Property Insurance Coverage Law Blog

Adjustment of Claims is 100 Percent Policyholder Service--Is The Insurance Industry Providing This Service?

Chip Merlin — Tue, 18 Jun 2013 07:10:10 -0500

Property claims adjusters are supposed to promptly evaluate damage, investigate coverage, and provide full benefits to policyholders. Adjustment is about giving the customer the service promised and paid for when the policy was purchased. This service is not paid with "indemnity dollars," but with insurance company claims expense dollars, which insurance companies must spend to make certain their policyholders are promptly and fully receiving benefits. The insurance industry recognizes this obligation of customer service. Here is a recent quote from Carl Van, President and CEO of the International Insurance Institute, Inc.: Claims is a 100-percent customer service business. We don’t build anything. We don’t make anything. We don’t fix cars; someone else does that. We don’t mend wounds; someone else does that. We don’t rebuild houses. We arrange for those things to happen, and that is the customer service component. Sometimes we pay...

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Certain Coverage Disputes Under New York Law May Not Prevent An Appraisal Demand

Shaun Marker — Mon, 17 Jun 2013 05:30:35 -0500

Under New York law, certain coverage disputes may not prevent appraisal. You may have heard the general rule that issues involving coverage disputes under an insurance policy are purely legal issues that should not be determined by an appraisal panel. Appraisal in the property insurance context is meant to resolve a disagreement over the amount of loss for which the insurance carrier is responsible. This seemingly clear rule becomes murky when the parties disagree on its application to the facts of the loss at hand. We have seen several Sandy claims in New York where insurance carriers have refused appraisal demands, contending coverage issues prohibit appraisal. The distinction between coverage and damages may become challenging when business income is claimed. In some cases, the policy specifies the method of calculating lost business income. In others, the calculation involves complex apportionments of competing causal factors. Calculation of the restoration period, or period...

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What Makes New Jersey Beach-Front Homes So Valuable?

Nicole Vinson — Sun, 16 Jun 2013 09:39:42 -0500

Beach-front homes in New Jersey generally cost over $1,000,000. What makes these properties so valuable? Is it simply the proximity to the beach or the views that come with that proximity? Most argue it’s both. What about homes that are close to the beach but lose their view? As we all know, Hurricane Sandy caused never before seen damage to the New Jersey coast. Countless homes were damaged or destroyed. As it should, the government is taking steps to protect residents from future storms. In several areas, this includes building massive dunes to protect from flooding. In Mantoloking, the Army Corps of Engineers is seeking easements across beachfront property to build two-foot high dunes to protect the coast. Mantoloking has hired an attorney to obtain the easements. Affected property owners are now in a quandary. The dunes will protect their homes, but will obstruct their once pristine view of the ocean. The question then becomes what effect will this have on the value of the...

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Carolina Coverage - Producing records Can Mean Physical Delivery

Nicole Vinson — Sat, 15 Jun 2013 09:19:09 -0500

Last week, my post, Carolina Coverage - Are All These Documents Really Necessary, highlighted the Chavis case, in which the North Carolina Supreme Court ruled the Plaintiffs were justified as a matter of law in refusing to sign an overly broad release for records. But when it comes to producing documents requested by an insurance company, it is important to understand courts focus on whether the request is reasonable. Consider another property damage case from the same year, Moore v. North Carolina Farm Bureau Mutual.1 In this case, the Plaintiff owned a grocery store and was also a farmer. The grocery store was damaged by fire, but the office in the back of store survived. The office was smoke and water damaged and the records were in a metal file box in the office. The insurance company asked for an examination under oath and requested records. Moore cooperated by attending the examination but he failed to compile all the documents requested by the insurance company. At the...

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Dynamite Discovery Decisions: Part 1 - Barten v. State Farm

Jeffrey Greyber — Fri, 14 Jun 2013 07:41:36 -0500

After thirty-two weeks of posting on insurance policy conditions, it is time to turn over a new blog leaf. In the legal world, there is this very important thing called discovery, which is: [T]he pre-trial phase in a lawsuit in which each party, through the law of civil procedure, can obtain evidence from the opposing party by means of discovery devices including requests for answers to interrogatories, requests for production of documents, requests for admissions and depositions. Discovery can be obtained from non-parties using subpoenas. When discovery requests are objected to, the requesting party may seek the assistance of the court by filing a motion to compel discovery.1 Cases are often won or lost on discovery, especially in the insurance world, where insurers cringe at the thought of having to air their dirty laundry. When courts order insurers reveal their motivations and profit driven directives in the discovery process, insurers will frequently write a check rather than...

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Overhead and Profit versus Supervision

Chip Merlin — Thu, 13 Jun 2013 12:57:18 -0500

Monday's Superstorm Sandy Seminar for Public Insurance Adjusters had some very interesting discussions involving the fine details of adjustment. One of those had to do with the costs of supervision and whether those should be part of general contractor overhead and profit. The insurance industry, through its estimating program Xactimate agrees that job related direct supervision is not included in General Contractor overhead and profit. It should be a line item cost: General Overhead are expenses incurred by a General Contractor, that cannot be attributed to individual projects, and include any and all expenses necessary for the General Contractor to operate their business. Examples (including but not limited to): General and Administrative (G&A) expenses, office rent, utilities, office supplies, salaries for office personnel, depreciation on office equipment, licenses, and advertising. Including General Overhead expenses in an Xactimate estimate—General Overhead...

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Consequences of Failing to Comply with Request for Examination Under Oath and Submission of Insufficient Proof of Loss in Texas

Nyanza Moore — Wed, 12 Jun 2013 13:20:27 -0500

While working on a case for recovery after hail pummeled a homeowner’s roof, I found a recent case that discussed Texas law regarding Examinations Under Oath (EUO). In this case, the insurer demanded that the EUO be videotaped. When the insured refused to submit to a videotaped EUO, the issue of failing to comply with conditions precedent arose. It was clear in the insurance policy that “no suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity until after full compliance by the insured with all the foregoing requirements, nor unless commenced within two years after the [event].” There are a number of cases in Texas where the insured refused for various reasons to submit to a EUO. One case in particular stands out. In Shafighi v. Texas Farmers Insurance Company,1 the insured lived in California and it was too inconvenient to fly to Texas for the examination. The insured requested the examination be done...

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What Constitutes a Total Loss in Iowa?

Kenneth Kan — Tue, 11 Jun 2013 13:06:45 -0500

In continuing with the series on total loss standards state by state, I looked at my map of the U.S. to determine what states have yet to be covered. This time, my eyes were drawn to Iowa. Of the states that hug the mighty Mississippi River, Iowa is the only state we have not blogged about. Now, back to business. In my research, I came across an early case decided by the Supreme Court of Iowa. In H.S. Chase & Co. v. Fleming,1 a case involving a building fire, the court attempted to settle the question of what constitutes a total loss. The building at issue had burned for several hours before it was finally suppressed. The extent of the damage was described as follows: In a large section flames had eaten their way from the basement to the top with, and in this section, all of the section all of the several floors and the roof were entirely consumed or had fallen into the basement. In other sections the floors had not fallen in, and the partitions between the rooms were left...

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The Insurer And Its Independent Adjuster Said There Was No Damage From Hail Storms To My Property; Should I Be Able To Obtain Other Hail Files That The Adjuster Handled?

Shaun Marker — Mon, 10 Jun 2013 11:04:00 -0500

If an insurance adjuster states in deposition there was no damage to your property after a hail storm, but he had previously issued reports finding the properties around and including yours were damaged by hail, you should be able to obtain those files (with reasonable limitations) in discovery in your case. Discovery of relevant information does not necessarily mean every single piece of information would be admissible as evidence at trial of the case. A New York trial and appellate court recently followed this common sense approach in an insurance case and ordered the independent adjuster to produce the files. In American Heritage Realty, LLC v. Strathmore Insurance Company, the policyholder owned five apartment complexes that were insured by Strathmore Insurance Company. The policyholder sued the insurance carrier alleging it breached the insurance policies by failing to cover losses caused by hail storms in 2008 and 2009. The policyholder issued a subpoena requesting...

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Rallying Jersey Shore Policyholders at Joey Harrison's Surf Club

Chip Merlin — Mon, 10 Jun 2013 07:08:21 -0500

We represent Joey Harrison's Surf Club. It is a landmark on the Jersey Shore. Generations of Jersey Shore sun worshippers have made fond memories with family and friends at the Surf Club. I met many of them at a Rally for Policyholders which was instigated by the Surf Club's owners, Joey and Delores Barcelona. Here is a little clip of the event:

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Insurance Bonuses: an Inherent Conflict of Interest

Robert Trautmann — Sun, 09 Jun 2013 15:36:26 -0500

As I mentioned in a prior post, I was recently given the opportunity to meet with one of the foremost experts in the insurance industry. We discussed compensation for insurance adjusters, specifically bonuses. When I worked for an insurance carrier, the bonus structure for all employees was a two step process. First, like most industries, individual performance must merit a bonus. The second step, however, involved a favorable combined ratio, a measurement of the insurance company’s underwriting profitability. It factors in premium dollars written, operating expenses, and claims dollars paid. The lower the combined ratio, the more profitable the company is. It doesn’t take a rocket scientist to figure out that if you want a bonus, you need to do your part to help lower the combined ratio. I learned this very quickly, as do most insurance company employees. It really is the first step of the indoctrination process where the company aligns your interests with its own. This...

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Carolina Coverage - Are All These Documents Really Necessary?

Nicole Vinson — Sat, 08 Jun 2013 07:20:39 -0500

Most property insurance policies have a requirement that in the event of the loss, documents will need to be provided to the insurance company. What documents must an insured provide? Often times, particularly in disputed claims, carriers will request a laundry list of documents. When this happens, digesting and responding can be overwhelming and an insured is left guessing if all these records are really necessary. Policy language of this nature was evaluated by the Supreme Court of North Carolina in Chavis1 but as you will see in upcoming posts, determining what an insurance company is entitled to depends on the nature of the loss and the wording of the requests. The policy language: The insured, as often as may be reasonably required, shall exhibit to any person designated by this Company all that remains of any property herein described, and submit to examinations under oath by any person named by this Company, and subscribe the same; and as often as may be reasonably required,...

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Insurance Policy Conditions (a/k/a/ Land Mines): Part 32 - Mortgage Clause

Jeffrey Greyber — Fri, 07 Jun 2013 16:05:48 -0500

Property insurance policies typically contain a “Mortgage Clause” condition that reads along these lines (bear with me, the condition is a bit wordy): The word ‘mortgagee’ includes trustee. If a mortgagee is named in this policy, any loss [under the structural damage aspects of this policy] shall be paid to the mortgagee and you, as interests appear. If more than one mortgagee is named, the order of payment shall be the same as the order of precedence of the mortgagees. If we deny your claim, that denial shall not apply to a valid claim of the mortgagee, if the mortgagee: a. Notifies us of any change in ownership, occupancy or substantial change in risk of which the mortgagee is aware; b. Pays any premium due under this policy on demand if you have neglected to pay the premium; c. Submits a signed, sworn statement of loss within sixty (60) days after receiving notice from of us of your failure to do so. Policy conditions relating to Appraisal, Suit Against...

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Superstorm Sandy Seminar for Public Insurance Adjusters

Chip Merlin — Thu, 06 Jun 2013 08:48:53 -0500

We will be teaching a Superstorm Sandy seminar for Public Insurance Adjusters next Monday at the East Side Marriott in Manhattan. Here is the agenda we outlined for the New York Department of Insurance: Title: What We Have Learned And Are Seeing In The Field From Hurricane Sandy Date: June 10, 2013 Time: 9:30 am – 3:15 pm 9:30am-10:00am: Registration 10:00am-11:00am: Issues, Status of Claims and Litigation Update This 60-minute presentation will address the status of Hurricane Sandy claims, and how insurers are responding to claimants. It will also address how various courts throughout the affected areas are dealing with the number of lawsuits that have been and will be filed. The discussion will include a summary of any general orders entered by the courts, as well as updated information concerning coverage and litigation matters. Litigation in New Jersey and New York Mediation programs New Jersey: Order # A13-106; Bulletin 13-08 New York: 15th...

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Superstorm Sandy: Many Causes, Many Losses---Is Your Business Income Loss Covered ?

Chip Merlin — Wed, 05 Jun 2013 15:45:02 -0500

I spoke in Manhatten yesterday at the New York State Society of Certified Public Accountants. The presentation was Superstorm Sandy: Many Causes, Many Losses---Is Your Business Income Loss Covered? I bet you'd imagine that a nerdy insurance attorney presenting to nerdy accountants would seem to make for a very dry event. Since I was the last speaker at 4 pm, I was a little concerned that most in the audience would be more focused on Miller Time rather than the fine nuances of commercial business income and extra expense coverage. So, Ruck DeMinico and I made a power point with a question and answer format to help get some audience participation. If anybody reading this post has seen me give a speech over the last several years, you know that I first call on those in the audience that are looking at their cell phone, computer, or not paying attention. People like to be entertained while they learn. I try my best. How many questions can you get right? Here are the questions...

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A Texas Style Dinner With Friends: Where A Handshake Is Still The Way To Make A Deal

Nyanza Moore — Wed, 05 Jun 2013 05:30:26 -0500

Many decades ago, fair property deals were made with a simple handshake. Sometimes along with their handshake, gentlemen1 would add “you have my word” to seal a deal. Times have surely changed. Recently, I had a fantastic dinner with a bona fide Expert Risk Manager,2 a Dallas County Judge,3 an Assistant City Attorney,4 and a proud Mother of 7 daughters.5 During dinner, we discussed how people used to make promises and keep them. Deals and agreements were almost never reduced to writing since they were made by people with good intentions. Somewhere along the way there was a deal that fell through because one or both of the parties couldn’t remember all the terms of the deal. Since the very first breach of a “gentlemen’s agreement,”6 contracts have morphed into written instruments designed to include and exclude every possible detail that may be more beneficial to one party than the other. Your insurance policy started as an agreement between you...

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Reminder to Policyholders: Verify Application Information Provided to Insurer

Kenneth Kan — Tue, 04 Jun 2013 05:30:37 -0500

This past week, in American Way Cellular Inc. v. Travelers Property Casualty Company of America,1 a California appellate court held an insurer does not need to pay for fire damage because the policyholder’s property lacked the automatic sprinkler system required by the policy. In American Way, the policyholder, through its insurance broker, submitted a commercial insurance application to Travelers. In the box entitled “FIRE PROTECTION (Sprinklers, Standpipes, CQ/Halon Systems),” the application indicated the policyholder had “SMOKE DETECTORS/FIRE EXTING./SPRINKLERS.” The application was prepared by the broker based on information obtained from one of American Way’s principals. The owner claimed he was never asked if his business had sprinklers. The policy contained a “Protective Safeguards Endorsement,” which required the policyholder to maintain an automatic sprinkler system on the premises as a condition for coverage. Following a fire...

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So You Have A Back Up Of Water From A Drain Line; Was Blockage On or Off the Insured Property?

Shaun Marker — Mon, 03 Jun 2013 07:26:12 -0500

If you have a claim based on a back up of water from a drain line into an insured property, one of the first questions property insurance professionals may ask is whether the blockage that caused the back up originated on or off the insured property. One of the most intriguing things in the area of first party property insurance is how the little details can make a drastic difference in claims. A few feet can mean the difference between a covered loss and an uncovered loss. Recently, a New York trial court ruled that a property insurance carrier has to cover a claim for damages from waste water back up into apartment buildings because the insurance carrier failed to prove the damages were caused by a blockage that originated off the insured property.1 Two buildings were damaged by waste water that entered through bathtubs, condensation drains, and laundry room drains located in the basement levels. The waste water backed up due to a blockage in a pipe through which waste water from...

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Appraisal and Bad Faith in New Jersey

Robert Trautmann — Sun, 02 Jun 2013 09:47:53 -0500

Many know that I previously worked for a major national insurer in their staff counsel office. Now, I am fortunate to practice law at the Merlin Law Group. One of the best parts about practicing law in this environment is that I am surrounded by the best minds in policyholder advocacy. Recently, my colleagues Larry Bache and Ashley Smith posted about Hunt v. State Farm Florida Insurance Company, a Florida case that held a favorable appraisal award satisfies a statutory condition precedent to a bad faith claim. That begged the question, how would New Jersey law treat an appraisal award in a bad faith context? In a relatively recent unpublished opinion, the New Jersey Appellate Division addressed this very issue. In Bello v. Merrimak Mutual Fire Insurance Company,1 the policyholder suffered a windstorm loss that damaged his roof and retaining wall. There was a dispute over the cause of damage to the retaining wall. The carrier demanded appraisal, but the policyholder...

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Florida's Universal Property and Casualty Fined 1.26 Million Dollars

Nicole Vinson — Sat, 01 Jun 2013 09:50:07 -0500

Florida’s Insurance Commissioner Fined Universal Property and Casualty Insurance Company $1,260,000 after an extended market review found new and repeated statutory violations, some going back to 2004. Florida's policyholders have been hurt by these actions, and Universal has been ordered to pay. This market review probably only scratches the surface of Universal’s improper actions. $1.26 million is a small, small, price, but at least the state has taken a step towards protecting Florida policyholders. The order details violations for claims handling, consumer complaints response, rate filings, financial transactions, and post-loss underwriting. The press release from the Office of Insurance Regulation details the administrative fine: UPCIC is the second largest property insurer in Florida with more than $765 million in written annual premium and over 542,000 policyholders. The company represents an estimated 8.9% of the total Florida property insurance market and has...

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