Barge’s Destruction of Beachfront Home Not Covered By Homeowner’s Policy, Mississippi Supreme Court Rules


BILOXI, Jan. 5 – The Mississippi Supreme Court ruled that the destruction of a beachfront home by a barge which became loose from its moorings during Hurricane Katrina was not a covered loss under the applicable homeowner’s insurance policy.

In Porter v. Grand Casino et al, Chreryl Porter’s beachfront vacation home was completely destroyed by a barge owned by Grand Casino that had become loose from its moorings as a result of Hurricane Katrina.  She submitted a claim to her homeowner’s carrier, State Farm, which denied the claim, citing a policy provision excluding coverage for property damage arising out of flood, surface, and tidal water.

Porter filed breach of contract and bad faith claims against State Farm, arguing that the cause of the loss was Grand Casino’s barge, and not water.  She also filed claims against Grand Casino and her insurance agent, Max Mullins.  The trial court granted summary judgment for all defendants, and the Court of Appeals affirmed.

In affirming the judgment in favor of State Farm, the Mississippi Supreme Court in a 7-1 ruling held that the homeowner’s policy excluded from coverage any losses  which would not have occurred but for the movement of surface water.  The Court referred to policy language which stated, “we do not insure under any coverage for any loss which would not have occurred in the absence of … [w]ater damage,” and  ruled that where water caused the debris to collide with the property, such a loss was properly excluded.

Porter v. Grand Casino, et. al (Miss., Jan. 5, 2016)


Insured’s Failure To Cooperate In Corvette Theft Claim Dooms Bad Faith Case in Mississippi


ABERDEEN, Feb. 26 – An insured’s failure to cooperate in the investigation of the claimed theft of his Corvette entitled his insurer to judgment as a matter of law on coverage and bad faith claims, a Mississippi federal judge has ruled.

In Holt v. Victoria Fire & Casualty Company, Plaintiff Eddie Gray Holt claimed his 2008 Corvette was stolen from an Alabama parking lot where it was left overnight, and filed a theft claim with his insurer, Victoria.  Because video surveillance of the parking lot did not show the presence or the theft of the car, Victoria sought Holt’s Examination Under Oath, and requested in writing that he bring to the examination documentation, including documentation regarding his finances, income, and expenses.

At his examination, Holt refused to produce the requested documents, and refused to answer certain questions.  After Victoria denied his claim, he filed a breach of contract and bad faith suit, after which Victoria moved for summary judgment on grounds that Holt breached several contractual duties in the policy, most notably his contractual duty to cooperate in the investigation of any claim.

After reviewing not only the applicable policy language but Mississippi common law, U.S. District Judge Carlton Reeves ruled that Holt’s refusal to cooperate in the investigation voided the policy, and entered judgment for Victoria on breach of contract and bad faith claims.

Holt v. Victoria Fire & Casualty Co., (N.D. Miss., March 3, 2016)

Use Privilege Logs To Win Bad Faith Discovery Battles


There is no more critical or touchy stage of discovery in a bad faith case than the request for the claims file.  It will color the rest of the discovery course, including, most notably, depositions of claims personnel.  Inevitably the request for the file comes, seeking every bit of data, electronic and hard copy, which ever existed in the claims file.  The request contains no restrictions, and no reasonable bounds – the bane of insurance company counsel’s existence.  How to respond, yet again, without having to fight World War III?

A well-prepared privilege log provides insurance company counsel with an opportunity to frame and present argument on discovery motions before they are ever filed.  And yet this opportunity is overlooked — passed over for  rote, form privilege log entries like “Not Discoverable:  Attorney Client Privilege” and the like.  These bland entries will neither  satisfy plaintiff’s counsel, nor a judge.  So take a step back and look differently at the privilege log which accompanies your initial  claims file production.  Look at the opportunity as a chance to file a free discovery brief, and treat it as such.  Get the jump on making valid arguments to protect those portions of the claims file which need not be disclosed under the applicable jurisdiction’s discovery law.

First, a quick look at an example regarding the discovery of claims reserve information, and then a review of the basic elements of privilege log entries which will persuade judges and protect portions of the insurer’s claims file:

Bad Privilege Log Entry Example:  “Objection.  Claims Reserves Are Not Discoverable”

Much Better Privilege Log Entry Example:  “Reserve information is non-discoverable work product and/or is irrelevant and disclosure of information will not lead to admissible information. See, Safeguard Lighting Sys. , Inc. v. N.Am. Specialty Ins., 2004 WL 3037947 (E.D.Pa. 2004); Union Carbide Corp. v. The Travelers Indemnity Co., 61 F.R.D. 411 (W.D.Pa. 1973); Fidelity & Deposit Co. of Maryland v. McCulloch, 168 F.R.D. 516 (E.D.Pa. 1996); and Williams v. Nationwide Mut. Ins. Co., 750 A.2d 881 (Pa.Super. 2000). Reserving is an insurance accounting instrument largely designed for purpose of regulatory compliance, and not evidence of an insurer’s opinion as to either the actual value or settlement value of the claim.  See, id.”

The differences in the two privilege log entries is apparent, but it is not simply the size — don’t confuse length with persuasive substance.  The better privilege log entry contains the following elements:

  • specific reference to the discovery sought, identifying it with as much particularity as possible;
  • Comprehensive statement of case law and rule of procedure which supports insurance company counsel’s position that the discovery sought is protected from discovery.
  • Where possible, additional identification of important public policy principles which weigh in favor of protecting the discovery sought.  Common sense and logical arguments can also appear here.

In addition to providing a jump on the opposition should the dispute make its way to a judge, it demonstrates to the reviewing judge that the objections were not “knee-jerk” or form objections not worthy of the judge’s consideration.  It sets up the insurer’s counsel as credible and thoughtful in the mind of the Court , which will not hurt the insurer, of course.

Good insurance company counsel do not look at privilege logs as merely something to be thrown together as part of preparing discovery answers.  They look at logs instead  as an opportunity to advocate for the protection of discovery at a key point in the bad faith or coverage case.






Delaware: Bad Faith Limitations Period Starts Only Upon Excess Judgment


NEWARK, DE., March 4 – The Delaware Supreme Court has ruled that a third party  bad faith cause of action does not begin to run for statute of limitations purposes until the underlying excess judgment upon which the claim is based becomes final.  In Connelly v. State Farm Mut. Auto Ins. Co., the Court found that such an approach “conserves litigant and judicial resources,” and that the rule permitted an insured to plead requisite damages, “which she cannot do before there is a final excess judgment against her.”

In Connelly, State Farm’s insured, Brown, rear ended Connelly, who sued Brown.  In May 2011, Connelly offered to settle with Brown for $35,000 of Brown’s $100,000 per per son liability limit, which State Farm declined on Connelly’s behalf.  State Farm stipulated to Connelly’s negligence at trial and the jury awarded Connelly nearly $225,000.   That judgment became final on April 29, 2012.

After State Farm paid only half the judgment, Connelly sued State Farm as a judgment creditor on September 3, 2014 , claiming among other things bad faith.  The Delaware Superior Court dismissed the complaint, ruling that the claims were untimely, the applicable three year statute of limitations having begun to run from the date of State Farm’s alleged wrongful act of  declining the settlement in May of 2011.

The Supreme Court reversed, and in so doing conducted an extensive survey of the precedents in other states, as well as leading insurance treatises to arrive at the result.  It also point out that the ruling was consistent with the Delaware Corporate code and Chancery Court decisions  which provide that indemnity claims  to not accrue until there is a final judgment.

Connelly v. State Farm Mut. Auto Ins. Co., (Delaware March 4, 2016)

Alternative Fee Spotlight: Fixed Fee Coverage Opinions and Bad Faith Claims Audits


Within legal departments today, the most common barriers to obtaining knowledgeable outside counsel for non-litigated matters are cost and uncertainty.   Outside counsel is seen nowdays as an expense which must be scrutinized, limited and reduced.  But there are ways to enjoy the benefit of the independent, objective opinion of outside counsel without worrying that doing so is an unnecessary extravagance, or yet another trip down the black hole of a running meter.

The truth is that most non-litigated matters handled for insurance company legal departments don’t need to be handled  via hourly rate.  Costing such projects is easy and predictable.  And the legal marketplace no longer operates under a single, monolithic pricing model.  Good lawyers are available for reasonable, flexible, affordable fees.

Coverage opinions and claims file audits can be performed by experienced outside counsel via fixed fee, quoted arrangements.  A legal department can get the benefit of a coverage opinion or claims file review for a low, fixed sum, quoted after only a brief review of the scope of the matter.  This small investment in an outside opinion can save an insurer many multiples of the fixed fee cost in coverage or extra-contractual exposure later on.    There are even more savings available with volume discounts or “block” fee quoting for multiple non-litigated  matters.  The options are virtually endless.

Traditionally, the return on investment which a coverage opinion or claims file audit brought was not sufficiently predictable:  the hourly rate arrangement made the initial investment in an outside opinion unclear, and therefore made the benefit hard to measure.  Under a fixed-fee arrangement, six and seven figure exposures can be identified and prevented with small four figure investments.

For more information on providing your legal department the large investment return on fixed fee coverage opinions and claims file audits, reach me at or 717-731-4800. Launches Best Claims Practices and Bad Faith Avoidance Training and Continuing Education

training%20image has launched both online and onsite continuing education services at no cost to insurers and other related businesses.  For more information on the benefits and options of this no- cost training and continuing education service, click here.

NY: No Coverage For Negligent Handling of Electronic Data


NEW YORK, Feb. 18 – A New York  intermediate appellate court ruled on Feb. 18 that claims against an insured for the alleged negligent handling of the electronic data of customers were  not covered.

In RVST Holdings v. Main Street America Assurance Co., the  liability policy in question provided for defense and indemnity to RVST for liability arising out of direct physical loss to tangible property.  The policy, however, excluded losses relating to electronic data.  The intermediate appellate court, giving the language in question its plain meaning, ruled that the insurer did not have a duty to defend or indemnify  RVST from claims relating to RVST’s alleged negligent handling of electronic data.

RVST Holdings, Inc. v. Main Street America Assurance Co.,(N.Y. App. 3rd Dept., Feb. 18, 2016)