Travelers’ “Fairly Debatable” Position On Roof Loss Bars Bad Faith Claim

SALT LAKE CITY, Jan. 25 – A Utah federal judge has dismissed bad faith claims against Travelers on grounds that the insurer’s position on coverage of a roofing damage claim  following a windstorm was “fairly debatable.”  In Pheasantbrook Homeowners Ass’n. v. Travelers, U.D. District Judge David Nuffer ruled that even if an insurer is ultimately incorrect on a coverage position, it should escape bad faith liability if the position it took is “fairly debatable.”

Judge Nuffer reviewed applicable case law, including Utah decisions which have held that an insurer’s engagement of an expert to help assess the nature and extent of covered damage for a given loss could provide a defense to bad faith liability.  He ruled that the denial of certain portions of the windstorm claim in reliance on an expert engaged by the insurer, even if the expert was compensated, created legitimate factual questions regarding which portions of the roofing repairs were attributable to the windstorm, as opposed to betterment, maintenance, or a need to replace the roofing regardless of the wind damage.

Such legitimate factual questions regarding the insured’s proposal for roof replacement created a “fairly debatable” dispute about the amount owed, causing the judge to grant Travelers’ summary judgment motion as to the bad faith claim.

Pheasantbrook Homeowners Ass’n. v. Travelers, N.D. Utah, 2016 (Nuffer, J.)

Alternative Fee Arrangements, Revisited

CAMP HILL, Jan. 27 – We addressed some of the flexibility provided by alternative fee arrangements in a prior post.   We are adding to that a resource page surveying some of the many emerging alternative fee arrangements we are offering to existing and prospective clients.  Please feel free to dig in and explore the many options available.

Good outside counsel view alternative fee ideas as starting points, not destinations.  Legal fee agreements can be as diverse and inventive as the lawyers and clients involved.  Reach out any time to me chaddick@dmclaw.com or 717-731-4800 for more information.

Zurich Asks 3rd Circuit To Reverse $1M UM/UIM Award

PHILADELPHIA, Jan. 13.  Zurich American Insurance company has asked the U.S. Court of appeals  for the Third Circuit to reverse a lower court’s ruling ordering it to pay $1 million in uninsured motorist (UM) benefits, arguing that a sign down form setting UM limits at $35,oo0.00 was valid and enforceable.

Stefan Freeth alleged injury while working on a truck owned by roadway contractor Road-Con Inc.  He sought UM/UIM benefits under Road – Con’s commercial auto policy with Zurich, and was awarded $1 million in U.S. District Court for the Eastern District of Pa., following Zurich’s removal of the case from the Chester County, Pa. Court of Common Pleas.

On appeal, Zurich contends that the sign down form completed by a company executive was a sufficient “express designation” within the meaning of the Pa. M.V.F.R.L.  to constitute a valid election of UM/UIM limits lower than the commercial auto policy’s bodily injury limits of $1 million dollars.  Freeth’s counsel claims the form is ambiguous, stating,  “there is no affirmative written election of the amount of $35,000.00 by Road-Con. There is no handwritten entry by the named insured or check mark or initialing of the amount of $35,000.00 on the Summary Form.”

Stefan Freeth v. Zurich American Insurance Co., No. 15-2924, (3rd Cir 2015)

Editor’s Note:  For copies of the briefing, email me at chaddick@dmclaw.com

Legal Departments: Are You Sharing Your Metrics With Outside Counsel?

From Legal Project Management (LPM) to the arrival of Legal Operations Officers at Legal Departments, insurers have become far more discerning and discriminating buyers of legal services than ever before.  Technology allows for any number of measurements of the performance of outside law firms, and therefore comparison of outside law firms.

Should this data be kept secret? Not if the insurer truly wishes to incentivize outside lawyers become the kind of lawyers the metrics are designed to create in the first place.

There are concerns, of course, about disclosing proprietary data, and information regarding other firms.  These issues, however, are easily addressed by 1.) providing metrics outputs to lawyers and law firms, not the methodologies and 2.) showing the outside lawyer or firm how it stacks up against averages, or par, as opposed to providing data on other lawyers or firms.

For an insurer to measure the data and not use it to influence outside lawyers toward the benchmarks the insurer is aiming for is to use but half of the tool.

The metrics themselves are as diverse as the objectives, but some of the more popular ones are:

  • Cycle Time  – how long a case takes from assignment to closing
  • Return on Investment – how much exposure was eliminated or reduced in exchange for payment of legal fees to defend a claim.  (This can also be an effective marketing tool for a law firm:  I was able to demonstrate to a large national insurer that over the course of several years that for every dollar they invested in legal fees,  my firm was able to eliminate six dollars in corporate contingent exposure.)
  • Leverage  – similar to ROI, a measure of dollars spent in relation to dollars at stake. Designed to prevent lawyers from killing flies with sledgehammers.
  • Overall Grade – somewhat subjective, but a great overall metric which allows General Counsel to grade how their outside lawyers are doing

We will delve into metrics in more detail in a future post.  In the meantime, remember that what can be measured can be used to steer outside lawyers in the direction the insurer wants to go.   Good outside lawyers will neither mind being measured, nor adjusting their performance to suit the insurer’s needs.

CJH

Travelers, Cincinnati Owe No Duty To Defend School In Lacrosse Death

Louisville, Jan. 21.  A U.S. District Court Judge in Kentucky has ruled that neither Travelers or excess insurer Cincinnati Ins. Co. have a duty to defend Bellarmine University in a wrongful death suit brought by the estate of a university lacrosse player who died while participating in conditioning drills.

On January 21, U.S. District Judge Charles R. Simpson granted the insurers’ motion for judgment on the pleadings, holding that the policy’s Athletic Participants Exclusion Endorsement relieved the insurers of the duty to defend or indemnify Bellarmine in the underlying death suit.   The endorsement excluded coverage for bodily injury “to any person engaged in athletic, exercise, or sports activities” sponsored by the university.

The Court held that Travelers did not contract to ensure the exposure for which Bellarmine was seeking defense and indemnity.  It also held that the excess policy issued by Cincinnati did not apply, as it contained language disclaiming coverage for any loss which came within an applicable exclusion in the language of the primary policy.

Underwriters Safety et al v. Travelers et al, W.D. Ky. 2016 (Simpson, J.)

Federal Judge Denies Stay, Upholds Insurer’s Work Product Privilege In Bad Faith Case

Reading, Pa., Jan. 19.  U.S. District Judge  Joseph Leeson  has denied a motion filed by Allstate Insurance Company to sever and  stay a  bad faith claim, including  discovery,  in a combined breach of contract and bad faith case, but has ordered that Allstate may properly assert work product privilege protection as to matters genuinely prepared in anticipation of litigation.

In Wagner v. Allstate, Judge Leeson conceded that while there may be a basis for separate trial of the breach of contract and bad faith claims under F.R.C.P. 42 , there was no need to prevent simultaneous discovery in both the breach of contract and bad faith claims.

Judge Leeson also granted in part and denied in part Plaintiff’s motion to compel discovery of Allstate’s claims file, ruling that the Court needed more information to make a complete ruling on the motion.  The Court ruled that Allstate did have the right to assert privilege over materials in its claims files which were prepared in anticipation of litigation, while observing the parties disputed the date at which time Allstate’s anticipation of litigation over the underlying UIM claim was bona fide.

Wagner v. Allstate Ins. Co., E.D. Pa. 2016 (Leeson, J.)

Phila. Judge Recommends Bad Faith Dismissal

Philadelphia, Jan. 20.  A Philadelphia Common Pleas Judge has recommended that the Pa. Superior Court affirm her dismissal of breach of contract and bad faith claims filed against Progressive Insurance Company.   In an opinion written pursuant to Pa.R.A.P. 1925(a) in Racioppi v. Progressive Ins. Co.,2015 Phila. Ct. Com. Pl. LEXIS 415 , the Court dismissed the Plaintiff’s claims for UM benefits under her Progressive auto policy following an automobile accident.  The Plaintiff  had previously collected policy limits of the tortfeasor, Insured by Geico.

The Court held that both the breach of contract and bad faith counts suffered from the same fatal defect:  The Plaintiff failed to proved that she paid for a policy which was in force at the time of the collision.  While the Court conceded there were circumstances in which a bad faith claim could proceed in the absence of a breach of contract claim, it found that such circumstances were not presented by the Plaintiff’s UM claim at issue:

Since the breach of contract claim is without evidence, this component of the bad faith claim must immediately be rejected; Appellee-Defendants cannot have failed to pay in reckless disregard of the contract when Appellant-Plaintiff fails to offer any evidence that there was a contract between the parties on the date of the accident.

The Court dismissed the claims by way of a motion for summary judgment filed by Progressive.

Racioppi v. Progressive Ins. Co., 2015 Phila. Ct. Com. Pl. LEXIS 415 (Shreeves-Johns, J.)

Success Not Element of Insurance Fraud in New Jersey

New Jersey, January 20.  The New Jersey Supreme Court has unanimously  ruled that the state insurance fraud statue does not require the perpetrator to be successful in  the effort to sustain a conviction.   In State v. Goodwin, A-20 September Term 2014, 07352 (pdf copy attached below), Justice Albin wrote for a 6-0 majority that the making of a statement of a material fact  to an insurer “that has the capacity to influence a decision-maker in determining whether to cover a claim” was sufficient proof to sustain a conviction under N.J.S.A. 2C:21-4.6(a).

Justice Albin wrote:

If the falsehood is discovered during an investigation but before payment of the claim, a defendant is not relieved of criminal responsibility.  Here, defendant falsely reported that his girlfriend’s vehicle was stolen.  It was for the jury to determine whether the series of false statements about the theft generated by the defendant had the capacity to influence the insurance carrier in deciding whether to reimburse for the damage caused by the arson.

Goodwin, at pp. 2-3.    The Supreme Court reversed a N.J. Superior Court ruling which overturned the conviction on grounds that the jury instructions permitted conviction without showing harm or prejudice to the insurer, Progressive.

Justice Albin found that the State’s argument that “material fact” required an element of actual prejudice to it was far too strict an interpretation of the statute.  He referred to prior state and federal criminal statutes on perjury and false statement to rule that actual harm has never been a prerequisite to a conviction for crimes of falsehood.

Finally, the Court ruled that the Model Jury Charge on insurance fraud accurately set forth the standard for conviction and that the jury was free to conclude that Goodwin’s knowingly false statements affected Progressive’s analysis of whether to pay the claim.

State v. Goodwin, N.J. Supreme Court, 2016

 

DMC Lawyers Obtain Summary Judgment For Harleysville In Bad Faith Suit

Reading, Pa., Jan. 19Dickie, McCamey & Chilcote attorneys C.J. Haddick and Christine Line have won a dismissal in a bad faith case in favor of client Harleysville Insurance Companies.  The Berks County, Pa.  Court of Common Pleas on January 19 granted the motion for summary judgment filed by Haddick and Line in a bad faith suit arising out of a commercial property coverage dispute over an alleged van theft and fire involving business personal property.  Haddick and Line are members of the firm’s Insurance Law and Litigation Group.

Harleysville did not dispute it owed coverage for the value of the van, substitute van rental expense, and for the value of certain business personal property under an inland marine policy.  It did contest, however, the Plaintiff’s claimed entitlement to a variety of other sums for towing, vehicle storage, loss of business income, and claims for tool losses in excess of the policy limit.  The Court agreed that the additional claims were unsupported by the policy language.

The Court also agreed with Harleysville’s position that regardless of the outcome of the several coverage claims, the claims decisions made were made with reasonable legal and factual bases.  As a result, the Plaintiff’s bad faith claims were dismissed as well.

For additional details on  the ruling, or suggestions  how to have your coverage and bad faith claims decided faster and more favorably with greater cost control, contact us at chaddick@dmclaw.com or 717-731-4800

Rogers Flooring Co. v. Harleysville Ins. Co., Berks County No. 14-674 (Sprecher, J.)

Insured’s Failure To Cooperate During Time Limit Demand Leads To Bad Faith Dismissal

Florida, Jan. 19.  A Federal District Judge in Florida has granted summary judgment in favor of Titan Insurance Co. in a bad faith case, finding that the insured’s lack of responsiveness during a time limits settlement demand precluded the case from proceeding further.

In Hinson v. Titan Ins. Co., 2015 U.S. Dist. LEXIS 121666 (N.D. Fla. 2015), Chief Judge M. Casey Rodgers dismissed a third party bad faith suit arising out of an excess verdict against Titan’s insured, Hinson.  During an underlying personal injury case against Hinson, the plaintiff’s lawyer issued a 20 day settlement demand for policy limits, requiring among other things an affidavit from Hinson as to any other applicable insurance.

Titan’s claims personnel made multiple attempts to alert Hinson, including the hand delivery of a draft affidavit to his address, in an effort to comply with the terms of the time limits demand.  Chief Judge Rodgers wrote:

Hinson failed to timely return the required affidavit to meet the [terms of the time limit] demand…The totality of the circumstances demonstrate that Titan diligently pursued a settlement; advised Hinson of the risks of an excess judgment, of settlement opportunities, and the probable outcome of the litigation; and tendered checks on more than one occasion.

Hinson at 15-16.

The Court found that the failure to meet the conditions of the 20 day time limit demand were therefore attributable to the insured, not Titan, and entered judgment for Titan.

The Court also found that Titan’s refusal to agree to try the bad faith claim before the personal injury action and pay the limits to the personal injury plaintiff  if the insurer prevailed in the bad faith case (known in Florida as a “Cunningham agreement”) was not bad faith as a matter of law.

Takeaway:  There is nothing new under the sun here, although the case is a perfect illustration of two key components of dealing with time limit personal injury settlement demands: 1.) claims staff must make Herculean efforts to act  on the insured’s behalf within the demand window, and before it is too late; and 2.) those efforts must be re-traceable in a well-d0cumented claims file.  For additional information on defensive handling of time limit settlement demands, reach me at chaddick@dmclaw.com or 717-731-4800.

Hinson v. Titan Ins. Co., 2015 U.S. Dist. LEXIS 121666 (N.D. Fla. 2015),

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