Plaintiff owns a restaurant that sells rotisserie chickens…On April 12, 2008, a greasy chicken ignited in plaintiff's restaurant causing fire and extensive damage. Plaintiff filed a claim under the policy to recover his losses. In response, NSIC sent a claims adjuster on April 14, 2008, to observe the damage. The claims adjuster recommended that Mr. LeBow, a cause and origination specialist, further inspect plaintiff's restaurant….April 16, 2008, Mr. LeBow conducted his initial investigation.

Mr. LeBow examined, among other things, the exhaust filters, and the chemical fire suppression system. The filters, which attach to the hood over the rotisserie, sieve the smoke before it enters the ducts. Mr. LeBow concluded that after the chicken ignited, the fire traveled through these four filters, consuming one of them, and then spread through the entire duct system. As for the suppression system, Mr. LeBow observed that the system valve was “jammed.” Specifically he observed that the suppression nozzle at the duct entry point above the rotisserie was twisted in such a way that, had it activated, it would have inadequately dispersed suppressant. However, the inner workings of the suppression system were beyond Mr. LeBow's expertise, as such he could not make any conclusive determinations about the affect of this “jam” on the fire damage. For this reason, the investigator told plaintiff that an engineer would be coming to look at the fire remains and that plaintiff should not touch anything. Plaintiff responded by closing his restaurant to await further inspection.

Then, according to defendant, the NSIC claims adjuster reached out to potential subrogation targets, including the manufacturer of the chemical-fire suppression system. The defendant attempted to organize a joint inspection with all parties, targets, and engineers on May 14, 2008; however, plaintiff was unavailable on that date, so the meeting was rescheduled to May 22, 2008. The May 22 meeting was also rescheduled, to May 30, but this time because the NSIC-affiliated engineer was unavailable. By May 30, approximately seven weeks after the initial incident, plaintiff had removed the damaged ductwork, replaced the fire suppression system and completely cleaned the fire scene. Defendant contends that by cleaning up the fire scene and replacing the suppression system, it was unable to complete its investigation. Accordingly, NSIC denied plaintiff's request for coverage. Plaintiff initiated this action on March 9, 2009 demanding payment for his loss. Defendant, asserts…affirmative defenses including that plaintiff…impaired defendant's subrogation rights… [and] failed to preserve property for inspection. (case docket citations omitted)

Regarding subrogation, the policy provided:

If any person or organization to or for whom we may make payment under this Coverage Part has rights to recover damages from another, those rights are transferred to the extent of our payment. That person or organization must do everything necessary to secure our rights and must do nothing after the loss to impair them.

The Court held that the policyholder breached this provision of the policy:

It is undisputed that by May 30, approximately seven weeks after the initial incident, plaintiff had removed the damaged ductwork, replaced the fire suppression system and completely cleaned the fire scene. Since this action prevented a full inspection to be completed by the engineers and subrogation targets, plaintiff's actions impaired defendant's subrogation rights by, e.g., affecting defendant's ability to meet its burden of proof in future litigation against the third-party targets. Moreover, Plaintiff's failure to obtain the approval of defendant prior to ripping out the ductwork and replacing the suppression system, also violated his obligation to do “everything necessary” to preserve defendant's rights. The court concludes, therefore, that plaintiff failed to comply with the plain terms of the policy. (case docket citations omitted)

The case is a warning to policyholders, public adjusters, and counsel for policyholders that clean up and other return to business operations that destroy or alter evidence could lead to a claim denial. The best practice is to get prior approval from an insurer before those activities to avoid this situation.

The ruling is harsh enough to the policyholder without the Court providing wrong legal reasoning. Sometimes, judges write too much to justify their decisions. Here is this Court’s incorrect reasoning:

[P]laintiff has not explained how seven weeks is an inordinate amount of time under the circumstances presented by this case, particularly in light of the mores and business practices of the insurance industry, and nothing in the record suggests so. In fact, the record suggests that defendant was diligently conducting the investigation. Lastly, if plaintiff wanted to guard against lost profits, it could have bargained for such a provision in the policy. (emphasis added)

 Seven weeks of lost revenue can force many businesses into bankruptcy, and commercial insurers understand that cash is blood to a commercial enterprise. Commercial claims adjusters should be required to immediately investigate facts, evaluate damages and work with businesses on survivability plans through extra expense payments and mitigation efforts. Fast investigation of possible subrogation is paramount because delay often destroys otherwise fully insured businesses.

There is nothing prompt about a seven week claims investigation of a fire. If the policyholder caused the delay and breached the policy by its own action, that could be a basis for claim denial. But, the Court should never have justified the insurer’s slow claims investigation – it occurs too often.

Finally, the number of commercial policyholders that can demand specific insurance contract terms is negligible. Virtually all insurance policies are sold on a take it or leave it basis, where the insurer does not even provide the actual policy until after purchase. The exact policy wording is rarely bargained for prior to purchase through a manuscript form. The Court's statement about the ability of policyholders to bargain for specific wording is untrue in most cases; only the largest commercial policyholders, usually negotiating through large brokers, can do so.

[T]he rule followed and applied by the district court creates a financial incentive for insurers to underpay or delay payment of covered losses owed to insured Texas businesses. By allowing the payment of an appraisal award to negate a claim for breach of contract, attorneys’ fees, bad faith and statutory delay penalties, the district court’s opinion means that the worst that can happen to an insurer as a result of underpaying a claim (even when done in bad faith or deliberately) is that it may end up paying the amount it owed in the first place – and nothing more. Notwithstanding the clear contrary pronouncements the Texas legislature and Texas courts, the rule applied by the district court would extend this judge-made legal immunity to any recalcitrant or even unscrupulous insurer – inviting abuse of insured businesses, especially when they are at their most vulnerable after a catastrophic loss.

The upshot of this rule could and likely will be disastrous for Texas businesses and property owners. If an insured business that depends on its property to generate income and meet expenses – like an apartment complex, auto dealership, or hospital – suffers a catastrophic loss (such as fire or hurricane damage), insurers would have a financial incentive to underpay or delay payment, and to use the vulnerable position in which the business finds itself to force the business owners to accept far less than is contractually owed for the loss. This is precisely the sort of conduct the legislature has sought to discourage and penalize by passing the statutory bad faith scheme and Texas Prompt Payment of Claims Act...

. . . .The correct rule in Texas is that when a dispute about the amount of the loss is resolved against the insurer through appraisal, and the insurer is found to have underpaid the amount of the covered loss, the insured may go forward in the trial court with its claims for breach of contract, bad faith, attorneys’ fees and PPCA.

In Fifth Circuit Approves of Slow Hurricane Claims Process, we noted the impact of the decision and why such flawed legal reasoning is bad public policy and harms policyholders:

This is an unfortunate decision for policyholders in Texas because it essentially paves the way for insurance companies to make lowball initial payments and require policyholders to work for the benefits that were agreed upon when their policies were purchased, with no repercussions for the insurers. If policyholders end up getting more than the original lowball payments, insurance companies suffer no penalties or accountability for low and slow payments. The one saving grace in this opinion is that the Fifth Circuit decided not to publish this opinion in the Federal Reporter, which might limit its applicability to other cases.

I encourage consumer attorneys with insurance cases to consider asking for amicus input so jurists can consider the broader public policy considerations of their decisions.

(1) Promulgate a single policy that serves as a minimum baseline of coverage.

(2) Develop "nutritional labels" geared towards providing consumers with a basic sense of the degree to which a carrier's policy provides greater coverage than the minimum baseline.

(3) Require prominent disclosure on the nutritional labels of several measures of claims paying quality, such as the percentage of claims denied, the average time within which claims are paid, and the frequency of non-renewal or cancellation within a year of a claim being submitted.

(4) Require full online disclosure of insurance policies, variables relating to claims payment, and data regarding the availability of coverage.

(5) Carefully consider the need to regulate risk classifications that have a disparate impact on underserved communities.

(6) Abandon all price regulation designed to suppress insurance rates, so long as a reasonable number of carriers exist in the marketplace.

(7) Promote the importance of independent insurance agents, but prohibit these agents from receiving different amounts of compensation based on the carrier with which they place consumers.

Professor Schwarcz promotes transparency of the property and casualty insurance markets. Last year he testified before the Senate Subcommittee on Securities, Insurance and Investment regarding "Emerging Issues in Insurance Regulation,” criticizing state insurance regulators for failing to protect insurance consumers. The record of his testimony included the following:

Currently, most states do a remarkably poor job of promoting transparent insurance markets. This failing occurs at two levels. First, most states do not empower consumers to make informed decisions among competing carriers. For instance, in personal lines markets – such as home, auto, and renters insurance – consumers have no capacity to identify or evaluate the substantial differences in carriers’ insurance policies. Consumers cannot acquire policies before, or even during, purchase; instead, they receive them only weeks after the fact. Meanwhile, no disclosures warn consumers to consider differences in coverage, much less enable them to evaluate these differences. Similar deficiencies prevent consumers from comparing carriers’ claims-paying practices. Consumers neither receive nor can access reliable measures of how often or how quickly carriers pay claims. Finally, consumers are almost never informed that ostensibly independent agents typically have financial incentives to steer them to particular carriers who may not provide optimal coverage. Given this collective lack of transparency, it is hardly surprising that several large national companies have started to hollow out their coverage and embrace aggressive claims handling strategies.

...

The second broad transparency failing of state insurance regulators involves the absence of publicly available market information...[T]his second form of transparency involves making detailed market information broadly available, typically through the Internet. Most consumers, of course, are unlikely to consult such information. But this form of transparency is nonetheless crucial for markets to operate effectively because it allows market intermediaries – including consumer-oriented magazines, public interest groups, and academics – to police marketplaces, identify problems, and convey relevant information to consumers, newspapers, and lawmakers.

Currently, insurance regulation does a dismal job of making publicly available the information that market intermediaries need to perform this watchdog role. For instance, carriers’ terms of coverage are not generally publicly accessible – insurers do not post their policies online and most insurance regulators do not maintain up to date or accessible records on the policies that different companies employ. Company-specific market conduct information – including data on how often claims are paid within specified time periods, how often claims are denied, how often policies are non-renewed after a claim is filed, and how often policyholders sue for coverage – is also hidden from public scrutiny and treated as confidential. Virtually no states make available geo-coded, insurer-specific application, premium, exposure, and claims data, similar to that required of lenders by the Home Mortgage Disclosure Act. Product filings with the states and the Interstate Insurance Product Regulation Commission (IIPRC) are not made public before approval, thus precluding public comment. And even companies’ annual financial statements are only accessible on the Internet for a fee, in notable contrast to the public availability of companies’ SEC filings.

...

In sum, state insurance regulation has generally failed at a core task of consumer protection regulation – making complex markets comprehensible to consumers and broadly transparent to those who may act on their behalf. This type of transparency is fundamental to fostering competitive and efficient markets. [emphasis added]

I wonder why honest and fair insurance companies would not accept his criticism and call for insurance reform? It seems natural that honest insurance companies would call for fair, open and transparent markets. Most of us know the types of businesses that want to operate in secret and not disclose the terms of their product or be subject to penalties for dishonest or unfair dealing.

So, what do our insurance regulators think about these suggestions, and what have they done to promote transparency? I wonder if Florida's Insurance Consumer Advocate, Robin Westcott, has an opinion regarding Professor Schwarcz’s suggestions and whether she is willing to implement these important consumer protections? I will have a follow up post when we get answers.

This Article empirically debunks the common claim that homeowners insurance policies do not vary across different insurance carriers. In fact, carriers’ homeowners policies differ radically with respect to numerous important coverage provisions. A substantial majority of these deviations produce decreases in the amount of coverage relative to the presumptive industry standard, though some deviations increase coverage. Despite this substantial variability in policy terms, even informed and vigilant consumers are currently unable to comparison shop among carriers on the basis of differences in coverage. The Article reviews various regulatory and judicial options for responding to this lack of transparency in homeowners insurance markets. It closes by considering the broader theoretical implications of the findings for regulatory theory and the efficiency of standardized form contracts.

It's not often that a law review article has such obvious practical, down-to-earth information that its substance migrates to the mainstream media even before publication, but that's what's happened with University of Minnesota law professor Daniel Schwarcz's article "Reevaluating Standardized Insurance Policies." ...the article says that despite widespread consumer presumptions that homeowner insurance policies are basically all alike, what were once standardized provisions have evolved into a plethora of significant deviations. According to Schwarcz the deviations, which mostly decrease the amount of coverage relative to the presumptive industry standard, are so widespread that even informed and vigilant consumers are unable to comparison shop among carriers on the basis of differences in coverage. He calls for state insurance commissioners to help make the contracts more transparent... 

Even before the article was published, the New York Times noted it in Not All Homeowners’ Policies Are Alike. The Times quoted Schwarcz:

Most consumers, he said, choose a homeowner insurance carrier based on the premium quoted, the company’s financial soundness or a vague idea about its reputation. That approach assumes that one company’s underlying policy is pretty much the same as another. Yet an analysis of contracts from large insurers obtained from seven states, he said in an interview this week, shows that belief is “a myth.”

...

Here’s one example: The standard contract insures a home against risk of “direct physical loss to property,” he noted. But some insurers have altered that language to say “sudden and accidental” direct physical loss to property. (His paper doesn’t identify which specific insurers use the language, he said, because he wants to focus on changes regulators should make.) Such wording, he said, might be used to deny claims for vandalism or from a threat that grew over time — say, an old tree that weakens and eventually falls on a house. It’s conceivable, he said, that the language could be used to deny claims for theft on the grounds that the loss wasn’t “accidental.”

The upshot, he said, was that such changes were “an indication that insurers are writing policies so they can deny claims whenever they want.” (emphasis added)

Professor Schwarcz has now made observations very similar to those I noted almost three years ago in Is the State Farm Policy Really Worth Anything?:

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.

...

Many State Farm policyholders reading these exclusions probably worry that anything that accidentally breaks down will not be covered. State Farm and its competitors should make customers aware of how much is not covered, rather than advertise its affordable rates and those syrupy feel good advertisements. The true nature of the insurance company is determined by the coverage sold and the performance of the claims department. Those advertisements have nothing to do with what truly happens in the field on a day to day basis...

...

...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.” I suggested that the anti-concurrent causation language and re-writing of exclusions rendered the all-risk coverage illusionary. Many scoffed at my suggestion that the exclusionary 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 what is happening and is the result I feared.

I am delivering a presentation at the Annual Convention of the National Association of Public Insurance Adjusters this week. In preparation, I spoke with a colleague, Jonathon Wilkofsky who will be part of a panel in the educational discussion. Jonathon was the NAPIA Co-Person of the year with me in 2007. In our discussion, Jonathon complained that he was being forced to request the New York Department of Insurance to decertify newly written exclusions as against public policy in a number of instances. His perception is the same as mine--insurers are significantly limiting the amount of coverage with small, but significant, changes in policy language that most, including regulators, would not appreciate until after a loss occurs.

Professor Schwarcz's conclusion is the same as mine and those of other policyholder advocates: 

The current personal-lines insurance marketplace is largely organized around a myth. That myth is that personal-lines insurance policies are completely uniform. This myth explains regulatory rules that do nothing to promote insurance contract transparency. It explains the ignorance of most information intermediaries about the details of contract terms. And, to a substantial degree, it explains the willingness of courts to treat insurance policies as ordinary contracts.
 

As this Article has shown, this myth is false. Not only does there exist substantial heterogeneity in insurance policy terms but most of this heterogeneity reflects the efforts of carriers to limit coverage relative to the presumptive industry baseline. These insurers have actively hidden and obscured this trend, in notable contrast to the comparatively transparent marketing of the few carriers who have departed from standardized policies to improve coverage. If regulators do not act to substantially improve consumer protection in this domain, then it can be expected that coverage will continue to degrade for most carriers, in a modern-day reenactment of the race to the bottom in fire insurance that triggered the first wave of standardized insurance policies.

I will follow tomorrow with some of Professor Schwarcz's suggestions for reform.

Kelly Kubiak burst into my office jubilant in her recent victory over Great American Insurance Company. She received an Order granting her Motion for Summary Judgment in a case where the central dispute involved the interpretation of the valuation clause of an insurance policy. We so often talk about the problems of causation that we fail to spend enough time talking about how many benefits insurance policies are supposed to provide. It has been our experience that many policyholders think they have obtained a fantastic settlement from their insurance company until we explain how much money was left on the table through lack of knowledge and experience.

In Experience and Passion Count When Selecting Insurance Lawyers, I noted something else about Kelly:
 

I thought about this on Saturday morning while eight of our attorneys were in deep discussion with an expert claims consultant about the presentation of insurance cases to juries. It was a beautiful day outside; I could see people milling about and enjoying a free concert. I wondered how many other law firms were working on such a beautiful day, flying in attorneys from other offices to teach how to do a better job for their clients -- specifically on insurance cases where they represent policyholders. I'll bet that the answer to that is zero.

The discussion among us was pretty brutal at times. You do not help others get better at something by just letting them slide by when they do the wrong technique. Eventually, the trial presentation topic changed to reaching settlement after a heated battle with an insurance company. Kelly Kubiak has been quite successful for her clients over the past year and she was trying to articulate her perception of what was working for her. I interrupted and said, "Kelly, you are passionate about your clients and you have experience and maturity. You are a better attorney than you were five years ago because you now have a deeper feeling and anticipation for what works and does not work in a given situation.

Kelly Kubiak commented on my post:

I have always wanted to be an attorney since grade school. I did not know exactly what an attorney was, but knew I wanted to be one. Even when I graduated from law school, I did not know what type of law I wanted to practice. I just wanted a job. I started off doing personal injury work. Three of the four years I was practicing personal injury law, I represented insurance companies. Eventually, I lucked out and was hired to work for the Merlin Law Group. I've been working here for about 8 years and I love it. I love the practice of insurance law -- the investigation and litigation.

As attorneys, we strive to balance our personal time with our professional life. It is a hard balance because we strive to give our clients the best representation. The practice of law takes time. There is no way around it.

Despite the sacrifices, I know that I am truly blessed and lucky that I am able to do something that I enjoy doing. I still run down the hallway with excitement babbling in shock and disbelief about some testimony or fact discovered about an insurance company's practices. (I know I have to stop running down the hallway and causing possible harm to my colleagues). If I continue to be lucky, I will be doing this well into my 90's and never retire.

Craig Kubiak is lucky to have Kelly as his wife. Her children are lucky to have such a wonderful mother. We are lucky to have such a hard working, bright and passionate colleague to work with everyday.

Public adjusters play an important role in protecting insurance consumers in Texas. Attorneys from Merlin Law Group are proud to host a cocktail reception on November 16 at 6:30. I hope all public adjusters who can attend, will. The practice of public adjusting involves the public trust. These educational events are important aspects of the right to practice public adjusting and fulfilling the profession’s obligation to the policyholders we serve.

The Conference will be at the Hilton Dallas Lincoln Centre. Here is a link for registration.

Nicole will be back next week posting on her series regarding issues relating to public insurance adjusting.  This weekend, Nicole and Merlin Law Group’s Sandy Baldinelli are walking in Tampa Bay’s Susan G. Komen 3-day walk for the cure to breast cancer.  Nicole and Sandy are each walking 60 miles and together they have raised more than $4,600.00 to find a cure.

The record shows that the following, which is quoted as a never-to-be-emulated model of its kind...

The holding is important:

 …De Leon “refused” to respond to wholly impertinent and improper questions which had nothing to do with the merits of the claim. And we think he was right to do so. To hold in these circumstances, as did the trial court, that it was not necessary to file the action and thus that section 627.428 is inapplicable, is to turn reality upon its head. What actually happened is that De Leon took [defense counsel] up on his challenge (and the propriety of his conduct of the sworn statement) and sued the company because, as was obvious, there was no other way to be paid. So far from being improperly employed, the statute was enacted for the very purpose presented by this case—to discourage the games insurance companies play.

The insurance defense counsel’s improper questions and the threatening conduct were not unusual. As many policyholders have experienced, this behavior during examinations under oath is standard operating procedure for many insurance defense lawyers. Hopefully, this opinion will curtail the games and abuse many policyholders with legitimate claims endure.

The Illinois case dates back to 1997 when it was filed in Williamson County. The suit alleged State Farm breached its contract with policyholders when it directed the use of non-original parts in vehicles damaged in crashes. A jury awarded $465 million to some State Farm customers. Williamson County Associate Judge John Speroni awarded $730 million to other policy holders.

In 2001, an intermediate Appellate Court affirmed the $1.05 billion judgment. As the case approached the Illinois Supreme Court, Karmeier threw his hat into what was one of the most expensive judicial elections in U.S. history.

Karmeier won that race, became a member of the Illinois Supreme Court and, after refusing to recuse himself from the case, voted to overturn the billion-dollar verdict against State Farm.

According to Cynthia Hsu, of the Strategist:

“At the time, it was known that Judge Karmeier received donations from State Farm during his judicial race. Karmeier declined to recuse himself.

The State Supreme Court analyzed the potential bias at the time, and found none. They thought State Farm had only raised $350,000 of Karmeier's donations.

Why would they think State Farm only raised $350,000? That's because $350,000 is the amount that State Farm told the court they donated when they were asked.”

According to reports, a FBI investigation discovered that State Farm actually funneled between $2.4 and $4 million in donations into Karmeier's judicial campaign.

Based on these reports, State Farm used policyholder premiums to defraud the Illinois justice system and essentially buy a verdict in Illinois. If these allegations are found to be true, our elected officials and Department of Insurance regulators should consider whether State Farm is a corporate citizen worthy of license to sell insurance. They should investigate how State Farm uses its vast wealth to influence government and the judiciary at the expense of its customers and the public trust.

Fasano said that he and Policyholders of Florida, a consumer advocacy group headed by former state Insurance Consumer Advocate Sean Shaw, are loading up 150-200 consumers on three buses to attend today's hearing, which will be held at 4 p.m. in Ballroom D at the Tampa Convention Center, 333 South Franklin St.

Under pressure from state leaders and consumer advocates, the Citizens Property Insurance board voted Monday to raise rates gradually for optional sinkhole insurance, instead of jacking them up right away by as much as 2,000 percent or more.

The decision, which would raise rates 50 percent in the first year, came on the eve of a hearing that state insurance regulators have scheduled Tuesday in Tampa to consider the rate request.

The board had voted in late July to raise sinkhole rates statewide by 430 percent on average to make them actuarially sound -- and by as much as 2,300 percent in Pinellas County. Tampa rates would have risen by 2,239 percent on . The Bay area has earned the nickname of "sinkhole alley" because of insurers' heavy losses on claims there.

The Citizens board's vote during its emergency Monday hearing by teleconference does not actually change its rate request. The state-backed insurer still plans to ask state Insurance Commissioner Kevin McCarty to approve the same increases.

The democratic process requires citizen involvement to work. I am happy my law firm is taking a role organizing such endeavors. People can make a difference in Tallahassee.

How about a little inspiration for those protesting:

 --my insurance coverage nerd personality drove me to research insurance coverage cases involving whipped cream or honey.

. . . Roberts began finding live honeybees inside their home. A few days after this discovery, Roberts noticed that a swarm of the insects had formed on their roof. Apparently the bees had made their way through the roof and were constructing a hive in Roberts' attic. A beekeeper was consulted but due to the inaccessible location of the hive, he could not extract the queen and thereby draw off the swarm. Instead, he recommended extermination.

A few days after the bees were dispatched, Roberts noticed honey dripping into their dining room. At first, this drip confined itself to one location, but gradually it began to spread and eventually encompassed the entire room. Apparently, after the bees were exterminated, the hive began to leak.

The Roberts posed their bitter sweet dilemma to their insurer. As indicated in The Dirty Secret of Exclusions Some Major Insurance Companies Like State Farm, Allstate, Nationwide and even USAA, Do Not Want You to Think About, major insurance companies rarely advertise how often their modern "all risk" insurance policies do not pay or provide "peace of mind." State Farm denied the Roberts' claim.

The Court noted the crucial insurance coverage interpretation issue as follows:

State Farm contends that the damage to Roberts' home was due to insects and clearly excluded from coverage by the terms of the policy. Roberts, on the other hand, maintain that the loss was not due to insects, but due to the absence of insects. They claim that after the bees were exterminated the hive began to melt and only then did the honey seepage begin. They therefore conclude that this was an “ensuing loss” from insects covered through the ensuing loss provision of their policy. They concede that the actual damage done by the bees themselves, i.e., the cost of tearing out hive and accompanying repairs is not covered. They dispute, however, that the damage to their dining room is not covered.

"Ensuing loss" provisions are the "Lazarus" clauses in property insurance policies, as discussed in Water Loss Denied? Ensuing Loss Provisions May Provide Coverage. Following that logic, the Court's legal discussion is significant and provides a sweet result for policyholders:

We note that the term “ensuing loss” is nowhere defined in the policy. Both parties have agreed, however, that the word “ensuing” means “to take place afterward ... to follow as a chance, likely, or necessary consequence: RESULT ... to follow in chronological succession.” ...Webster's Third New International Dictionary, 756 (1969) definition of the word “ensue”). We note that this definition of “ensue” is not without precedent. See Aetna Insurance Co. v. Getchell Steel Treating Co., 395 F.2d 12, 16 (8th Cir.1968) (“to follow as a chance, likely or necessary consequence: to take place afterwards”). Both parties have also agreed on the meaning of certain other language within the policy: both agree that bees are insects and both agree that a loss occurred. With these agreements in mind, we focus on the disputed provision. In shortened form, it reads:

We insure for all risks of physical loss to the property ... except for loss caused by:
....
6.... [bees]....
Any ... loss [taking place afterward or following as a chance, likely, or necessary consequence] from ... [bees] ... not excluded is covered.

We do not believe this language is ambiguous. It cannot be construed in more than one sense. The plain import of this language is that the loss, due to honey seepage, is an ensuing loss and is covered by the policy, unless one of the other various exclusions applies. Unless, for example, the honey seepage caused “marring” or “settling” or any one of the numerous other exclusions. (emphasis added)

We can all crave honey and similar legal results. How about A Taste of Honey:

If you are filing a claim under your homeowners policy because of Hurricane Irene or another loss, brace yourself: On major claims, it could take months to get through the whole process.

The article even suggested that businesses consider hiring a public insurance adjuster:

If you have a small business, consider hiring a public insurance adjuster to assess the damage and organize your claim, which might include inventory and repair costs. The public adjuster negotiates with your insurance company and typically takes about 10% of the claim as payment.

When the Wall Street Journal, a bastion of pro-business rhetoric, admits that the insurance industry takes months to pay claims and that policyholders will benefit from hiring public insurance adjusters, people should take notice and act accordingly.

All this reporting of slow paying insurance companies can be disheartening to policyholders. There are certainly more enjoyable slow rides than the claims process:

Greetings and Salutations!

You are invited to a kindergarten party on THURSDAY, SEPTEMBER 1,2011, at 10:00 a.m. in Courtroom 2 of the United States Courthouse, 200 W. Eighth Street, Austin, Texas.

The party will feature many exciting and informative lessons, including:

• How to telephone and communicate with a lawyer

• How to enter into reasonable agreements about deposition dates

• How to limit depositions to reasonable subject matter

• Why it is neither cute nor clever to attempt to quash a subpoena for technical failures of service when notice is reasonably given; and

• An advanced seminar on not wasting the time of a busy federal judge and his staff because you are unable to practice law at the level of a first year law student.

Invitation to this exclusive event is not RSVP. Please remember to bring a sack lunch! The United States Marshals have beds available if necessary, so you may wish to bring a toothbrush in case the party runs late.

Accordingly,

IT IS ORDERED that defense counsel Jonathan L. Woods, and movants' attorney Travis Barton, shall appear in Courtroom 2 of the United States Courthouse, 200 W. Eighth Street, Austin, Texas, on THURSDAY, SEPTEMBER 1, 2011, at 10:00 a.m., for a memorable and exciting event

We will have more information regarding insurance claims handling along the eastern seaboard and specific information regarding National Flood Insurance claims.

People who act as contractors for policyholders can negotiate insurance claims only if they are licensed attorneys or licensed public insurance adjusters. If properly licensed, they can negotiate only if they are retained by the policyholders. In jurisdictions that allow a contractor to work on and act as a public insurance adjuster on a single claim, I imagine some contractors are retained as both. A conflict of interest seems inherent in the dual roles, and virtually every Bar Association in America would prohibit an attorney from representing a client as a contractor and legal counsel at the same time.

As I noted in Failure to Communicate with the Insured's Contractor is Bad Faith, this does not mean that once a policyholder has retained a contractor or roofing contractor insurance adjusters should not seek out and consider their opinions. However, it is illegal for an insurance adjuster and roofing contractor to negotiate or adjust a policyholder's claim together.

The ad by All Star Roofing seems to indicate that after an insurance claim denial, policyholders should retain All Star Roofing to guide them through the claims process with the insurance company. The ad further indicates something about a "free roof program." My impression is that the first ad encourages policyholders to engage a non-lawyer for legal advice and help with an insurance claim or to engage a contractor to act as a public adjuster. This is the exact activity which the Arizona Department of Insurance warned against in the Contractors Cannot Legally Negotiate Insurance Claims post.

I have noticed a trend at insurance fraud seminars where insurance restoration contractors and roofers are discussed. The insurance restoration industry has exploded over the last dozen years. There are many legitimate players in that industry and some unprincipled players who will do anything to make money. For example, Comments on Unauthorized Public Adjusting noted how some construction contracts are deemed illegal public adjusting contracts by the California Department of Insurance. Problems arise in the insurance restoration industry because it is not licensed by the departments of insurance, and in many venues, there is no government oversight which protects the public at a time of crisis.

I think one of the best observations about this situation was made in Greenspan Public Adjuster Interviewed About Unauthorized Public Adjusting, where lawyer turned public adjuster Masood Kahn said:

We do not let our lawyers, doctors, real estate and insurance agents, etc. engage in their professions without being licensed. Even our mechanics and our hairstylists are regulated and held to a certain minimum standard. Accordingly, individuals negotiating and compromising the rights of policyholders, particularly after they have suffered a loss, must be regulated, licensed and held to a higher standard.

Unfortunately, there are an abundance of construction firms, water and smoke remediation firms, and accounting companies that are engaging in unauthorized public adjusting, and breaking the law regularly, mostly with impunity.
...

Unless a CPA is an employee of the insured, it’s illegal for them to represent a policyholder for compensation in the settlement of an insurance claim without a license. A CPA would be an improper person to measure inventory losses. Additionally, simply having a CPA designation will ensure he/she has the skills necessary to measure and adjust the business interruption aspect of the claim. An insured would need the skills of a forensic insurance accountant who has intimate knowledge of the particular business, and one who is skilled in representing policyholders.

Given the expected strength of Hurricane Irene, I am pretty certain that Gene Veno will make certain the South and North Carolina Departments of Insurance are aware of these important consumer protection issues.

Friday, September 16, 2011

2011 Food Symposium: Eating and the Law

8:30 AM: Registration

8:45 AM: Welcome — Elizabeth Williams, Southern Food and Beverage Museum, New Orleans, Louisiana

9:00 – 10:30 AM: Panel: Contemporary Issues in the Law of Restaurants

Panelists: William T Abbott, Attorney at Law, New Orleans, Louisiana; Alan Yacoubian, Johnson, Johnson, Barrios & Yacoubian and General Counsel of the Louisiana Restaurant Association, New Orleans, Louisiana

10:30 –10:45 AM: Break

10:45 – 12:15 AM: Panel: Issues in Obesity Law

Elizabeth Williams, Southern Food and Beverage Museum, New Orleans, Louisiana

12:15 – 12:30 PM: Break

12:30 – 1:30 PM: Keynote Speaker: Anticipating Manmade & Natural Disaster Trends That Impact Business
William “Chip” Merlin, The Merlin Law Firm, Tampa FL

1:30 – 2:00 PM: Lunch. Sponsored by The Merlin Law Firm, Tampa Florida. Chip Merlin will be available for questions during lunch.

2:00-3:30 PM: Panel: Food Law 2.0: Food & Law Beyond the Food, Drug, and Cosmetic Act

Panelists: Emily Broad Leib, Senior Clinical in the Health, Law, and Policy Clinic, Harvard Law School; Margaret McCabe Professor of Law and Director of Accreditation and Academic Integration, University of New Hampshire School of Law; Michael Roberts Adjunct Faculty, School of Law, University of California, Los Angeles

Moderator: Baylen Linnekin, Keeping Food Legal, Washington, DC

3:30 – 4:45 PM: Break

3:45 – 5:15 PM: Panel: Ethics in Food Law

Michael H. Idoyaga, Attorney at Law and Adjunct Faculty at Tulane University Law School, New Orleans, Louisiana

The topic of my speech is something that I have been studying for quite some time. Disasters are occurring with greater frequency with widespread financial impact; this is inevitable as the world’s population has increased and global trade is more frequent. Even when disasters occur far away or last for a relatively short period of time, we live in a globally interdependent society and are likely affected.

When disaster strikes directly, life as you know it is either put on a hold or is forever changed. A collaboratively designed contingency plan is paramount to survival and getting your business and life back on track. My plan is to share trends proving that insurance alone cannot provide peace of mind or guarantee that you will financially survive economic disasters. I plan to show how we can more fully prepare for disasters, and for some, how they can even profit from catastrophe.

For those that would like to attend the conference, here is the registration.

I suggest that readers take the time to read Preparation for the Hurricane Season Includes Insurance and Risk Reviews and pass it on to their friends. While I indicated in Chip, Where Are the Hurricanes Going to Hit?, that it is difficult to predict where these monsters will land, the odds seem to favor a major strike this year.

Take precautions and be safe.

FPCC is a dynamic two-day educational event for professionals from all aspects of the first party property insurance claims community. Offering 40 nationally recognized speakers, sponsors and exhibitors, and a minimum of 12 continuing education credits, FPCC provides high-quality education sessions and valuable networking opportunities for a reasonable cost to the first party claims community. Nearly 250 insurance professionals attended FPCC 2010, and attendance at FPCC 2011 is expected to be even greater!

I look forward to seeing you there. Click here to register.

• Sinkhole rate hike spurs rally

• Pasco, Hernando residents' sinkhole coverage outrage on display

• Tampa Bay residents rally against proposed Citizens Insurance rate hike

• Insurance customers protest new sinkhole rates

• Pasco Residents, Fasano Protest Proposed Sinkhole Insurance Rate Hike

• Outrage in Pasco over proposed insurance hikes

• Tampa Bay residents protest sinkhole rate increases

Florida Senator Mike Fasano had some very enlightening comments about our politicians' lack of concern for their policyholder constituents:

Is there no common sense left in Tallahassee? Why would they even imagine or even consider suggesting these types of rate increases when people, look at them here. There are senior citizens, working families who can barely take care of the bills they have today. They're going to lose their homes

…

That bill was signed into law by our Governor. It has barely gone into effect and we already see the consequences the people of this area will pay.

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 There are very few people in Tallahassee looking out for the little people.

Sean Shaw helped organize the event. He noted in Property Insurance Bill is presented to the Governor that these new insurance laws will harm policyholder interests:

I would argue that the majority of changes contained in SB 408 are anti-consumer -- the sinkhole and claims payment provisions in particular.

…

Lastly, although this bill is bad, the Legislative Session could have been a lot worse for insurance consumers of Florida. Thankfully, there were a lot of groups representing consumers in Tallahassee and the concerted effort to halt other anti-consumer legislation was successful. Hopefully, we can maintain the momentum.

While Shaw has maintained momentum through this protest, some politicians still parrot the insurance industry's propaganda that these laws were needed to curb fraud. State Representative Robert Schenck, a Republican representing the 44th district, voted for the original House bill. He explained his rationale doing so--"So if you guys want to know why we have so much trouble with sinkhole coverage in Hernando County, that's why. It's the rampant fraud."

Robert Schenck’s explanation is fraudulent, and he should apologize to his constituents for calling them insurance cheats. In Newspaper Questions Whether Politicians Favor the Insurance Industry Over Voters, I noted that politicians who are caught in bed with insurance industry lobbyists often resort to the “fraud” bogeyman as their excuse for voting for insurance industry interests to the detriment of their constituents:

I am amazed that after consumer advocates, including myself and Florida’s previous Insurance Consumer Advocate Sean Shaw, noted the lack of any concrete evidence that insurance fraud is forcing insurers to charge higher rates, lawmakers continue to parrot the insurance industry’s mantra. In essence, lawmakers are calling many of their own constituents who make insurance claims crooks, even though there is no evidence to suggest this is true.

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Do you think Representative John Legg’s unfortunate constituents who suffered a sinkhole loss would appreciate his intimating that they committed a fraud? Do you think Legg would want those unfortunate constituents to be made aware of his statement? Why should anybody make such a charge, a felony crime, against people with absolutely no proof? Many of these people have seen their largest investments-their homes-significantly damaged or effectively destroyed through no fault of their own. And, how does one create or fraudulently convince insurers of a sinkhole loss?

The truth is that there is a little, if any, evidence of insurance fraud. Premiums should have gone down because the laws Legg and other Legislators voted for took away benefits, and those Legislators changed the laws to make it much more difficult for their constituents to collect if they have a loss. As a result, all Floridians with legitimate losses will receive fewer benefits.

The truth will set you free.