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

When Northern and Central California experiences wildfires, even if the local vineyards are not in immediate danger of burning, local wineries may keep careful watch as the smoke poses a danger to vineyard workers. Heavy smoke may cause delays for a winery and the smoke damage to a year’s crop can change the wine.

Los Angeles County has been plagued with arson fires. More than 50 blazes have flared since Friday in Hollywood, neighboring West Hollywood and the San Fernando Valley, causing about $3 million in damage. Although most of these fires were set in vehicles, a few blazes were set in buildings. Today, a suspect was taken into custody and charged. Southern California has not seen arson like this for years and it has brought terror to the surrounding neighborhoods. For each of these fire victims, they have lost property, and the arson will likely be covered under their insurance policies. However, the fear derived from such an act of arson lingers.

Whether it is a wildfire or an arson fire, the loss is the same. Fire consumes a home or vehicle in minutes, leaving little to nothing but salvage. Submitting a claim to an insurer for destruction from a wildfire or arson is pretty much the same as submitting any other claim for a total loss. An insured must report the claim in a timely manner and submit to any preconditions of coverage such as providing a sworn affidavit of a proof of loss or submitting to an examination under oath.

In these instances, it is incredibly important to be able to inventory the loss for the insurer. For example, a claim might not only include a vehicle damaged in a fire, but also the contents of the vehicle, such as laptops or luggage.

Putting a claim together can be difficult or confusing. Fortunately, United Policyholders has compiled several great resources for policyholders. You can order a copy of United Policyholders’ Disaster Relief Handbook and Household Inventory Guide here.

After hurricanes have affected a region, homeowners and businesses are advised to have a licensed professional roofer examine their roofs in the expectation that hurricane winds may cause damage. In many instances after Hurricane Ike went through Texas, businesses and homeowners didn’t know that the gale-force winds extensively damaged their roofs until months down the road when the rainy season began. The rains came and suddenly business owners and homeowners discovered that the winds formed cracks in the membrane of their roofs and caused minute ripples, which allow water to seep into structures. Over a course of a few months, relatively young roofs deteriorated quickly with the rain, turning the roof into a total loss.

There are many different types of roofs, and they are all rated for a certain amount of years depending on the type of material the roof is made out of and what kind of conditions (or region) the roof is expected to weather. In Southern California, a roof can be rated a 10, 20 or 30 year roof. After the strong Santa Ana gusts last week, building owners may want a professional to examine their roofs to see if any repairs should be reported to their insurance companies. In particular, roofs over 10 years old, may be more susceptible to strong winds. Winds may cause buckling or bring off tiles which cover the felt underneath. If the winds caused severe cracks or loosened too many seams, rain may come into a building, or a roof may be damaged enough to collapse.

A professional roofer can identify cracks and loose seams which we may not be readily seen. In the long run, a proper examination may be the difference between a few leaks and a roof collapse. Southern California is about to enter its winter rainy season.

More information on how an insured home or business owner may find help in dealing with wind related claims may be found at the non-profit insurance consumer protection organization, United Policyholders.

Stan got his start in the insurance industry in 1950 when he was only 20 years old. He was a college student on scholarship, working weekends scoping auto claims for his uncle, a well known insurance broker in New Jersey. Stan was known as a “runner” – he was paid five dollars for every claim he worked. On a given weekend, he could make twenty to thirty five dollars evaluating the automobiles, taking photos, and summarizing the damages.

Stan graduated from St. Paul College and went on to become an insurance agent. He was quickly promoted to managing agent. In 1956, Stan became a public insurance adjuster, starting first in New Jersey, and then expanding his business to five states --80 public adjusters strong.

Stan Kaufman worked approximately 30,000 claims on the East Coast before expanding to California. Stan was challenged in California. Back East, business was done with a handshake. Stan and other public adjusters built solid reputations and were respected by many insurance company representatives. Stan was known in the community for helping people navigate the muddy waters of insurance coverage. But after moving west, Stan encountered resistance when he was adjusting claims. Insurance companies and police and fire departments did not understand his role. The communities weren’t as familiar with the good work of public adjusters. Stan explained that in the beginning of his career in California, the competition between public adjusters was intense and caused a divide between policyholder representatives. Seeing an opportunity to improve the industry, Stan started gathering the troops.

Stan formed the California Association of Public Insurance Adjusters in 1976. CAPIA held monthly Saturday morning meetings. At every CAPIA event, Stan said he has pushed for CAPIA members to follow three key principles:

1. Brotherhood. Professional Public Adjusters should work together. Public adjusters should interact with each other on a claim with respect. Respecting the profession includes following a first-come, first-serve approach when several adjusters arrive on a loss site. Adjusters should join together to help protect policyholders.
2. Education is fundamental. Each CAPIA meeting features experts who discuss relevant insurance topics.
3. Socialize. The monthly meetings, originally held over breakfast, allowed the adjusters the opportunity to build up a sense of camaraderie.

Currently, CAPIA’s headquarters is in Los Angeles, California, and the association promotes professional public adjuster education and employs lobbyists throughout the Los Angeles area to protect the interests of the industry and the insureds.

Jeff Sjobring, vice president of CAPIA, said the association plans to honor Stan with a plaque, recognizing Stan’s lifelong hard work and dedication to the initiation and preservation of CAPIA at their August 5, 2011 Bi-Monthly meeting in Simi Valley.

For more information on how to join CAPIA, Jeff encourages licensed public adjusters to go to the CAPIA website at www.capiainc.com to contact the association. To be considered for membership, persons must be licensed by the California Department of Insurance and adhere to the CAPIA Code of Ethics. To be considered for affiliate membership, a person must be employed by a company or firm engaged in the business which serves the best interests of Insureds.

For directions to the August 5, 2011 meeting, where the featured speaker will be Amy Bach Esq., of United Policyholders, go to: http://www.lostcanyons.com/facility_directions.php. All Public Adjusters are welcome. Admission is the cost of lunch. Applications to join CAPIA will be available at the meeting.

This would be a great chance to meet Stan. After helping insureds for over 60 years, Stan has a wealth of knowledge concerning the principles and application of insurance coverage, and he is willing to share his knowledge in every way that helps policyholders.

United Policyholders (UP) has often filed amicus briefs in insurance related cases. Their goal is to provide judges with a balanced perspective when they review cases involving insurance questions. As described by United Policyholders,

Amicus curiae (friend of the court) briefs are the vehicle through which interested parties other than the parties in a case make points for reviewing judges to consider. Judicial decisions define insurance consumers' rights and insurance companies' obligations, so they are critically important and have long-lasting impact.

UP points out that insurance companies and their associations routinely inundate reviewing courts with briefs arguing their views. In the majority of cases, judges get no briefs at all that advance the perspective of insureds/insurance consumers. Predictably, the results often favor the insurance industry. UP is striving to change this imbalance through their Amicus Project.

In the appeal of Woodham, Marc Ladd, from the New York office of Anderson Kill & Olick, wrote the pro bono brief. The issues on appeal are whether Allstate’s 180 day policy language violates New York’s Standard Fire Policy and whether Allstate’s 180-day policy language is ambiguous.

As background, Thomas Woodhams and Charlene Connors suffered a fire loss to their property in 2007. The necessary building permit took 180 days to be issued. They asked Allstate for an extension but, because they could not complete repairs within 180 days, Allstate would pay no more than the actual cash value of the loss. In total, Allstate refused to pay over $58,000 in replacement costs.

In litigation, Allstate argued policy required the repairs to be completed within 180 days. The insureds disagreed with this interpretation and argued that policy provisions violate New York’s statute for fire payment claims.

New York Statute §3404 on standard fire insurance policy provides that insured parties shall be entitled to:

TO THE LESSER AMOUNT OF EITHER:

1. THE ACTUAL CASH VALUE OF THE PROPERTY AT THE TIME OF THE LOSS, OR

2. THE AMOUNT WHICH IT WOULD COST TO REPAIR OR REPLACE THE PROPERTY WITH MATERIAL OF LIKE KIND AND QUALITY WITHIN A REASONABLE TIME AFTER SUCH LOSS, WITHOUT ALLOWANCE FOR ANY INCREASED COST OF REPAIR OR RECONSTRUCTION BY REASON OF ANY ORDINANCE OR LAW REGULATING CONSTRUCTION OR REPAIR, AND WITHOUT COMPENSATION FOR LOSS RESULTING FROM INTERRUPTION OF BUSINESS OR MANUFACTURE, OR

3. TO AN AMOUNT NOT EXCEEDING ................ DOLLARS, BUT IN ANY EVENT FOR NO MORE THAN THE INTEREST OF THE INSURED, AGAINST ALL DIRECT LOSS BY FIRE, LIGHTNING AND BY REMOVAL FROM PREMISES ENDANGERED BY THE PERILS INSURED AGAINST IN THIS POLICY, EXCEPT AS HEREINAFTER PROVIDED, to the property described hereinafter while located or contained as described in this policy, or pro rata for five days at each proper place to which any of the property shall necessarily be removed for preservation from the perils insured against in this policy, but not elsewhere.

In the early 1990s, Allstate changed the language in its property damage policies regarding coverage of replacement or repair costs. Prior to the change, the language read:

If you decide not to repair or replace the damage[d] property, settlement will be on an actual cash value basis, not to exceed the limit of liability applicable to the building. You may make claim within 180 days after the date of the loss for any additional payment on a replacement cost basis if you repair the damaged property.

In the initial action against Allstate, the policyholders point out that this language only required a policyholder to make a claim for this additional replacement cost coverage within 180 days of the date of loss. It did not require that repairs be completed within any period of time.

In the mid-'90s, Allstate revised this policy to state the following:

If you do not ... repair or replace the damage[d] building structure, payment will be on an actual cash value basis…You may make claim for additional payment ... if you repair or replace the damaged, destroyed, or stolen covered property within 180 days of the actual cash value payment.

The policy also stated that:

When the policy provisions conflict with the statutes of the state in which the residence premises is located, the provisions are amended to conform to such statutes.

In 1994, The New York State Insurance Department (NYSID) approved this language, and since then, Allstate has issued policies with this language.

In New York, policies that provide coverage for loss by fire must either conform to the standard fire policy, or be approved by NYSID and must include terms and provisions that are no less favorable to the insured than those contained in the standard fire policy.

In the complaint, the insureds argued that the relevant terms of Allstate's policies provide “less favorable” coverage than the standard fire policy.

The insureds filed suit in New York state court, but the case was later removed to the United States District Court for the Southern District of New York in New York City. The case never proceeded to the discovery phase because Allstate’s motion to dismiss was granted. On September 28, 2010, Judge Koeltl issued his Opinion and Order dismissing all claims without prejudice and judgment was entered on September 30, 2010. The insureds appealed, and the matter is still pending in the United States Court of Appeals for the Second Circuit.

Next Saturday, I will write about the arguments raised by the policyholders against the language of Allstate’s policy and the arguments raised on behalf of policyholders in the amicus brief.

Jefferson Dodge at BoulderWeekly discussed this problem in his article, Burned again- Fourmile Fire Victim Report Problems Getting Insurance Money. Dodge explained, “many Fourmile victims were unaware they were ‘under-insured.’ either because they hadn’t updated their policy in decades or were sold less insurance than they actually needed.” Lewis Perkins serves as one example. Perkins lost his home in the fire but doesn’t have enough coverage to rebuild the home he once had. At the time of the loss, the assessed value of his home was $210,000.00 but Perkins only received $91,000.00 for the structure damages. Perkins explained that he relied on his insurance company for proper coverage, after being insured with Nationwide for 26 years, Perkins thought he was covered: “I thought if you bought insurance, it would take care of things.” Another Colorado resident ran into a similar problem, but Nana Will thought she had performed her due diligence as an informed consumer when she checked on her coverage amounts after upgrading her home. In January 2010, after Will added solar panels to her home she notified Safeco. Safeco advised that so long as the system did not exceed $50,000.00 the coverage she had in place was appropriate. The solar system was less, but Will states the coverage she had in place during the September fire was inadequate; Safeco has issued payment far less than the amount needed for reconstruction.

As mentioned in Part I of this post, public adjuster Scott deLuise and others are attempting to help the policyholders who have suffered as a result of this fire.

One way public adjusters can help in times of catastrophe, as demonstrated by deLuise, is by reaching out to United Policyholders (UP).

Karen Reimus, of UP, explained that in cases of natural disaster underinsurance is the number one problem facing families who have lost their homes. Before a loss, UP suggests homeowners examine their policies closely and provides a practical math equation to see if more coverage should be purchased. Evaluate the structure limit on the home and compare this figure to the cost per-square-foot needed to rebuild a new home in your specific area. If this coverage is too low, higher limits need to be purchased for structure coverage and most likely for each coverages provided under the policy. UP’s website provides other practical tips for policyholders that can help before a loss happens.

• Make a personal property inventory
• Take pictures of your belongings
• Keep a record of your items and important papers somewhere safe (besides inside your home)

The recommendations Reimus makes are sound. She came to learn about issues with her own insurance company first-hand when she lost her home in a 2003 California fire. Reimus’ home had been purchased just four months before the loss. At the time the policy was issued, Reimus asked her agent questions about the amount of coverage but she was still a victim of underinsurance. Reimus states that carriers underinsure homes intentionally to minimize their exposure and protect their market share by making premiums competitive. The problems show up for the policyholders in cases of disaster and total loss scenarios.

To help local fire victims in Colorado with this problem and others, Karen Reimus is holding a monthly series of workshops. To learn more practical tips or additional information about the situation in Colorado visit www.unitedpolicyholders/disaster.com

DeLuise prepared the claim on behalf of Onysko, and during the evaluation of the damages, he learned from an industrial hygienist that the insulation and the walls of the property were damaged by smoke. In order to replace the insulation, the insured must remove the sheetrock or take the siding off from the outside.

According to the news report, Farmers’s spokeman, Mark Toohey, said the company has already paid for a deodorizing technique to treat the damages inside the walls. After being contacted by 7News, a Farmers representative said they would visit the loss again. As of the time of his post, however, Farmers would not agree to appraise the damages with the insured.

Dayle Cedars reported that the Colorado Division of Insurance considers appraisal proper “only when there are discrepancies concerning value, the actual cost of an item or items. In situations where the ‘scope’ of the claim is in question, a third party is not required. The Division of Insurance cannot force an insurance company to pay a claim or to go through the appraisal process with a third party, known as an umpire.”

Many policies provide for appraisal when there is a disagreement regarding the amount of the loss. To set the amount of loss, the scope of damages should to be reviewed by the appraisers and the umpire. Thus, it seems the Division of Insurance’s limitation of appraisal to exclude scope of damages is off base.

The Colorado Department of Regulatory Agencies Division of Insurance’s bulletin, Insurer Requirements Related to Disputed Claims Subject to Appraisal, does not specifically exclude evaluating the scope of damages in an appraisal. It states “most, if not all, property insurance policy contracts include an appraisal clause which may be invoked if there is a dispute between the insured and the insurer regarding a coverage determination, the claim handling process, or the settlement amount.”

Unfortunately, Joshua Onysko is not alone in his fight against his insurance company. The reporter for 7News uncovered 18 others who were having problems. Scott deLuise explained that United Policyholders has been actively helping the victims of the fire loss learn more about insurance. Amy Bach, of United Policyholders, advised that her group is partnering with the County of Boulder to host a series of educational workshops. The next workshop will be held on Monday, January 10, 2011. The information provided to the policyholders from the last educational session is available here.

Next week, my post will feature more information about the situation in Boulder.

The full interview is available here.

In the unpublished section of the interview, Khan weighed in on why hiring a public insurance adjuster is beneficial. Recently, PAs have been under an even hotter fire than usual and, in light of all the negative news, it is refreshing to see a qualified public adjuster get the spotlight from a non-profit consumer organization.

Here is a portion of the interview:

AB: How can public adjusters get more money out of an insurance company than a policyholder can get on their own?

MK: It is simple. We level the playing field. If an insurance company adjuster told an insured following a fire to his 3,000 square foot house occupied by only two people, that what is standard in such a case is a one or two bedroom apartment or house, would he know if the information was correct? Would he know where to go to challenge it? There can be hundreds of issues on every claim where knowledge, background, expertise, experience and tenacity come together over and over again to get a policy holder more than he can on his own. It is the insurance company adjuster’s job to protect his principal. He does so by paying as little as possible. Having him represent both sides, considering he gets paid by the insurance company, makes no sense. We see to it that the policy holder is on equal footing. It requires availability of proper resources, knowledge, expertise, experience, perseverance, creativity, and just being proactive. Expertise comes with time, and through experience dealing with different types of claims and issues in a variety of ways.

AB: I’ve heard critics say that public adjusters justify their fee by padding the numbers. What is your response to that?

MK: No insurance company will ever pay a client more than they are owed after the carrier is absolutely convinced of the obligation. Any public adjuster that “pads” a claim is only asking for a protracted and long drawn out adjustment that will hurt their client as well as the public adjuster’s own reputation. This will ultimately result in a reduction in business for the public adjuster.

Every industry has bad eggs. I’ve had a philosophy that has worked for me on both sides: being aggressive, defensible and reasonable. That is why it is critical that the DOI license and regulate anyone who engages in representing a policyholder in a first-party claim.

At Greenspan we add value through our expertise with properly and accurately measuring insurance claims. We have in-house inventory specialists who go through a damaged site, and physically count every T-shirt, sock, pencil and makeup, or whatever articles you’ve got. Our building estimators have construction backgrounds and know how to properly cost what it takes to put a property back to its pre-loss condition. And, our in-house accountants and CPAs have tremendous insight on the working of numerous types of companies that allow them to accurately schedule a business interruption claim. Finally, having public adjusters who zealously advocate the policyholder’s right to fair and just indemnity under the policy is critical. That is how a public adjuster should add value.

Masood Khan previously practiced law, primarily representing insurers. Khan now represents policyholders as a public adjuster and is a vice president of Greenspan Adjusters International, in their South San Francisco office.

Masood Khan is no stranger to the law. He is a licensed California attorney who found his calling in public adjusting. He has made a point of telling me that he does not practice law in his dealings with insurers. Masood is delightful and very engaging. I have enjoyed working with him on matters where legal representation was required to get a claim fairly paid. I hope he will take a more active role in the leadership of public adjusting because his background and views about the role of adjusters are insightful.

Here are some of his comments about unauthorized public adjusting:

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.

The legal audit departments of some major accounting firms and publicly traded consulting companies probably have good cause to be concerned about this interview. United Policyholders' newsletters are read by the various departments of insurance. It does not take a genius to figure out that an enforcement officer of any department of insurance could simply look on the web to find those people that cannot legally practice public adjusting, but advertise that they provide those services. I am surprised that more public adjusters do not file a criminal notice or complaint. It does not take much to start a mandatory criminal investigation in many states.

So, in the spirit of "The Clash" between public adjusters and those hoping not to get arrested, this song seems an appropriate warning:

 

Examinations under oath are often not needed if the insurance company has only non-fraudulent concerns. Discussion and exchange of information is far quicker and much more in depth than the typical questions and answers in most examinations under oath. Insurance adjusters, claims managers and their attorneys must know must know this, so the only real reason for examinations under oath is to help the insurance company attorneys make final coverage suggestions before their claims managers make the decision.

Corey Harris wrote an excellent piece in When Can An Insurer Require An Examination Under Oath? Readers should note that this post involves Florida law and many states have different case law, regulations and statutes that may apply. Most regulations and statutes require insurers to quickly invoke examination requests or lose the right. United Policyholders remarked in Examinations Under Oath on the various consumer protections regulations and statutes that are needed to keep insurers acting in good faith:

Companies use this procedure to screen out fraudulent claims and test a policyholder’s credibility and/or evaluate what kind of a witness he or she will make if a claim or coverage dispute goes into litigation. The EUO procedure was abused by insurers after past disasters to intimidate and frighten policyholders. So United Policyholders helped pass legislation in California to stop the abuses and protect policyholders. (empahsis added) But the EUO procedure is still a legal and valid requirement in homeowners policies, and the law in most states is vague on the subject. A homeowner who makes a claim for policy benefits must cooperate when an insurer makes a reasonable request to examine them under oath or risk losing the right to recover the funds they’re entitled to. Courts have traditionally been hard on policyholders who refused to cooperate in EUOs.

In California and in most states there are “Fair Claim Handling Regulations”, and there are laws that tell insurers what they must, can and cannot do. Above all, your insurance company has the legal duty to investigate and process your claim fully, promptly and in good faith and deal with you fairly.

Florida and other states in the Southeast need more consumer protections to prevent and discourage the delays that routinely occur when some insurers’ investigations seem to last forever and do not lead to a claims decision, but further excuses for more delay--- usually the excuses of needing and analyzing more information. Some insurers are trying to avoid this by re-writing policies with increasing and detailed conditions precedent.

Nevertheless, Corey Harris correctly notes the general majority rule: Examinations Under Oath should be demanded timely, before payment or denial, and definitely before a properly filed lawsuit where the insurer had not reqested an examination. His discussion gets to the heart of the matter:

...the Court ruled that because the insurer had requested the examination under oath prior to the lawsuit, the examination under oath was a condition precedent to filing suit. Therefore, the Court determined that the insured had breached the contract and was not entitled to payment under the policy.

A much different scenario exists when the insurer does not request an examination under oath prior to the lawsuit being filed. This situation arose in Willis v. Bankers Insurance Company, 736 So.2d 1272 (Fla. 4th DCA 1999). In Willis, the Court distinguished the facts in Goldman because of the time when the examination under oath was requested. Since the insurer did not request the examination under oath until after the suit was filed, the court held that the examination under oath was not a condition precedent to filing suit. Therefore, the insured in Willis did not breach the contract by refusing to sit for the examination under oath.

In The Mind Of The Insurance Fraud Adjuster And Investigator, I made the following remarks:

Some may question why I spend time studying the insurance company's perspective. From my viewpoint, even a broken clock is right twice a day. And, I need to understand the mind of my opponent and anticipate his actions to do a better job for my clients.
...

Guy "Sandy" Burnette invited me to speak at the International Association of Special Investigation Units over a decade ago. I was the token insurance attorney for policyholders. During my presentation, I cautioned that the two major human problems facing fraud investigators would be the issue of wrongly accusing innocent people of fraud and the tendency of some in an investigative role to view everybody as a potential crook. Well meaning or not, seventeenth century witch hunts can be repeated by modern groups. If all you concentrate upon in life is uncovering fraud, you may start seeing signs of it everywhere.

When I get called about possibly working on a case where a claim is dragging along and a possibility of an examination exists, getting the insurance company to act promptly and in good faith becomes paramount. Asking who opposes the claim, why the claim has not been paid, whether there is any concern about fraud and, if so, what those fraudulent issues are, and demanding that information be exchanged informally or through a prompt examination under oath moves the matter along. These demands should be made politely and cooperatively, trying to get payment while still pointing out the seriousness of not having a prompt adjustment.

The National Law Journal picked up on this in Florida Insurance Case Could Set Precedent for Hurricane Claims when it noted:

The case came before the justices when the 11th U.S. Circuit Court of Appeals certified five questions of state law to the Florida court.

The biggest issue: Does Florida recognize a claim for breach of implied warranty of good faith and fair dealing? If so, must the claim be brought after the fact like a bad faith claim?

The justices did not seem convinced that lack of good faith and bad faith were separate issues. Justice Charles Canady, who replaced Cantero on the court, said, "What I'm hearing is a distinction without a difference."

Justice Barbara Pariente told Rogow that it's "a little disingenuous" to say it's not a bad faith claim but a lack of good faith claim. (emphasis added)

I agree with the justices. And, it didn't have to be argued that way. We filed an Amicus brief on behalf of United Policyholders in the case. As indicated in A Common Law Remedy For Lack Of Good Faith And Fair Dealing Is Before The Florida Supreme Court, the simple argument is:

Nowhere is the contractual concept of an "implied warranty of good faith and fair dealing" more important than in the insurance setting, due to the unique nature of the product and the disparate circumstances of the parties to the contract. Although Florida courts have previously and explicitly recognized a common law claim arising from the nature of an insurer's obligation to its insured in the third party setting, Florida should join the majority of states that recognize a common law remedy for damages caused by first party insurers breaching their recognized obligations of good faith and fair dealing.

Legislation passed in Florida recognizes the obligation of insurers to act in the utmost of good faith and fair dealing to their insureds. § 624.155, Fla. Stat., and § 626.9541, Fla. Stat. These obligations are further evidenced by pertinent portions of the Florida Administrative Code, requiring claims adjusters to provide ethical and good faith treatment to policyholders. The insurance industry recognizes its obligation to act in the utmost of good faith and fair dealing as evidenced in the training and reference textbooks for claims handlers and in internal claims handling documents prepared by individual insurance companies. Since Florida public policy, demonstrated in legislation and regulation, recognize a duty of good faith, and even the insurance industry recognizes such a duty, it would be a strange quirk in Florida common law for it to not to recognize what everybody else is requiring insurers to do-act in accordance of a duty of good faith and fair dealing to its own customers.

Florida should align itself with that majority of states, and allow this important alternative remedy to stand.

Here is the link to the Oral Argument. The relevant argument starts at 1:39.

Here is QBE's Brief.

Here is Chalfonte's Brief.

The January Claims Tips explained how policyholders can effectively communicate with their insurance company adjusters following a loss. For many policyholders, ineffective communications leads to delayed claims or underpaid claims. The tips provide some practical suggestions that I recommend all claimants consider:

Effectively communicating with your insurance company is an incredibly important part of the claims process. Many insurance companies will try to handle your claim by telephone, with no records. You must make sure that everything in the claim gets documented in writing. How you communicate makes a world of difference in the amount of benefits you collect and how fast you collect them. We recommend that you:

1. Document every communication with your insurance company in a notebook or diary so you can keep track of the status of your claim.

2. Create a paper trail. Confirm representations and promises made in person or over the phone by insurance company personnel by sending them a short follow-up email or letter.

3. Use good grammar, punctuation and capitalization. Promptly respond to letters and requests if they are unreasonable. If they are, say so, in writing.

4. Be proactive: Give your insurer proof of your losses and ask for the dollar amounts you are entitled to. Don’t wait for them to tell you how much they owe you.

5. Use specific instances of improper conduct by your adjuster or insurer as leverage to negotiate the settlement you need. Your diary will come in handy.

6. Don’t mistake a friendly claim adjuster for a friend. Remember you’re in a business negotiation. Keep it professional.

7. Don’t use your insurance company as an outlet to vent frustrations and emotions related to the original cause of your loss.

8. Remember that everything you write and say may be noted in the insurance company’s records. Even if you’re frustrated, avoid saying or writing things that will make you seem uncooperative or the cause of delays or problems.

9. Don’t sign a confidentiality or non-disclosure agreement without consulting with an attorney. Agreeing to an overly broad or premature non-disclosure agreement can significantly reduce your leverage and ability to obtain full policy benefits.

10. Attitude is Everything: Be Polite, Be Prompt, Be Persistent.

This is great advice. I would add to number 9 that a policyholder should never sign a release without first consulting an attorney. Policyholders filing a claim with their own insurance company for a property damage are almost never required to sign a release to obtain payment, unless the matter is in litigation.

The United Policyholders site has hundreds of valuable tips and information about every imaginable type of claim. I consult it on a regular basis and have spent hours reading its seemingly unending library of claims information. Amy Bach, United Policyholders Executive Director, has accumulated and organized a very valuable site for anybody with a claims question or who may be looking to become more involved in the advocacy for policyholders.

Most people never admit they made a mistake, even after reflecting upon it and knowing they have. I make plenty of them everyday and made one in Friday afternoon's post, Amy Bach and United Policyholders Supports Mississippi Insurance Protections by not pointing out that the proposed Mississippi legislation may not accomplish enough to be worth anything and is worded incorrectly. Slabbed fairly slammed my post in "Merlin – Amy Bach and United Policyholders Supports Mississippi Insurance Protection" for failing to point this out, as they did in "Watered Down Policyholder Legislation Still Hanging on in the Mississippi Legislature."

Mississippi already has a very limited Policyholder Bill of Rights. I feel that the proposed requirement that the Policyholder Bill of Rights "must include a provision establishing reasonable time frames for the processing and payment of homeowners insurance claims" is something very worthwhile because delay of payment is the most common complaint of insureds following a loss. I also believe that eliminating the citation to the Fifth Circuit Court of Appeals decision in Leonard vs. Nationwide, 499 F.3d 419 (5th Cir. 2007), in the current Policyholder Bill of Rights is a valid change by substituting the language:

If a policyholder sues to recover under the insurance policy, the insurance company has the burden of proof as to the application of any exclusion in the policy and any exception to or other avoidance of coverage claimed by the insurer.

However, the following language in the proposed bill makes no sense:

Unless based on sound actuarial principles, an insurance company may not treat a policyholder differently from other individuals of the same class and essentially the same hazard when evaluating a claim.

Actuarial principles typically apply to rates and underwriting. They never apply to claims handling. Here are a couple of examples of how a slight modification of the proposed language may help policyholders:

Unless based on sound actuarial principles, an insurance company may not treat a policyholder differently from other individuals of the same class and essentially the same hazard when underwriting a policy.

or

Unless based on sound actuarial principles, an insurance company may not treat a policyholder differently from other individuals of the same class and essentially the same hazard when evaluating whether an application for insurance is acceptable.

So, is the quest of one motivated private individual, Kevin Buckel, to get a revised Policyholder Bill of Rights a practical attempt to add a little meaningful law for policyholders (assuming the wrong language can be corrected) or a Don Quixote waste of time that does more harm than good, as Slabbed suggests? Could it be a little of both?

United Policyholders noted Kevin Buckel in its 2007 Newsletter:

One person making a difference in Mississippi:
During the summer you’ll find Kevin Buckel keeping kids safe at the water park he manages, but since Katrina blew his home away, he’s become a self-taught citizen lobbyist working to enact a Policyholders Bill of Rights in his home state. With drafting and strategy help from UP, he’s refined the bill and is connecting with other MS citizens working to strengthen protections for policyholders in that state.

Visit Kevin’s site to read his proposal: http://www.msbillofrights.com/msinsurancebillforus.html, and check out “Homeowner Rights Battleground”
http://www.gulfcoastnews.com/GCNnewsHomeownersRightsBattleground.htm.

I give credit to Slabbed for demanding that my posts are accurate and that laws are written to make sense and advance justice. I also give all the credit to non-professional lobbyists, such as Buckel, who are actually meeting with our representatives, writing proposed legislation to advance policyholder rights, and trying to encourage others to take time and participate in our democracy. Policyholders need all the help we can get to protect our rights against the army of lawyers, public relation consultants, and governmental affairs types that the insurance industry has lobbying full-time in every state legislature.

In a letter to Mississippi Insurance Commissioner Chaney, Amy Bach calls on him to support policyholders in Mississippi with regulations demanding that insurers sell and service the insurance product so that full and prompt indemnity is accomplished. Here is what she calling on Chaney to do:

I’m writing to encourage you to lend your support to a legislative measure that passed out of the Mississippi House of Representatives earlier this week. My understanding is that the bill has been amended to address concerns you raised to the sponsor. The bill will strengthen legal protections for insured property owners in your state, and we hope your office will help get it enacted. You know all too well about the problems people have experienced in getting paid on their hurricane damage claims due to confusing legalese in property policies and unanticipated exclusions.

I am certain many may think these efforts are a waste of time because the insurance lobby in Mississippi seems to be in control of the political process. Standing up for the right principle and social policy is always the right thing to do. Like water in a stream relentlessly influencing the earth, just social policy reflected in law will eventually happen. But this will occur only so long as we stand up to those with more significant wealth or power that are attempting to keep the unjust status quo in place.

My hat is off to everybody who stands with Amy Bach and does something, however seemingly slight or unimportant, to help even the playing field for policyholders. In the long run, these efforts will prevail and be reflected in rules for accountability for the greater benefit of all.

Wall's very brief blog post noted that:

In King Cole Condominium Ass'n v. QBE Insurance Corp., (S.D. Fla. Opinion Filed January 5, 2010), a Federal Judge held that the collateral source rule does not preclude evidence regarding an Other Insurance Policy, issued by one USPlate Glass Insurance. Defendant QBE Insurance Corporation argued in that case "that the USPlate policy goes directly to the issue of whether Defendant breached its obligations to Plaintiff under the insurance contract." The Federal Court denied the Plaintiff's Motion in Limine to Preclude Evidence of the USPlate Policy:

“The Court agrees with Defendant. Defendant shall be permitted to introduce evidence relating to the USPlate Glass Insurance Policy as it relates to its obligations to Plaintiff and whether it breached the contract.”

The practice pointer for all insurance coverage attorneys is to follow up on the "plate glass coverage." Yet, the more interesting part of the decision, and the reason for my interest in this post, has to do with the recurrent theme that QBE hires the same experts and attorneys that claim the policyholder, usually a Condominium Association, is guilty of fraud. In almost every case that I know of where QBE has disputed the amount of the damage, QBE has hired the same set of experts and its attorneys argue that the condominium association is guilty of fraud because, in part, the association asks for amounts of damage higher than the amounts QBE’s experts estimated. Wall's blog failed to raise or note this issue which many policyholders would question.

QBE retains the same set of alleged expert witnesses in virtually every case, including engineer, Dan Laverich. In the same case Wall referenced, he made no mention of this or of the Court's opinion that such practice may be explained to a jury in order to question whether Laverich has an outcome oriented bias towards QBE. In his brief summary, Walls neglected to note that the Court ruled that the dollar amount paid to Laverich by QBE was clearly relevant to establish his "prejudice and bias" to provide opinions on behalf of QBE. I wonder why Wall did not comment on that part of the case?

QBE has been a subject of recent blog posts. Michelle Claverol noted a QBE decision worth reading in her post, Replacement Cost Value Coverage After a Claim Denial: Florida Valuation Issues, Part 6:

Likewise, in Vantage View v. QBE Ins. Corp., 2009 WL 536546 (S.D. Fla. March 3, 2009), the insurer denied the claim. The court, relying on Bailey, held that it is not “reasonably possible” for the insured to make repairs without receipt of the funds from the insurer and that the insured was therefore relieved from its obligation of repairing or replacing the damaged property before demanding replacement cost value.

The point of that blog is that QBE denied coverage and then has its attorneys argue that it would never be responsible for replacement cost coverage even if the insured prevails. Since the policy contemplates prompt payment of actual cash value benefits, how does an insured fully replace at replacement cost values without the insurer first paying the full amount of the actual cash value of the loss promptly? QBE was trying to get out of paying the replacement cost, even if it lost on the actual cash value coverage issue.

QBE may even significantly change longstanding Florida law to allow insurance lawsuits to be brought for the breach of good faith obligations at common law. As I noted in Common Law Good Faith Duty Before Florida Supreme Court, QBE has now placed the most important insurance consumer protection question before the Florida Supreme Court--I can imagine QBE’s insurance competitors and attorneys are wondering why. In that post, I noted:

QBE Insurance Corp. v. Chalfonte Condominium Apartment Ass'n., will be a landmark case in Florida. Mary Fortson and I have been working on an amicus brief on behalf of United Policyholders. My opinion is that it would not make sense for Florida law to not recognize the duty of good faith when every adjuster is trained from day one that insurers have such a duty. The duty of good faith and fair dealing is accepted as the most basic principal of an insurance company's primary obligation in the insurance industry.

Why in the world would a judge say that a good faith duty does not exist? To do so would not only be legally wrong, it would be factually wrong as well.

In A Common Law Remedy For Lack Of Good Faith And Fair Dealing Is Before The Florida Supreme Court, we uploaded our amicus brief on behalf of United Policyholders. There I argued:

Making an insurer accountable for causing additional damages that naturally flow from the breach of its mandated obligation of utmost good faith is good public policy and logically required if accountability is important to the law. Without accountability for breaches of these insurance good faith duties that most recognize as involving the public trust, the law would minimize these concepts and the importance of personal responsibility for insurers to do what they are obligated to do.

Does anybody, even Dennis Wall, disagree?

Sometimes, the best course of action is to take simple steps to solve a problem rather than a radical departure. Tweaking a process may be the best course of action rather than setting in motion an entire new process that creates additional and often unforeseen adverse consequences. If I had to suggest one thing to Sean Shaw regarding his recommendations, it would be: “keep it simple.” There were so many new ideas being espoused at the roundtable without thorough thought as to all the consequences, that I am afraid he and others at the Office of Insurance Regulation could promote a new policy which could end up being more harmful than good.

Assuming that appraisal is a mandatory requirement in all property insurance policies, I still like what I proposed in my post, A Method for Keeping the Appraisal Clause in Property Insurance Policies Which Will Satisfy All Concerns. I have no problem saying that I may be persuaded with a better idea, but I heard none yesterday that provided a simple solution. After listening to others, I have changed my opinion regarding the licensing of appraisers. I think that there should be licensing of appraisers to help protect consumers from unregulated individuals giving legal and claim advice.

Policy should be reflected in law and regulation that promotes quick and full payment of property insurance claims. The implied performance duties of an insurer to adjust the claim are found nowhere in the insurance contract. Regulators and judges must understand that law and regulation are the only methods of placing adjusting performance claims duties contractually upon insurers. I agree with the insurance executive that spoke during the public comment portion of the session who said there needs to be accountability when those duties applied to the contract are violated. The Prompt Payment requirements championed by Senator Jeff Atwater should have greater teeth and the obligations of good faith claim handling should always have an aspect of accountability when breached.

The California law which requires disclosure of the insurer’s claims file to the insured upon request should be adopted in Florida. I raised this point in the session and nobody seemed to disagree. The first party claims file is the most relevant evidence of how the insurer is evaluating the claim. It seems to work in California and there should be no reason why it would not work here. Why shouldn’t an insurer be honest with its customer and honestly share how the claim is being handled? Only cheating adjusters would be afraid of honesty and transparency.

The individual largely responsible for this California law is Amy Bach, the executive director of United Policyholders. The California law provides:

The insurer shall notify every claimant that they may obtain, upon request, copies of claim-related documents. For purposes of this section, "claim-related documents" means all documents that relate to the evaluation of damages, including, but not limited to, repair and replacement estimates and bids, appraisals, scopes of loss,
drawings, plans, reports, third-party findings on the amount of loss, covered damages, and cost of repairs, and all other valuation, measurement, and loss adjustment calculations of the amount of loss, covered damage, and cost of repairs. However, attorney work product and attorney-client privileged documents, and documents that indicate fraud by the insured or that contain medically privileged
information, are excluded from the documents an insurer is required to provide pursuant to this section to a claimant. Within 15 calendar days after receiving a request from an insured for claim-related documents, the insurer shall provide the insured with copies of all claim-related documents, except those excluded by this section. Nothing in this section shall be construed to affect existing litigation discovery rights.

When I was speaking with Amy Bach about the Roundtable, she reminded me that California has optional appraisal where there has been a disaster. Either party may opt out. There, the insurers were abusing the process by outspending the policyholders and making the process so expensive for the consumer that it significantly lengthened the time to recovery and reduced the net payout because of the expense. Insurers leverage this fact with policyholders by threatening appraisal when negotiating settlements. As I pointed out yesterday, absent the obligations of good faith claims handling, the insurer often has no time pressure to pay claims quickly. Raising time and expense as a negative aspect to a consumer can provide insurers with enough leverage to achieve an underpaid claim result to the customer. Here is that portion of the California law:

Appraisal

In case the insured and this company shall fail to agree as to the actual cash value or the amount of loss, then, on the written request of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within 20 days of the request. Where the request is accepted, the appraisers shall first select a competent and disinterested umpire; and failing for 15 days to agree upon the umpire, then, on request of the insured or this company, the umpire shall be selected by a judge of a court of record in the state in which the property covered is located. Appraisal proceedings are informal unless the insured and this company mutually agree otherwise. For purposes of this section, "informal" means that no formal discovery shall be conducted, including depositions, interrogatories, requests for admission, or other forms of formal civil discovery, no formal rules of evidence shall be applied, and no court reporter shall be used for the proceedings. The appraisers shall then appraise the loss, stating separately actual cash value and loss to each item; and, failing to agree, shall submit their differences, only, to the umpire. An award in writing, so itemized, of any two when filed with this company
shall determine the amount of actual cash value and loss. Each appraiser shall be paid by the party selecting him or her and the expenses of appraisal and umpire shall be paid by the parties equally. In the event of a government-declared disaster, as defined in the Government Code, appraisal may be requested by either the
insured or this company but shall not be compelled.

Making the appraisal optional by law is an option which may be considered. Under this view, the inexpensive informal mechanism can stay in place by agreement. A negative aspect of my proposal is that policyholders may be better off simply litigating the matter rather than going through a full blown arbitration.

The insurance industry wants to push mediation. It wants to do this to avoid the perceived negative results of appraisal and still provide an alternative to litigation. My impression is that the insurer’s financial desire to achieve a reduction in the amount of claims severity (the average amount an insurer pays out for claims) can be achieved through a negotiation process where the insured can be leveraged by the prospect of delay and expense. Insurers train adjusters how to negotiate and even a voluntary mediation process can be abused. A Biloxi television station ran a feature of clients we represented that twice went through the Mississippi Department of Insurance mediation program following Katrina:
 

The real issue is how to get these disputes prevented in the first place. And, when they arise, how to get them resolved quickly and fairly. While it is easy for me to say that, coming up with an alternative dispute resolution process that is fair, quick and inexpensive, in a one size fits all format, is a puzzle that nobody has a perfect answer for. The prevention of the dispute and fair treatment can be accomplished as I have suggested with strong laws, transparency and good faith claims practice obligations.

But what about good faith disputes between parties? I still strongly feel that the insurer’s request for fair process of binding claim resolution with transparency is inherently sound. Indeed, that is what consumer’s want. And, what is often not said is that the result for the consumer once the dispute arises is often the skill of the appraiser or if litigated, the attorney selected by the policyholder. For example, our clients in the above video were advised by the first attorneys they hired to accept less in settlement than what the insurer twice offered in mediation. The skill of the right appraiser is something I noted in, Appraisers, Umpires and Appraisals as Valid Substitutions for the Right to a Jury Trial Depend on Viewpoint.

Insurance Veteran made a point that everybody in the insurance business knows. There are certain policyholders who want much more than what is fairly owed, and they unrealistically believe they are entitled to the money. Some of these people go over the top and commit fraud. Others just want magic to happen, and the claims money to be paid regardless of any justification.

While I can certainly appreciate his comment, he may have missed part of the point of my post. Many policyholder appraisers do not fully understand how to win the appraisal for the policyholder. They do not comprehend that the appraisal is truly an alternative dispute process that binds the policyholder.

Some may suggest that I am wrong, and that the goal of appraisal is a fair number for both sides. But, my policyholder clients may have a very different view of what fair is. So, if the insurer wants to dispute the amount in an appraisal, I want as much as I can get for my clients. After all, if there were no appraisal, my client would be asking a jury of peers for justice. But the insurance companies were historically so afraid of juries and costs, that a hybrid dispute process became standard in form insurance policies. Guess who benefitted most from that process?

Accordingly, my warning to all policyholders and those working with them in appraisals is that it is binding and should be taken as seriously as a public trial. I want the mindset of policyholders faced with an appraisal to be:

There is no second chance.

I started writing a reply that I feel better explains my impressions on this topic. Some suggest that I am opposed to appraisals for a number of reasons, including the possible loss of litigation revenue. These people do not fully understand the consequences of appraisal. I have a hard time explaining the historical importance of a jury as a core concept of American democracy, but I believe that giving up the right to a jury trial is the most important consequence of appraisal. Justice comes from the values of one’s peers in the community, not experts or government deciding what is fair and just. This is a fundamental concept of American democracy and protected by our Constitution.

My impression is that the skills of consumers’ appraisers have become much better. There are now numerous seminars that provide knowledge to public adjusters which result in an understanding of how to obtain a fair settlement for the policyholder through the appraisal process. Indeed, there now seems to be a certain segment of public adjuster that cannot reach voluntary resolution and thus use appraisal as the actual adjustment of the claim. The response is that some insurers are now removing the clause. From their view, there is not first a good faith adjustment which is then subject to a process that has no rules and enough transparency for them to think it is fair. And, the most important reason insurers are removing the clause is that they losing.

Finally, I applaud Sean Shaw. I would love to participate and listen to the views of the insurance industry. I have a warning about the comment from the lobbyist from the insurance trade association. But, that is for another day.

Again, keep it simple.

This week, Miller testified before the National Association of Insurance Commissioners that damages caused by Chinese drywall are covered under first party property insurance policies. Dan Luby of the Florida Insurance News forwarded an article, Lawyer Sees Insurer Vulnerability To Drywall Claims, that indicated:

Charles Miller, of the Insurance Law Center in Berkeley, Calif., made his remarks here at a hearing on drywall issues by the National Association of Insurance Commissioners Catastrophe Insurance Working Group at the NAIC’s Winter National Meeting.

Mr. Miller drew upon language contained within Fire, Casualty & Surety (FC&S) bulletins, a publication within National Underwriters parent Summit Business Media, to raise questions about whether exclusions apply.

If you want to read the FC&S Bulletin Miller is referring to, I wrote about it in a prior post, Chinese Drywall Losses Covered Under First Party Property Insurance Policy.

The article also noted:

Mr. Miller said FC&S - resource for insurers for interpretation of both commercial and personal lines coverages - notes that many courts have found the pollution exclusion in homeowners policies only applies to “traditional environmental damage.”

Mr. Miller said, “The release of gases inside of a residence is not normally considered to be traditional environmental damage.

Regarding latent defect and inherent vice exclusions some insurers have cited, Mr. Miller noted the FC&S bulletin states the exclusion applies to “a loss due to any quality in the property that causes the property to damage or destroy itself that results from something in the property itself.”

The drywall, he noted, is not destroying itself, but rather causing ensuing damage to its surroundings, which should be covered.

Mr. Miller said regulators should look to protect consumers by conducting multistate market conduct exams to ensure proper investigations into Chinese drywall are being conducted. Mr. Miller said there is a “critically important relationship between a timely and thorough investigation and a proper evaluation of the coverages.”

Amy Bach of United Policyholders was at the same lecture concerning Chinese drywall coverage issues that I wrote about earlier this week in Ensuing or Resulting Loss, and the Burden of Proving Causation Explained Simply. I talked briefly with Amy about my concerns over the coverage analysis and whether courts would misconstrue "ensuing loss" language.

Amy Bach also testified and was quoted with a rather unique suggestion for helping out policyholders with coverage issues:

"Ms. Bach indicated that insurers should assist policyholders and cover their claims now, and if they are found not liable later, they could then subrogate against those entities."

I personally do not know any first party insurer that has afforded any coverage for Chinese drywall losses. I seriously doubt they would do so because insurance companies love to hold money. Further, if there truly is no coverage, they may lose their subrogation rights as a volunteer rather than a party obligated to pay a debt.

One trend seems to be more coverage gurus stating that coverage exists to some extent for first party Chinese drywall claims. As a result, more claims are going to be made. We will see how they play out after denial and litigation ensues.

The article quoted Barney Bishop, the Executive Director for Associated Industries of Florida as advocating the following:

Florida insurance regulators are failing in their duties if they don't make the state-backed Citizens Property Insurance Corp. raise property insurance rates by 10 percent across the board, a business group lobbyist said Tuesday.

Barney Bishop III, president of Associated Industries of Florida, said it's ''astonishing'' that the state-backed insurer would not increase rates on all policies by 10 percent.

''It is our position that every rate should go up,'' Bishop told representatives from the Office of Insurance Regulation. ''The rates haven't been actuarially sound for the last five years.'

In response, Belinda Miller of the Florida Office of Insurance Regulation disagreed:

Miller argued the 10 percent was a cap set by lawmakers and not intended to be applied equally to all Citizens' policy holders.

''We don't want to increase rates too quickly because people would have a hard time paying for it.'' Miller said. ''Nor do we want to have a rate that is not adequate to pay their claims. Our concern is to make sure that this strikes the appropriate balance.''

This is a topic that Belinda Miller knows very well. She served with me on the Citizens Property Insurance Mission Review Task Force. I wrote about this issue last January in Headlines And Reality. There, I wrote:

The Citizens Mission Review Task Force made a significant recommendation at its meeting on Tuesday. Prior testimony was that the average Florida rate hike, which would be approved by the Office of Insurance Regulation, would almost certainly be higher than 30%. We recommended to the Florida Legislature that they to pass a statute to cap that rate increase at 10%. Without this law, the rate would probably go up over 30% on a statewide basis.

So, what do you think a proper headline would be in a newspaper article reporting on this outcome? Panel Votes to Cap Rates. 10% Maximum Rate Increase Proposed. How about, Panel Says No to Unlimited Rate Increases?

By Jingo, no way! Newspaper editors must think they need headlines full of sensationalism and fear to catch a reader’s attention. These were some of the headlines I found on a Google search Wednesday morning:

• Citizens Property Insurance Plans to Increase Rates
• State Panel Backs Rate Hike of up to 20 Percent for Citizens Insurance
• Citizens Should Hike Insurance Rates, Task Force Says
• Hike Citizens Property Insurance Corp's Premiums, Florida Panel Urges

We never found that the rates should be hiked. Instead, a bunch of experts explained why they thought a "fair" rate was going to result in a huge increase because Citizens has been charging an amount of premium that is not "sound." Even the Florida Office of Insurance Regulation indicated that a fair rate for Citizens was one that could have an increase above 30%.

In 2006, the Florida Legislature froze Citizens rates to combat skyrocketing premiums. The Legislature then passed a law mandating that Citizens had to charge "actuarial sound rates" by January 1, 2010.

I never voted to raise rates. I advocated and then argued for the cap because I felt it was going to make insurance unaffordable for many if the rates jumped overnight.

It is obvious that Belinda Miller is correct and Barney Bishop is spewing the propaganda of the insurance industry that is a big supporter of Associated Industries. The entire debate and method contemplated that overall rates would go up, but it would vary.

What is happening is that lobbying organizations supporting the insurance industry have already paid significant monies to the leaders in the Florida legislature. Now, they have to start raising the issues important to them for the next legislative session. Those lobbyists cannot come out and say, “hey, we paid you all this money to have dinner with you, go to golf and raise money for your next campaign, so vote our way.” That would be stupid because those legislators would be any “easy mark” for being in the pocket of those lobbyists. Then, what would they say to their electorate?

The smart way to do it is to have people like Barney Bishop say that the problem is Citizens not charging enough. Public relations experts have people like Barney Bishop also change the debate to one of “free choice” so that State Farm and others will no longer have to worry about getting approval for a fair rate. It is all part of the charade to allow many bought and paid for legislators to vote in a demanded manner by the insurance industry.

It is fortunate that some leaders in Florida, like Governor Crist, remember the public promises they make to the people are far more important than privately taking excessive amounts of campaign money from huge insurance corporations knowing that clandestine public relations campaigns will be run by those corporations to mask the private “deal” made with the devil.

I am going to propose to United Policyholders or other consumer groups that we try to find out who is taking the money and disclose which politicians have switched their votes since 2006 to allow rates to go up. They might as well be honest about it the next time election time rolls around.

Below is an item from the National Association of State Farm Agents' website. The letter she referenced provided:

Florida Fallout

Florida agents statewide are in a controlled panic over State Farm's recent decisions concerning its desire to remain in, or leave the State of Florida. Whether the problem is driven by underwriting issues or political considerations really does not make much difference at this point. The current underwriting restrictions alone are enough to drive many agents out of business.

You are all familiar with the more recent facts. State Farm requested, among other things, a sizeable rate increase. When that increase was denied, it filed a request to withdraw from the fire market in Florida. That request was met with a remarkable opinion from Florida Insurance Commissioner Kevin McCarty (see the entire opinion, and other related documents on NASFA.com). In a 14-page order, Commissioner McCarty not only denies State Farm's request, but takes strong exception to the Company's conduct to date. State Farm has until March 7 to appeal the order.

The order highlights the strong difference of opinion and approach being taken by Florida and State Farm. One glimmer of light for agency is the finding in paragraph 24 of the order that State Farm is placing too great a burden on Citizens Property Insurance Corporation by only permitting agents to rewrite the policies there. The order goes on to require State Farm to permit it's agents to write homeowner's coverage for other carriers. We would expect State Farm to vigorously oppose this idea.

At this time, there are far more questions than answers. Each type of agent contract faces different issues and challenges. Entitlement to or continuation of termination and extended termination benefits being paramount to the AA3/4 agents. However, other critical questions, most directly affecting the agent's ability to survive, still loom large. Most cannot be accurately answered until Florida and State Farm determine if, and how, State Farm will stay in Florida.

NASFA continues to collect information concerning State Farm's actions, the State's actions and company releases to agency.

I suggest that if you want to see whether all of State Farm's agents truly trust State Farm "to be there," as it advertises it will, you visit the National Association of State Farm Agents website.

Again, for many different reasons, I hope McCarty and State Farm can work out a deal. And, as indicated in my post, Is the State Farm Policy Really Worth Anything?, the current advertisement campaign by State Farm suggesting that it will be there for policyholders after a disaster is a joke.

Insurance industry lobbyist Mark Delegal, who represents State Farm and other insurance companies, said Wednesday that bringing back the insurance deregulation bill - which passed last session but was vetoed by Gov. Charlie Crist - is definitely being explored by the industry.

"If there's a special session, we would be pursuing legislation that is the same as or similar to HB 1171," Delegal said.

Last session's HB 1171 would have allowed certain large, well-capitalized insurance companies to raise rates outside of the regulatory framework. It was an effort to appease companies that say they can't make money in Florida - including State Farm, which is trying to pull out of the property insurance market here because regulators won't allow it to raise rates to what it says it needs to charge to remain viable.

The legislation, sponsored last session by Rep. Bill Proctor, passed the House overwhelmingly - 105-13 - and passed the Senate 27-9. Those numbers give backers of the legislation hope that a veto override would be possible if lawmakers return.

Proctor said Wednesday in an interview that he had already filed the same legislation for next session, and acknowledged interest in the possibility of bringing it back earlier should there be a special session.

Here’s the question - Is Procter bought and paid for by the insurance industry? He is in the leadership of the Florida legislature. And, as a card carrying member of the Republican Party, I wonder whether our Republican legislative leadership is giving into corporate interests rather than the individual fiscal conservative interests that should be the bedrock of both major political parties. Insurance companies, as non-human “Citizens,” do not necessarily care about such concerns. The rest of us, breathing and bleeding types, really do care.

I pour my heart out for my policyholder clients. As I write this, I am making last edits to get that point out to some lawyers that will inspire other attorneys to do the same and make it worth their while to take on these very able insurance litigators. My speech is at the National Institute on Insurance Bad Faith.

I honestly feel humbled that some attorneys would pay to attend this seminar where I have the opportunity to teach them how my firm tries to help policyholders every day regarding their claims disputes. As far as I am concerned, this is our professional obligation. Still, I understand that the insurance companies try costly tactics against many of my colleagues that are not very well financed every day. Trying to make these cases simpler and less costly has been a concern of mine.

And after all this, we all benefit from those that advocate for fairness of rates and claims practices. These others, similarly situated, are those that support United Policyholders or are members of the AAJ Fair Insurance Claims Practices Group a/k/a Bad Faith litigation Group.

The bottom line is that I have deep concerns about how many in the Florida Legislature are advocating certain positions when they address the citizens of this State, but are behaving much differently behind closed doors. Stay tuned. 

This is the California Law she referred to:

Cal Ins Code § 10082.3 Provisions regarding loss requirements, appraisals, and adjusters; Applicable policies

 Notwithstanding any other provision of law, the following provisions regarding loss requirements, appraisals, and adjusters shall apply to the following types of policies originated or renewed on and after January 1, 2002: all policies of residential property insurance, as defined in Section 10087, all policies, endorsements, or certificates of insurance providing coverage for loss or damage caused by the peril of earthquake issued pursuant to this chapter; and all policies of basic residential earthquake insurance issued pursuant to Chapter 8.6 (commencing with Section 10089.5).

...

 The insurer shall notify every claimant that they may obtain, upon request, copies of claim-related documents. For purposes of this section, "claim-related documents" means all documents that relate to the evaluation of damages, including, but not limited to, repair and replacement estimates and bids, appraisals, scopes of loss, drawings, plans, reports, third party findings on the amount of loss, covered damages, and cost of repairs, and all other valuation, measurement, and loss adjustment calculations of the amount of loss, covered damage, and cost of repairs. However, attorney work product and attorney-client privileged documents, and documents that indicate fraud by the insured or that contain medically privileged information, are excluded from the documents an insurer is required to provide pursuant to this section to a claimant. Within 15 calendar days after receiving a request from an insured for claim-related documents, the insurer shall provide the insured with copies of all claim-related documents, except those excluded by this section. Nothing in this section shall be construed to affect existing litigation discovery rights. (Emphasis Added)

I love the "including, but not limited to" language. Why shouldn't these documents be turned over? It would stop much of the gamesmanship and deceit that commonly occurs. Honest claims adjustment should be transparent--does anybody disagree?

I recently wrote on the noble work United Policyholders does on a very limited budget. Amy Bach's suggestion that this law become a national standard is well founded. It would prevent some of the needless insurance coverage lawsuits because the insurer's analysis would be truly transparent to the customer. I know of at least one major insurer, FM Global, that claims to have this good faith standard in place throughout the country.

For consumer interest attorneys attending the American Association of Justice Convention in San Francisco next week, Merlin Law Group, with a number of other policyholder law firms, is co-sponsoring a cocktail party to benefit United Policyholders. It will be held on Monday, July 27, in the private library at Bourbon & Branch, a 1920’s inspired San Francisco speakeasy located one block away from the AAJ convention hotel. It starts at 5:30 p.m.

Since the party is sponsored by a number of consumer interest law firms, including: Daley, DeBofsky & Bryant; Goldstein, Gellman, Melbostad, Gibson & Harris; and the Merlin Law Group, there is no cover charge and your first drink is on us. If you wish to support United Policyholders or add your firm as a sponsor of this FUNraising?? event, a minimum (tax deductible) contribution of $500 is required. Please contact Emily Cabral at (415) 393-9990 or emily@uphelp.org to sponsor, donate, or obtain an invitation.

The work of a handful of policyholder advocates such as Amy Bach help keep policyholder interests in front of state legislatures and Departments of Insurance despite an extraordinarily well funded opponent. I find it ironic that the major players in the insurance industry spend so much time and money trying to prevent passage of laws, such as the one above, which would ultimately protect them, as well as their consumers, from unscrupulous competitors. Maybe that says something about the claims culture of many insurers...and something they should think about when they reflect on business ethics and lobbying

In our Motion For Leave Of Court to file the brief, we wrote:

“1. The financial security that insurance policies provide is critical to business and property owners and to the fabric of our economy and our society. United Policyholders ("UP") is a unique non-profit charitable organization founded in 1991 that is helping preserve the integrity of the insurance system by serving as an information resource and a voice for policyholders' interests. Donations, grants and volunteer labor support the organization's work.

2. United Policyholders monitors the national insurance marketplace with a particular focus on regions impacted by large-scale natural disasters. The organization hosts and participates in public forums, disseminates information about the claim process, works with individuals and elected officials to solve insurance problems, and files amicus briefs in cases involving coverage and claim disputes. UP serves as a clearinghouse for information on coverage and claim issues related to commercial and personal lines insurance products.

3. United Policyholders has focused its efforts since the 2005 hurricane season on providing education and support to businesses and homeowners in the Gulf Coast states and working to help solve insurance problems. The organization hosts a free on-line "Road Map to Recovery" for Florida, Louisiana and Mississippi, and created and is maintaining a Hurricane Claim Help Library for residents of the impacted states. For more information, visit www.unitedpolicyholders.org.

4. United Policyholders seeks to fulfill the "classic role of amicus curiae in a case of general public interest, supplementing the efforts of counsel, and drawing the court's attention to law that escaped consideration." Miller-Wohl Co. v. Commissioner of Labor & Indus., 694 F.2d 203,204 (9th Cir. 1982). This is an appropriate role for amicus curiae. As commentators have often stressed, an amicus is often in a superior position to "focus the court's attention on the broad implications of various possible rulings." Robert L. Stem, et al., Supreme Court Practice 570-71 (1986), quoting Ennis, Effective Amicus Briefs, 33 Cath. U. L. Rev. 603, 608 (1984).

5. United Policyholders has filed over two hundred and thirty-five amicus briefs, since it was founded, in state and federal appellate courts throughout the United States. United Policyholders' amicus brief was cited in the U.S. Supreme Court's opinion in Humana Inc. v. Forsyth, 525 U.S. 229 (1999). UP was the only national consumer organization to submit an amicus brie/in the landmark case of State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003). The organization has participated by court invitation in briefing and oral argument, and many of the arguments from United Policyholders' amicus curiae briefs have been cited with approval by reviewing courts.

6. The issue involved in this case, concerning whether or not Florida law recognizes a claim for breach of the implied warranty of good faith and fair dealing by an insured against its insurer based on the insurer's failure to investigate and assess the insured's claim within a reasonable period of time, has significant ramifications for insurance policyholders seeking to hold their insurance companies responsible for their insurers' actions. This is an area of law in which United Policyholders and the undersigned attorneys submit it would be useful to the Court to allow the insurance policyholders' perspective to be heard.

7. The undersigned counsel for United Policyholders have significant experience in first-party property insurance litigation against major insurance companies, such as QBE Insurance Corporation, and honestly believe that they will be able to provide assistance to jurists analyzing the insurance issues of this case and their public policy implications in a way that compliments and dovetails with the arguments raised by counsel for the parties to this appeal. Counsel for United Policyholders is retained pro bono, and will accept no money for their legal work in this case.”

Obviously, this matter is extremely important to Florida policyholders. Florida has never recognized a common law cause of action for the breach of the duty of good faith arising from a first party property insurance claim. In the summary of our argument, we noted:

“Nowhere is the contractual concept of an "implied warranty of good faith and fair dealing" more important than in the insurance setting, due to the unique nature of the product and the disparate circumstances of the parties to the contract. Although Florida courts have previously and explicitly recognized a common law claim arising from the nature of an insurer's obligation to its insured in the third party setting, Florida should join the majority of states that recognize a common law remedy for damages caused by first party insurers breaching their recognized obligations of good faith and fair dealing.

Legislation passed in Florida recognizes the obligation of insurers to act in the utmost of good faith and fair dealing to their insureds. § 624.155, Fla. Stat., and § 626.9541, Fla. Stat. These obligations are further evidenced by pertinent portions of the Florida Administrative Code, requiring claims adjusters to provide ethical and good faith treatment to policyholders. The insurance industry recognizes its obligation to act in the utmost of good faith and fair dealing as evidenced in the training and reference textbooks for claims handlers and in internal claims handling documents prepared by individual insurance companies. Since Florida public policy, demonstrated in legislation and regulation, recognize a duty of good faith, and even the insurance industry recognizes such a duty, it would be a strange quirk in Florida common law for it to not to recognize what everybody else is requiring insurers to do-act in accordance of a duty of good faith and fair dealing to its own customers.

Florida should align itself with that majority of states, and allow this important alternative remedy to stand.”

I suggest those interested in this topic to read our entire brief—it may also be better than a sleeping pill for those in need of a good night’s rest. The last paragraph of the argument sums up my feelings on this issue:

“Making an insurer accountable for causing additional damages that naturally flow from the breach of its mandated obligation of utmost good faith is good public policy and logically required if accountability is important to the law. Without accountability for breaches of these insurance good faith duties that most recognize as involving the public trust, the law would minimize these concepts and the importance of personal responsibility for insurers to do what they are obligated to do.”

The newsletter also links to even more information on the United Policyholder website, such as Claim Tips:

“United Policyholders' Claim Tips simplify the insurance claim process and offer practical suggestions for getting the insurance protection you paid for. Our tips are based on our organization's many years of hands-on experience. They include information from the nation's leading policyholder-oriented insurance professionals, including former industry insiders, agents and brokers, attorneys, consumer advocates and public adjusters. Our goal is to help policyholders understand the process and get fair claim settlements. We offer these tips as a public service.”

I met with United Policyholders Executive Director, Amy Bach, in California two weeks ago. She has done a wonderful job incorporating new projects and raising awareness of insurance concerns from the consumer’s standpoint. She is always looking for help from those with an interest and knowledge in the issues facing policyholders. She needs expertise from those individuals to participate in dialogue with Departments of Insurance and in front of legislative bodies. If you have such knowledge or interest, I strongly urge you to contact her. Attorneys can always participate in the pro bono amicus project. And, everybody should consider financial support for such an important organization.