Landslides and mud-slides: NOT covered by a standard homeowners policy

The New York Times has an interesting story today about a significant hazard here in the rainy Pacific Northwest: mudslides.

Mudslides and landslides, the article notes, are "a topographical drama less spectacular but far more common than the potentially deadly earthquakes, avalanches and tsunamis that loom in anxious minds across the Pacific Northwest."

And here's what many homeowners don't know: mudslides and landslides aren't covered by a standard homeowners policy. So it can be very difficult to collect for losses caused by any form of land movement unless you bought specific additional riders or policies, like these:

Landslide coverage: You may be able to buy a special rider for your homeowners policy that includes coverage for contents for all perils, including earth movement. But this type of rider only covers contents, not the structure, and some insurers don't offer this option at all. For the structure, you may be able to buy separate earth-movement coverage from what's known as the "surplus lines" market, meaning insurers who specialize in risks that the traditional insurance industry doesn't cover. But if your home is on a hillside, it may be difficult to get this kind of coverage.

Flood insurance: Flood insurance may apply to some kinds of earth movement, such as water-related erosion, mudflows or flash floods. Most homeowners seeking flood coverage start with the National Flood Insurance Program, which is federally run but sold by local agents and brokers.

Earthquakes: Quake damage is another category of risk not covered in a standard homeowners policy, but you can buy this coverage to protect against losses from an earthquake -- or quake-triggered landslides.

Minimum Maintenance Standards Ruled Inapplicable

Giuliani v. Halton (Municipality), 2011 ONCA 812 (C.A.)

The Giuliani decision was released by the Court of Appeal on December 21, 2011. The plaintiff lost control of her vehicle when the road she was travelling on was covered with snow and ice. Approximately two centimetres of snow had fallen on the road which impacted and turned to ice.

The weather forecasts beginning the afternoon prior to the date of the accident indicated that snow would fall beginning the next morning. The trial judge found that the Town had ample time to schedule a person or crew to monitor the weather and road conditions and to place a maintenance crew on standby.

Salting operations did not begin until fifteen minutes after the accident occurred. It was not clear when the icy road conditions were first discovered. It was held that the Town “failed to inspect the roads when it ought to have known that an inspection was necessary to trigger the remedial steps necessary to maintain [the road in question]”.

The trial judge held that the defendants had complied with the Minimum Maintenance Standards (MMS) with respect to treating the icy roadway within the required time after becoming aware of its icy condition. However, the trial judge held that this was not a defence.

The Court of Appeal upheld the decision and held that sections 4 and 5 of the MMS do not establish minimum standards to address the accumulation of 2 centimetres of snow on a Class 2 roadway (they apply when there is a 5 cm accumulation), nor do they establish a minimum standard for the treatment of a highway before ice is formed and becomes an icy roadway. The Town was liable for failure to monitor the weather and the failure to deploy resources to prevent the road from becoming icy. Therefore, the analysis did not centre on the MMS as the MMS does not establish a minimum standard for the treatment of a highway before ice is formed and becomes icy.

The analysis turned to section 44(1) of the Municipal Act, 2001 requiring municipalities to take reasonable steps. The Court of Appeal agreed with the trial judge that reasonable steps were not taken with respect to monitoring the weather and lining crews up in advance.

This case raises the bar significantly with respect to what the courts require of municipalities to meet the reasonableness standard. It also takes away much of the certainty that was provided to municipalities by way of the MMS. An increased proactive approach to maintenance of roadways will be required.

̶ Kristen Dearlove, Student-at-Law

Job opening: Actuary

We have a job opening for a full-time, permanent actuary at our main office in Tumwater.

The person will be reviewing health and disablity insurance rate filings, as well as helping our company supervision divisions financial analysis work. For a full description of the job, salary range, benefits, etc., please see the job listing.

Superior Court rules that insurer was not required to continue relationship with agent begun under CAR

In Calianos v. Commerce Ins. Co., 2012 WL 414464 (Mass. Super.), Judge Fabricant of the Massachusetts Superior Court held than an auto insurer was not liable to an agent when it terminated high risk policies assigned to it under the Commonwealth Automobile Reinsurers (CAR) program, when CAR was replaced by Massachusetts Automobile Insurance Plan (MAIP).

Under the old CAR program, all insurers who wrote auto insurance policies in Massachusetts were required to accept all high-risk applicants for insurance, but they had the option of merely administering the policies and ceding the profits and losses from such policies to the residual market.

An insurance agent who was unable to obtain a voluntary contract with an insurer could apply to CAR to be assigned as an Exclusive Representative Producer, or ERP. CAR appointed each ERP to an insurer.

The Commissioner of Insurance replaced CAR with MAIP, which I discussed in these posts (hit the link and then scroll down). Under MAIP, insurers are assigned, based on their market share, policies issued to high risk drivers, and are required to absorb any losses from those policies. MAIP became effective in 2008.

Under MAIP, agents are no longer assigned on an involuntary basis to insurers. Only agents who are licensed as Assigned Risk Producers, or ARP's, service the high-risk market.

While CAR was still in effect in 2006, CAR assigned insurance agent Jason Calianos as an ERP to Commerce.

In January, 2009, after MAIP replaced CAR, Commerce informed Calianos that he would no longer have authority to solicit or bind new policies and that Commerce would non-renew his existing policies. Commerce then issued notices of nonrenewal to Calianos's customers.

Calianos sued Commerce, alleging that Commerce had amended or terminated its agreement with him without the requisite notice, and that it declined to renew his customers' policies, depriving him of commissions.

The court held:

• Commerce did not breach Calianos's contract. His CAR contract terminated when CAR was replaced by MAIP.



• Commerce was not required by MAIP to continue its relationship with Calianos.



• Commerce did not act in bad faith when it did not renew Calianos's policies on a voluntary basis, because it was not required to do so and never had a voluntary relationship with him.



• Commerce was not liable for intentional interference with contractual relationships, because Commerce had no contractual duty to renew the CAR policies.

Insurance companies and agents fined

We'll be posting a news release on this shortly, but we've issued the following fines and other enforcement actions:

• Fidelity National Title Insurance Co. and Chicago Title Insurance Co.: Fined $100,000 for wrongfully offering discount club memberships to people who were in a position to send title business to the companies.
• Aetna Life Insurance Co.: Fined $20,000 for failing to promptly handle appeals from consumers.
• Charter Warranty Services, Inc., Mechanical Breakdown Protection, Inc., and Paul Pawlusiak, of Detroit, Mich.: Ordered to stop selling unauthorized motor vehicle service contacts.
• Scott L. Stevens and RV Protection.net, of Mill Creek: Ordered to stop acting as an agent for a service contract provider not authorized to do business in Washington state.
• Cynthia L. Rushing, of Spokane: License revoked for misappropriating funds.
• Trevor D’Jon Losse, of Cle Elum: Fined $1,000 for multiple violations, including failing to disclose other state disciplinary actions against him.
• Robert Tychsen, of El Cajon, Calif.: Fined $1,750 for selling insurance in Washington without a license.
• Douglas D. Wellsandt, of Hayden, Idaho: Fined $5,000 for violations including falsely stating that Washington policies had been sold in Idaho.
• Ross S. Wolf, of Sammamish: Fined $2,000 for violations including acting as an insurance company’s agent without having been appointed by the company.

Orders and details about these cases are posted online at www.insurance.wa.gov/orders/enforcement.asp.

The fines collected do not go to the agency. They are deposited in the state's general fund to pay for other state services.

Washington consumers with questions, problems or complaints can call us at 1-800-562-6900 or e-mail AskMike@oic.wa.gov. (Not in Washington? Here's how to reach your state's insurance regulator.)

A company that insured the Titanic goes under, leaving behind maritime relics

The Wall Street Journal's Leslie Scism has a story today about Atlantic Mutual, the company that insurered the Titanic and many other ships for more than a century, before the company was ordered into liquidation two years ago.

The story details the maritime artifacts and records amassed by the company. Many of the items -- model ships, paintings, old maps, gold coins, barometers, etc. -- may be sold soon.

Tacoma man sentenced to prison for insurance fraud, forgery

A Tacoma man has been sentenced to more than two years in prison for insurance fraud and forgery after filing a false auto insurance claim.

Cash B. Knott, 46, was sentenced Friday in Pierce County Superior Court to 29 months in prison and must pay $1,200 in costs and assessments. He pleaded guilty in January to two counts of forgery and one count of felony insurance fraud.

On Nov. 6th, less than a month after getting coverage from Progressive Direct Insurance Co. for his 1992 Ford Ranger pickup, Knott filed a $5,674 insurance claim with Progressive. He said someone had scratched the paint, stolen his chrome wheels and tires, and stolen his navigation and entertainment system, 1,000 watt amplifier and other electronic components.

He provided Progressive with a Sept. 2 stereo shop invoice for $4,547.84 worth of stereo equipment, a copy of his check, and a bank statement showing the withdrawal from his checking account.

The problem: When contacted by an insurance adjuster, the stereo shop said it had no record of such a purchase. All they could find was that Knott had bought an amplifier -- for $109 -- on Sept. 2.

Insurance Commissioner Mike Kreidler's Special Investigations Unit obtained a search warrant for Knott's bank records. The bank found no checks written to the stereo shop, and none whatsoever for $4,547.84.

Homeowners insurance: What's NOT covered

People often assume that homeowners insurance is a catch-all, covering virtually any event.

Not true, unfortunately. There are many things that a typical homeowners policy does NOT cover. Among them:

• floods
• earthquakes
• breaks in a water line leading to your home
• termites
• stolen pets
• damaged or stolen cars, boats and motorcycles (these would typically be covered, however, by your car/boat/etc. insurance)

Also, here's a list of what IS covered by a typical homeowners policy, as well as add-ons you might want to consider.

Here's a state-by-state guide to claim-handling requirements

Property-Casualty 360 has published this state-by-state guide to claim handling requirements.

Separating Self-Insurance Facts From Fiction

Note: The following commentary appears in the February 20, 2012 edition of Business Insurance Magazine as part of its special spotlight report on self-insurance for the middle market.

Small and midsize companies are looking at self-insurance as a cost-effective health care benefits solution as Patient Protection and Affordable Care Act deadlines approach. Michael W. Ferguson serves as chief operating officer for the Self-Insurance Institute of America Inc., looks at facts and myths surrounding the decision to self-insure.

As more smaller and midsize companies look to self-insurance solutions to control escalating group health care costs in the wake of passage of the Patient Protection and Affordable Care Act, this proactive risk management approach has attracted increased negative attention from traditional health insurance industry and state regulators who warn of various calamities.

Of course, this criticism is largely predictable, as health insurance carriers are worried about market-share erosion, and state regulators don’t like the fact they cannot directly regulate self-insured group health plans because of Employee Retirement Income Security Act (ERISA) pre-emption. Nonetheless, it’s worth pointing out some of the more frequently repeated canards in order to help clear up any confusion this may cause for employers considering self-insurance.

But first the disclaimer: Self-insurance is not the best option for every employer, regardless of size. In fact, it could be a very bad option based on a variety of considerations. In this regard, it is highly recommended that employers engage in the same type of thorough due diligence they would rely on for any other major financial decision.

That said, let’s jump in and separate some important myths from realities.

Perhaps the most unfortunate allegation is that a primary motive for many employers to self-insure is that they can escape regulation, raising consumer protection concerns. While it is true that self-insured plans are not subject to state benefit mandates, there is no evidence to suggest that self-insured employers scrimp on covered benefits. In fact, it is widely acknowledged that self-insured plans incorporate more robust coverage terms for key health services because they have the ability to customize their plans to meet the specific needs of their employees.

And for employers switching to self-insurance since the passage of PPACA, they don’t evade any new substantive federal regulations—except those specifically geared for commercial health insurance carriers—because, by definition, they would establish “non-grandfathered” plans.

The reality is that self-insured employers actually subject themselves to more regulatory requirements because they are governed by ERISA, which prescribes strict federal rules for plan fiduciaries, among other requirements designed to protect the interests of plan participants.

Some critics also claim that self-insured health plans are more cost-effective because they deny claims at a higher rate than fully insured plans. But in a report issued by the U.S. Department of Health & Human Services last year, HHS-contracted researchers from RAND Corp. concluded that there is no evidence of such disparity.

Then there’s the belief that self-insured plan participants pay higher premiums than their fully insured counterparts. The available data does not support this conclusion, either.

As part of a U.S. Department of Labor report on self-insured health plans released last year, Deloitte Financial Advisory Services L.L.P. and Advanced Analytical Consulting Group, Inc. found that from 2009 to 2010 for employers with more than 200 covered lives, the average per employee premium contribution to be covered by fully-insured plans increased by $808 compared to average increase of $248 for self-insured premiums.


Most recently, influential academics and public policymakers predicted that such self-insured plans would contribute to adverse selection when insurance market reforms are fully implemented, suggesting that employers would switch back and forth between self-insured and exchange-offered plans based on their claims experience on a yearly basis.

That’s a nice conspiracy theory for sure, but it does not match up with marketplace realities. The fact is that due to ongoing administrative and compliance requirements, employers cannot simply switch their self-insured plans on and off.

Moreover, once an employer transitions to a fully insured health plan, it loses possession of claims data, which makes it more difficult to re-establish a self-insured plan in the future regardless of other considerations.

Claims data is arguably the most important health plan asset, as it can help employers control future health plan costs and can be used to customized plan design details. Giving up this asset over one bad claim year is not a decision to be taken lightly by plan sponsors.

The health care marketplace is certainly evolving, creating shifting roles for self-insurers, commercial health insurance companies and public sector payers. All three industry segments contribute in different ways to ensure that coverage is as available and affordable for the widest population possible.

Those who disseminate misleading information about any of these segments do a disservice to the ongoing public dialogue on how to improve the country’s health care system.

Court of Appeal - Striking a Jury Notice

There is an interesting recent Court of Appeal decision in which the court discusses the appropriateness of a jury notice where there is a significant pre-accident medical condition. In Placzek v Green, (January 26, 2012, Ontario Court of Appeal) the plaintiff was injured in a rear end collision. The plaintiff had suffered from "severe fibromyalgia" for many years before the accident. The defendant argued that, to the extent that the plaintiff's physical problems interfered with her life after the accident, both problems were attributable in whole or in the main to the serious pre-existing condition and not to the relatively minor accident involving the vehicle driven by the defendant.

The trial judge struck the jury at the outset of the trial and held that, with respect to damages, despite the plaintiff's prior physical problems, the injuries suffered as a result of the car accident had caused significant problems for the plaintiff. The trial judge awarded damages in the amount of $919,237.

The defendant appealed on the basis that the trial judge should not have discharged the jury and that she did not quantify the damages on the basis of a rational analysis of the evidence.

With respect to discharging the jury, the Court of Appeal pointed out that the decision to discharge a jury is a discretionary one and that the court will defer to the exercise of that discretion unless it is shown that it was exercised on a wrong principle or that the exercise in the circumstances can be properly characterized as arbitrary, capricious or unreasonable.

In this case, the trial judge dismissed the jury on the basis of the anticipated complexity of the evidence to come relevant to the damage assessment. The complexity arose out of the plaintiff's pre-existing medical condition and the need to determine the impact of that condition on the plaintiff's post accident medical condition. In addition, there was competing expert evidence relating to the plaintiff's lost income and loss of future income claims. The plaintiff was a self-employed realtor and there were several factual variables relevant to her lost income claims. Finally there was competing and somewhat complex medical, engineering and biomedical evidence.

The Court of Appeal acknowledged that the defendant had made a powerful argument in support of his position that this was not really a complicated case at all, but found that they were unable to describe the trial judge's characterization of the evidentiary complexity as arbitrary, capricious or unreasonable. The Court of Appeal acknowledged that other judges might have reached a different assessment of the complexity of the evidence and declined to strike the jury, but that is not a basis upon which the trial judge's exercise of her discretion can be interfered with.

Of interest, the Court of Appeal went on to discuss other factors which the trial judge thought supported the exercise of her discretion in favor of striking the jury. For example, the Court of Appeal was of the view that the manner in which some of the evidence might be put before the jury and the advantages or disadvantages that one side or the other might have as a consequence, is irrelevant to the decision as to whether the jury should be struck before the trial started. Also, concerns about the position taken by the defendant with respect to liability could not provide any basis for striking a jury.

However, because the trial judge made it clear in her reasons that she struck the jury because of the anticipated evidentiary complexity on matters relating to damages, errors in respect of other matters considered did not taint the exercise of the trial judge's discretion.

With respect to the second ground of appeal, the defendant argued that the trial judge did not attempt to quantify the damages based on a critical assessment of the evidence, but instead simply picked a point somewhere in the middle between the various scenarios advanced by the parties. The Court of Appeal gave short shrift to that argument which apparently did not have much basis in evidence.

This case should be of some concern to defendants who believe that their cases are best determined by a jury. In most injury cases, certainly most cases which proceed to trial, there are issues relating to pre-existing medical conditions and there are issues relating to the calculation of future lost income. We certainly hope that Courts will not develop the habit of striking juries on those types of cases.

- Colin Osterberg

Cease and desist order issued for "Prolong Plus" auto warranties

A New Jersey-based company selling vehicle warranties paired with engine additives has been ordered to stop selling unauthorized vehicle warranties in Washington state. The order takes effect immediately.
The Choice Manufacturing Company, Inc., also known as The Choice Warranty, Inc., is not authorized to sell vehicle service contracts in Washington. Their application was denied in 2008 because they didn't meet several requirements of the state's insurance law.

Despite that denial, however, the company continued to sell its "Prolong Plus" vehicle warranty in Washington. When state officials investigated, the company and principal Peter Masi refused to provide information or cooperate.

Our office has received several complaints from people who bought the warranties. Each said that the company had wrongly denied claims.

The Prolong Plus warranty requires consumers to put additives in their car radiators, engine oil, air conditioning or batteries. The additives are manufactured by Choice Manufacturing.

What if you live in Washington and bought one of these warranties? Even though the warranty was not legally sold here, the company is still required to honor the terms of the contract.

Update: On Aug. 6, 2012, the company agreed to pay a $10,000 fine.

Most and least expensive cars to insure

Insure.com is out with its annual list of the most- and least-expensive cars to insure. (Scroll down after clicking that link to reach the table listing the cars.)

Among the cheapest to insure: minivans, small SUVs, and some large pickup trucks. The lowest-cost vehicle to insure is the Toyota Sienna.

The most expensive will come as no surprise. The list, topped by the Audi R8 Spyder Quattro convertible, is dominated by expensive European sports cars.

The folks at PropertyCasualty360.com, an industry news site, put together a short slideshow with the top cars in each category.

Give us your feedback

We're tuning up our agency website (not this blog; we've already done that part) and would love to get your feedback.

Our survey takes less than a minute. Please take a quick look at the site and give us your thoughts.

Thank you!

Holy Land Trip

Our Trip to Israel

It has long been a dream of ours to go tour the Holy Land.

This past month, we were able to go, and even bring our three children, ages 9, 10, and 12. Out of 82 people on the tour, sponsored by Bellevue Baptist Church, our three children were the only non-adults. However, they were so mature, I must tell you I was very proud. As they are homeschooled, this qualified, I suppose, as the mother of all field trips!

Israel is a land of contradictions: It is very small, but militarily quite mighty. It is the source of three major religions, but is far from a peaceful place. It is the home of Jesus, though only a minority of occupants are actually His followers.

It is amazing to stand in one place and see the place of so many events of history so closely aligned. For instance, in basically one spot, John the Baptist immersed Jesus, Elijah and Elisha parted the Jordan River, Elijah was taken to heaven, Abraham and Lot parted ways, and Joshua crossed over to defeat Jericho.

Just South of this area lies Qumran, the site of the discovery of the Dead Sea Scrolls. These scrolls were hidden for over 1,850 years. They contain exact language of every book of our Old Testament except Esther! This means you can certainly trust the translation of your Old Testament.

The Dead Sea spans further Southward, where Herod the Great’s fortress of Masada towers over the lowest place on the face of the Earth. In the Dead Sea, you cannot sink. The salt content is so high you float. I could even stand up in deep water, and never sink below my chest. Just across the Jordan River, is Mt. Nebo, where Moses’ body was hidden after he’d been allowed to see the Promised Land.

In Bethlehem, you can touch the spots where Jesus was born, and where the Shepherds were visited by angelic hosts. As you travel, you can see where Elijah called down fire at Mt. Carmel, and Megiddo, where the prophetic battle of Armageddon will take place.

Jerusalem is where Jesus taught, was tried, convicted, crucified and placed in a tomb. And rose again. You can visit all those sights. It is also the site of the Temple Mount, which is controlled by Muslims. Interestingly, they have read of the Bible’s prophecy of Jesus touching down again bodily on the Mount of Olives and walking through the Eastern Gate. In reaction, local Muslims have bricked up that gate. Because of their belief that Jews cannot enter a Muslim graveyard, they have even placed lines of Muslims graves to block it off! (Good luck with that).

The Sea of Galilee’s Northern Shore is the site of many Biblical accounts. There you can walk through Capernum, where Jesus taught the Beattitudes, fed 5,000 men with five loaves and two fishes, and tour the remains of Peter’s home. The precipice where He was nearly thrown off is there, not far from the Gentile area where He cast demons into a heard of swine and they ran into the Sea of Galilee.

It is an inspiring place. My favorite part was getting to baptize my children in the Jordan River. If you ever have thought about going on an organized tour of Israel, let me be an encouragement to you. It is never totally safe, but neither is here. We seldom regret all we do, but we often regret those things we did not do.

Mr. Peel is a local Injury Attorney, who home-schools his three children with his wife of 17 years, Trish. He has been in practice since 1996, and had his own firm for over a decade in the same Millington location. Mr. Peel makes time to write weekly articles and to talk with church and civic groups free of charge. He can be reached through his website, PeelLawFirm.com, wherein more articles can be accessed.

In huge victory for insureds, SJC holds that measure of multiple damages in 93A claim is underlying judgment

On Friday, in a case which has been closely watched by those on both sides of the insurer/insured divide (and by those of us who straddle the divide), the SJC has overturned in no uncertain terms a ruling by the Massachusetts Appeals Court regarding calculation of multiple damages in a 93A claim against an insurer for unfair settlement practices. The Appeals Court had held that the multiple damages in a 93A claim where the underlying tort claim has gone to judgment are calculated by the loss of use of settlement funds -- in other words, interest from the time a reasonable settlement offer should have been made until it actually was made. I was shocked by the Appeals Court decision when it came out, because it contradicted the plain language of Mass. Gen. Laws ch. 93A s. 2, which states that multiple damages are based on the underlying judgment.

The SJC also held that to recover under ch. 93A the insureds do not have to prove that they would have accepted a reasonable settlement offer had one been made.

In January, 2002, Marcia Rhodes received catastrophic injuries including permanent paraplegia when a tractor trailer rear-ended her car. She and her family sued the truck driver, his employer, and the company to which he had been assigned by his employer.

At trial in September, 2004, the plaintiffs received a trial judgment of approximately $11.3 million. During the appeal process the plaintiffs settled the claim with the defendants' insurers.

Before settlement the plaintiffs filed a 93A claim against the insurers for failing to enter into a prompt, fair, and equitable settlement.

The trial court ruled on the 93A claim that excess carrier AIGDC had violated ch. 93A, but that the violation did not cause the plaintiffs any damages prior to trial because they would not have accepted even a timely reasonable offer prior to trial. The trial court also held that the 93A damages for AIGDC's failure to settle immediately after trial were the loss of use of the settlement funds.

On appeal, the Massachusetts Appeals Court held that the plaintiffs suffered damages as a result of both AIGDC's pre- and post-trial conduct. Like the trial court, it held that the measure of damages was the loss of use of the settlement funds.

On Friday, February 10, 2012, the SJC reversed. In Rhodes v. AIG Domestic Claims, Inc., 2012 WL 401034 (Mass.), the court first held that the plaintiffs are not required to prove that they would have accepted a prompt, reasonable settlement offer if the insurer had made such an offer.

It then held that the measure of damages is the underlying judgment is the plaintiffs' tort action, not loss of use of settlement funds.

The basis for this decision is Mass. Gen. Laws ch. 93A, s. 2, which states, "For the purposes of this chapter, the amount of actual damages to be multiplied by the court shall be the amount of the judgment on all claims arising out of the same and underlying transaction or occurrence."

Surpluses of nonprofit health insurers in WA at $2.4 billion

The Seattle Times had a story today about a change in the law we've proposed.

The background: Washington's three major health insurers -- all of whom are non-profit companies -- have amassed surpluses totalling more than $2.4 billion.

Commissioner Kreidler is asking lawmakers to let him consider those surpluses when the companies propose increases in health insurance premiums. The That, hopefully, could ease future premium hikes. In the individual and small group markets, insurance premiums, on average, have more than doubled since 2005.

The bill is SB 5247. It has cleared a key committee and is currently in the Senate's Rules Committee.

Fantastic resource on professional liability insurance

The Washington, D.C. firm of Jackson & Campbell has posted a 50-state review of professional liability insurance coverage. Click here for the link.

How to look up the number of complaints against an insurance company

We've created an easy online tool to look up the number of complaints against insurance companies.

We're the insurance regulator in Washington state, so the data's only for our state. But it can provide some insight into who we hear a lot of complaints about, and who we don't.

Since the market share of these companies varies widely, we also calculate what we call the "complaint index." That's simply the ratio of complaints divided by market share, to make the results easy to compare.

Fourth Circuit Declines to Apply Tort Doctrine to Insurance Contract

Post by Jack Griffeth

Last Friday, February 3, 2012, the United States Court of Appeals for the Fourth Circuit [1] filed its opinion in Pennsylvania National Mutual Casualty Insurance Company v. Roberts, in which the Court declined to apply the tort doctrine of “joint and several liability” to the payment of insurance proceeds.

The underlying facts of this case are tragic.  From birth, Lakia Roberts was exposed to lead paint dust in the building where she lived.  She was first diagnosed with lead poisoning at only “20 months” of age.  The exposure to lead over the years resulted in debilitating problems.  A jury returned a verdict of $2,000,000 against Attsgood and Gordon Gondrezick who owned, leased and managed the property for the period of 55 months of lead exposure that Roberts suffered. Under the Maryland economic damages cap, the $2,000,000 judgment was reduced to $850,000.  It was undisputed that Attsgood and Gondrezick were jointly and severally liable for the $850,000.     

Pennsylvania National filed a declaratory judgment action against Attsgood and Roberts on the basis of diversity jurisdiction.  Penn National argued that it was obliged to indemnify its insured Attsgood for no more than 40% of the total judgment or $340,000.  It was undisputed that Attsgood had owned a policy of insurance for the property with Penn National for 24 months (January 1992 – January 1994), but Attsgood had sold the property to Defendant Gondrezick in November of 1993.  Penn National contended that it only had 22 months of coverage. 

There were cross motions for summary judgment filed in the District Court.  Plaintiff Roberts argued that Penn National owed the entire verdict based on “joint and several” liability.  Penn National argued that it owed for only 22 months of coverage given that during the last two months of coverage, its insured did not own the property.  The lower Court held Penn National to an exposure of 24 months, the entire period of coverage, but refused to impose a “joint and several” recovery.  Both parties appealed.  The Fourth Circuit affirmed in part and reversed in part as follows:

1. The Court recognized the tragic circumstances that Roberts had suffered but adhered to the plain language of the insurance contract which obligated Penn National, on behalf of Attsgood, to pay sums legally obligated to pay as damages because of “bodily injury…to which this insurance applies…”
2. The Court reasoned that since Attsgood did not own the property for the last two months of the Penn National coverage period that Penn National’s pro rata share amounted to 22 of the 55 months exposure (40%) of the amount of the underlying verdict.  
3. In rejecting the “joint and several” tort analysis, the Fourth Circuit in its well reasoned opinion noted that Attsgood and Gondrezick were jointly and severally liable and that each was responsible for the entire judgment under long standing principals or tort law.  However, the court held that insurance coverage disputes are “governed by contract law…” and the court could therefore find no rationale to support the imposition of “joint and several” liability upon the insurer.  Moreover, the court held that though there was a distinct and full basis of Maryland cases to support this position, it further opined that not only was it “neither equitable or fair to require an insurance company to pay for coverage during the period for which effective coverage was not in force,” but would be disruptive for insurance markets as well.  Ultimately, the Court reasoned that such a “joint and several” application would, in fact, ultimately, discourage tort feasors from buying insurance, and would create uncertainty which would result in significant costs on both insurance companies and policy holders.

Conclusion:

In recognizing that Roberts, unfortunately, might not be able to collect the full amount of the $850,000 judgment, the Fourth Circuit, nevertheless, upheld the principle that it could not ignore the Maryland law by holding an insurance company to a contractual provision, in which it never agreed to, or to scramble together whole areas of the law that are conceptually distinct.     

---

[1] Including the Honorable Richard M. Gergel, United States District Judge for the District of South Carolina, sitting by designation.

Loss Transfer - Costs of Assessments

In Wawanesa v. Axa (2012), 107 O.R. (3d) 395 (S.C.J.), the issue was whether the cost of s. 42 assessments are recoverable in loss transfer, particularly in light of the legislative changes that came into effect March 1, 2006 (when DACs were eliminated). The underlying accidents occurred on August 21, 2006 and October 6, 2005.

The arbitrator held that the cost of s. 42 assessments are not recoverable under loss transfer. Justice Greer upheld the decision. The legislative changes had no impact on the principle that assessment expenses are not recoverable in loss transfer.

Survey: 57 percent of people in low-income families have no health insurance

The Commonwealth Fund today released the results of a new survey on the uninsured. Among the group's findings:

• 57 percent of people in low-income families (those earning less than about $30,000 for a family of 4) had no health insurance at some point last year.
• 35 percent have been uninsured for two years or more.
• Among moderate-income adults (about $30,000 to $56,000 for a family of 4), some 36 percent of adults in those families were uninsured during the past year.

None of this should come as a surprise. We do our own report on the uninsured in Washington state, and income is by far the largest factor correlated to being uninsured. The less you make, the more likely it is that you don't have health insurance.

We've also found that in most income brackets, the younger you are, the more likely that you're uninsured. See the report link above for more data and details.

Car sharing and usage-based insurance bills move forward

Everyone in Washington state is required to have basic liability insurance if you own a car. Well, here's two bills that could impact how you get insurance and how much you pay for coverage.

The first, House Bill 2384, creates an insurance framework for peer-to-peer car sharing programs. Several other western states (OR, CA) have passed similar bills. Here's how it would work: You sign-up with a program to share your car when you're not using it. Your financial liability for the car transfers to the program during the time it's in use. Of course you still need insurance coverage for when you're driving your car, but the program is responsible for having insurance coverage for any car in its use. The bill report has all of the details if you want to know more.

Next is an issue we've seen before: Usage-based insurance (House Bill 2361). Nothing prevents an insurance company from creating a usage-based insurance product today, but under our state law, all auto insurance products and why they cost what they do is public once the premiums are approved by our office.

Certain information is considered confidential (ie. those pesky credit scoring models) but only if they've been carved out in state law. This bill would allow insurers who want to offer a usage-base product the ability to keep their products confidential. Also, there would be limits on how the insurance company could use your information and they couldn't sell it to anyone.

So why should you care? Well, you could get your rates reduced depending on how you drive. This means: the amount of miles, where you drive, the time of the day you drive, your speed, etc. Of course it goes both ways - if you have a lead foot or tend to brake hard, you could see your rates go up. Here's the full details.

Both bills must pass a February 14 deadline to stay alive.

First Circuit holds no coverage for breach of contract damages

In Lopez & Medina Corp. v. Marsh USA, Inc., __ F.3d __, 2012 WL 229856 (1st. Cir.), the First Circuit Court of Appeals held that coverage under a liability policy does not extend to breach of contract damages.

The insured argued that the policy covered breach of contract damages because in it the insurer agreed to pay "all sums which the insured shall become legally obligated to pay as damages."

The court, which was deciding a case on appeal for the United States District Court for the District of Puerto Rico, noted that there was no Puerto Rican case law on point. It based its holding on the unanimous opinions of other jurisdictions as well as insurance treatises.

Job openings: Actuary, investigator, HR consultant, etc.

We have four job openings, although some of the application deadlines are coming up soon. (Check each listing for the deadline, some may have closed by the time you're reading this.) We're looking for:

• Human resource consultant 3
• Actuary 2 or Actuary 3
• Investigator 3
• Health insurance advisor 2

We're a small agency, but we do have job openings periodically. Most are due to retirements or resignations, rather than new positions. When we have job openings, we post them on our jobs page, as well as on the state's careers.wa.gov site.

Insurers and agents fined more than $1.3 million in 2011

Insurance Commissioner Mike Kreidler fined insurance companies, agents and brokers more than $1.3 million in 2011.

Violations included wrongly denying medical claims, overcharging customers, misappropriating clients’ money, charging unapproved rates and submitting false documents.

“These cases are the exception, not the rule,” said Kreidler, who’s been the state’s insurance regulator since 2001. “The vast majority of insurers, agents and brokers comply with the law.”

The largest fine, issued in January 2011, was against six Chubb & Son subsidiaries, which were ordered to pay $534,000 for violations including a long-running pattern of failing to properly document why the companies were charging higher or lower rates for certain policyholders.

Other major fines included $100,000 from American Bankers Insurance Co. of Florida (June 2011) and $100,000 from Regence BlueShield (August 2011).

Over the past 11 years, Kreidler has issued more than $13 million in fines against insurers, agents and brokers who violated the law. The agency’s disciplinary orders are posted online at http://www.insurance.wa.gov/orders/enforcement.asp.

Fines collected by the insurance commissioner’s office do not go to the agency. The money is deposited in the state’s general fund to pay for other state services.

Appeals Court holds insurer not liable for misrepresentations of attorney representing it in subrogation action

During a delivery of heating oil to the residence of Elaine Sandman a delivery line burst, causing her basement to flood with oil. Sandman's insurer, Quincy Mutual, agreed to cover the cost of cleaning the spill, but the policy excluded coverage for damage to Sandman's personal property.

Quincy Mutual hired an attorney to bring a subrogation action against the oil delivery company. According to Sandman's complaint, over the course of five years the attorney consistently led her to believe that he represented her interests as well as those of Quincy Mutual and that he was seeking to recover her damages for loss to personal property.

Quincy Mutual's subrogation claim settled in the spring of 2009. At that time the attorney informed Sandman that he could not help her with her own claim because of a conflict of interest as Quincy Mutual's attorney. Sandmans' claims were barred by that time by the statute of limitations.

Sandman sued the attorney and Quincy Mutual. Quincy Mutual moved to dismiss, on the ground that it was not vicariously liable to Sandman for the attorney's malpractice and misrepresentations.

In Sandman v. Quincy Mut. Fire Ins.Co., 81 Mass. App. Ct. 188 (2012), Judge Grasso held that as a matter of law Quincy Mutual cannot be vicariously liable for the representations and professional negligence of the attorney, "because as an attorney and an independent professional he has a nondelegable duty of care to Sandman." Neither an insurer nor any other third party may exercise control over the independent judgment in the representation of a client.

Judge Brown dissented. Whereas Judge Grasso analyzed the issue from the perspective of the attorney's attorney-client relationship with Sandman, Judge Brown analyzed the issue from the perspective of the attorney's attorney-client relationship with Quincy Mutual. He wrote that the allegations of the complaint were sufficient to establish that the attorney may have had actual authority to act on behalf of Quincy Mutual. He also noted that the acts of an attorney in the conduct of litigation are binding upon the client. He distinguished cases discussing liability of an insurer for counsel it hired to represent an insured, because in that situation the attorney, while paid by the insurer, does not represent the insurer; in the present situation the attorney represented Quincy Mutual.

Is Your Golf Cart an Uninsured Motor Vehicle?

Post by Ross Plyler

With the growing use of golf carts outside the boundaries of golf courses, it is worth some discussion about whether a golf cart is a motor vehicle. If it is, could it be an “uninsured motor vehicle” under an automobile insurance policy such that an insured would have uninsured motorist (UM) coverage for property damage caused by a golf cart? 

A typical auto policy pays for damages for bodily injury or property damage a covered person is legally entitled to collect from the owner of an uninsured motor vehicle. This is UM coverage. South Carolina Code § 56-9-20 defines “motor vehicle” as “every self propelled vehicle which is designed for use upon a highway.” While the statute lists some very specific exceptions to the definition, golf carts are not among the exceptions. This means that if a golf cart meets the definition of a motor vehicle, it could also be an “uninsured motor vehicle” entitling the victim of golf cart mayhem to UM coverage.

The one case in South Carolina that may be instructive is Anderson v. State Farm Mutual Insurance Company, 314 S.C. 140, 442 S.E.2d 179 (1994). In this case, an insured vehicle collided with an uninsured farm tractor, killing the driver of the tractor and injuring the insured driver. The driver of the automobile filed a declaratory judgment action seeking a declaration that a farm tractor is a “motor vehicle” under the UM statute. The Court said a tractor was not a motor vehicle under the statute and was properly excluded from coverage. The Court of Appeals affirmed stating that even though a tractor may incidentally or occasionally enter the highway, “a vehicle must be designed to operate on the highway in order to come within the term ‘motor vehicle’” (emphasis added).         

Under the same analysis, a golf cart may enter roadways incidentally or occasionally, but it may not be specifically designed for that use. Traditionally, golf carts were instead designed for a fairly specific recreational purpose on closed designated pathways. This may not be true any longer, as golf carts get “souped-up” and are used more and more off the course.

The Anderson court also makes a point to say that the UM statute is not intended to apply to injuries inflicted by vehicles that are not subject to registration or compulsory insurance requirements. However, golf carts, at least if you want to drive on the roadways, are subject to mandatory registration requirements. South Carolina Code § 56-3-115 requires purchase of a $5.00 permit to drive a golf cart on secondary roads within two miles of the residence during daylight hours. If the owner seeks to permit a golf cart, he or she must also provide proof of insurance. Under Anderson, if golf carts have a registration along with an insurance requirement, this may mean that golf carts are subject to the uninsured motorist statute. However, the Anderson court also says “the fact that farm tractors are subject to statutes regulating traffic on the highway, does not convert farm tractors to motor vehicles for insurance purposes.” This seems to be an open question here, and it raises interesting questions in determining what exactly is a “motor vehicle.” FORE!

Interpretation of the Insurance Contract – Back to the Basics

In Sam’s Auto Wrecking Co. (c.o.b. Wentworth Metal) v. Lombard General Insurance Co. of Canada (S.C.J.), the Operations Manager of Sam’s Auto, Mr. Farber, was injured on the job when he was run over by a crane being operated by an employee, resulting in the severance of his right leg between the ankle and knee and a serious cut to his left heel.

Mr. Farber was not an owner but was considered to be a part of the management team at Sam’s Auto. Prior to the incident, the owners had decided to opt out of WSIB insurance for themselves and Mr. Farber, for economic reasons. They purchased alternative disability insurance. However, they were left with a gap in coverage for which they were unaware.

When they approached the broker for Lombard to acquire a comprehensive business policy, they did not advise him that not everyone at their company had WSIB coverage. They obtained a comprehensive business insurance policy through Lombard which included commercial general liability. Because no one was aware of the gap in coverage, an employer’s liability endorsement was not requested.

Following the incident, Mr. Farber sued Sam’s Auto. Lombard took an off coverage position and consequently would not provide a
defence. As a result, this action was commenced.

The issue before the court was whether the personal injury experienced by Mr. Farber, due to the actions of an employee at Sam’s Auto, operating within the scope of his employment, was or should have been covered by the insurance policy Sam’s Auto had through Lombard.

Justice Whitten used basic contract interpretation principles in his interpretation of the insurance policy:
1) The contra proferentem rule;
2) The principle that coverage provisions should be construed broadly and exclusion clauses narrowly; and
3) The desirability, at least where the policy is ambiguous, of giving effect to the reasonable expectation of the parties.

Justice Whitten cited the principle from Bathurst Ltd. V. Mutual Boiler and Machinery Insurance Company [1980] 1SCR 888 that the “objective is to search for an interpretation which from the whole of the contract would appear to promote or advance the true intent of the parties at the time of entry into the contract.”

Justice Whitten listed factors to consider, in an insurance context, to determine the intent of the parties at the time of entry into the contract:
1) What was the nature of the business operated by the potential insured?
2) Was there an independent insurance contractor involved? Or was the insurance solicited direct from the insurance company?
3) If a broker was involved, what was requested or communicated to the broker?
4) What was the broker’s understanding of what was communicated to him or her that guided the request for coverage from the insurer?
5) What was the broker’s understanding or knowledge as to the appropriate insurance coverage?

The policy stated: "We will pay those sums that the insured becomes legally obligated to pay as compensatory damages because of “bodily injury” to which this insurance applies...This insurance does not apply to … (d) “Bodily Injury” to an employee of the insured arising out of and in the course of employment by the insured".

Justice Whitten held that there was no ambiguity with respect to these sections and it was clear that personal injury to the public was covered but personal injury to an employee working in the course of his or her employment was exempt. Given the nature and size of the business, the broker was reasonable in assuming that all employees were covered by WSIB, and was not told any different. Therefore, the broker would not have been aware of the gap in coverage.

There were arguments advanced with respect to whether Mr. Farber would be considered an “employee” because of the management position he held. Justice Whitten held that the distinction between the terms “employee” and “executive officer” is purely “academic”, and had no bearing in this context.

It was held that there was a clear lack of coverage and therefore no duty to defend existed.

- Kristen Dearlove, Student-at-Law