Monthly Archives: November 2006

Court In Katrina Case: One-Year Statute Of Limitations Bars Misrepresentation Claim Against Agent

Claims of policy ambiguity are the staple of Katrina coverage litigation, as they are in a lot of coverage actions. Lieschen Clover v. Allstate Ins. Co., 2006 WL 3366132 (Banktrcy. E.D. La., November 20, 2006) is one of those cases.  Allstate removed Clover’s claims against the insurer and the agent who sold Clover the policy, saying the plaintiff had improperly joined the agent to the lawsuit to defeat diversity jurisdiction and prevent removal to federal court.  Both the agent and Clover were citizens of Louisiana at the time the lawsuit was filed.  The court uses the term "improper joinder" rather than "fraudulent joinder," which is the more common term, apparently because it sounds nicer.  I agree.

Clover, who is now a resident of Pampano Beach, Florida, is a pro se plaintiff who sued over business interruption coverage for a New Orleans establishment that was put out of commission by Hurricane Katrina.  He pointed to two provisions in the policy as entitling him to coverage:

 1.  [The insurer will pay up to 12 consecutive months for] Your loss of income resulting from a covered loss but not to exceed the actual reduction in net income from the operation of the business plus charges and expenses which necessarily continue during the interruption of business.

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4.  The reasonable and necessary loss of net income or net rental income for up to two weeks should civil authorities prohibit you from occupying the insured premises due to a loss at the immediately adjacent premises, caused by a peril we insure you against.

Clover said the words "adjacent premises" in paragraph 4 were interpreted by Allstate as meaning all of New Orleans, while his agent told him when he got the policy that adjacent premises meant nearby buildings.  As it turned out, Allstate had already paid him the two weeks’ loss of income under paragraph 4, but Clover claimed the agent’s representation created an ambiguity about the meaning of paragraph 4, and that entitled him to the one year’s coverage of paragraph 1.  Now, people who read this blog analyze insurance policies for a living, and you all could guess with great certainty that argument isn’t going to cut it with a federal judge.  It didn’t.  An ambiguity as to the price of a hamburger and fries doesn’t entitle you to order anything on the menu free for a year.

The court found that the meaning of paragraph 4 was clear, and that a Louisiana statute bars claims against insurance agents more than one year from the date a negligent act or statement was discovered or should have been discovered.  Because the policy’s coverage was clear, the court said, the discovery date ran from the issuance of the policy. Unfortunately for Clover, that date was one year and six days before he filed his lawsuit.  So the court said the claims against the agent were not viable and would be dismissed.  With the agent out of the lawsuit, complete diversity of citizenship existed between Clover and Allstate, and the case will stay in federal court.

 

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Potpourri

Work is calling, and calling, and calling, and I was out late last night at the Trail Blazers game (I have three young kids, late for me is anything past 9:30), so there is time only for a couple quick items today.  

— I saw this hyped on a couple of relentlessly shrill sites this morning as a court ruling on Farmers’ alleged practice of tying adjusters’ compensation to the amount of claims paid out.  Instead, it looks like a pretty unremarkable discovery ruling.   Here’s the ruling: judge for yourself, it’s only a few pages long.  Credibility is hard to come by, easy to squander. You can’t fool people on the Web, they can check it out for themselves.

This caught my eye because it started out talking about Jacques Barzun and his recent book, From Dawn to Decadence, which I really liked. This piece is good in its own right: it discusses whether society has actually grown more illiterate, not less, over the centuries.  Incidentally, I’ll link to anything that talks about Jacques Barzun, because I have fond memories of discovering, while in college, a series of taped discussions between Barzun and Clifton Fadiman on literary matters.  It would be difficult to find two more erudite, well-reasoned people, and I spent many an hour listening to their talks.    

— In my never-ending search for Katrina coverage news, one of my 24/7 robot searches returned this item about a federal judge in Louisiana who found flood exclusions in some policies ambiguous.  If this is an accurate description of what happened, it would be significant, but because the ruling is 85 pages long, I’m not going to be able to look at it for a while. I take any news reporting on insurance coverage with a grain of salt: reporters have no better idea what a case really says or means than I would have had back in my reporting days, and consequently are dependent on interviews and subject to spin. 

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Health Care Insurance: Four Products, Three Of Which Are Not ‘Insurance’

This story starts out with a lot of promise and a fresh idea: one reason health care insurance is so expensive is that it is actually four products.  Here’s the explanation from the story:

Elements commonly included in health insurance are actually four distinct financial instruments, he said, only one of which is insurance in the classic sense — and that is coverage to protect a person’s assets from a catastrophic event like a car accident or serious illness.

The other three areas of coverage — for preventive services, routine treatment and chronic care — are not insurance because they are used for predictable expenses, Smith said.

The story goes on to say that these other non-insurance items may be obtained in some other, cheaper way, but that bundling them together drives up the cost of all of them.  Unfortunately, towards the end, the story feels some need to swerve from excellence to insert some stuff in the "news you can use" category: I blame some weasel editor somewhere along the line.  Still, this is a good story overall, one that I would have liked to have seen at feature length, perhaps like something in The New Yorker.  It certainly would be better than the last story I read on health care insurance in The New Yorker, which bizarrely dwelled on people pulling their own teeth.  

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Is There Actually A Litigation Crisis?

I think it was Anthony Downs, a Senior Fellow at the Brookings Institution, who coined the phrase "exagger-books" to criticize works like Future Shock, by Alvin Toffler.  It has been quite a few years since I read Future Shock, and I have no intention of picking it up again, but from my recollection it is full of dire data showing people are suffering from information overload and loss of ability to function properly because of the increasing rapidity of change.  If memory serves, one of the illustrative anecdotes about how change destroys positive values was that of French housewives, who were used to carrying produce home daily in their own canvas bag or net, and who initially resisted the idea of using throw-away plastic bags, but then became wastefully socialized like the rest of us.  According to Downs, authors like Toffler were guilty of "megahyping the pseudo facts."   Let’s test Downs’s hypothesis with this question: remembering Future Shock was published in 1970, 36 years later do you believe you personally have succumbed to future shock?  I didn’t think so.  So perhaps Downs was on the money.

Now, I don’t want to pick on this post, but you will notice that under the guise of addressing a particular problem — alleged runaway liability for pension plan fiduciaries — it throws together a lot of data, most of which has very little to do with pension plan fiduciaries and some of which has nothing to do with much of anything.  The lead item of evidence is the Fulbright & Jaworski litigation survey from earlier this year, which I found somewhat lacking because it lumped insurance litigation (apparently including defense obligations pursuant to the terms of liability policies) with other commercial litigation.  It may be legit to include insurance coverage litigation in the mix of commercial lawsuits, but including insurance defense counts some things as commercial litigation that should not be counted, and counts other things twice that should only be counted once. The Lexis-Nexis survey of chief legal officers cited in the post seems off topic: does the fact that companies spend money on compliance mean a liability problem, when litigation itself is only third on the list of concerns?  Returning for a moment to the Fulbright & Jaworski survey, note that it calls its 111 responses to 422 inquiries "statistically significant," but is it really statistically significant of industry in general or just statistically significant of the total number of survey forms? Could it be the survey is best seen as an advertisement for Fulbright & Jaworski that contains some anecdotal evidence of possible but limited interest?  Does the fact that a given number of lawsuits happen, or that companies spend a given amount of money on them, actually tell us whether the lawsuits are a benefit or a hazard? For example, it is theoretically possible that lawsuits themselves are part of the competitive process, and that fear of lawsuits in some instances may produce greater efficiencies.   

I find that most writing on whether the amount of litigation is too great or too little suffers from the same defect as the post I linked to.  In fact, I’m sure you see this same thing every day in a variety of writings meant to persuade, ranging from corporate memos to legal briefs to the news articles in your local paper.  Citing disparate information and anecdotal evidence is not the same as proving a point, it’s using French housewives to make an exagger-point.   

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Insight Into The Mind Of A Doctor Sued For Malpractice

I was reading a very good series of posts by a general surgeon who was sued for malpractice and ended up settling the case.   Here are the three parts: one, two and three.  (Never mind the somewhat strange title and graphics on the posts, and the fact that some of the doc’s other posts have a focus on bodily functions that may be natural to a doctor’s blog but that is fortunately outside the norm for legal blogging).  If you have time only for a quick scan, I think the third one is the best, but the whole series was instructive to me about the psychology of a lawsuit and a defendant’s state of mind, and I felt this account was very honest and credible.  I like to read perspectives like this, because it helps me to remember that litigation, no matter how abstract the legal principle, is in essence a people business, and that there are obligations of conduct not only to my own clients but also to adversaries and other parties.

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Blogging Schedule

I’ll be posting after 9:30 a.m. Pacific Time this morning.  Seems anytime a holiday approaches the work multiplies, so I’ll get to blogging as soon as I can.

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Mississippi Attorney General Asks Court To Suspend Lawsuit Against Katrina-Related ‘Whistleblower’ Sisters

Here’s another interesting turn of events in the story about the sisters who allegedly took a bunch of documents from a business hired by State Farm to provide Hurricane Katrina claims adjusting services.  Apparently, they then gave them to plaintiff attorney Dickie Scruggs and became consultants to him.  The Mississippi Attorney General is asking a federal judge in Alabama for a suspension of the the civil suit by their former employer, E.A. Renfroe & Co., while his criminal probe continues into insurance claim practices.  Slow down, Mr. Attorney General, there are still plenty of headlines out there to be grabbed. I wrote about it earlier here.

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The Gospel Of Blogging

I found this story in the Des Moines Business Record better than most stories on legal blogging, and I liked the perspective that one goal of blogging is to take the mystery out of law. I might also add that putting some fun into it doesn’t hurt, either.  One bone to pick: the story says the featured attorney "is not a writer by profession. In fact, he’s not a writer at all."  Remember, that’s the reporter’s turn of phrase, not a self-description by the attorney.  If any lawyer does not see himself or herself as a professional writer, they are doing a disservice to themselves and anyone who encounters their prose.  Lawyers get paid, and paid well, to write.  They owe the reader an excellent, thoughtful product, whether it is an update letter, an e-mail or an important brief.  Hat tip: Blawg, written by Bill Gratsch.

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Thanks To Readers

With Thanksgiving coming up, I was thinking about all the things I have to be thankful for, including getting the chance to have two wonderful families: first my Mom and Dad and brother and sisters and all the people of Wildrose, North Dakota; and then my wife and three kids and the great folks of Portland, Oregon, one of the friendliest, most supportive cities you will ever find.  What a great life I’ve had, growing up on a farm, then working as a newspaper reporter and earning a living as a writer, and then becoming a lawyer and practicing insurance and commercial litigation at BPM.  Along the way I’ve met so many amazing people who make me appreciate how varied and resilient life is.  I wouldn’t change places with anyone on Earth, not if it meant giving up my memories.

I’m also thankful for all the readers of Insurance Coverage Law Blog, especially you folks who take the time to make this blog a regular part of your daily routine.  I’ve gotten to know a number of you and count you as friends, and that is a truly remarkable thing to me, because before I started this blog I can vividly remember a few people who told me insurance coverage is boring and no one would read what I wrote. However, I devoutly believe that it is not a subject that is boring, but the writer.  It’s been true since the time of Homer and it will always be so: any writing that is any good whatsoever tells a story.  A story features some kind of conflict, and there are only three: man vs. man, man vs. nature, man vs. himself.  Legal analysis in itself must tell a story to be effective, and that’s what this blog is about: a place where we share stories.  

One story I want to share today is about Bobbi Fortier Talmadge.  When I was a teenager in Wildrose, Bobbi was one of the kids I coached in T-ball and drove to swimming lessons.  Her real name is Roberta, but I don’t think I’ve ever heard anyone call her that.  I grew up as a Lutheran, but sometimes I went to Mass with Bobbi’s family: her mom, Marlene, and sisters Shelley, Denise, Jackie, Suzi and Lois.  Now, in case you didn’t know, in a very small town or rural area your individuality is constrained somewhat: there just aren’t enough people to make things work unless some consensus or group norm emerges.  To get anything done, you need to be able to accept people as they are, accept life as it is and make the best of it.   Once you decide to do this, a hidden world opens to you, and you can find a current of strength underlying life that ties us together in all sorts of ways you did not suspect.  Maybe it is this upbringing that is helping Bobbi tap into a reservoir of strength now.  Not even two weeks ago, Bobbi found out she has leukemia, and she’s now in the Mayo Clinic getting chemo.  Bobbi has three kids, all young.  Last week I e-mailed Bobbi and asked her to please let me know what I can do for her and her family.  She said just pray for her.  Her attitude is that of a fighter who is going to beat this disease — I’ve known Bobbi my whole life and that is typical of her.  I’ll tell you what, that’s the kind of person I admire.  If you’re the praying kind, maybe you’d say a prayer for Bobbi too.

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Oregon Supreme Court Case Provides More Questions Than Answers

This Oregon Supreme Court case, Holloway v. Republic Indemnity, was the talk of Oregon coverage lawyers last week, who found themselves looking slack-jawed at each other and muttering, "what just happened?" 

When the Court of Appeals decision in this case came out in 2005, I thought it was a curious piece of work, chiefly because it beat around the bush about the issue of ORS 31.825, which says that:

 A defendant in a tort action against whom a judgment has been rendered may assign any cause of action that defendant has against the defendant’s insurer as a result of the judgment to the plaintiff in whose favor the judgment has been entered.  That assignment and any release or covenant given for the assignment shall not extinguish the cause of action against the insurer unless the assignment specifically so provides.

Oregon appellate courts have never directly addressed whether this statute overrules the so-called Stubblefield line of cases, which invalidated assignments of rights against breaching insurers when the underlying case had not proceeded to a judgment on the merits.  As a result, there is some confusion about what ORS 31.825 means, and if it doesn’t protect this type of assignment, what the purpose of the statute would be.  

The Court of Appeals reversed a summary judgment by the trial court in favor of the insurer, holding that the insurer breached a duty to defend the insured in an employment discrimination/intentional tort case.  After the insurer failed to defend, the insured settled with the plaintiff for a stipulated judgment of $50,000, with a covenant not to enforce the judgment, in return for assignment of causes of action for the insurer’s alleged breach of the duties to defend and indemnify. 

One might have expected the Court of Appeals either to say the breach of the duty to defend relieved the insured from compliance with the policy’s anti-assignment clause, or that anti-assignment clauses by law apply to pre-loss assignments, not those that are post-loss.  Instead, the Court of Appeals said the clause was ambiguous and therefore interpreted it in favor of the insured.

The Supreme Court reversed and gave the decision to the insurer.  However, the Supreme Court did not address the duty to defend at all, saying it was unnecessary to complete the analysis.  The court found the anti-assignment clause was not ambiguous, and must be enforced as written.  It’s not clear exactly what this means. Did the court intend to invalidate assignments of policy rights unless they occur after a judgment on the merits? If so, what about ORS 31.825?  The court also ignored cases from other jurisdictions, saying without explanation that these jurisdictions follow a different analytical framework in insurance cases than Oregon courts. 

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