Monthly Archives: December 2006

Last Post of 2006/Happy New Year

I’ve had a good time in my first year of blogging and met a lot of great people.  What better way to end the year and bring in the new than with this wonderful version of Auld Lang Syne from the 1940 movie Waterloo Bridge, starring Vivien Leigh and Robert Taylor.  Here’s more information about the movie.

And here, as a bonus, is the Voice, the greatest singer of all time, Frank Sinatra, in his prime with those 1950s muted trumpets blaring, really belting out The Way You Look Tonight.  Happy New Year to everyone, may 2007 bring you much joy and prosperity.

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I Wish I Could Defend This Lawsuit

I’ve had a few contractor problems in my day, so I feel this woman’s pain.  These plumbers  apparently think they are the Real Slim Shady — it would be fun to mix it up with them.

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Pennsylvania Appellate Court: Lack Of Word ‘All’ Makes UIM Waiver Void

The intent of the parties to an insurance contract is of the utmost importance, except where it isn’t.  The dictates of a statute can override any subjective or objective intent.  American International Insurance Co. v. Vaxmonsky (Penn. App. December 21, 2006) is an example.  Click here for the court’s opinion.  UPDATE: for some reason, this link doesn’t go directly to the case, but to the home page of the court’s wesbite.  When you get there, click on "List Opinions" on the left, and then on "Most Current Filed Cases," in the middle of the screen.  Vaxmonsky is currently fourth on the list.

In the case, there was no dispute that both the insurance company and the policyholder intended that the policyholder would waive underinsured motorist coverage.  He not only signed a form that said so, but, as the insurance company pointed out, he never paid any premiums for UIM coverage. Incidentally, I have found that, more often than not, courts do not pay much attention to an argument saying the policyholder’s intent is reflected in the lack of payment of premiums — your results may vary.  Usually, in the context where that issue comes up, the court has other things to think about, and such was the case here.  The waiver form was required by statute to contain this exact phrase: "Underinsured coverage protects me and my relatives living in my household for losses and damages if injury is caused by the negligence of a driver who does not have enough insurance to pay for all losses and damages." 

The policy contained that sentence, minus the word "all," fourth from the end of the sentence.  The court said the Pennsylvania UIM statute gives the precise language that must be used in a waiver of UIM coverage, and any deviation renders the waiver void, no matter what the parties intended.  If you’ve every studied the difference between various theories of law, this is the result you’d get every time under the Legal Process theory, which, and I am simplifying here, states that adherence to the full text of a statute eliminates monitoring costs and, although it might lead to some cases where the punishment is out of proportion to the offense, society benefits overall by retaining the full vigor of the law.

One could debate whether the lack of the work "all" makes any substantive difference, especially considering the preceding sentence was this: "By signing this waiver, I am rejecting underinsured motorist coverage under this policy, for myself and all relatives residing in my household." This sentence was also required by statute.  But the argument about whether the deletion of a word affects the meaning is one of policy interpretation, not enforcement of a statute, and the court was having none of that. Citing the statute — "any rejection form that does not specifically comply with this section is void" — the court said it had no choice, despite what equity might dictate.

 As a sidenote, here’s a pretty good newspaper story about the case.  A sidebar to the story refers to an online poll about whether the insurance company "should . . . be required to pay" the UIM award (the sidebar wrongly lists the amount of the award as $400,000, but it is really $250,000).  I think the wording of the poll is ambiguous: of course the insurer should be required to pay if a court found it should pay, but that does not mean the court should have required the insurer to pay.  However, for the question to be less ambiguous, it would have to ask if the court was right in declaring the waiver void, which the editor who wrote the question rightly decided is technical and boring to a general readership and would get approximately zero responses. Surprisingly, the insurance company did better than I thought it would in the web poll — 37 percent when I checked the results last.  Considering there is an inherent bias against insurers that is worth at least 20 points, getting 37 percent is like winning a landslide victory.

Note: Corrected name of case.

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Filed under UIM/UM Coverage

Katrina-Related Decisions; 2006 Saw Lowest Catastrophe Payouts In Decade

Technically, I’ve been on vacation since December 16, and I actually managed to stop doing work by about noon on December 23.  I’m also on a reduced blogging routine, but I intend to stick to my usual schedule of posting daily, except for weekends and major holidays. Sometime this summer, a friend sent me a Wall Street Journal story about bloggers who go on vacation, and whether they choose to continue blogging while on holiday, ask a guest blogger to step in, or let the blog lie fallow. 

I’ve not really considered getting a guest blogger, mostly because I’d be reluctant to ask anyone to spend the time it takes to do this blog.  I haven’t really considered not posting during certain stretches, either.  This blog is almost a year old come January, and maybe I’ll change my mind as the blog ages, but I feel an obligation to the people who’ve been reading a long time, many of whom read every day.  This summer, I even got up at some unholy hour to hunt down a dial-up connection in the middle of Yellowstone — not an easy thing to do, I found — fight off other tourists and blog for an hour or so.  You can, of course, write stuff in advance and program your blog to post it on a given day, but I do this seldomly, because there are only a certain number of hours in a day, and writing three posts in a day is usually more than I have time for.

With this being said, today I’m doing what they do in your local newspaper over the holidays when they don’t have any one crime or traffic accident that stands out, or they don’t have enough staff or time to cover them as major stories — writing a "roundup": 

— Mississippi Attorney General Jim Hood’s lawsuit against various insurance companies about their claims handling practices regarding Hurricane Katrina damage has been transferred from federal court back to state court by Judge L.T. Senter, Jr.  

Here is an interesting decision by Judge Senter from earlier this month in the Katrina litigation, in which he found that an "other insurance" provision in a Lloyds policy did not apply to the policyholder’s flood insurance.  The other insurance clause spoke of "insurance covering the same loss or damage," and Senter said the flood insurance did not cover the same loss, because the Lloyds policy excluded flood damage.  The case is SIMA/Signature Lake v. Certain Underwriters at Lloyds London.

Here’s a decent little story about how State Farm has expanded its public relations staff to deal with the Katrina publicity. 

Good story from the Daily Telegraph (UK): fewer storms and natural disasters made 2006 the lowest year in a decade for catastrophe payouts from property and casualty insurers, and the third lowest in the last 20 years.  It also includes this paragraph, which is a point I’ve often made:

US property insurance rates are particularly expensive to reflect property prices. Infrastructure in areas such as California and Florida is highly developed and more likely to be insured and it will cost more to repair any damage.

That’s it for today. 


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Filed under First Party Insurance

Contractors’ Insurance In Iraq

This story from the Raleigh News & Observer on taxpayers’ costs for underwriting what is essentially workers comp insurance for contractors employed overseas, including in war zones, is interesting and well-written, but can’t make up its mind what it wants to criticize.  Is it that the market is unregulated, or that an insurance monopoly exists?  It appears significant cost savings could be found by introducing more competitive bidding for the insurance contracts, but the story impliedly criticizes the fact that contractors are doing the work rather than the military.  From a purely economic  standpoint, does anyone think the military would be any cheaper? 

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Filed under Industry Developments

Season’s Greetings

No insurance today.  Just a link to the best version I’ve ever heard of Santa Claus Is Coming To Town, by Karen Carpenter.   Although she was thought of as lightweight fare in her own day, the passage of time has revealed the initial judgments were flawed.  There is no female singer who ever sang more sincerely and believed in a song more than Karen Carpenter. 

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Friday Potpourri

—  If you lack sufficient information as to why lawyers are hated as a class, you need only read the comments to this post by Peter Lattman of the Wall Street Journal Law Blog.  The commenters appear to agree on only one thing: let pomposity, self-righteousness and rudeness ring throughout the land!

— News You Can’t Use.  From the Deccan Herald, in Bangalore, India, here is a headline you don’t see much: "Come January, sheep will be insured!" Limit is 10 per shepherd, some income limits apply.

— December has been a crazy month for me for work, so I haven’t had much time to look at new coverage cases.  Here’s one from a couple weeks back that bears mention: Blue & Gold Fleet, Inc. v. St. Paul Fire and Marine Ins. Co., 2006 WL 3480419 (Cal.App. December 1, 2006).  The appeals court found St. Paul had no duty to defend under the Advertising Injury provisions of a CGL for allegations of "unfair business practices"  made by a cruise line’s competitor.  These had to do with alleged below-cost pricing and anti-trust violations.  The court said these allegations did not fit into the advertising injury endorsement, which covers injuries arising out "libel, slander, defamation, violation of rights of privacy, piracy, unfair competition, or infringement of copyright, title or slogans." The unfair competition covered by the policy, the court said, is what is often called "passing off" your goods as those of another, and does not include all unfair business practices.


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Maniloff’s Top 10 Coverage Decisions Of 2006

It is hard to write excellent legal prose for a number of reasons, not the least of which is the surprising resistance one encounters to good writing from many people who treat legal writing as if it is not an art but merely an industrial process, like bleaching wood pulp. These people treat any attempt at originality, creativity or — heaven forbid — humor as if you had showed up at a job interview with a Harley tattoo on your forehead. In addition, writing anything good is just plain hard, often agonizing, work.  Strangely enough, really good writing does not bear the marks and bruises of all this laboring, but instead reads as if it flowed naturally from the author’s fingertips with little effort.  Good writing glides, turns, shoots and scores like The Great One in his prime.     

So here is an example of legal writing that is really good, by Randy Maniloff, of White and Williams in Philadelphia.  Here is a link to Randy’s upcoming article in Mealey’s Litigation Report: Insurance on the year’s 10 most significant insurance decisions.  When I praise the writing, don’t take that to mean I slight the substance, because good writing is substance.  I place this article in my highest category of legal writing — the Steve Buscemi class — named after the actor who always brings something fresh, surprising and original to a role, who puts maximum effort into each part without letting you see the effort, and who worked as a firefighter for four years before becoming a star, and then showed up for work at his old firehouse the day after 9/11, working 12-hour shifts at Ground Zero while disdaining publicity. 

I can’t quibble with Randy’s case selection — I’ve written about many of them myself — although for sentimental reasons, I found myself wishing at least one of the Hurricane Katrina coverage cases, which I have spent so much time analyzing and of which I have grown so fond, had made the list.  My favorite analysis in Randy’s piece is French v. Assurance Co. of America (4th Cir. 2006), particularly this excerpt that brings clarity to a construction defect issue that often seems murky:

However, the flaw in this argument is that the subcontractor exception to the your work exclusion is not called the subcontractor exception to the occurrence requirement. The French Court recognized this and concluded that, notwithstanding that the EIFS was defectively installed by a subcontractor, such defective application does not constitute an accident, and, therefore, is not an occurrence under the CGL policy. 

My favorite lede from the analysis of the cases is this one, from Standard Fire Ins. Co. v. Spectrum Community Assoc., 46 Cal.Rptr.3d 804 (Cal.App. 2006):

What’s the difference between a John Grisham novel and the continuous trigger? Answer: Nothing.  They are both legal fiction.

And here’s a great short summary of Brannon v. Continental Casualty Co.:

— Supreme Court of Alaska gave an insurer a chilly reception to its argument that the statute of limitations on an insured’s action for breach of the duty to defend began to run from the time of the disclaimer . . . .

Print the article out and read the whole thing.  At 23 pages, it will take a little time, but it’s worth it.


Filed under Bad Faith, Duty to Defend, Duty to Indemnify, Industry Developments, Liability Policies

Wednesday Insurance Melange

A couple quick items for you today:

—  As a result of Hurricane Katrina complications over wind vs. water coverage, State Farm will sell neither along the Mississippi coast.  (Homeowners policies traditionally include wind coverage, but flood insurance is available only through a federally backed insurance program).  Here is Ted Frank’s take at PointofLaw.

—  Here is a good example of cognitive dissonance about insurance.  This is a perfectly fine little story that has modest goals — to put a smile on your face, or plant a seed of frivolity in your mind that may later bloom into the equanimity that protects against life’s slings and arrows — but as Melanie Safka might say, Look What They’ve Done To My Song, Ma.  Look at the readers’ comments underneath the story, and see how some people take it seriously and digress. 

—  I know there is supposed to be an accent aigu on the word "melange," but I hate looking for symbols and trying to import them over to my blogging program. 

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Filed under Miscellaneous

Making Flood Protection Risk-Based Rather Than A ‘Reactive Investment’

This report from Risk Management Solutions, Inc. on the Hurricane Katrina flooding in New Orleans is quite good, and shows that, despite suffering four major hurricane-caused floods in the last 100 years, the approach to flood protection in the city is still one of addressing the problem that just occurred, rather than preparing defenses based on expected future risk. 

The best part of the report is Section 4, which examines how the Federal Flood Insurance Program is being inundated, in part because it has become a subsidy for flood plain development rather than an insurance program.  If you are pressed for time, Section 4 will take only 5 to 8 minutes to read.  The next best part is Section 5, which advocates that flood protection planning be based on risk assessments, with development within the flood plain tied to the chance each particular structure has of being flooded.    

Some might assume that this is being done, but it is not.  Section 5 presents a convincing illustration of the continual re-occurrence of "reactive investment," where defenses are upgraded after a flood to deal with the last flood.  Major floods are an infrequent occurrence, but the interval between them is taken as evidence that the flood defenses have solved the problem, and development is allowed in even higher-risk areas, ensuring that the next flood will be even more catastrophic.  This complacency also leads the supposedly improved defenses to degrade, endangering not just new development but also the existing property that the defenses were designed to protect.

A good report, but let’s not forget RMS is selling its services — sophisticated computer modeling of risk assessment — in this report.  That doesn’t mean what they are saying is untrue, but like any report, it does mean that its conclusions are colored by its point of view.  

Hat tip: Mark Geoghegan at blog-re

CORRECTION: I’ve fixed the spelling of Mark’s name, which I misspelled in my haste to post.

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Filed under First Party Insurance