Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

Oftentimes after a windstorm, flood, or plumbing leak, mold develops in a home. There are several standard insurance policies issued in Texas, and they all have some language that deals with mold. For example, a standard Texas Dwelling Policy—Form 3 specifically excludes mold damage, but covers an “ensuing loss” caused by water damage. These clauses seemingly contradict one another: how can there be no coverage for mold damage if it is an “ensuing loss” caused by water damage? In 2004, the U.S. District Court for the Eastern District of Texas discussed this issue in Malley v. Allstate Texas Lloyds.

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Chip brought up the five year anniversary of Hurricane Katrina in his post last week titled, “The Hurricane Katrina Five Year Anniversary is Noted as New Hurricanes Lurk in the Atlantic Ocean.” The anniversary of Katrina will have special meaning to all who were affected by it, but this five year anniversary also has a practical importance to anyone in Florida that is still attempting to put the pieces back together after Katrina, thanks to Florida’s five year statute of limitations on contract lawsuits. Fla. Stat. § 95.11(2)(b) requires that “[a] legal or equitable action on a contract, obligation, or liability founded on a written instrument…” must be commenced within five years.

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For those keeping score of the hottest debate in business interruption claims, a patient reading of Consolidated Companies, Inc. v. Lexington Insurance Company, No. 09-30178, ___ F. 3d ___ (5th Cir. August 17, 2010) is of rigor. For those who need to catch up to speed, I suggest reading my blog posts titled, To Consider the Economy or Not to? ‘That is the Question’ as well as Post Loss Market Earnings Ignored in Mississippi.

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This month, a letter to the editor by Guy Marvin was published in the Florida Times Union.

Marvin is the President of the Florida Insurance Council (“FIC”). The FIC is based out of Tallahassee, but Marvin has ties to Jacksonville from his former work as general counsel at Independent Life Insurance Company.

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Louisiana Citizens Property Insurance Company has settled a state class action case, Press v. Louisiana Citizens Fair Plan Property Insurance Corp., for failing to fully pay overhead and profit to insureds. The proposed settlement, for $23 million, covers claims from Hurricanes Katrina and Rita.

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Last week's post, The Big Picture in Discovery of Insurer Claims Practices, discussed a case from the Supreme Court of Kentucky that provided an overview of how Courts tie together various principles of discovery that are generally raised in the discovery of bad faith cases. General rules of bad faith discovery vary between states and the types controversies at issue. An Indiana federal court decision, Harper v. Auto-Owners Ins. Co., 138 F.R.D. 655 (S.D. Ind. 1991), is a classic example.

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The Insurance Commissioner has apparently decided to start calling some of my clients. According to the St. Petersburg Times, his office is trying to find statistical information regarding sinkholes reported between 2006 and 2009. We'll call and try to find out more information so we can help them get accurate answers, but, in "Florida Regulators Investigate Rash of Sinkhole Claims" reporter Jeff Harrington found the following:

Florida Insurance Commissioner Kevin McCarty said Wednesday that he has issued a "data call" to commercial and residential property insurers to collect sinkhole claims information.

Specifically, regulators are seeking details about claims opened anywhere in the state from 2006 to 2010. Included in the report will be the types of claims, testing procedures to determine legitimacy, costs of inspections, locations of claims, legal fees and public adjuster fees, and amount of structural loss.

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Slabbed has been dogged regarding its reporting on the Mississippi qui tam litigation involving State Farm. A recent post, Rigsbys file “Motion to Reconsider Scope of Proceedings in Light of Evidence Adduced in Discovery” – ask Court for additional time to conduct Discovery into “the Scheme,” provides some insight regarding the flood adjustment techniques required by National Flood versus how flood adjusters in the field actually do their job.

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What happens in Vegas stays in Vegas--unless you learn something you can use to make yourself a better attorney. The 360 Advocacy Institute is hosting a national summit on insurance bad faith law and techniques. The speakers are some of the most cutting edge participants in this area of the law. Learning and having fun usually do not go together, but this event is different.

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The media is trying to scoop each other on the five year anniversary of Hurricane Katrina. In State Farm's hometown of Bloomington, Illinois, the Pantagraph ran a story about State Farm's Hurricane Katrina litigation. A massive and unfinished novel could be written on that subject. I found the article by Ryan Denhem, How State Farm Fought Through the Second Storm, to be far too light an analysis of some of the most important insurance coverage litigation ever waged.

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A colleague of mine recently dealt with an interesting issue regarding the assignment of an insurance claim. Specifically, she looked into how Texas law applies to the assignment of an insurance claim when the insurance policy contains a non-assignment clause. Most states follow the rule that if the policy prohibits assignment, the insured cannot assign the policy but can assign the right to the claim after it occurs. Unsurprisingly, Texas does not follow the majority rule.

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Many residential insurance policies in Florida have additional coverage for “Ordinance or Law” or code upgrade coverage. I wanted to write about this additional coverage in the context of the Hurricane Law series because it is important to understand how this additional coverage kicks in during a typical residential hurricane claim. In South Florida, many property insurance claim issues remain from the 2005 and 2005 hurricanes. Many of the open disputes concern hurricane damage to residential roofs and whether they can be repaired or necessitate replacement. Of course there are many other issues still being litigated from the hurricanes of 2004-2005 in Florida, but this post will focus on the Ordinance or Law additional coverage in the context of a residential roof.

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The Fifth Circuit Court of Appeals recently issued a 21-page opinion in the case of Consolidated Companies, Inc. v. Lexington Insurance Company, No. 09-30178, ___ F. 3d ___ (5th Cir. August 17, 2010). The opinion is dense, to say the least, but it resolves an issue that sometimes can make or break a settlement in business interruption claims.

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The water is warm, the wind sheer is declining, and it is late August. For those along the southern coastal areas, it is important to monitor waves of weather off the African coast for the next six weeks. The most active part of hurricane season is upon us. There is reason to be concerned.

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The amount of time one has to bring a lawsuit is limited by the law. Each state has established statues which define the amount of time provided to file suit for particular causes of actions based on particular circumstances. Recently, I learned more about how important and valuable the pre-litigation correspondence file can be when the insurance company appeals a case based on the allegation that the lawsuit was filed too late.

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I wonder if the Liberty Mutual Fire Insurance Company would want to advertise how proud they are of their case investigations that result in lawsuits. Yet, wrongful claims practice cases sometimes result in decisions by trial judges that seem wrong to those who practice in this area. The case of Luse v. Liberty Mutual Fire Insurance Company, No. 09-1221, 2010 WL 2698342 (M.D. Pa. July 7, 2010), is a recent example.

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In recent conversations with attorneys representing homeowners against insurance companies in claims practice disputes, a number of recurrent themes in discovery arise. Insurers typically raise relevancy, privacy, trade secret and burden objections when policyholders attempt to find internal documents explaining the how, what, and why of an insurer's claims procedures. Policyholder counsel must make motions to compel in spite of these common objections or those claims procedures and the motives behind them will never see the light of day.

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Sinkholes won’t go away. While policyholders, insurance companies and governmental leaders fantasize that this peril would sink into oblivion, nobody’s magic wand will make this a reality. Hurricanes and sinkholes will happen in Florida because of the geography and geology. As more people who live and work in Florida, more losses will result.

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A post earlier this week, Greenspan Public Adjuster Interviewed About Unauthorized Public Adjusting, generated a number of comments and questions, both public and private. Many well meaning individuals probably overstep bounds and violate the law. Some are simply scamming.

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Coral Insurance Company has been placed in receivership. One aspect of handling claims where the insurer is in receivership is that a statutory time limit exists to file a lawsuit. However, for adjusters and policyholders, before a lawsuit can be filed, a "claim deadline" must first be met. We often get requests shortly before the lawsuit deadline only to find the claim deadline had not been met.

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Texas law allows for interest to be awarded to a policyholder as a penalty for the insurer delaying payment of a claim, in addition to the amount of the claim. Section 542.060 of the Texas Insurance Code states:

If an insurer that is liable for a claim under an insurance policy is not in compliance with [Chapter 542, Subchapter B – Prompt Payment of Claims], the insurer is liable to pay the holder of the policy, in addition to the amount of the claim, interest on the amount of the claim at the rate of 18 percent a year as damages… .

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Insurance company coverage counsel certainly will do everything in their power to dismiss claims that their clients breached obligations of good faith when those cases are in federal court. Last week's post, Networking and Sharing Information Can Help Win Cases and Prevent Losses: A Liberty Mutual Example, is followed by another case with a very similar point in Johnson v. Liberty Mut. Ins. Co., No. 10-494, 2010 WL 2560489 (D. N.J. June 24, 2010). The important observation is that it is becoming a lot more difficult to get by motions to dismiss in federal court since civil procedure case law changed, starting in 2007. Bad faith lawsuits are often "sitting ducks" because all the facts and motives giving rise to the bad faith activities are generally not known until after discovery reveals exactly how, what and why the insurance company failed to pay or pay timely.

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Amy Bach, the Executive Director of United Policyholders recently interviewed public adjuster Masood Khan. In United Policyholders' summer newsletter, Khan, a vice president of The Greenspan Company Adjusters International, was interviewed regarding a number of important topics. One of the more controversial comments he made will be of concern with accounting firms, consultants and contractors. Masood Khan correctly noted that in most states, those determining, presenting, negotiating and adjusting losses for policyholders without a public adjuster license are illegally practicing public adjusting. In most of the states, it is a crime to do so.

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I recently represented a client at a court hearing on a motion to compel appraisal to determine the amount of roof damage from Hurricane Wilma. The insurance company’s attorney opposed appraisal, so the judge asked him who other than appraisers should determine the amount of damage from Wilma. “I’m not getting on that roof!” exclaimed the judge. “Are you getting on the roof?” he asked the insurance company’s attorney before looking at me and asking me the same question. As much as I wished I were qualified to differentiate between hurricane damage and wear and tear, I admitted that such a decision should be left to the experts. That experience led me to ponder on the subject of experts.

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In a business interruption claim the insured has an obligation to mitigate its losses by reasonable means, but, as illustrated in Insured’s Duty to Mitigate – Understanding Business Interruption Claims Part 30, insureds should not be required to go out on a limb to protect the insurer and then get a hand slap in response.

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Usually, I write about cases involving public adjusters, but here is an interesting case where the insurance company’s adjuster helped the insureds.

Recently, a frequent allegation raised by the insurance companies seems to be “too little…too late.” Insurance policies typically include a condition that requires losses to be promptly reported.

Jeremy Tyler and Shaun Marker have addressed late reporting and late notice issues in great detail in their posts about hurricane losses. This week, I came across a case where the insureds were successful in overcoming the late notice/late discovery defense raised in a water damage claim in Pennsylvania. After reading the case, I reached out to some of the public adjusters in Pennsylvania and I learned a little more.

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Matt Litsky represents certain underwriters and syndicates from Lloyd's. I have talked with Matt and written others explaining that many policyholder counsel incorrectly file suit against Lloyd's. Failing to properly name and serve Lloyd's can lead to dismissed legal actions and possible malpractice claims against counsel who make these mistakes.

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Last week in Don't Forget to Consider the Severity of Your Claim, I wrote about what severity means in the insurance context. We also started to talk about how severity can affect whether the insured’s claim was handled fairly by the insurer. Let’s hear a little more about what some of these carriers have to say about it and whether it makes sense to you.

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Every now and then, a headline has me wondering “what is this?” I love whales and watching them. I love salmon in a very different way and usually only watch them on my dinner plate. So, when the Insurance Journal listed a headline, Flood Program Must Consider Salmon and Whales, my curiosity was piqued.

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Recently, I was discussing my job with a non-lawyer friend. I told him that I typically pursue claims against insurance companies on behalf of policyholders for a variety of reasons, including “unfair insurance practices.” At that point, he asked about “unfair insurance practices” because he didn’t know what that meant. His question made me think about how lawyers use terms such “unfair insurance practices” when communicating with clients without ever considering that their clients may not actually know what those terms mean. For my friend’s benefit, and anyone else who does not already know what “unfair insurance practices” means, here is some of what “unfair insurance practices” encompasses.

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The United States Judicial Panel on Multidistrict Litigation issued a Transfer Order yesterday in which it consolidated economic, environmental and personal injury cases arising out of the Deepwater Horizon explosion and oil spill.

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Sometimes cases are lost because the policyholder attorney lacks information about an insurance company. I was recently thinking about this when our firm's Knowledge Manager, Ruck DeMinico, sent a property insurance opinion involving a claim with Liberty Mutual to our firm's attorneys. The opinion, Delfrate v. Liberty Mutual Fire Ins. Co., ___ F. Supp. 2d ___, 2010 WL 3023866 (M.D. Fla. July 16, 2010), demonstrates these perceptions.

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As many people are aware, property insurance policies often have a large deductible for hurricane losses. In Florida, the hurricane deductible can be a percentage of the dwelling policy limit: 2%, 5%, or even 10%. These percentage deductibles can be very large on personal lines residential claims where a policyholder’s house may be insured for several hundred thousand dollars. Policyholders must be aware that the Florida legislature has created a statute prohibiting an insurance carrier from applying a policy hurricane deductible more than once during a calendar year for personal lines residential claims.

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Catastrophic losses impact unimaginable aspects of a business operation that go beyond the loss of net profits. For example, access to an insured property may sometimes be impaired after a loss, and the resulting loss can be covered under Ingress/Egress coverage.

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Severe rain and flooding swept through Tennessee last May, causing catastrophic damage which made the headlines around the globe. Lives were lost, people were separated, drinking water was rationed and the homes and businesses many residents were severely damaged.

 A house is surrounded by floodwater Tuesday, May 4, 2010, in Nashville, Tennessee. (AP Photo/Jeff Roberson)

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Every now and then, I check Hurricane Harbor just to see what this hurricane prognosticator is predicting. Her rather bizarre Blog reads the way a few of my friends will sound a little later tonight:

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The insurance industry never rests when it comes to lobbying and politics. The Florida Insurance Council has a new leader who used to be its old leader. Insurance lobbyist Cecil Pearce has taken over the reigns from Guy Marvin. Here is a little about Pearce from the press release:

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Many of you probably think that I am referring to the extent of damage of a claim or a claim involving a total loss. The word “severity” naturally conjures up the thought of something that is serious or grievous. But I’m actually writing about something many of you probably don’t know all that much about. In the arena of bad faith litigation, severity is a way that insurers measure claims employees’ performance. And, of course, it doesn’t stop there - you knew there was an angle, right? Yes, severity can affect whether your insured’s claim was properly handled by the insurance company. Severity is one of the many, important factors that you should consider in your bad faith case against a carrier. Let me tell you more…

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Every Sunday for the past thirty two weeks, Michelle Claverol has written on topics involving business income, extra expense and interruption claims. These are not the easiest or sexiest of insurance coverage matters, but, for many businesses, winning these issues and having claims paid promptly can determine economic survival.

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The Texas Supreme Court released an interesting ruling recently. Many were intrigued by it because it appeared to be counterintuitive at first glance. In State Farm Lloyds et al. v. Page, No. 08-0799, 2010 WL 2331460 (Tex. June 11, 2010), the Court decided that mold damage to a woman’s personal property was covered in a standard homeowner’s insurance policy, but damage to her home was not.

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Slabbed is a blog that grates on those in the insurance industry, its legal counsel and proponents. My impression is that because those from the insurance industry do not like the criticism, positions and strong rhetoric, they stop reading Slabbed and read only those that criticize policyholder advocates, policyholders, and others who pander to the insurance industry. Nobody likes to be criticized or cast in the role of the villain. That is human nature. Yet, I agree with comedian Chris Rock, who stated that "anyone who makes up their mind before hearing the issue is a ... fool."

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Just a few weeks ago, the Fort Myers Division of the United States District Court for the Middle District of Florida handed down its memorandum opinion on the insurer’s motion for summary judgment in Royal Marco Point I Condo. Ass’n, Inc. v. QBE Ins. Corp., No. 3:07 CV 16, 2010 WL 2757240 (M.D. Fla. July 13, 2010). Among other things, the insurer, QBE Insurance Corporation, argued that its participation in appraisal and timely payment of the appraisal award precluded an action against it on bad faith.

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"If it is OK for Gene to say it, then why can't I?" was the question I asked Mary Fortson nearly ten years ago as we discussed a number of legal issues for a brief we were filing in federal court. I loved Eugene Anderson. He was free to say what he knew was the truth regarding insurance. We had a bond.

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Catastrophic losses are life altering. Hurricanes and earthquakes often shut down power and utility services for weeks, and, all of the sudden, ice becomes the most valued commodity in town. People are resilient. Businesses, however, need more than a little ice to survive.

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Practicing law and practicing adjustment are two different things. Some attorneys arrogantly think they know more about insurance because they understand insurance law. They often have no clue what they are talking about or understand what is going on in the insurance claims office. One significant part of understanding insurance and insurance claims handling for attorneys, whether policyholder or insurance company counsel, is to understand the training, management and day to day activities of adjusters. Thinking that an attorney is skilled in insurance because he can read, write and understand insurance cases and statutes is akin to thinking that an attorney can be skilled in surgery because he can read, write and understand medical malpractice cases.

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