilzenrath, "Richmond Insurer Fails to Qualify for TARP/Genworth Tried to Become a Thrift" (Washington Post Online, Friday, April 10, 2009).

    Not one Property and Casualty Insurance Company has applied for a Bailout.  When these newspaper reports refer only to "insurance companies," sometimes they do not say it.  What they are referring to, of course, is LIFE Insurance Companies, ONLY.

Please Read The Disclaimer.

 

A Tarp, or an Umbrella?

    There seem to be differing perceptions over the purposes of the Troubled Assets Relief Program ("TARP").  Congress and the Federal Taxpayers, whose Tax money is being used to fund the program, understood Congress to provide for the purchase of troubled assets from banks.  This program would clear the way on the basis of strengthened credit for banks to make loans to start-ups and growing businesses, which would in turn would hire employees, who in their turn would have money to spend, all to the good for the national economy.

    On the other side of the perception divide stand not a few bankers.  They for their part think of TARP as Insurance, a hedge against bad times, and not an incentive to make loans they otherwise would not have made (and before TARP, they were not making many loans):

We see TARP as an insurance policy.  That when all this stuff is finally over, no matter how bad it gets, we're gong to be one of the remainng banks.

John C. Hope, III, Chair, Whitney National Bank of New Orleans, speaking at the Palm Beach Ritz-Carlton in November, 2008,  quoted by Mike McIntire, "Bailout is a No-Strings Windfall to Bankers, if Not to Borrowers" p. 1, col. 2 (New York Times Nat'l Ed., Sunday, January 18, 2009).

Please Read The Disclaimer..

Professional Liability Insurance Claims Anticipated Against Unregulated Investors.

    A spokesperson for Marsh & McLennan, reportedly the second-largest Insurance Broker in the United States, is cited recently as reporting that "[r]egistered mutual funds and their advisers pay about $250 million for errors and omissions insurance each year".  Erik Holm and Andrew Frye, "Madoff May Cost Insurers $1 Billion to Cover Funds (Update 3)" (Bloomberg.com, Friday, January 9, 2009).

    In the same article, it is reported that as cases involving Mr. Bernard Madoff are tried (if they are tried), Professional Liability Insurance or "E and O" Claims Expenses will rise.  See id.  Unfortunately for wealthy investors such as those catered to by Mr. Madoff, hedge funds and unregulated investment vehicles often do not buy Insurance Coverage.  See id.

    Whether and when Claims will be made on Professional Liability Insurance Policies that were actually issued remains to be seen.  "'I think it's too early to tell,'" according to the Marsh and McLennan spokesperson quoted in the linked news report.  Id.

Please Read The Disclaimer.

Hurricanes Not Buffeting Florida, Benefits Both Florida and Mr. Buffett.

    After Hurricanes Charley, Ivan, Jeanne, Rita and Wilma et al. pummeled Florida properties in recent years, the Florida Legislature established a fund for the avowed purpose of enabling Florida Property Owners to purchase Property Insurance Coverage.  The fund was so large that there were warnings that with one Catastrophe, the Taxpayers of Florida would potentially be on the hook for more money to fund CatClaims than anyone had yet dreamed of.

    To its credit, the State of Florida purchased a reported "option agreement" from Mr. Warren Buffett's Berkshire Hathaway Inc.  In exchange for $224 Million, Berkshire Hathaway agreed in the event of a Catastrophe "to buy $4 billion of bonds to finance storm recovery".  That agreement expired as of December 31, 2008.  Although it has been characterized as another shrewd business move for Mr. Buffett, see, e.g., Hugh Son, "Buffett Wins $224 Million Storm Bet With Florida (Update 2)" (Bloomberg.com, Monday, December 29, 2008); Tom Petruno, "Buffett's Berkshire Scores on Florida Hurricane Season Bet" (Money & Co. Blog, Los Angeles Times Online, Monday, December 29, 2008), with all due respect to Mr. Buffett it was also a shrewed business move under the circumstances for Florida Taxpayers as well.

Please Read The Disclaimer.

Man Bites Dog ... Berkshire Hathaway Loses Money!

Insurance Losses and Investment Losses on Derivatives Drop Value in 3Q 2008 Reported Results.

    Berkshire Hathaway reports that its 3Q profit declined 77%.  It was the fourth straight Quarterly drop for Berkshire Hathaway.  Reportedly, that has not happened since at least 1995.

    Berkshire Hathaway's 3Q report includes a drop in "operating profit" in its Insurance subsidiaries, although they are still in the black, turning a profit still.  Berkshire Hathaway's Insurance subsidiaries include GEICO and General Re.  Their income in 3Q 2008 was reportedly $81 Million, down from $486 Million.  3Q 2008 Hurricane losses of $1.05 Billion were reported.

    However, in addition Berkshire Hathaway reported also on certain losses with which it began 2008, which tanked even further in 3Q 2008:  Derivative Contracts.    E.g., "Berkshire Hathaway Profit Tumbles 77%" (Associated Press Copyrighted Report published in New York Times Nat'l Ed., p. B8, col. 4 Business Day Section, Saturday, November 8, 2008); Earnings Roundup, "Berkshire Hathaway Profit Falls 77%/Lower Insurance Returns Send Profit Down 77%" (Los Angeles Times Online, Saturday, November 8, 2008).  Those are the "weapons of financial destruction," to quote Mr. Warren Buffett the prime mover behind Berkshire Hathaway, that are responsible for the world's credit chaos at this time.

    Reportedly, Berkshire Hathaway began 2008 with "an unrealized $1.67 billion loss" on its derivative contracts and, in 3Q 2008, they lost value in the reported amount of $1.05 Billion, the identical, exact amount reported by Berkshire Hathaway as the total of its 3Q losses on Insurance Claims from Hurricane damage.

    It is fair to say, based on these results, that the damage caused by Derivative Contracts is equivalent to the insured damage caused by a Hurricane.

Postscript of Monday Evening, November 10, 2008:

And see this Blog Post by Julie Patel on "House Keys" Blog, "Even Warren Buffett Takes a Hit as Insurance Industry Sees More Trouble", November 10, 2008.

Please Read The Disclaimer.

Bust Times, Bad Results: Insurers of Corporations Face Exposure, Risk.

    It is reported that poor corporate results, even bankruptcy, may not deter lawsuits against failed and failing corporations.  Instead, their Liability Insurance Coverage may be at risk from claims by shareholders against the insured corporations.  Jonathan D. Glater, "Financial Crisis Provides Fertile Ground for Boom in Lawsuits" p. B1, col. 2 (New York Times Nat'l Ed., Business Day Section, Saturday, October 18, 2008).

    What is not mentioned in this otherwise insightful report is that there are other types of Insurance Coverages held by failing corporations.  Claims on certain other kinds of corporate Insurance Coverages are anticipated to rise besides Liability Insurance Claims, including Claims under Director's and Officer's Coverage.

Please Read The Disclaimer.