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

Dan Luby forwarded me an article, “State Farm Will Continue Homeowners Insurance in Florida, Insurance Commissioner Predicts,” which indicated that:

State Farm might not pull out of Florida's homeowners insurance market after all, Florida Insurance Commissioner Kevin McCarty said…

McCarty said he's "cautiously optimistic" that State Farm will keep at least some of its homeowners policyholders in Florida. Bloomington, Ill.-based State Farm is Florida's largest private insurer of homes, and it said in January that it would stop writing property policies in Florida, where it covers 700,000 homes.

"We've really been having intense negotiations with the company at very high levels," McCarty said.

This morning, the St. Petersburg Times similarly reported the findings in “State Farm May Stay for Florida Homeowners.” The on-line article provided some plausible reasons for the change:

State Farm's threat to pull out came after the state rejected its request for an average rate increase of 47 percent. Since then:

• Insurance regulators have approved numerous homeowners rate increases across the state. Universal Property and Casualty, the second-biggest private insurer behind State Farm, got the green light for an average 14.6 percent increase.

• Citizens Property Insurance, the state-run insurer for those who cannot find coverage in the open market, was approved for an average 5.4 percent rate hike for its base homeowners' policies and has a pending request for an average 7.7 percent increase for high-risk properties.

• Regulators said State Farm Florida could eliminate or reduce some discounts it offers its policyholders, effectively increasing premiums for homeowners as much as 28.4 percent. The decision will bring in $278 million in additional premiums for the company after all policies come up for renewals starting Dec. 1.

• There's a growing backlash against state-mandated mitigation credits that property insurers must give to those who take steps to shore up their homes against potential hurricane damage.

Insurers have criticized the program for depleting their premiums and say it is susceptible to fraud. Citizens Property recently approved a controversial $60 million "emergency plan" to inspect for cases of fraud among 400,000 policyholders who have received credits.

Arguably one of the most significant changes: Regulators have toned down their rhetoric against State Farm and other insurers. Despite another mild hurricane season, McCarty recently said he is sympathetic that property insurers deserve increases because they are receiving less in premiums and paying more for reinsurance.

State Farm spokesman Chris Neal said his company appreciates the attitude change.

"The tone has changed from last January when we filed our withdrawal," he said. "At least we're talking.

As I indicated awhile ago, State Farm Must Love the Clash because of its indecision regarding this matter. It is obvious that State Farm was bullying Florida’s government into giving higher rate hikes. It is also obvious that this has been a bluff game for a long time where a corporation of immense wealth wants to continue in Florida but not lose face in compromising its position. The recent newpaper articles seem to confirm my September post, McCarty Claims State Farm Trying to Work Out Deal and Expects Property Insurance Rates to Go Up. I hope they can work something out.

The good litigation news last week for State Farm was the verdict of zero punitive damages in the Bossier vs. State Farm Katrina case. I would not equate the verdict with indicating that State Farm did nothing wrong—it underpaid its policyholder’s contents claim and forced a lawsuit for those benefits to get paid. The jury did rule that no further dwelling benefits were to be paid. Slabbed reported on this case in “While today’s Bossier verdict is still a rumor, chew on this!” and “Slabbed Scoops the News: Bossier gets nothing in Phase 2.”

I was aware of the case before the trial started and we provided the Bossiers’ very able counsel, Judy Guice, with some information and depositions in other matters. Certainly, we will talk with Judy and study the case. We will try to determine where arguments and evidence can be presented in a different manner to help provide a different result. We were pleased that Judge Senter allowed the issue of punitive damages to be presented to the jury.

I was thinking about these two different matters during the deposition because the catastrophe adjuster said that she could recall seeing only one structure in Mississippi that had any wind damage---even inland structures. She testified that she was instructed to determine the amount of pre-existing wind damage by going to the wind data for Bay St. Louis and Waveland to see if there were any strong gusts. She said she found no such data that suggested such strong wind speeds. So, she simply paid everything on flood claim which is under the National Flood Program and nothing for damage under the all-risk policy issued by State Farm.

Sounds crazy, right? Just about as crazy as thinking that State Farm really wanted to bankrupt its agents and stop doing business in Florida? I guess that reading about beating a customer’s punitive damage insurance claim in court and getting approval to raise customer rates in the newspapers is “good news” in the eyes of State Farm. And to most of us, I bet that sounds a little crazy as well.

I live in a world where words, and the subtle understanding of them, mean much financially to everybody involved, including myself. I personally had millions of dollars on the line advancing the costs of lawsuits in Mississippi. I was very much a partner with my clients advocating for coverage.

Corban is a big decision in my world. As I read the decision, most of my thoughts were upon others that have been through this huge legal mess. Unless you have lost everything and have had your insurance denied, it is hard to comprehend how frustrating being embroiled in a sea of insurance lawyers can be—it is a curse at best.

When I first started reading the case, I was silently cursing our firm’s knowledge manager for not indicating which side won the decision. Since some of the award was for the insurance company regarding the flood issue, maybe he could not figure it out. I am certain that some insurance company claims executives and their counsel will feign that this is “a win” because the storm surge and flood exclusions were found to be valid and applicable. I have never shared much hope for that legal position. I think my view regarding that issue prevented me and others with me from joining Dickie Scruggs’ group and his attempts for a class action lawsuit on that issue.

Yet, I knew that Judy Guice always advocated that view of flood being covered. When I read Anita Lee’s article this afternoon quoting from Judy Guice’s class action attorney, Richard “Flip” Phillips, I kept thinking about Judy advocating that flood was not excluded for a number of reasons. Judy Guice is a noble person and a worthy advocate. I am happy she uses her talents for policyholders and people rather than corporate and insurance company interests. She should be proud of the result. She has worked very hard for the people along the Mississippi Coast.

I also thought about my argument against Flip and Judy Guice about making the cases a class action. The federal courtroom was filled with journalists and I was pretty punishing about my views of how a class would hurt most policyholders. Honestly, class action status would have been a windfall for the attorneys, but a lopsided loss for the policyholders. I know Dickie Scruggs and I disagreed about that, but all you need to do is watch our clients, the Lees, to understand why I say that.

Slabbed was also on my mind while reading the decision. Their post, Insurance is a big think – Have you ever tried to think?, is something I can appreciate and strongly urge others to read and gain a better intellectual knowledge of the legal discussion in Corban.

There was an entire causation discussion in this decision where I was thinking about an attorney, David Rossmiller, who had nothing personally involved with the outcome of any of these cases. Rossmiller is a former journalist turned lawyer. I thought of Rossmiller teaching that many concurrent cases were truly not concurrent situations when the Corban court wrote:

No reasonable person can seriously dispute that if a loss occurs, caused by either a covered peril (wind) or an excluded peril (water), that particular loss is not changed by any subsequent cause or event. Nor can the loss be excluded after it has been suffered, as the right to be indemnified for a loss caused by a covered peril attaches at that point in time when the insured suffers deprivation of, physical damage to, or destruction of the property insured. An insurer cannot avoid its obligation to indemnify the insured based upon an event which occurs subsequent to the covered loss. The insured’s right to be indemnified for a covered loss vests at time of loss. Once the duty to indemnify arises, it cannot be extinguished by a successive cause or event…. The same principle applies in reverse. In the case of a loss caused by an excluded peril, that particular loss is not changed by any subsequent covered peril or event. Nor can that excluded loss become a covered loss, after it has been suffered.

…

Loss to property can consist of many losses because property can consist of many
elements, and ‘loss’ need not refer only to the totality of the damage and in fact should not when different forces have caused different damage.” Appleman on Insurance § 192.03[H] (2009) (emphasis added). The subject homeowner’s policy insures “for direct, physical loss” to property.

Rossmiller wrote this about the Corban case long before this decision in his post, Mississippi Supreme Court Asked to Interpret Anti-concurrent Cause in Interlocutory Appeal:

When I see something like this, I call it a "yeah but" moment. Yeah, but where's the analysis showing exactly how you think wind and water acted either concurrently or sequentially to cause the same damage? Those words, concurrently or sequentially, can have meaning only within the context of the clause's overarching purpose – to address multiple causes of the same loss. And if there ain't no same loss, they ain't no good.

So "concurrent" and "in sequence" have to have some specialized meaning within this context, or they make no sense -- they can't be used in a colloquial sense. Merely because one thing follows another does not give it the meaning of sequentially within this context, nor are two things concurrent in this context merely because the forces act at roughly the same time or act on the same physical element of property. You have to understand the purpose of those words, and once you do, it is relatively easy to see that Katrina wind and water were neither concurrent nor sequential. They can't be, because they didn't cause the same loss at the same time, they caused different losses to property at different times. It is not important that the same element of property was damaged by different forces twice -- they are still distinct and so any form of causation analysis used to sort out what is responsible for the same loss is irrelevant. I am still waiting for anyone to show me even one instance of Katrina wind and water acting concurrently or sequentially as I explain those terms. No one has yet, and I doubt anyone ever will.

The Corban Court obviously followed Rossmiller’s causation analysis. While he is not blogging any longer, his analysis is still respected among those of us that do this law day to day.

Thank God the Mississippi Supreme Court did not follow Nationwide’s analysis or nobody would have coverage for just about any cause of loss. Nationwide is not on Your Side unless you have an ownership interest in its profits. Beware if this is your insurance company. Their public claims of limited coverage in courts and lawsuits are very different than what that company advertises and leads customers to think is covered. The executives of Nationwide should be ashamed to have allowed their attorneys to argue what they did. The Mississippi justices singularly pointed out how harsh Nationwide’s interpretation was against the policyholder. This company obviously has an anti-customer attitude when it comes to claims. Buyer beware.

I wish this case came out two years ago. The Fifth Circuit should have allowed the Mississippi Supreme Court to decide these issues in the Leonard case, but it refused to place a certified question before the Mississippi Supreme Court at that time.

The bottom line is that this case is so long in the tooth that most Mississippi policyholders cannot benefit from it because most cases are finished. It is a rule of law that benefits a few and hurts a few because the vast majority of Katrina cases are settled, for better or worse.

Still, I keep wondering what I, and my clients, would have done had this case come out three years ago and followed Nationwide’s argument. We would have been in a world of hurt and true despair.