Court Upholds Post-Loss Assignment of Claims

Larry Bache and I have many cases in Nebraska where we represent a contractor with assignments of insurance claims from homeowners. These assignments were made after a hail loss. The policyholder assigned his rights to the insurance claim to the roofing contractor working on his property. Most insurance policies contain what is called an anti-assignment clause, which forbids the policyholder from assigning rights and duties in the policy to anyone else without the insurance carrier’s consent. In Nebraska the insurance companies have steadily argued that our client’s claims are not valid because they were assigned without the insurance companies’ consent. Continue Reading

Merlin vs Badger II – Gonna Be the Baddest Show in Orlando

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Steve Badger and Chip Merlin

The Windstorm Insurance Conference in Orlando will feature a debate re-match between yours truly representing the policyholder view and Steve Badger who represents insurance companies. Many of my policyholder friends often ask how I can have such a good professional relationship with Badger whom they view as somebody akin to Darth Vader. I am certain some insurance claims executives wonder why Steve would hang out or discuss the current issues addressing insurance claims with somebody their world may view as on the insurance industry’s most wanted to destroy list.

Here is a list of some of the topics which have been suggested we analyze:

Coverage/Adjustment Issues

  1. General Contractor Overhead and Profit — When is it owed?
  2. “Functional” Damage — What is it?
  3. Dings to Metal — Will it rust through and leak?
  4. Matching — Must it match?
  5. Repair vs. Replacement — How do we determine?
  6. Assignment of Benefits/Power of Attorney — Good or bad idea?

Emerging Policy Forms — Reactions?

  1. Farmers Appraisal Form
  2. One Year Notice of Loss
  3. Mandatory Appraisal
  4. Mandatory Arbitration
  5. Managed Repair

The Appraisal Process

  1. Love it or hate it?
  2. Proper Scope
  3. Preferred Process/Use of Appraisal Protocol
  4. Waiver — Can it be waived?
  5. Disqualifying Appraisers — When is a challenge warranted?
  6. Umpires — Who’s best?
  7. Challenging Awards

The Ethical and Esoteric Issues

  1. Polarization of the Claims Process — Who’s fault and why?
  2. Public Adjusters — Is it still a “profession”?
  3. Unauthorized Practice of Public Adjusting — What is it and what to do?
  4. Case Solicitation for Lawyers — All agree it’s wrong?
  5. The Xactimate Game — Too high? Too low? Alternatives?
  6. Experts — Can we believe anyone?
  7. Policyholders — Lost in the shuffle?

Steve Badger and I had a similar rough and tumble discussion in Texas. I reported on that event in Representing and Helping Policyholders is Good for the Soul – Reflections on Merlin vs. Badger, and this one promises to be just as lively.

The Windstorm Insurance Conference is a premier claims training event. Cutting edge claims presentations and workshops like the one Steve Badger and I will have make the event something adjusters and those involved with handling property insurance claims should never miss.

Here is a link for registration.

Positive Thought For The Day

Love is the only force capable of transforming an enemy into a friend. 

—Dr. Martin Luther King, Jr.

“Other Insurance” Provisions

In 2012, the Barnard Elementary School Building (“Barnard Building”) in Tulsa, Oklahoma sustained approximately $6 million in fire damage in 2012. There were two insurance policies covering the same policy period: (1) a policy issued by Philadelphia Indemnity Insurance Company (“Philadelphia”) to the Tulsa School of Arts and Sciences for coverage of the building it leased from the Tulsa County School District; and (2) a policy issued by Lexington Insurance Company (“Lexington”) that covered 100 Tulsa County School District facilities, including the Barnard Building.

Both policies covered fire damage, so the question became, what insurer owed for the damage and in what amounts?

The policies contained identical “other insurance” provisions:

  1. You may have other insurance subject to the same plan, termsconditions and provisions as the insurance under this Coverage Part.If you do, we will pay our share of the covered loss or damage. Our share is the proportion that the applicable Limit of Insurance under this Coverage Part bears to the Limits of Insurance of all insurance covering on the same basis.,
  1. If there is other insurance covering the same loss or damage, otherthan that described in 1 above, we will pay only for the amount of covered loss or damage in excess of the amount due from that other insurance, whether you can collect on it or not. But we will not pay more than the applicable Limit of Insurance.

In December 2015, an Oklahoma federal judge ruled these provisions cancelled each other out and the insurers would owe a portion based on their policy limits (“Philadelphia and Lexington shall share coverage of the loss ‘on a pro rata basis according to the ratio each respective policy limit bears to the cumulative limit of all concurrent policies.’”). Philadelphia’s policy limit was $7 million. Lexington’s policy covered many buildings and had a total coverage limit of $100 million per occurrence. The district court determined that Philadelphia owed 54% ($3.2 million) and Lexington owed 46% ($2.8 million).

The ruling was appealed to the Tenth Circuit Court of Appeals, and on January 19, 2017, the Tenth Circuit affirmed the district court’s judgment that Philadelphia and Lexington must split coverage in the pro rata allocation determined by the district court.1

The appellate court’s 41-page opinion relied on the Oklahoma Supreme Court case, Equity Mutual Insurance Company v. Spring Valley Wholesale Nursery, Inc.:2

Equity Mutual instructs that, after ‘disregard[ing]’ the conflicting clauses, the insurers must share the loss ‘on a pro rata basis,’ unless, that is, the policies contain ‘concurring provisions for apportionment’ that provide otherwise, in which case, we follow the parties’ preferred method. The policies here have concurring clauses for apportionment—the first clauses in each policy’s ‘other insurance’ provision. We therefore give effect to the parties’ preference expressed in their identical first clauses for pro rata apportionment, which, as previously explained, tracks the default rule.

The Tenth Circuit also considered persuasive support from Southern Insurance Co. v. Affiliated FM Insurance Co., 830 F.3d 337, 350-351 (5th Cir. 2016), in which the Fifth Circuit, applying Mississippi law to facts similar to those in this case, held two “other insurance” clauses were mutually repugnant and ordered a pro rata distribution.

While this decision addressed a dispute between two insurers, it is still important for policyholders to be mindful of multiple property insurance policies that may provide coverage for a loss, and therefore another reminder to periodically review your policies.
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1 Philadelphia Indemnity Ins. Co. v. Lexington Ins. Co., case numbers 16-5008 and 16-5010, (10th Cir. Jan. 19, 2017).
2 Id. at 36; Equity Mutual Ins. Co. v. Spring Valley Wholesale Nursery, Inc., 747 P.2d 947 (Okla. 1987).

Insurance Bulletins Can Help Consumers Looking for Full Recovery

Rarely do insurance commissioner bulletins warn insurance companies of paying too much or that consumers are not entitled to insurance benefits. Most departments of insurance only write bulletins because insurance company adjusters pay far too less to similarly situated consumers suffering from the same loss.  Of course, insurance company lobbyists now go into overdrive to argue against the bulletin and to influence those in power to change the bulletin to favor payment of less money. Insurance companies essentially use policyholder premiums to pay the expense of their lobbyists to reduce payments to those paying for the insurance benefits.  How ironic. Continue Reading

It Never Rains in Southern California (but it pours)

Mario Lopez was a guest host on the Today show the other day, and described his recent property loss where his backyard collapsed into the street. Photos of the loss are available on Mr. Lopez’ Instagram or the Los Angeles Times. What struck me as blogworthy, other than the horrific loss of his yard, was his statement: “Thank God for insurance.” Continue Reading

Assignment of Benefits and the 2017 Florida Legislative Session

The 2017 Florida Legislative Session does not start until March 7th but committee weeks have begun in both Chambers. As a member of the Florida House of Representatives, I have been assigned to the following committees:

  • Civil Justice & Claims Subcommittee
  • Commerce Committee
  • Energy & Utilities Subcommittee
  • Government Operations & Technology Appropriations Subcommittee
  • Insurance & Banking Subcommittee

Continue Reading

Claims Handling Requirements by State – North Carolina

Next up in our whirlwind 50-state tour of claims handling requirements is the Tar Heel State. Unlike our previous stops in New Jersey and Pennsylvania, North Carolina has relatively few explicit claims handling requirements. This may be why North Carolina ranked dead last in a 50-state ranking of insurance regulations as pointed out by my colleague, Nicole Vinson. Continue Reading

The Obligation to Comply with Proof of Loss Policy Conditions

Insurance policies containing conditions pertaining to an insured’s obligation to submit a notice and proof of loss are “meant to give the insurer the necessary facts to facilitate an investigation of a claim and to protect it against fraudulent and excessive claims.”1 Continue Reading

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