A recently filed proposed class action1 accusing California health insurance giant Anthem Blue Cross of using a "bait and switch" scheme that offered insurance policy "renewals" that did not clearly disclose major policy changes offers a great example of why the law requires insurers to notify insureds of reductions in insurance coverage.


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Merlin Law Group filed a class action lawsuit in Federal Court today alleging that sales tax was not being paid to many Superstorm Sandy policyholders with flood insurance claims insured by Selective Insurance. Some must be wondering that if policyholders cannot trust insurance company engineering reports, why should they trust that the estimates of damage made by the insurance companies own estimators?


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When a borrower fails to obtain or maintain proper hazard, flood, or wind/hail insurance on property that secures a loan, the lender remains authorized to “force place insurance” on the property in order to protect the lender’s interest in the property. Sounds reasonable… right? On its face, it makes sense that lending institutions should have the right to make sure property securing a loan maintain adequate insurance in the event of a natural disaster or other hazard that property owners encounter.

Like so many issues with both high finance and insurance carriers, though, one can’t necessarily take force placed insurance at face value. In this initial installment of the Force Placed Insurance Series, I’ll take a closer look at issues surrounding force placed insurance.


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In a recent conference on Class Actions and Aggregate Litigation,1 a recent trend in Class Actions was discussed that could have a significant affect on the property damage insurance claims handling industry:

(i) “Private regulatory actions” – i.e., mass lawsuits based on a private right of action that challenge conduct not widely recognized as being wrong. This category would include many current class actions in the United States, such as those involving alleged deceptive trade practices.2


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Let’s consider the following scenarios. For purposes of this discussion, we assume you handle hail claims all over Texas:

  1. For all claims statewide in which the carrier pays for full roof replacement, the carrier still denies payment for particular roofing system components.
  2. The carrier pays Overhead & Profit for Dallas claims, but denies Overhead & Profit in Amarillo.

My previous post in this Aggregate Litigation series generated interest and discussion regarding potential Class Actions. In this post, we will discuss requirements for Class Certification. In addition, how those requirements influence whether a Class Action is the best option for recovery under different circumstances.


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Let’s consider the following:

  • How many public adjusters and lawyers do you know who routinely represent policyholders on claims that total less than $500?
  • How many public adjusters and policyholder lawyers do you know who refuse to resolve any claim unless the carrier pays for every lower-value damaged component in the roofing system?
  • What if a means existed to efficiently prosecute smaller claims that are not typically prosecuted because the costs are likely to exceed the benefits?


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I recently deposed corporate representatives from American Family, Auto Owners, State Farm and Allstate Insurance Companies and received the following admissions from some of those corporate representatives:

  1. the independent adjuster (often catastrophe adjusters) failed to follow key aspects of the insurers’ own claims handling guidelines;
     
  2. the independent adjuster failed to properly document the claims file, including failure to enter log notes regarding investigation of the claim;
     
  3. refusal by the independent adjuster to consider additional evidence submitted by the homeowner regarding the property damage claim;
     
  4. there was zero oversight the by insurer’s claim file manager, including no supervision of the independent adjuster;
     
  5. the claims manager failed to have any meaningful participation in the claim and failed to ensure the claims file was properly documented.
     
  6. the independent adjuster made an on site coverage determination and informed the homeowner in-person of the denial of coverage– without prior review of the claim or any supervision by the insurer’s claims manager.


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