Insurance Claims And Issues

UPDATE: Cancer, Chemotherapy, Cancellation and Punitive Damages in California Arbitration.

    A previous post in this space addressed an Arbitration Award in a California Arbitration.  The Arbitration of the Insurance issues apparently including Good Faith and Fair Dealing or not, was demanded by the Health Insurance Company, Health Net Inc.  The agreed Arbitrator is a retired California Judge.  The California Arbitration resulted in an Award of over $9.4 Million, $8.4 Million of which was a Punitive Damages assessment against Health Net.  See the post here, on February 25, 2008.

    On February 28, 2008, a follow up newspaper report published in the Los Angeles Times Online seems to call into question what remedies or options, if any, Health Net and its Attorneys may have to appeal or even question the Arbitration Award:  Lisa Girion, "Penalty Cuts Insurer Profit/Health Net Lowers Its Earnings After a Judge Awards $9.4 Million to a Cancer Patient Whose Policy Was Canceled" (Los Angeles Times Online, Thursday, Feb. 28, 2008).

    As the linked newspaper report's headline reflects, Health Net is filing documents with the Securities and Exchange Commission reflecting that the Arbitration Award has lowered its reportable net income for 4Q 2007, from $123.4 Million to $116.9 Million.

    The newspaper also reports that the California Arbitrator has awarded the Policyholder her Attorney's Fees, in an amount to be determined.

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Mississippi Claims Handling After the Complaint is Filed

     Reviewing cases decided under Mississippi substantive law quickly reveals some simple truths.  Claims handling that occurs after a Complaint claiming Coverage is filed, can subject the Insurance Company to liability.  This holding was announced by the Mississippi Supreme court so "long ago" that its decision is not available on its web site:  Gregory v. Continental Insurance Co., 575 So. 2d 534 (Miss. 1990).  That case involved a Claim for business loss Damages allegedly caused by Hurricane Elena on September 2, 1985.  All Courts in Mississippi from the Trial Court to the Supreme Court exonerated the Defendant in that case against any claim that it mishandled the Policyholders' Claim before suit was filed.  However, it was a different story after suit was filed, according to the Mississippi Supreme Court's holding:

An insurance carrier's duty to promptly pay a legitimate claim does not end because a lawsuit has been filed against it for nonpayment.  Put more bluntly, if you owe a debt the duty to pay does not end when you are sued for nonpayment of it.

Id. at 541.

     Among other things in the present age post-Katrina and post-Rita (among other posts-), a Federal Court in Mississippi holds that this means that Policyholders "are entitled to take discovery concerning the handling of their claim, both before and after the filing of the complaint."  Odom_v. Armed Forces Insurance (S.D. Miss. Case No. 1.05CV669, Opinion Filed Aug. 31, 2006).pdf at page 4 of 5 in the Official Report linked here.  An Order of Dismissal was entered in this case on December 21, 2006, according to the Court's online docket, following the parties' announced settlement of all claims.  The linked opinion including the page with the above quotation is also available by subscription as 2006 WL 2541599 at *3.

     Further, even after the Policyholders file their Complaint for Coverage, the same Federal Court in Mississippi holds that there is a continuing duty of Good Faith and Fair Dealing which includes acting reasonably "in investigating and paying legitimate claims".  That continuing duty "requires an insurer to take into consideration any new information that comes to it through its own investigation of a claim whether or not a suit has been filed."  Broussard_v. State Farm Fire & Casualty Co. (S.D. Miss. Case No. 1.06CV6, Opinion Filed Jan. 17, 2007).pdf at page 4 of 4 pages of this linked Official Opinion; the opinion is also available by subscription and this particular quotation can be found as 2007 WL 113942 at *3.  The Court's online docket shows that the Broussard case went forward after this decision was issued, and that a Notice of Appeal was thereafter filed.  An appeal is apparently pending in this case at this time.

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Arbitrary? Capricious? Katrina?

     Delay or denial of covered claims can give rise to an Insurance Company incurring liability to pay all sorts of penalties, assessments, attorney's fees, and other damages outside of the contract of insurance.  A recent case, pending a motion for reconsideration at the time of this post, contains the holding that whether or not a refusal to pay a Renter's Insurance Claim in New Orleans after Hurricane Katrina is arbitrary, capricious or without probable cause depends on the facts known to the Insurance Company at the time of its action.  Aronson_v. State Farm Fire & Casualty Co. (La. Ct. App. 4th Cir. Case No. 2007CA0573, Opinion Filed October 10, 2007).pdf at page 15 of the linked Official Opinion from the Court's publicly accessible web site; also available by subscription as 2007 WL 3015571 at *7.  The currently available opinion reports the record facts in some detail that supported both the Trial Court's decision and the Appellate Court's decision that in this case, there was an arbitrary and capricious refusal to settle an insurance claim at the time the Insurance Company failed to reconsider its denial of a Renter's Claim after it had been told that it had already paid an Owner's Insurance Policy Claim based on damage caused by Hurricane Katrina to the same duplex in New Orleans.

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Insurance Issues: Web Log Posts and Insurance News Reports.

     Posting to a web log involves choices I never imagined.  I prefer fact-based and reasoned analysis of Insurance Issues to opinions.  You know what they say about opinions.  Everybody has one of those, also.

     Fact-based and reasoned analysis of Insurance Issues, in turn, involves time.  Lots of time.  That is why most of my posts, and probably all of my early posts here, are detailed.  Some are downright long.  Can you imagine the amount of time it took to write those posts?

     Recently, I have experimented with providing some analysis and still providing facts for readers, but limiting my reporting to newly decided cases and leaving the discussion of overall trends to others for the most part.  This is not unique to me.  Others have noted the distinction between reporting and most 'blogging'.

     One commentator recently wrote a thought-provoking column about the differences between posts on a web log, and reporting news.    Here is a link to "Blogs:  All the Noise That Fits/The Hard-Line Opinions on Weblogs Are No Substitute for the Patient Fact-Finding of Reporters" by Michael Skube (The Los Angeles Times, Sunday, August 19, 2007).

     My readers can make their own minds up about two recent reports which address Insurance Issues, as to where facts might end and opinions begin--if opinions are expressed at all in these recent reports in two different media.  Here is a link to Bloomberg.com for an article by David Dietz and Darrell Preston, "Home Insurers' Secret Tactics Cheat Fire Victims, Hike Profits" ("Last Updated August 3, 2007").

     And here is a link to the Friday, August 17, 2007 broadcast on NOW on the Public Broadcasting System:  "Home Insurance 9-1-1".

     Which one, either, or both displays the facts vs. opinions?

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Suit for Alleged Breach of (First) Settlement Agreement.

     It appears that a settlement of many filed and potential CatClaims resulting from Hurricane Katrina in Mississippi has blown up.  There was once a settlement agreement, among many policyholders and State Farm.  The proposed settlement agreement was subject to Federal Court approval.  The Federal Judge found wrong in the proposed settlement and refused to approve it.   State Farm then reportedly reached a settlement agreement of many of the same claims with the Mississippi Insurance Commissioner's Office.  This lengthy previous history was summarized in "Update to the Update:  New Settlement in Mississippi," posted here on March 20, 2007.

     It is now reported that through its Attorney General, the State of Mississippi filed suit on Monday, June 11, 2007 in Mississippi State Court.  The Complaint alleges that State Farm breached the (first) settlement agreement and thus breached a contract, claiming compensatory and punitive damages. As of the night of June 11, 2007, there is a temporary silence on the subject on the web sites of both the Mississippi Attorney General and the Mississippi Insurance Commissioner.

     Here is a link to State Farm's Press Release of June 11, 2007,which State Farm entitled "Mississippi Attorney General's Lawsuit Threatens to Disrupt Hurricane Katrina Settlement Process with MIssissippi Insurance Department". 

     There will be more to come on the settlement (or not) of Hurricane Katrina CatClaims in Mississippi, and elsewhere, there can be no doubt.
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Settlements of Bad Faith Claims ....

                 .... When is That Settlement Confidential and Protected,
                 And When is it Concealment and Void?
There may be an issue under Florida law, whether a settlement of Bad Faith Claims can be kept confidential by the parties as a provision of their settlement agreement, even with a Court's approval.   Under Florida Statute Section 69.081(4):

Any portion of an agreement or contract which has the purpose or effect of concealing a public hazard, any information concerning a public hazard, or any information which may be useful to members of the public in protecting themselves from injury which may result from the public hazard, is void, contrary to public policy, and may not be enforced.

     A "public hazard" under this statute includes any "person" or "procedure" "that has caused and is likely to cause injury."  Fla. Stat. § 69.081(1).    No Court shall enter an order or judgment, it is provided in this statute, "[e]xcept pursuant to this section," which order or judgment has, among other things, "the purpose or effect of concealing a public hazard" or "of concealing any information which may be useful to members of the public in protecting themselves from injury which may result from the public hazard."  Id. (3).

    Time and the Courts will tell which settlement of Bad Faith Claims is confidential and protected, and which is concealment and void.

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Allegations, Property Insurance Claims and Litigation.

     It seems like an allegation made by one party often assists another party in the same litigation on an issue arising later in the lawsuit, whether in Property Insurance litigation or in any other kind of lawsuit.  Last Saturday, April 21, 2007, I touched on this during my Powerpoint presentation to the American Bar Association at Amelia Island, Florida on Property Insurance Claims Litigation.

     This post provides you with two recent Federal cases involving Homeowners Property Insurance Coverage issues, because together these cases show how allegations can sometimes assist either the policyholders or the Property insurance company.

     Both new Federal cases involve a motion to remand after the policyholders' lawsuit was filed in State Court  on claims for Insurance Coverage, Bad Faith, and Punitive Damages or "penalties".

     In Jack Punzak & Janet Punzak v. Allstate Insurance Co. (E.D. Pa. Case No. 07-1052), on April 16, 2007 the Court granted the policyholders' motion to remand back to State Court in this case of Federal diversity jurisdiction.  Among other things the amount in controversy in a diversity case must be in excess of $75,000.00 exclusive of interest and costs.

     Although this lawsuit was removed from State Court on the basis of unchallenged 'speaking denials' to requests for admissions, the District Judge held that those denials were trumped by the policyholders' allegations in their State Court Complaint that "[t]hey seek compensation for the property damage, as well as punitive damages, counsel fees and costs, 'in an amount not in excess of $50,000.00.'  Compl. at 8."  Here is why.

     The Federal Judge explained that the policyholders' State Court Complaint was filed in Philadelphia County in the Court of Common Pleas, a Court which provides by local rule for compulsory arbitration in cases where damages are claimed for not greater than $50,000.00.  Thus, when the policyholders alleged that their claims were for not greater than $50,000.00, they were required by Pennsylvania law to allege a figure for which they claimed damages at the time they filed their lawsuit in Philadelphia County, if they sought compulsory arbitration short of extended litigation.  The Federal Judge pointed out that compulsory arbitration, and authorization for local court rules, is provided by Statute in Pennsylvania involving cases in which such damages are claimed in amounts not greater than $50,000.00.

     Accordingly, the Federal Court in this case granted the policyholders' motion to remand:  "Pennsylvania law, therefore, gives legal effect to the ad damnum clauses in the Punzaks' complaint."  Here is the April 16, 2007 Order in the Punzak case:   Download Punzak_v. Allstate Insurance Co. (E.D. Pa. Case No. 07.1052, Order of April 16, 2007)..pdf

     In John "Jack" Dee v. State Farm Fire & Casualty Co. (E.D. La. Case No. 06-7984), on April 11, 2007 the Federal Judge denied a policyholder's motion to remand.  The policyholder's complaint, said the Court in that Order, was "not clear" and was "vague" to the extent that the policyholder might assert claims for damage for "improper adjustment", i.e., claims handling, under a Flood Insurance Policy issued by the insurance company defendant.  The Federal Court did not specifically mention the claims for Bad Faith and "penalties" asserted in the State Court Complaint in that case.  The Federal Judge's ruling in denying remand to State Court, was premised on what the Federal Judge saw as an inartfully worded State Court complaint that could affect the administration of Flood Insurance claims:  "Therefore, the Court finds original exclusive jurisdiction exists pursuant to the NFIA [National Flood Insurance Act]."  Here is the April 11, 2007 Order in Dee:  Download John.Jack.Dee v. State Farm Fire and Casualty Co.  (E.D. La. Case No. 06.7984, Order of April 11, 2007)..pdf

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Update to the Update: New Settlement in Mississippi

     The parties that apparently pulled out of the Mississippi Federal Court settlement, as noted here on March 14, 2007, were represented by Policyholder attorney Richard Scruggs.  Now the insurance company involved in that proposed settlement, State Farm, has arranged a reportedly similar settlement instead with the Mississippi Insurance Commissioner who recently declared for re-election to his office.  The latest developments are reported by Joseph B. Treaster in "State Farm Skirts Judge in New Hurricane Plan" (New York Times Online, Tuesday, March 20, 2007).

    The title of this newspaper article has got the wrong focus, it seems.  It appears that instead of skirting the Federal Judge or any Court, that the insurance company is "skirting" Mr. Scruggs.  The content of the article indicates that too. 

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Update: Settlement Withdrawal in Mississippi.

     UPDATE:  The Settlement is in the Details, or, Show Me The Facts.

     Posts on this page reported on January 24 and January 27, 2007 how the proposed settlement of Hurricane Katrina CatClaims in Mississippi Federal Court left a lot of questions unanswered.  On Wednesday, March 14, 2007 it is being reported elsewhere that at least some of the parties are pulling the plug on this proposed settlement.  A search of the online docket for the Federal Court does not show papers filed after March 9, 2007.  As and when a link is available to relevant and material -- a well-worn phrase -- papers filed in Court, it will be linked here.
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But, When A Court Declares What Evidence is Required to Bar All Coverage ...

         ... After That, It Is Good Business to Act Accordingly.

     Mr. Joe Nocera, the knowledgeable "Talking Business" columnist for The New York Times, writes that "A Contract Is a Contract, Right?"  Here is a link to Mr. Nocera's insightful column:  Joe Nocera, "A Contract Is a Contract, Right?"  (Talking Business, New York Times, Saturday, February 24, 2007, p. B1, col. 1). 

     Mr. Nocera knows a lot about how to conduct business, and it shows.  The theme of his column is that many events in Mississippi bring pressure on an Insurance Company to make Homeowner's and other Property insurance contracts pay claims of Policyholders so that they can rebuild after Hurricane Katrina.    The Insurance business climate in Mississippi is not the same as in Louisiana and Alabama, Mr. Nocera points out, and in those states Hurricane Katrina (among other Hurricanes) also caused great damage.  Mr. Nocera's column involves political reality in Mississippi, and Mr. Nocera's business experience heightens that reality.

     However, the column does not reflect reality of the courtroom in Mississippi.  It does not accurately represent key rulings of a Federal Judge, instead seemingly bending the description of those rulings to fit the theme of contract manipulation.  Instead, the focus should have remained on how an Insurance Company can adjust to current business conditions in Mississippi -- which in Mississippi clearly and indisputably now include the reality of a Federal courtroom.

     Mr. Nocera first alleges that the Federal Judge, the Honorable L.T. Senter, Jr., stuck an Insurance Company with Punitive Damages amounting to $1,000,000.00.  That is false.  Reality is not hidden in this instance; it was posted here on February 1, 2007 involving an Order entered in the Broussard case on January 31, 2007 by Judge Senter which states the matter clearly.

     A Federal Jury assessed punitive damages in the Broussard case.  The amount which the Jury assessed was $2,500,000.00.  Judge Senter reduced that amount to 40% of the Jury's original assessment, to $1,000,000.00.  The Federal Judge did not 'stick' anybody with anything in this regard; the result of the Judge's action is in the Insurance Company's favor here.

     Mr. Nocera further writes that the Policyholder attorneys attempted a 'tactic' in the Broussard case; they attacked the Insurance Company's standard Flood Exclusion and their 'tactic' failed.  The reality is that Judge Senter rejected the Policyholder attorneys' legal arguments against the Flood Exclusion.  The Court upheld the standard Flood Exclusion.

     Last,  Mr. Nocera voices his impression that the evidence should not reflect that the Insurance Company followed a practice of denying Coverage to Policyholders based on the Flood Exclusion.  Mr. Nocera's conviction appears to be honestly held.  So does the conviction of the Federal Jury appear to be honestly held.  The Jury did not assess Punitive Damages in the Broussard case because of a Flood Exclusion in and of itself, however.

     The Jury assessed Punitive Damages because there was undisputed evidence of the Insurance Company's claims handling, that the Insurance Company never made one settlement offer even in the many months after Judge Senter ruled that the Flood Exclusion alone would not bar ALL Coverage unless the Insurance Company proved that ALL of the damages claimed by the Policyholders were caused by Flood.

     These facts I have just mentioned were not easily found.  The results of my own efforts to find them are posted here.  See my posts of January 12, 2007 and February 1, 2007 in particular, along with my earlier posts here on January 9, 24, 27, and 28, 2007.  The reality in the Federal Courtroom in Mississippi is reflected there.

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