Insurance Claims And Issues

Catastrophe Claims Strip Homeowner's Insurance Coverage, Lift Premiums.

     Since about the time of Hurricane Andrew in 1992, Homeowner's Insurance Policies and other kinds of Property Insurance Policies have been adversely affected by Catastrophe Claims.  Coverage provisions have been narrowed and new Exclusions have been added.  A director of consumer services at Florida's Department of Financial Services is quoted on these issues, for example, by Jeff Plungis, "Homeowners May be Twice Burned as Insurers Cap Policy Coverage" (Bloomberg.com, Wed., July 16, 2008).  "Policies are written annually so insurers can add exclusions."  Id.  (This last observation makes sense, but it applies to virtually all Insurance Policies.)

     One transformation of Coverage has been the nearly uniform refusal to provide "guaranteed replacement cost" Coverage, with Property Insurance Companies instead offering Coverage with a cap called "extended replacement cost" which by any name does not cover the actual cost of replacing a home totally destroyed by a Catastrophe.  These developments over the last 15+ years, which have been chronicled in many places including in previous posts here, for example, lead to the newspaper article's wise advice that "people should review their homeowners' coverage to make sure dollar amounts keep pace with currrent construction expenses."  Id.

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Earthquake Shakes Up Some Insurance Coverage Expectations.

     A newspaper report about Insurance Coverage and Catastrophe Claims following the Sichuan earthquake in China, highlights issues important to people in the United States who face the real possiblity of having to make Catastrophe Claims.

    Concentrating on two types of Insurance, it is reported that holders of Property Insurance Policies are left with little more than uncovered Catastrophic Damage, while the much smaller group of Chinese Life Insurance Policyholders have fared much better.  Life Insurance Policies in China, as elsewhere including in the United States, generally pay benefits upon an accidental death regardless of cause.  Earthquakes as a cause of loss are almost always Excluded in Property Insurance Policies in China, however.

     "[A]s in California," in order to obtain Coverage for losses caused by Earthquakes, for example, "you have to buy a special policy and pay extra."  "In China, Few Are Covered by Earthquake Insurance," by Don Lee (Los Angeles Times Online, Tuesday, June 24, 2008). 

     These differences are illustrated in the newspaper report by convincing numbers.  First, so far about a quarter of a million Property Insurance Claims have been presented to China Property Insurers as a result of this Catastrophe.  Most of those CatClaims are reportedly on account of damage to personal property.   In addition, some Three Million houses were destroyed.  Approximately $15 Billion to $20 Billion of Property Damage is estimated as a result of the Sichuan earthquake.  Property Insurance Companies have paid out $20 Million in CatClaims.

     With regard to Claims on Life Insurance Policies, on the other hand, an unreported number of Claims has been presented since the Sichuan earthquake.  It is reported that "only a tiny fraction of people hold such policies."  Reportedly, Life Insurance Companies paid out $26 Million in Claims resulting from the earthquake.

     Finally, it is of more than passing interest to Homeowners seeking Property Insurance Coverage outside of China, that the Earthquake Exclusion was reportedly adopted after a 1996 meeting of "earthquake scholars" and "experts".  In that meeting, participants predicted that earthquakes would trouble China for the next ten to twenty years.  The Property Exclusion was almost immediately written in response, it is reported.

     In the United States, one of the central and largely unreported battlegrounds concerning Property Insurance Coverage, particularly for CatClaims, has been the use of new Catastrophe Models that result in predictions of more Catastrophes such as Hurricanes, and in higher Premiums or Exclusions, than seem justified by authorized and fact-based Catastrophe Models that have been relied on by Insurance Departments, Insurance Companies, Agents and Brokers, and of course ultimately, relied on by Policyholders.  Events associated with that battleground and other largely unreported areas of interest to Insurance Coverage for Catastrophes have been reported here in the categories of "CatClaims" and "Catastrophe Models," along with "Property Insurance" and many other related kinds of Insurance.

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Anti-Concurrent Cause Exclusion Blows.

    Frustrated by the famed Anti-Concurrent Cause Exclusion by which damages caused in part by an Excluded Peril and in part by a Covered Peril are totally excluded from Coverage, some Members of Congress propose adding "wind" coverage to the National Flood Insurance Program.  The idea is resisted by Insurance Companies, among others.   See Jeffrey H. Birnbaum, "Storm Brews Over Adding Wind Coverage to Federal Flood Program" (washingtonpost.com, Tuesday, March 25, 2008).

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"Review Insurance Policies Now" Says Orlando Newspaper.

   Good advice with related links in this newspaper article published in the Orlando Sentinel, February 22, 2008, by Greg Groeller, "Review Insurance Policies Now".  Every Policyholder and their Agents and Brokers holding every kind of Insurance Policy can benefit from following the good advice published by this linked newspaper article.

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Louisiana Supreme Court Has Final Word on Louisiana Flood Exclusions ....

                       ...  Not the 9 Supremes in Washington, D.C.

    On February 26, 2008, the Louisiana Supreme Court is scheduled to hear Oral Arguments in cases involving so-called Flood Exclusions and Anti-Concurrent Cause Exclusions in Homeowner's and other Property Insurance Policies.  The cases involve Catastrophe Claims from Hurricane Katrina, it is reported in this Associated Press story published by the Washington Post Online on Tuesday, Feb. 19, 2008.   

    In the meantime, the nine people who currently sit as the Supreme Court of the United States let stand a Fifth Circuit ruling by 3 other Federal appeals court judges that Louisiana law would bar any claims involving water damage.

    Louisiana State Insurance Law, at least, will be decided by Louisiana Judges in the Courts of Louisiana, not by people unconnected with Louisiana and who happen to currently be Federal appeals court Judges.

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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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Florida Court Holds: "Intentional Damage Exclusion ...

                            ... in Part A Does Not Work in Part D."

     In Taisyer Kattoum v. New Hampshire Indemnity Co. (Fla. 2d DCA Case No. 2D05-3526, Opinion Filed Sept. 28, 2007), Mr. Taisyer Kattoum made a claim under Coverage D, Collision Coverage, after his wife, Mrs. Saadia Kattoum, crashed his Lincoln Town Car into a wall.  The police investigated and concluded that this particular car crash was intentional.  The insurance company denied all Coverage because of an Intentional Damages Exclusion.  The Intentional Damages Exclusion, however, is contained in Coverage A, Liability Coverage, and not in Coverage D.

    For the following reasons, Florida's Second District Court of Appeal reversed a Declaratory Judgment obtained by the insurance company in this case.

     An Intentional Damages Exclusion that is written only in the Liability Section could not apply to the separate Collision Section without being incorporated into that separate Section, and so the Florida Appellate Court held that in this case, the Florida Trial Court "erred in applying the exclusion contained in Part A of the policy to Part D."

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Florida Court Interprets Ambiguous Homeowner's Exclusion With Insurance Company Aid ...

          ... By Quoting the Homeowner's Insurance Company's Internal Documents.

     In the recent case of Castillo_v. State Farm Florida Insurance Co. (Fla. 3d DCA Case No. 3DO6.2874, Opinion Filed October 17, 2007).pdf , also reported as 2007 WL 3005974 (subscription required) and as 32 Fla. Law Weekly D2474 (also subscription required), a Florida Appellate Court was confronted with the second appearance of a case on appeal.  In an unusual twist, the new appeal, which the Court dubbed Castillo II, was filed by different people who shared the same name as the appellants in the prior appeal.  The new appeal similarly involves claims under a Homeowner's Insurance Policy.

     The Policy was held ambiguous because its Earth Movement Exclusion "does not specifically address" damages caused by the matters alleged.  The Castillos alleged in their Complaint for Coverage "that vibrations and shockwaves caused by blasting and without displacement of the earth resulted in damages to an insured dwelling."  Id. at 6.

     The Florida Appellate Court then turned to extrinsic evidence for an explanation of the Earth Movement Exclusion in the Homeowner's Policy in this case, namely, evidence provided by the Homeowner's Insurance Company itself in its own internal documents:  "Given that the policy is ambiguous as to whether damages caused by shockwaves and vibrations in the absence of displacement of the earth are covered, State Farm's internal operating guideline OG 75-105 ('OG 75-105') is both instructive and admissible as parol evidence."  Id. at 6-7.

     After consulting OG 75-105, the Florida Appellate Court reversed the entry of summary judgment in favor of the Homeowner's Insurance Company.

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And A Little Child With Autism, Shall Lead Them.

     Jacob Micheletti was 3 years old when he was diagnosed with autism.  His father, Joseph Micheletti, an employee of the State of New Jersey, belonged to the State Health Benefits Program.  As the intermediate appellate court in New Jersey would later declare:  "All authorities agree that treatment [of autism] should commence as early as possible."    Following the diagnosis  of Jacob's autism, Joseph Micheletti filed a claim for speech therapy and for occupational therapy for Jacob.  New Jersey law makes the Program the equivalent of private Health Insurance for the same Coverage.

     The State drafted two Exclusions, however, which it put in its Members Handbook, excluding (1) "[t]raining in the activities of daily living," and (2) services or supplies "[t]o promote development beyond any level of function previously demonstrated."  The Program Administrator initially determined that speech therapy was covered for Jacob, but that occupational therapy was not covered.  Ultimately, the New Jersey State Health Benefits Commission ("SHBC") reviewed all Coverage determinations and decided that both speech therapy and occupational therapy were excluded from Coverage under the Program because these therapies as applied to Jacob Micheletti would promote development of this autistic child beyond any level of function he had previously demonstrated.

     The medical necessity of these therapies was not contested and apparently never in doubt.  See  In re Jacob Micheletti (Jacob Micheletti v. State Health Benefits Commission), New Jersey Superior Court, Appellate Divison, Docket No. A-4418-05T2, Opinion Filed January 17, 2007.  However, the State contested Coverage.

     The New Jersey Superior Court, Appellate Division, reversed.  The Appellate Division's opinion includes some references to statutory interpretation, the Program in question being a creature of statute.  For example, the New Jersey Legislature made it clear that it intended to treat statutory regulations of benefits for private Health Insurance Companies in the same way as Coverage would be treated for benefits claimed by State Employees under the Program.  The New Jersey Department of Banking and Insurance adopted a regulation which forbade enforcement of "the nonrestorative exclusion" by private Health Insurance Companies to deny treatment to autistic children, in pertinent part.  Clearly, then, reversal would be warranted by equal treatment of dependents of State Employees enrolled in the State Health Benefits Program, and dependents of Policyholders under Insurance Policies issued by private Health Insurance Companies; extending benefits to dependent autistic children in the latter case should mean that benefits must be extended to a dependent autistic child like Jacob who is the dependent of a State Employee enrolled in the Program.

     However, the Appellate Division did not rest its decision exclusively on the ground of equality.  The New Jersey appellate court reached out to "the reasonable expectation of [the Program's] participants."  Like the reasonable expectations of Policyholders under privately issued Insurance Policies, insured public employees of the State of New Jersey would expect that speech therapy and occupational therapy would be covered, and not excluded, for dependent autistic children.   The  New Jersey Program "deals with the same kinds of consumers of insurance protection, who accept what is available and try to find its meaning."

     Stating that "we find the exclusionary language to be ambiguous," the Appellate Division held that "the exclusions relied upon by the SHBC to deny coverage for the treatment sought for autism are void.  We direct that speech and occupational therapy be instituted for Jake without delay, and that the date of coverage is retroactive to the date of the initial petition."

     But there was a delay.  There was NOT a delay because the State appealed the decision of the Appellate Division, for the State did NOT appeal that decision.  Rather, the State simply did not pay for therapy for Jacob Micheletti, at least until the matter reached the Supreme Court of New Jersey.  The story is reported by Larry Abramson, "Children's Health/Family Wins Suit For Autistic Son's Health Care" (broadcast on National Public Radio on Wednesday, September 26, 2007 and found online at npr.org).  The report includes information on other therapies potentially available to autistic children, and on laws passed or pending in other States that may require Insurance Companies to provide Insurance Coverage for autism therapy, such as in Pennsylvania, South Carolina, and Texas.

     The decision of the New Jersey Supreme Court in the Micheletti case cannot be found online at any site available to the public such as the Court's web site nor in the Rutgers University archives, at least by the undersigned person writing this post.  The only report found of that September 12, 2007 decision may require a subscription:  In re Micheletti (Jacob Micheletti v. State Health Benefits Commission), ___ A.2d ___, 2007 WL 2660279 (New Jersey, No Case Number Located, Opinion Filed September 12, 2007).  In it, the New Jersey Supreme Court granted the Michelettis' petition for certification and Ordered that the State Health Benefits Commission "shall process and pay" all previously submitted invoices for the therapies in question within 14 days of the Court's Order and that the SHBC shall also "process and pay" all invoices submitted on and after September 12, 2007 -- the date of the Order -- no later than 30 days after their submission.  Sanctions were denied, but without prejudice should the SHBC "fail to comply with the terms of this Order."

     At the time that this post is written, it is unknown whether the State of New Jersey has begun to pay any invoices for the treatment of Jacob Micheletti.

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Nuclear Exclusion, Part 1: The U.S. House Passes Terrorism Risk Insurance Extension.

     There is a standard Exclusion in Casualty and other Insurance Policies for damage due to nuclear attack.  In what appears to be a little-noticed provision, the U.S. House of Representatives voted 312 to 110 to eliminate that Exclusion.  Ordinarily, the Government of the United States leaves the subject of Insurance to the States.  The  vote of the U.S. House  was on a bill to extend the Terrorism Risk Insurance Act, first passed in 2002, for another 15 years.  The extension bill included the provision deleting an Exclusion for damages due to nuclear, biological, chemical or radiological attack and instead requiring Commercial Property and Casualty Insurance Companies to cover losses resulting from such attacks, it is reported in Stephen Labaton, "House Approves Plan to Aid Insurers/Terrorism Coverage, Now Scarce, Would be Underwritten by U.S." (New York Times Nat'l Ed., Business Section, p. C3, Col. 1 Thursday, September 20, 2007).

     Whether the United States Senate will approve the bill with the Nuclear Exclusion elimination provision, or take some other action if any, remains to be seen.  It also remains to be seen what the next Federal foray into the area of Insurance will bring.

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