Monthly Archives: October 2007

You can afford it

This post just happened to get lodged in my feedreader, and I just happened to read it.  Nothing out of the ordinary, I’ve seen this argument in one form or another about — hold on while I count — I’d say about eleventy-billion times.  The post takes issue with Allstate canceling policies in certain coastal counties of New York.  Now, readers of this blog know that Allstate has a strategy of pulling back from what it believes was overextended risk in the homeowners insurance market.  I’m not here to defend Allstate, but just talking in general, doesn’t it seem like that argument is kind of tired? Do I say a restaurant owner should keep his restaurant open even though he is losing money merely because I like to eat there?  What if he’s a multi-millionaire many times over, should he lower his prices because he’s making enough money and I like cheap food?  Do I tell a doctor he should continue to practice in a high risk area of medicine even though he could make more money and feel more secure with another type of practice? If I go to a doctor for, I don’t know, cosmetic surgery do I say he should charge me less because I know he just bought a 42-foot boat?

Do I withhold  certain sums of money that the IRS claims I owe the government because they already have more than they need? Let’s put it another way.  Say there is a lawyer who has a colleague, and the lawyer finds out the colleague is completely alienating clients, making a horse’s arse out of himself, losing business.  Should the lawyer keep him on his cases because by the standards of many people he has enough business and is making enough money? What if your brother-in-law likes to juggle knives, but he’s terrible.  Are you supposed to sit there when he whips out the blades?  If Allstate is missing a good bet by not underwriting these policies, that is some other company’s gain, and something for which they will have to account to their stockholders.  Why does it matter if they made money or lost money? If you have a lousy employee do you keep her because your company posted record profits? Just asking, that’s all.

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McKinsey documents — overrated?

That’s what seems to be the message of this post on the blog of the Merlin Law Group.  The case mentioned is one I wrote about here.  One thing I found amusing in the post was the information — which I guess I had heard before but just more or less forgot — that ATLA, the Association of Trial Lawyers of America, changed its name to the American Association for Justice, a name Ted Frank has referred to as "Orwellian."  I guess the other name had become too pejorative. 

But the "American Association for Justice" sounds like some kind of splinter group of Amnesty International, or maybe a support group for folks in the Justice Department with alcohol and drug problems.  "Association for Justice"? Come on, who’s not for justice? Even Stalin was for justice, although he and I would differ on its definition and application (some say he was smothered with a pillow, which would be poetic justice in that I believe he had once expressed a desire to die in bed — be careful what you wish for!).   American Association for Justice just doesn’t have much pizazz, it’s kind of like People For A Nice Day.  Let’s try on a couple alternative names: how about Legal Crusaders Fighting Injustice? Lawyers Against Corporate Evil? If they thought the old name was getting too filthy, let’s ask what about it gave it a bad name — the words "trial lawyers," or course.  So why didn’t they just change it to the Association of Settlement Lawyers of America?  The overwhelming majority of cases are settled rather than tried anyway. 

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I find this to be one of the most disgusting things I’ve read this year

As the father of two girls who are 8 and 3, I found this Newsweek story about slutty Halloween costumes for little kids extremely disturbing.  Have parents lost their minds?  What kind of mother or father sends their kid out dressed as a strumpet?  After 40 years of feminism, how did we get to this weird place where you don’t get stomped when you glorify slatternly behavior and project it onto young girls?

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California wildfires: can battle against natural disasters be won?

This New York Times story by Kris Johnson and Jesse McKinley is the best I’ve seen yet on the California wildfires.  It points out that with increased development in high-risk areas, a cycle of disasters is guaranteed.  As the story also observes, the human tendency is to "overcome" the disaster, instead of drawing any inferences about how future conduct might be altered.  An excerpt:

More often than not, the human response after fire is to restore, not relocate, said Thomas J. Campanella, an assistant professor of city and regional planning at the University of North Carolina at Chapel Hill and co-editor of the 2004 book “The Resilient City: How Modern Cities Recover from Disaster.”

“After disaster, people are not in any mood to change further,” said Professor Campanella. “They already had their lives turned upside down, they want to get back to they way it was yesterday — turns out to be a very bad time to have vision.”

On a slightly different topic, you’ve all heard of that FEMA news conference on the wildfires where the stupid softball questions were all asked by fake reporters who were actually FEMA employees, right?  I mean, what where they thinking and why weren’t they all fired immediately? This story says the guy responsible was denied a promotion. That’s it? 

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Southern California wildfire roundup

This LA Times story about AIG’s private fire crews that are brought in to protect enclaves of million-dollar-plus homes has an undertone of resentment.  I saw a number of blog posts about this story, all ranging along the scale from upset to outraged.  I posted about AIG’s firefighters before these wildfires began, and as I indicated in that post, I’m curious what kind of lawsuits will eventually arise out of this practice.  When it comes to insurance, eventually all angles of recovery will be tried.  Even if it does result in scattered litigation, however, it’s worth it to AIG to avoid as many massive first-party claims as possible.  Why do I think this will result in litigation at some point? As the outraged blog posts I saw indicated, this practice is particularly prone to be used in a lawsuit to attack AIG’s brand image — a tactic policyholder attorneys increasingly favor.   

This MSNBC story says that wildfire damage easily will exceed $1 billion.  Most of it will be insured, but the question is whether property owners learned from the 2003 wildfires in the same area and made sure their coverage is equal to the value of their homes.  As the story says:

Homeowners who suffered losses may be in better shape than those who filed claims after the 2003 fires, which touched off widespread complaints after many discovered that they were underinsured. Though many have now beefed up their policies, they still face losses from deductibles and losses that may not be covered.

However, I have to point out that the paragraph that follows this in the story makes no sense at all: 

Insurance rates for home owners in fire-prone areas may well be raised if the insurance industry can convince state regulators they face higher risk from future fires. Those who lost their homes to fire will also be hurt by the depressed housing market, since claims are based on current market values, which have been substantially depressed by the downturn.

Sometimes news stories descend into random bits of kvetching held together only by the glue of schadenfreude.  Y’all know what I’m talking about here, don’t you, this tendency in disaster stories?  If someone is fully insured, is made whole and gets back a house of the same value in all respects to the one that was destroyed, it is not an insurance problem that the local housing market was in a downturn.  If no fire had occurred, the homeowner would be in the same market position as if one had.  

This story in the Washington Post — not sure you’ll get through if you click the link, the Post is one of those dinosaurs that requires subscriptions to access much of its database — says insurers don’t expect local or national premiums to go up as a result of the wildfires.  An excerpt:

As the wildfires that ravaged Southern California for five days lost momentum yesterday, representatives of the insurance industry said the estimated $1 billion in fire damage would have little if any impact on homeowners’ rates in California or the rest of the nation.

"It’s well within the range of losses we expect to see in California every few years," said economist Robert Hartwig, president of the Insurance Information Institute. "That means the rate in this area is already reflected with the risk associated with wildfires."

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Scruggs defense team files reply brief in USA v. Scruggs, defends sending of documents to AG Hood as legit cooperation with law enforcement

Dickie Scruggs, charged with criminal contempt of court for allegedly working with Mississippi AG Hood to circumvent a federal judge’s injunction, has filed his reply to a special prosecutors’ brief detailing Scruggs’ supposed legal "sham."

An excerpt from the Scruggs brief:

Aside from being factually wrong, the "sham" theory fails as a matter of law because the Injunction’s law-enforcement exemption requires nothing more than a request from law-enforcement officials.  It does not require any inquiry into the state of mind of the requesting officials, or any inquiry into the process by which those officials decided to request the documents.  Due process forbids reading additional restrictions and qualifications into the Injunction’s law-enforcement exemption — yet the "sham" theory turns on doing just that.

I think this is a clever argument.  It takes the terms of an injunction in a civil case and seeks to apply to it the standard for construction of a criminal statute — that the words of the statute must be strictly construed against the state and in favor of the accused.  I’m not sure I fully buy it, but it’s a good argument.

That first dependent clause in the paragraph excerpted above, however, is somewhat of a non sequitur — "aside from being factually wrong."  That clause refers to the previous sentence, which sums up the sham theory as asserting "that the Mississippi Attorney General didn’t really need the State Farm documents and requested them only ‘to assist the Defendants in their commercial business endeavors, and lawsuits’."  The Defendants are Scruggs and his law firm, and this sentence responds to prosecutors’ accusations that, after Judge William Acker issued an injunction requiring the "whistleblower" Rigsby sisters and their agents to return State Farm claims documents they had taken from their employer, E.A. Renfroe, Scruggs immediately called his close friend AG Jim Hood and arranged for him to request the documents so Scruggs could avoid handing them over to Renfroe’s attorneys.  However, it seems beyond dispute that Hood did not need the documents, as he already had another copy of them.  That doesn’t mean the argument excerpted above is no good, but the point is weakened by a protest against what seems self-evident.  Because Hood had his own copies, he did not "need" the Scruggs copies, so it is difficult to see how that assertion is "factually wrong." 

By way of background, the Rigsby sisters were being sued by Renfroe for taking 5,000 to 15,000  State Farm Katrina claims adjusting documents, allegedly in violation of their confidentiality agreements, and giving them to Scruggs.  If you don’t know the full story and want to know it, go to my blog’s search bar and type "Rigsby." I’ve written posts on this by the cyber-ton.

Scruggs also makes an argument that Judge Acker’s injunction did not encompass him as a nonparty: in other words, that Scruggs can be liable for violating the injunction only if he aided and abetted a party to the lawsuit to violate the injunction.  Without a primary violation by the Rigsby sisters, he says, he cannot have violated it himself.  Prosecutors have said the injunction clearly applied to the sisters and their agents, and that Scruggs and his firm, as their lawyers, were agents even though Scruggs did not represent the sisters in the Renfroe lawsuit, but instead was their counsel regarding the documents and a separate whistleblower lawsuit the sisters brought under the False Claims Act against several insurers and others.

The most extended argument in the brief, however, is an attempt to debunk the sham theory by stating that the injunction on its face contained no exclusion of documents in the law-enforcement section (allowing cooperation with law-enforcement officials in their investigations into insurer claims adjusting practices).  I thought this argument was exceptionally well-written, but it suffers from an internal contradiction: even under a generous interpretation, the law-enforcement exception allows only "disclosure" of documents to law-enforcement.  How can you disclose what someone already knows?  Can you disclose to me that I’m from NoDak?  Since Hood already had the very same documents, how can giving him the copies that were to go to Renfroe’s lawyers constitute a disclosure?       

All in all, though, I think this brief gets an A for clarity of writing and expression and legal argument.  If you would like to judge for yourself, click here to read the Scruggs reply brief.

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Grand jury seeks hard drive, firm suspects Scruggs of violating judge’s order and tipping off U.S. Attorney

Just when you think there can’t possibly be any other angles to Katrina litigation, another one sticks its head up like in some kind of Whack-A-Mole game, and Dickie Scruggs has a way of being involved.  Check out this story by Mike Kunzelman of the AP.  

It says Forensic Analysis and Engineering — and you may remember that firm as being involved in adjusting Katrina damage and also being the locus of those dumb e-mails that keep getting trotted out like they’re all that, but they ain’t, kind of like some middle-aged guy strutting around in a Speedo  — is seeking to block a grand jury subpoena of the hard drive of one of its employees.  The grand jury, convened by a U.S. Attorney, seems to be investigating whether insurers committed improprieties in paying wind claims off with federal flood policy money.  OK, we’ve been around and around on that, I don’t need to go over it again.  If you want more on that subject use my blog’s search bar and you’ll find a ton of posts.  Ah, but here, in the middle and at the bottom of the AP story, what is this? It looks like, could it be? Yes, yes it is — further allegations of Dickie Scruggs violating a judicial order:

Scruggs’ firm, for one of its cases against State Farm Fire & Casualty Co., obtained the hard drive from Forensic employee Nellie Williams in July. Forensic, which helped State Farm adjust claims after Katrina, says Scruggs’ firm wasn’t entitled to obtain the hard drive.

On Oct. 9, U.S. Magistrate Judge Robert Walker in Gulfport, Miss., agreed to temporarily block Scruggs from disseminating any information obtained from the hard drive. Two days later, however, Lampton’s office served Scruggs with the subpoena for the hard drive. (Lampton is the U.S. Attorney)

Scruggs subsequently asked for Walker’s permission to comply with the subpoena. Walker hasn’t ruled on that request.

Forensic’s lawyers say the timing of Lampton’s subpoena was "odd, but coincidence just cannot be the explanation." Instead, the firm’s attorneys claim Scruggs tipped off Lampton’s office to the existence of the hard drive "in direct contravention" to Walker’s order.

"Knowledge of the exact location of the hard drive and its potential contents are most likely not a lucky guess," Forensic attorney Kathryn Platt wrote.

Richard "Dickie" Scruggs, Zach’s father and law partner, said they told federal investigators about the hard drive before Walker issued his Oct. 9 order.

"We weren’t trying to circumvent Judge Walker’s order," he added. "We have complied with the letter and the spirit of his order."

. . . .

Scruggs also has cooperated with Mississippi Attorney General Jim Hood, whose office has investigated allegations that insurers fraudulently denied claims after Katrina. Scruggs’ firm provided Hood’s office with copies of internal State Farm documents obtained by two sisters who helped the company adjust claims.

In June, however, U.S. District Judge William Acker in Alabama ruled that Scruggs "willfully" violated a court order to return the documents. Acker named two special prosecutors to handle the case after U.S. Attorney Alice Martin declined to prosecute Scruggs for criminal contempt charges.

Forensic said Scruggs’ handling of the hard drive is "not completely dissimilar" from the contempt proceedings in Alabama. Scruggs, for his part, rejected that comparison.

 

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Southern California wildfires and insurance claims

I’ve been watching for stories on the California wildfires and what people are saying about potential insurance disputes.  This AP story by Gary Gentile talks about fears that policyholders will be canceled or that insurers will seek to raise premiums.  Actually, what I was thinking was more along these lines — in areas where homes are rapidly escalating in value, and for homeowners who don’t have replacement cost coverage, there will undoubtedly be a number of cases where the home value exceeds the insurance.  You remember this Bloomberg story that I talked about a few months ago?  The discrepancy between the home’s value and the insurance coverage was the story’s main anecdote in a story about purported insurer bad faith. The specter of too little insurance is also mentioned in this recent CNN story.  Here’s an excerpt:

Insurance companies brought in a combined $6.6 billion in homeowner insurance premiums statewide during 2006, according to the Insurance Information Institute. During that same period, total California premiums for auto insurance reached an eye-popping $19.8 billion.

But what experts like Doug Heller, executive director for Foundation for Taxpayer and Consumer Rights, worry about is how much money will be available when it comes time for customers to rebuild their homes.

"That’s the real concern for me at least," said Heller. "Will they actually fulfill their advertisements?"

One of the biggest controversies erupted in 2003, when fires ravaged San Diego and San Bernardino counties. Consumers found themselves underinsured because their policy limits were not raised to reflect their home values, said Heller. That meant homeowners had to pay the difference.

"I think there is a question as to whether insurance companies learned from 2003 and have made sure that policyholders have enough coverage," said Heller.

Interesting turn of the phrase there — did insurers make sure policyholders had enough insurance.  Another way to say it: did policyholders learn from the 2003 fires and make sure they had enough coverage? 

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It doesn’t take a Nobel Prize winner to explain high insurance prices on the Gulf Coast

At first, I thought this story might be intended as a joke.  Unfortunately, it appears that was not the  goal, which is a pity, because it would have worked better that way.

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Katrina’s long reach

This New York Times story about insurers non-renewing 3 million homeowners policies in the Eastern U.S. is not news to the kind of people who read this blog, but it’s a good, well-written story nonetheless, and worth a look. An excerpt:

Amy Bach, executive director of United Policyholders, a California-based consumer advocacy group, has watched the situation in the East with both professional and personal interest, since the policy on her parents’ Long Island home was recently canceled. Crisis or not, she said, the pattern is familiar.

”Wide-scale nonrenewal has been the knee-jerk reaction of the big insurance companies after every major disaster: hurricanes, earthquakes, wildfires,” she said.

Florida set the pattern for states in picking up the risk shed by major carriers. Its state-created Citizens Property Insurance Corporation, the insurance pool for those unable to find home insurance anywhere else, has become the state’s largest homeowners’ insurer, with 1.3 million policies.

But Massachusetts, last hit by a moderate hurricane in 1991, has also found itself in the insurance business. Its high-risk pool has doubled in size in the last five years, reaching 200,000 policies this year, which makes it the largest single homeowners’ insurance carrier in the state. On Cape Cod, 44 percent of homeowners are covered by the plan.

In New York, Connecticut and New Jersey, the number of people covered by state insurance pools has remained relatively low. The New York plan, known as the New York Property Insurance Underwriting Association, carries about 70,000 policies, most for homes in coastal areas; this year, officials said, the state pool was expecting 10,000 more.

 

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