Insurance advertisements have never been more entertaining. While perusing the net for information regarding Safeco and Liberty Mutual, I came across a number of insurance company television advertisements. We often use ad firms to find and pull the ads of some of our opponent insurers. It can be done cheaply through YouTube.
Continue Reading...The following coverage case note summarizes a decision rendered last week in Florida. Even for a practitioner constantly involved with insurance coverage disputes, it is hard to follow the entire logic of the Court’s reasoning. I doubt those outside the law will find the decision very helpful, unless they want to become brained tired and desire sleep.
What is apparent to one reading all risk policies for nearly three decades is the ever changing language drafted by insurers which increasingly limits coverage through broadening exclusionary language. Early all risk policies would have covered most of Ms. Liebel’s damage. As indicated here, only part of the damage is covered.
Continue Reading...The exodus of the larger national multiline carriers along coastal areas continues. Nationwide has reportedly filed a plan to non-renew 60,000 property insurance policies in Florida starting next July. Unlike State Farm, however, Nationwide Insurance Company has made arrangements with Tower Hill Insurance Group out of Gainesville, Florida, to accept all 60,000 policies.
Continue Reading...Some insurance policies have small print that can provide significant business income benefits under "dependent properties" that usually go unnoticed following a widespread catastrophe. I would encourage Nationwide and Nationwide agents to write, advertise and call their Hurricane Ike and other commercial policyholder customers about these valuable benefits because it is obvious to me that their adjusters have no clue about what this benefit means and are ignorant to advise their own policyholders about it.
Continue Reading...I was thinking about the question of property insurance trade associations and lobbying while reading today’s St. Petersburg Times article, At what Cost Care? The article was a question and answer discussion with Wendell Potter, who was a public relations executive for two major health insurers. Potter has given an inside view into the political and social power of the health insurance industry in a manner most Americans probably deplore. I wonder if property insurers are different? I doubt it.
Continue Reading...Coastal Mississippi policyholders are well served by the daily and in depth reporting by Slabbed. Writing daily for this blog is time consuming; posting two to five in-depth discussions each day must border on a full time job. Lately, Slabbed’s posts have highlighted two important issues regarding insurance coverage and insurance coverage litigation in Mississippi. One, if insurance companies want to pay nothing under the all-risk policy because of the anti-concurrent causation clause, a new form policy is needed--even if the government has to sponsor it. Two, the insurance industry is winning the lawsuits in Southern Mississippi because they are winning the discovery battle over key information.
Continue Reading...Why are major insurance companies selling insurance with "feel good" messages rather than explaining how many different types of accidents and catastrophes they will not cover? If they were honest, wouldn't they explain to customers what is not covered before the purchase? Sandy Burnette wrote a comment to "Is the State Farm Policy Really Worth Anything?" As I indicated in yesterday's "Some Public Adjuster and Insurance Attorney Concerns and My Blogging Mistakes," he made a valid criticism which I corrected and appreciate him calling to my attention.
Continue Reading...What is the value of insurance if it does not pay for insured losses? Imagine if you had a significant accidental water damage to your home or business, do you know whether your insurance company has your back? Will it really be there to help you? Don’t count on it. Today, modern insurance companies are re-writing their insurance policies to limit what is covered and excluding many losses that used to be covered under all-risk policies. State Farm, as an insurance industry leader, is leading the charge of making an insurance product that no consumer should trust as providing the amount of coverage the insurance product afforded 25 years ago. It is always important to remember that Policyholders Buy Insurance for Peace of Mind and Not Economic Advantage and that concept is being defeated as carriers try to gain economic advantage by changing small print in the policy that may have significant consequences discovered by the policyholder only after disaster happens. To be Fair And Balanced with State Farm, I could have substituted Allstate, Nationwide and USAA into the title.
Continue Reading...A former insurance defense attorney called me yesterday, asking if I would represent him and his wife in their sinkhole insurance dispute. While he oversaw many sinkhole matters from the insurance company's position, I guess he knows that a lawyer who represents himself has a fool for a client. His call to me is part of a trend, sinkhole loss calls to our Tampa office have been on the rise. Last week, the St. Petersburg Times ran a front page lead article, Geologists Worry About Drought's Effects on Sinkhole Season. The insurance coverage available, various statutory changes, caselaw, science, and repair of sinkhole losses make these cases fairly complex. Extreme rains or droughts seem to make sinkholes more frequent.
Continue Reading...Free enterprise is great until your competitors beat you. Dominant competitors may find it advantageous to combine interests to prevent new players from entering markets, destroying profit margins, and taking market share. It is amazing that there has not been more investigation and calls for transparency into the major personal lines insurance companies’ discussions and agreements which may reveal such a conspiracy. While anti-trust exemptions exist for insurance companies regarding sharing of loss data for rate making and other rate or form issues, there are no anti-trust exemptions for agreements that otherwise restrain trade and competition through collusion.
Continue Reading...State Farm is hard to figure out. They say one thing and often do another. When you finally get to the decision makers, there is usually some logic to why they do things despite disagreement from consumers or regulators. State Farm's announcement that it was leaving the Florida property market really has me wondering--"what's up?" From what I read and hear, I am not the only one.
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Best is reporting that State Farm continues to retreat from the insurance business in Mississippi. The headline suggests that State Farm merely canceled policies, but the article reveals that State Farm canceled 900 policies, and changed the terms of 5,000 more customers by refusing to insure for wind peril.
As I have explained, our largest insurance carriers are getting out of the risk business. Allstate, State Farm and Nationwide are following a business strategy that reduces their financial risk to catastrophic loss. They want to be in the business of "for sure" profits, which is more commonly found in the automobile and life insurance industries.
These insurers are getting out of a business they once fought to dominate. Like casinos in Las Vegas, they want the odds only in their favor and will change the rules to make this happen. Blackjack was the only game against the casino where careful play could provide an advantage to the player. The casinos have changed those rules, just like the insurance industry is doing to its customers.
State Farm only wants to insure structures where the rates and percentages are so far in its favor, it can never lose. By excluding wind and flood peril from coverage, State Farm truly covers only the very remote peril of fire in its customers' policies. This results because all other ensuing losses can arguably be denied under the anti-concurrent causation language found in their policies.
The implication is that consumers are going to have to help "start up" competitors and have some governmental backup until the private insurance market can develop these new entrants. Regulations should be considered which provide rate incentive for these entrants and penalize the old line carriers for depopulating its pool of customers through the cherry-picking of risks. The old line carriers are simply killing society's ability to have an orderly insurance market.
Could you imagine if the health insurance industry started to cancel policies for people over sixty and women between the ages of 18 and 38? What if we allowed health carriers to cancel or non-renew your policy if you were 15 pounds overweight or had a history of cancer in your family? This is what we are allowing the property and casualty industry to do. We simply have to stop it.
Capitalism and economic venture are alive and well in the Florida insurance market. The Florida Underwriter reported this month that over 1.7 million policies have been written by new insurance companies since the 2004 hurricane season. As Allstate, State Farm and Nationwide retreat from the Florida property insurance market, these new insurance companies are accepting risks that would otherwise end up with Citizens Property Insurance Corporation.
My initial reaction has been that this is a good development. We need an infusion of new companies to take the place of the older established insurers that seem determined to leave the insurance business in an effort to safeguard all the surplus they previously made.
The new economic premise of Enterprise Risk Management has led old lines carriers to get out of the alleged "risky" Florida insurance business to preserve the profits they made and enter other financial arenas--such as banking, life insurance, and pure investment. It is refreshing to see new private insurers take the place of old line carriers in the property insurance market.
This has not occurred without some governmental help and a fortuitous influx of money into the re-insurance markets. The Florida Legislature passed legislation which allowed up to $25 million in matching funds to loan any insurer who was willing to write business in Florida. At the same time, the re-insurance market has greater capacity to write business and the market has "softened" to afford lower rates to these newer carriers. The bottom line is an influx of new carriers entering Florida and writing insurance policies where the old line carriers dare not go.
Florida is still far from being economically insulated should a major storm hit the state. It is a Hurricane Katrina away from financial catastrophe. Still, it is encouraging to see these new companies enter the market. Hopefully, they will enjoy a number of profitable years to build their surplus ("surplus" is the net worth of an insurer) before faced with any widespread catastrophic losses.
The article in today's Tampa Tribune regarding a Federal Wind Insurance debate comes as no surprise. Amazing how big Insurance is adopting Enterprise Risk Theory to further its interest. Since large corporations in the insurance field are not so much interested in how they make money, just that they make as much as safely possible, it is no wonder they are making the case for Federal wind coverage.
Just so everyone understands what is happening, large insurance companies following Hurricane Andrew became fascinated with an actuarial model that better suited "safe" return of capital. This economic theory has been described as Enterprise Risk Theory, where the tolerance of risk to the corporation is measured against the business model. I will write on this more later because one blog is simply too short for an in depth analysis. The main concept to remember is that risks of large losses have to be minimized if the corporation cannot, for any reason, "stomach" the large variances.
So what do the oligopoly of State Farm, Allstate and Nationwide do regarding the wind risk along coastal states? They leave, raise rates and then start a national debate about government taking on the risk that they do not, but do not want new competitors replacing them. What "free enterprise" champions they are!!
Policyholders want one stop shopping for their insurance. They also want to know that they will be able to get insurance, so there exists some strong argument for the coverage. However, it is amazing that an industry built on spreading risks, and making money from it, transfers the variable catastrophic risks to the government---which is really the people---whenever it is to their advantage.
In the long term, we have to promote new entrants into the insurance market willing to accept these risks. We must also continually implement public policy, laws and codes that lower the severity of loss by catastrophic damage. The one thing we should be hesitant about is expecting government to act as well as a private insurance company. Government is not private enterprise.
Is the Insurance Industry Trying to Justify Increases in Rates or Simply Justifying Leaving the Risk Business Along Coastal areas? These questions came to my mind after reading an article in the February 2008 edition of Natural Hazards Review. The article, Normalized Hurricane Damage in the United States: 1900-2005 , claims that by 2020 a $500 billion dollar hurricane loss could happen in South Florida. Of course, those are in 2020 dollars -- but that is off the charts compared to any previous loss. The study was made primarily by people working for the insurance industry. Accordingly, some bias may exist and consumer activists may find my questions justified. The $500 million figure seems surreal given the Katrina's calculated damage was $156 billion dollars.
The study has two undeniable findings and conclusions. First, the population along coastal areas has grown. Thus, more property is in potential danger of hurricanes. The most concentrated areas are South Florida, Tampa, and the greater Houston area. All three areas have experienced significant population increases over the past century. Second, the per capita wealth has also increased over that period. Not only are more people and properties in harm's way, these people have more and more expensive properties at risk. In simple terms, we have more and better stuff to insure on an individual basis.
These statistics are important. Determining the amount at risk and the amount of available insurance is important to a community and state.
Since we cannot expect people are going to move away from the coast, the obvious long term solution is better risk management. The enforcement of building codes and stronger building codes are inevitable.
Tuesday was a rather interesting day. Our firm helped win a $4.6 million dollar judgment for a panhandle Condominium Association last year. Citizens Property Insurance Corporation did not pay, as usual, but appealed. I argued the case [Citizens Property Ins. Corp. vs. East Pass Towers II Condominium, No. 1D07-2727 (Fla. Dist. Ct. App. oral argument Jan. 22, 2008)] for our client in Tallahassee, met with the Association representatives, and then made my way up the hill to the State Capitol where the Select Committee on Property Insurance Accountability was meeting.
One of firm's lobbyists briefed me on the schedule and introduced me to some of the panel members I had not previously met. We wondered if the media attention and articles (Tom Zucco, No Auto for Allstate, St. Petersburg Times, January 17, 2008, at A1; Jerome R. Stockfisch, State Bans Allstate From writing any New Policies, January 17, 2008, Tampa Tribune) following last week's 0ffice of Insurance Regulation hearing would cause more attention to be focused on these proceedings. Given the media in attendance and the articles in this morning's papers (Jerome R. Stockfisch, Panel Begins Insurance Investigation, Tampa Tribune, January 23, 2008; Michael Sasso, Secretive Allstate File Could Show 'Bad Faith', Tampa Tribune, January 23, 2008), we are certain there is great interest regarding these investigations that would provide some transparency to the insurance industry's tactics to raise rates and lower claims payments.
The panel consists of Florida Senators. While it is in vogue to criticize our politicians, most are truly trying to make laws and policy that make our lives better. With the public outcry regarding extraordinary increases of insurance rates following the 2004 and 2005 hurricane seasons, they worked to find a solution to ease the burden of rate increases and policy considerations. The plan was for Florida to assume a greater risk in the event of a catastrophe and sell re-insurance to the insurance industry at lower than market rates to help lower premiums and provide capacity so cancellations would decrease.
The average residential premium was expected to decrease approximately 19%. Instead, many carriers sought increases. Allstate sought a 46% rate increase. This "duping" of the legislature and insurance regulators is what created the current investigations by the Office of Insurance Regulation and this select committee.
J. Robert Hunter has long studied and criticized many activities of the insurance industry. He is an actuary by trade, a former insurance commissioner, and serves as the Insurance Director for the Consumer Federation. Florida Insurance Commissioner Tom McCarty asked Hunter to testify about the "duping" and alleged misinformation generated by insurance industry trade associations.
Hunter provided a lengthy report: "Property/Casualty Insurance in 2008: Overpriced Insurance and Underpaid Claims Result in Unjustified Profits, Padded Reserves, and Excessive Capitalization", J. Robert Hunter, January 10, 2008. He detailed and provided evidence that the insurance industry has made significant profits and continues to do so despite providing alleged propaganda trying to demonstrate otherwise.
My impression of his testimony is that insurance company executives try to hide true profits being made to keep rates as high as possible. Hunter essentially indicated that insurance company management lied in its filings and practices. At one point, he called the activities possibly "illegal" when Senators were questioning if criminal activity occurred.
From experience, most honest people and corporate representatives openly discuss and show documents when authorities demand answers and proof of activities. Dishonest people and entities hide and try to avoid directly answering the same because guilt would be admitted. Anybody watching Allstate answering and avoiding production of requested information last week during the Office of Insurance Regulation hearing has to have an impression that Allstate is hiding something really bad.
In his report, Hunter specifically indicated that the Consumer Federation of America recommends that consumers avoid Allstate, if possible, because it has a history of anti-consumer behavior. Id. at 29.
As all this was being played out, I noticed the room was also full of insurance company attorneys and lobbyists. Most policyholders would be amazed to learn how much their own insurance companies spend in lobbying dollars to make and encourage anti-consumer efforts. The irony is that the policyholder's premiums are used to finance these activities. Modern insurance companies have the policyholder's money financing an army of attorneys to protect the insurance company with little regard to the policyholder's interest.
Accordingly, the efforts by those such as Robert Hunter, the Florida Senate, and the Office of Insurance Regulation should be applauded. It is high time that insurance executives are called to testify and provide documents demanded by regulators. If they have nothing to hide, they should be happy to provide truthful and complete disclosure. From past experience, nobody should be holding their breath that this will happen anytime soon.
A year ago the news from Mississippi largely concerned insurance claims practices, trials, and significant settlements. Except for the recent article of our firm's settlement of twenty two cases against State Farm, the media focus has been on alleged corruption of some policyholder attorneys, especially Dickie Scruggs. Insurance industry leaders must be smiling because this news coverage has completely derailed efforts for meaningful claims practice reform and protective legislation for policyholders. The sad truth is that all policyholders living along Coastal areas face exactly the same wind versus water fight with their insurers that happened in Katrina. Indeed, in Florida, the revised Valued Policy legislation and recent Florida Supreme Court decisions make it inevitable that more Floridian policyholders will have to litigate these issues. Maybe I should not complain, but there is a societal insurance problem along the Gulf and Eastern Coasts which is simply being ignored because the focus is upon corruption charges against Dickie Scruggs and others.
Eventually the sad stories of policyholders not being paid, and the problems of insurers being allowed to change wording in their policies to make "all risk" coverage more like "your risk" coverage, will be played out again. It is winter and hurricanes can seem a long time away. The sensational stories of corruption and the falling economy are in the minds of everyone. The insurance industry has once again escaped meaningful reform. Meanwhile, we are still just a Katrina away from another insurance disaster because those that make policy have shifted focus to other matters without first correcting problems from the past.
"If, for example, a policyholder's roof is blown off in a storm, and rain enters through the opening, the damage is covered. Only if storm-surge flooding - an excluded peril - then inundates the same area that the rain damaged is the ensuing loss excluded because the loss was caused concurrently or in sequence by the action of a covered and an excluded peril. The district court's unsupported conclusions that the ACC clause is ambiguous and that the policyholder can parse out the portion of the concurrently caused damage that is attributable to wind contradict the policy language."Where did that come from? Virtually every adjuster and claims manager I have ever deposed with that similar hypothetical situation in a Katrina loss has said coverage would be granted under the all-risk policy for the full amount of the loss. Maybe Judge Jones and her colleagues know more about how to deny insurance claims than the people that could profit from doing so. From a practical standpoint, where is there going to be any coverage if the flood policy has the typical exclusions regarding pre-existing loss or "roof leaks or wind-driven rain" as found in the National Flood Policy? Policyholders with all-risk and flood coverage under separate policies are left with the absurd result of having no coverage at all under this wrongly reasoned opinion. This has been the point of Representative Gene Taylor's criticism of just such an interpretation and the reason why he so strongly believes that wind and flood need to be in the same policy and has so vehemently advocates the passage of H.R. 920, the Multiperil Insurance Act of 2007. People will have no coverage whatsoever and that would be unconscionable when you buy insurance coverage that is supposed to cover a hurricane. In finding that the anti-concurrent causation language is not ambiguous, the Court completely missed a proper causation analysis. I partially agree with David Rossmiller when he indicated in a recent blog posting that the "the Fifth Circuit reached the result I agree with, but the court said too much. Its reading of the contract language was right, but its causation analysis was not entirely correct." Later on he further criticized the opinion stating "so we can see the court is dead wrong when it analyzes storm surge as being the product of concurrent causes." I do not agree that they read the anti-concurrent clause "right' when it is accompanied by such a poorly reasoned analysis of causation and fails to consider the practical effect of what that reasoning does. I also find the affirmation of the verdict to be correct and have stated so despite grumblings from other consumer advocates that argue that the flood caused by wind pushing the water, i.e. storm surge--was not excluded. But this opinion is simply wrong because it overstates how even the insurance industry contemplated the use of its anti-concurrent causation clause. At an American Bar Association National Institute on Coverage, I delivered a paper entitled "Does this Insurance Policy Cover Anything? An Insured's Perspective of the Late Twentieth Century All-Risk Policy", American Bar Association, National Institute On Insurance Coverage, Orlando, FL, 1994. I suggested that the anti-concurrent causation language rendered the all-risk coverage illusionary. Many scoffed at my suggestion that the anti-concurrent causation language adopted by many insurance companies invited creative findings of excluded causes "directly, indirectly, in any sequence, or as part of or a result of a loss" so that a loss would be denied or threatened to be denied. This is exactly the type of decision and practical result I feared and predicted may occur from ignorant jurists not fully versed in the nuances of insurance coverage lore and history. In the adjustment field, where the rubber meets the road, adjusters warn policyholders that interpretations could give a zero result where a coverage "problem" may exist in return for the policyholder being thankful for even an underpaid claim. This is exactly the situation now facing the public because of this overly broad interpretation of the clause given by the Fifth Circuit. Judge Senter had it right when he wrote:
"Read literally, this provision would exclude all coverage when a windstorm did damage to both an insured dwelling (a covered loss) and adjacent "screens, including their supports, around a pool, patio, or other areas." (an excluded loss). I do not believe this is a reasonable interpretation of the policy. A windstorm is a weather condition that is specifically included in the coverage of this policy. When the policy is read as a whole, I find that this exclusionary provision is ambiguous -- the policy as a whole providing explicitly for windstorm coverage in one section and purportedly excluding the same coverage on the grounds that a windstorm, a "weather condition," and an excluded peril, a flood, ; occurred at approximately the same time. The most reasonable interpretation for these conflicting policy provisions is that this policy provides coverage for windstorm damage, in accordance with its terms, and that coverage is not negated merely because an excluded peril (in this case storm surge flooding) occurs at or near the same time. If this second provision were read to exclude wind damage that occurs at or near the time that any excluded water damage occurs, the result would be contrary to well-established Mississippi law...... This reading of the policy would make the windstorm protection illusory for those who live in areas where the risk of flooding is greatest. Nationwide seems to recognize this to be the reasonable interpretation of its policy. Nationwide has not invoked this policy provision to deny coverage to the Leonards for what everyone recognizes to be wind damage."(emphasis added)Senter made the point that the Fifth Circuit missed, the insurance industry has heretofore no problem with paying for what damage wind does, despite a literal reading possibly giving rise to an absurd result. The example provided by Judge Edith Jones is an absurd result.
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