First Circuit vacates District Court ruling that mortgagee can require flood insurance in excess of amount of mortgage

I posted here about the decision of the United States District Court for the District of Massachusetts in Lass v. Bank of America, in which the court held that under the terms of the mortgage agreement that mortgagee bank could require the homeowner to have more flood insurance than the bank's interest in the property (in other words, more than the mortgage amount).

The United States Court of Appeals for the  First Circuit has now vacated that decision and remanded the case.  In Lass v. Bank of America, __ F.3d __, 2012 WL 4240504 (1st Cir.), the court held that although the pertinent mortgage provision gives the lender discretion over the amount of flood insurance, a supplemental document given to the borrower at her real estate closing may be read to state that the mandatory amount of flood insurance imposed at that time would remain unchanged for the duration of the mortgage. 

The mortgage agreement required the borrower to have flood insurance to "be maintained in the amounts and for the periods that Lender requires." 

A separate document, entitled "Flood Insurance Notification," stated, "At the closing the property you are financing must be covered by flood insurance in the amount of the principle [sic] amount financed, or the maximum amount available, whichever is less.  This insurance will be mandatory until the loan is paid in full." 

Lass obtained flood insurance equal to $40,000, the full amount of her loan.  She subsequently voluntarily increased the coverage to $100,000. 

The lender later told her that she needed an additional $145,086 in flood insurance, to reflect the replacement value of the improvements on the property. 

Lass refused to purchase the additional insurance.  After notice to her, the bank purchased it for her and charged her escrow account for the premium. 

Applying contract interpretation principles, the court held that the mortgage and notification, taken together, are ambiguous as to the lender's authority to demand increased flood coverage on Lass's property. 

Golf insurer in CT arrested for selling illegal insurance in WA

A Connecticut businessman who specializes in insurance for golf tournament hole-in-one prizes has been arrested in his home state after failing to appear for a felony arraignment in Seattle earlier this month.

Kevin Kolenda, 54, was arrested Wednesday in his hometown of Norwalk, Conn. He faces five counts of transacting insurance without a license, a class B felony.

"We've been warning the public about Mr. Kolenda's scam for years," Insurance Commissioner Mike Kreidler said in a recent press release. "He has a long history of selling illegal insurance, refusing to pay prize winners, and thumbing his nose at regulators."

Kolenda was supposed to appear in court Sept. 5 for arraignment on those charges, but he failed to appear. So the judge issued a bench warrant for his arrest.

Kolenda has ignored a previous cease and desist order from our office, as well as a $125,000 fine.

Update (9/28/2012): Added King5 video at top of post.

Why did you make my auto/homeowners insurance rates go up?

Q: My auto and homeowners insurance rates went up, and my agent and insurer said that it's because Washington state required them to charge more. Did you require this?

A: We get this question fairly often. While we do review rates for many kinds of insurance, no, we did not tell your auto/homeowners/etc. insurer to raise its rates. It's up to insurers to decide when, or if, they will submit proposals to us to increase or decrease rates. (In some cases, notably health coverage, insurers often reduce benefits in order to moderate rates hikes.)

Again: While we may review the rates, the insurance company is the one proposing any changes.

There are many insurers selling auto and homeowners policies in Washington. If your insurer is raising rates too high, maybe it's time to shop around. Need help? Here are some tips when shopping for auto coverage, and here are some tips when shopping for homeowners coverage.

S.C. Supreme Court Holds Damages Arising Out of Title Insurance Suit Are to Be Measured From the Date of the Property’s Purchase

Post by Pete Dworjanyn

On September 12, 2012, the South Carolina Supreme Court, on certification from the U.S. District Court for the District of South Carolina, held the insured’s damages arising out of a title insurance suit should be measured as of the date of the insured’s purchase of the property.

In Whitlock v. Stewart Title Guarantee Company[l1] , the plaintiff purchased a lot on the Intracoastal Waterway on October 30, 2006, for $410,000. A title search failed to disclose a spoilage easement which allowed the Army Corp of Engineers to dredge and maintain the Intracoastal Waterway and placed dredged material on the plaintiff’s lot at any time. In January 2012, the plaintiff sought a building permit to construct a home on the property. The building permit was rejected as a result of the spoilage easement. At issue was the date on which Plaintiff’s damages should be measured. The parties did not dispute that the value of the property had decreased as a result of the downturn in the real estate market, in addition to the diminution in value cost by the title defect.

Certain title insurance contracts unambiguously identify a date for measuring the diminution in value of the property, or otherwise allow for the method of valuation. The title insurance policy at issue, however, merely referred to “actual loss.” A title insurer is generally liable for losses or damages caused by defects in the property’s title. Defects for which title insurance policies provide coverage are generally defined as liens and encumbrances that result in the loss in the title’s value. The terms of the policies can control a method of valuation, but the purpose is to place the insured in the position he thought he occupied when the policy was issued. Generally, the measure of damages should compare the encumbered value with the value of the land without any encumbrances. Courts around the country have generally identified three points in time to measure an owner’s actual loss: the date the property was purchased, the date the title defect was created, and the date the defect was first discovered.

The plaintiff argued her damages, as measured by the diminution in property value, should be measured as of the date the property was purchased. The defendant insurer argued the value of any loss should be measured as of the date of the discovery of the title defect, asserting that under a title policy the risk of a decline in the land’s market value because of market conditions should be assumed by the purchaser, and the risk of the land’s market value being impacted by a title matter should be assumed by the title insurance company. Having considered the parties’ arguments, the court held, “We conceptually agree with Defendant, but we are construing a contract of insurance, not attempting to fashion an equitable remedy. The insurance policy here simply fails to identify the valuation date as the date of discovery of the title defect or otherwise provide clear language that would require a valuation date in line with Defendant’s position.” Recognizing the apparent inequity in the answer to the certified question, the court noted the resolution of the question was not a matter of equity, but a matter of construing an insurance policy, and concluded the date the property was purchased was the proper valuation date.

Justice Pleicones dissented, indicating that, in his opinion, an insured suffers no actual loss until the defect is discovered: “Until that juncture, the insured’s loss is unrealized. Since only a loss that is actualized as insured, I would find that the date of discovery of the title defect is the proper date upon which to measure the diminution in the property’s value.”

---

 [l1]http://sccourts.org/opinions/HTMLFiles/SC/27169.pdf

Threshold Motion Successful

Surveillance evidence can be useful in showing that the plaintiff does not meet the Insurance Act threshold.

In Dahrouj v. Aduvala, 2012 ONSC 4090 (S.C.J.), the plaintiff was injured in a minor rear end collision.  She was a homemaker and alleged she developed chronic pain which impaired her functioning in the home and her social interaction in the community.

The evidence at trial was that the plaintiff visited her family doctor on multiple occasions prior to the accident complaining of head, neck and back pain.  She made similar complaints post-accident.  The defendant obtained surveillance showing the plaintiff engaged in a variety of activities, including scraping snow and ice off her car, pumping gas, reaching for groceries on an upper shelf and carrying groceries.  Justice Hackland described the video as “particularly devastating” to the plaintiff’s credibility, as it showed the plaintiff stretching and lifting, the activities she alleged restricted her functioning as a homemaker.

The plaintiff’s expert diagnosed her with “central sensitization”, based on a 45 minute interview and relying only on the plaintiff’s self reports.  Justice Hackland preferred the defence expert, who conducted a more thorough assessment and whose opinion was corroborated by the surveillance evidence.

Justice Hackland held the plaintiff had not proved she sustained a serious, permanent impairment of an important physical function.  As a result, she was not entitled to general damages and her recovery was limited to $32,000, the amount the jury awarded for past housekeeping. 

Surveillance of the plaintiff can be extremely important in defending claims, especially those alleging chronic pain.  When surveillance can be combined with expert opinion, it can be effective in showing that the plaintiff’s claim does not meet the threshold.

Open enrollment for children ends Oct. 31

Do you need health insurance for your child? Open enrollment for individual health insurance for children is now underway. From Sept. 15-Oct. 31 you can buy an individual plan for your child or add them to your plan with out having to fill out a health questionnaire.

Under health reform, health plans can no longer deny children coverage if they have a pre-existing medical condition, but they can create open enrollment periods. Washington state has two annual enrollment periods: March 15-April 30 and Sept. 15-Oct. 31.

If you need coverage now, don't wait. You have until the end of Oct., but the sooner you enroll, the faster you'll get coverage.

The next open enrollment starts March 15. Here's a list of plans in the individual market by county and what to do if you miss the enrollment period.

Life insurance explainer: What are life settlements?

Life settlements are when you sell your life insurance policy to someone else. You get immediate cash, and they collect the value of the policy when you die.

There's a similar type of transaction, known as a viatical settlement, in which a terminally ill person sells his or her life insurance to someone else.

Both these types of transactions are mentioned as options in a notice that life insurers are required to send to some Washington policyholders.

According to a New York Times article published last month, the fast-growing life settlements business swelled to $12 billion in transactions by 2007, but has dropped off dramatically, with only $3.8 billion worth of policies changing hands in 2010. Life settlements brokers maintain, however, that with trillions of dollars in life insurance out there, the industry is still in its infancy.

Health insurers rebates

Q: I've read in the news that health insurers are having to send rebates to their customers because of health care reform. But I didn't get a rebate? What's going on?

A: Yes, we've heard from a number of folks that are wondering whether they're going to get a rebate. The rebates are from companies that aren't putting enough premium dollars toward actual medical care (as opposed to marketing, administrative costs, etc.).

Here in Washington, however, most companies are already spending a high percentage of your premium dollars on medical care. That's the good news. But that also means that few Washingtonians will get rebates. Here's more about the rebates and a state-by-state breakdown.

Consumer alert: Real Benefits Association

Consumer alert

An unlicensed company named "Real Benefits Association" may be offering bogus discount health care plans in Washington state.

Again: This company is not licensed to do business in Washington state.

We've heard from consumers who said they paid monthly premiums to the Real Benefits Association, believing that they would receive legitimate medical and prescription drug coverage, but to date, the company has paid none of the health care claims they submitted.

Real Benefits Association and its owner, David Clark, were issued a cease and desist order by our office in January 2010. They are operating in violation of that order by collecting premiums for bogus discount health care coverage from Washington state consumers.

Friday wildfire update: We're hearing that some insurers have stopped writing new policies in the fire areas

The AP is reporting that wildfires in central Washington have merged and now cover more than 47 square miles, with officials urging more than 100 homeowners north of Ellensburg and in the Liberty area to evacuate. Here is a checklist of things to do if a wildfire is approaching a home.

Crews are digging lines, using bulldozers and trying to douse the flames and protect structures with fire retardant dropped from aircraft. Here are maps showing the areas that are burning. The fire began Sept. 8th with a lightning strike near Cle Elum. 775 firefighters are on scene, but fire commanders this morning ranked both the terrain difficulty and growth potential of the blaze as "extreme."

We have heard a few reports from consumers that some homeowners' insurance companies have stopped approving new policies in areas close to the fires. Nobody wants to hear this if they're trying to close a deal on a home, for example, but insurers are allowed to suspend writing new policies in cases like this.

It's a common practice, for example, with earthquake insurers to stop writing policies after a quake, for fear of aftershocks. And flood insurance typically comes with a 30 day waiting period, to prevent people from waiting until the storm clouds are overhead before they buy coverage.

Several other fires are burning in the state. Most of the state is now at high or very high fire danger.

U.S. 97 in both directions is closing today from 8 a.m. to 6 p.m. from milepost 150 (at the junction of SR 970) to milepost 177 (8 miles south of the junction of U.S. 2) for back-burning and fire containment operations.

Update: (5:02 p.m.) Some insurers have also stopped writing new auto policies in certain Eastern Washington zip codes due to the fires.

You heard it here first

The Defense Research Institute (DRI) will be hosting a conference in Boston on June 6 and 7, 2013 on Insurance Bad Faith and Extra-Contractual Liability.  No details yet.  DRI attracts participants from around the country (especially from states that require continuing legal education) , so I would expect this to be an excellent networking opportunity.   

Attorney Pete Dworjanyn to Speak at Primerus Defense Institute Seminar on Insurance Coverage and Bad Faith

Pete Dworjanyn

Collins & Lacy attorney and Insurance Practice Group Chair Pete Dworjanyn will speak this week at the 2012 Primerus Defense Institute (PDI) Seminar on Insurance Coverage and Bad Faith. The seminar is September 20-21, 2012 in Chicago, Illinois. 

Alongside Kansas City, Missouri attorney Clay Crawford, Pete will discuss "Recognizing the Red Flags of a Bad Faith Set Up: A Proactive Response." The presentation is on Friday, September 21 from 3:10 p.m. to 4 p.m. Here is the full 2012 PDI Seminar Agenda.

In addition to his involvement with the Primerus Insurance Committee, Pete is the founding author of this South Carolina Insurance Law Blog, on which he frequently discusses insurance coverage and bad faith issues.  Here are some of his articles:

• Directors and Officers Insurers Win Summary Judgment on Specific Litigation Exclusion
• Nationwide Mutual Ins. Co. v. Rhoden, Arrieta and Dickey
• Fourth Cir. Denies Coverage Based on Insurance and Related Work Exclusion  

About Primerus Defense Institute

The Primerus Defense Institute (PDI) is a collaborative endeavor engaging Primerus defense attorneys and corporate defense representatives for the purpose of lowering business litigation costs and reducing exposure to liability. Attorneys and clients work together in a highly cooperative, low-pressure environment that leads to relationships built on trust. Participating corporate clients are leaders in their respective industries, and participating defense attorneys, like all Primerus attorneys, meet the highest of quality standards.

Adding an Insurer as a Defendant Rather than a Statutory Third Party

Can an insurer add itself as a defendant rather than as a statutory third party?

In Azad v. Dekran, 2012 ONSC 4257 (S.C.J.), the Personal insured the defendant and brought a motion pursuant to r. 13.01 to intervene as an added defendant.  It wished to allege that the accident did not occur or was staged and to crossclaim against its insured.  It preferred this route rather than being added as a statutory third party since s. 258(14) of the Insurance Act prohibits a statutory third party from taking a position incongruous to its insured.

Master Dash dismissed the motion, holding that it was not a proper use of r. 13.01.  One of the purposes of s. 258 is to permit an insurer to contest the plaintiff’s claim in a situation where it denies coverage.  The plaintiff’s action is not the appropriate forum to decide issues between the insured and insurer.  Any dispute could be decided in subsequent proceedings, including a proceeding to recover the statutory minimum paid to the plaintiff. 

Master Dash noted that if the accident was staged, the plaintiff would not be entitled to damages; on the other hand, if the trial court did award damages, it would mean there was a legitimate accident and there would be no basis for a crossclaim against the insured.  In addition, as a statutory third party, the insurer would have a right to discover its insured.

Master Dash refused to follow the decision in Esho v. Dekran, 2012 ONSC 3638 (S.C.J.), where the insurer was added as a defendant.  Now that there are conflicting decisions on this issue, perhaps it will be up to the Divisional Court to provide clarity.

Mass. Appeals Court holds that services by structural engineer hired by architect were "performed for" project owner

Cable Mills intended to renovate an old mill property it owned into mixed use condominium units.  It hired Feingold for architectural services.   Feingold hired William Barry to provide structural engineering services.  Barry fell through the floor at the site.  He sued Cable Mills. 

Cable Mills was insured by Lloyd's, London.  Lloyd's denied coverage for Barry's claim, relying on an exclusion for "bodily injury . . . for operations performed for you by independent contractors or your acts or omissions in connection with your general supervision of such operations." 

Cable Mills argued that the exclusion does not apply because Feingold, not Cable Mills, retained Barry, so his services were "performed for" Feingold, not Cable Mills. 

In Cable Mills, LLC v. Coakley Pierpan Dolan & Collins Ins. Agency, Inc., 82 Mass. App. Ct. 415 (2012), the Massachusetts Appeals Court agreed with Lloyd's that coverage was excluded.  It held, "performance of professional engineering services essential to the project, pursuant to a contract between the property owner and its architect, sufficiently fulfills the common meaning of 'operations performed for you.'" 

S.C. District Court Finds E&O Endorsement Does Not Provide Coverage for Insured’s Alleged Collection of Illegal Fees

S.C. District Court Finds Insured Car Dealer’s Alleged Violation of S.C. Code §§ 56-15-10 to 600 and S.C. Code § 37-2-307 Not Covered Under Truth in Lending or Leasing Provision of E&O Endorsement

Post by Logan Wells

On September 10, 2012, the United States District Court for the District of South Carolina held that a commercial package policy, particularly the Auto Dealers Errors and Omissions Liability (“ADEOL”) endorsement, did not provide coverage to the insured automobile dealer for the underlying action, which was based on alleged violations of S.C. Code §§ 56-15-10 to 600 and S.C. Code § 37-2-307.

In Graphic Arts Mutual Insurance Co. v. Caldwell Chevrolet, Inc., the underlying plaintiffs filed suit against Caldwell Chevrolet and other automobile dealers alleging the latter had collected illegal administrative fees in connection with the sale of automobiles. The purchasers accused the dealers of setting and advertising a sticker price for cars and then, upon closing, collecting illegal fees as part of a conspiracy to deceive car buyers.

Caldwell was insured through Graphic Arts via an insurance package which included liability coverage and auto dealers’ errors and omissions coverage. Graphic Arts provided a defense in the underlying action pursuant to a reservation of rights, but initiated the declaratory judgment action, alleging inter alia the ADEOL endorsement did not provide coverage. The ADEOL endorsement provided in pertinent part:

III. Truth in Lending or Leasing–Errors and Omissions Coverage–A. We will pay all sums an “insured” legally must pay as damages because of any negligent act, error or omission committed during the policy period for failing to comply with any federal, state, or local: 1. Truth in lending statute, or any statute that specifically regulates disclosures required to complete consumer finance agreements; or 2. Statute that specifically regulates disclosures required to complete consumer lease agreements. B. We have the right and duty to defend any “insured” against a “suit” asking for these damages even if the allegations of the “suit” are groundless, false or fraudulent. However, we have no duty to defend an “insured” against a “suit” not covered under part A. above ... C. This insurance does not apply to any claim or “suit” arising out of: 1. Section 112, Criminal Liability of Title 1 (Truth in Lending Act) of the Consumer Protection Act, (Public Law 90–321:82 Stat. 146 et. seq.); 2. Any dishonest, fraudulent, criminal or intentional act or acts committed by the “insured,” any of the partners, officers, employees or agents of the “insured” or other party in interest acting alone or in collusion with others; or 3. “bodily injury” or “property damage.”

Graphic Arts moved for summary judgment, contending: (1) S.C. Code §§ 56–15–10 to 600 and S.C. Code § 37–2–307 were not truth in lending statues and did not specifically regulate disclosures required to complete consumer finance agreements or consumer lease agreements, as required by the ADEOL endorsement; and (2) the underlying action arose from dishonest or intentional acts which were excluded pursuant to subsection C of the endorsement.

In opposition, Caldwell argued: (1) although the complaint did not specifically provide that the acts of deceiving customers as to the illegal fees was part of the financing for the purchase of the vehicle, the sale and financing is one ongoing transaction and the acts alleged against Caldwell fell under the ADEOL endorsement; (2) the complaint involved at least one disclosure statute which could be interpreted as regulating disclosure required to complete finance agreements; (3) the exclusion for intentional acts did not bar coverage because sections of the underlying complaint did not mention any deceptive or intentional conduct and at least one cause of action did not require proof of such intent.

The court rejected Caldwell’s argument, and found the language of the ADEOL endorsement precluded coverage. The court reasoned, first, the endorsement provided coverage for amounts the insured had to pay “because of ... failing to comply with any federal, state, or local: Truth in lending statute, or any statute that specifically regulates disclosures required to complete consumer finance agreements; or ... required to complete consumer lease agreements,” and the underlying complaint did not allege violation of a lending or leasing disclosure statute. Second, coverage did not exist under the ADEOL endorsement “because subsection C of the endorsement excludes coverage for ‘[a]ny dishonest, fraudulent, criminal or intentional act or acts committed by the insured.’” The facts of the underlying complaint specifically alleged intentional conduct by Caldwell. Accordingly, the court granted Graphic Arts’ motion for summary judgment and declared that the policy did not provide coverage to Caldwell for the claims and allegation in the underlying action. The court found Graphic Arts had no duty to defend or indemnify Caldwell with respect to the underlying action.

Monday wildfire update

Firefighters are making good gains against eastern Washington wilfires, with the list down to five active blazes in Chelan, Yakima, Kittitas, Okanogan, Klickitat counties.

Here's the morning update from Washington Emergency Management Division.

Washington wildfire update

Firefighters are making big gains containing the state's eight major fires, according to the latest update from the Washington Emergency Management Division.

The 91,000-acre Barker Canyon fire in Douglas and Grant counties is 63 percent contained, and the 23,000-acre Apache Pass fire in Lincoln County is 80 percent contained.

Seven aircraft and more than 1,100 firefighters are still wrestling, however, with the large Wenatchee River fire in Chelan County, which is only 10 percent contained. It covers more than 28,000 acres. More than 850 homes and other structures are threatened by that blaze, according to the update.

So far, the number of homes lost in this latest wave of wildfires is just 3, although about 14 non-residential structures have also burned.

See the report above for more detail.

Washington state fire update

According to the state's Emergency Management Division, early 3,000 firefighters and more than a dozen aircraft are battling seven fires -- several of which involve multiple large individual blazes -- on more than 150,000 acres throughout the eastern part of the state.

The largest is the Barker Canyon fire in Douglas and Grant counties, which includes more than 91,000 acres and this morning was only 20 percent contained.

Then there's the 25,000-acre Wenatchee River fire in Chelan County, which is only 8 percent contained. And then there's Lincoln County's 24,500-acre Apache Pass fire, which is about 40 percent contained. Smaller fires are burning in Yakima, Kittitas, Ferry, Okanogan and Klickitat counties.

So far, only a few homes appear to have been lost to fire, although some other structures (barns, etc.) have also burned. About 600 homes are considered threatened by fire at this point. We have a number of important tips for fire victims making insurance claims.

More details on each fire, including evacuation information, is available in this document prepared by the EMD. And for the latest information, see the agency's list of fire updates.

And for anyone in fire-prone areas, please see these tips to protect your belongings and property.

First Circuit holds that dec page cannot create ambiguity in flood policy terms

In McGair v. Am. Bankers Ins. Co., __ F.3d __, 2012 WL 3793130 (1st Cir. 2012), the First Circuit Court of Appeals held that the terms of a declarations page do not create an ambiguity in a flood insurance policy.

The McGairs purchased a flood insurance policy from American Bankers Insurance Company. The policy was part of the federal flood insurance program about which I've written previously. Under the program, private insurers issue and administer flood policies and claim payments are reimbursed by the Federal Emergency Management Agency (FEMA). FEMA provides a standard text for the policies, which are called Standard Flood Insurance Policies, or SFIPs.

The policy stated that it is provided "under the terms of the National Flood Insurance Act," and that it "cannot be changed nor can any of it provisions be waived without the express written consent of the Federal Insurance Administrator."

SFIPs limit coverage for personal property in basements. (According to the court in McGair, the limitation "serves to encourage construction that minimizes the risk of flooding (e.g., elevated foundations and buildings without basements.)" I'll have to suspend my disbelief on that one.)

In 2010 a flood damaged the McGairs' house and personal property in their basement. They sought compensation from American Bankers. American Bankers denied the claim, asserting the basement contents were not covered.

The McGairs sued, arguing that the Declarations Page created an ambiguity as to the scope of their policy. The Declarations Page indicated that the McGairs have a finished basement and that the contents of their home are located in the "basement and above." It provides that the contents of the home are covered by the policy up to $100,000 and identifies none of the SFIP limitations. The parties agreed that the information was used by American Bankers for the purpose of calculating premiums.

The court held, "there can be no ambiguity between the SFIP and the McGair's Declaration page because the terms of the SFIP control . . . Thus, as a matter of law, any discrepancy between the SFIP and an accompanying Declarations Page must be resolved in favor of SFIP."

New report: More than 740,000 homes nationwide at high or very high risk of wildfire

A private research firm, Corelogic, has produced a report estimating wildfire risk in 13 western states, including Washington.

The upshot: More than 740,000 homes are ranked as high risk or very high risk for wildfire damage. All told, those homes represent $136 billion in total property value, according to Corelogic. The states with the highest number of properties at risk at California, Colorado and Texas.

Here in Washington state, the company estimates, there are more than 9,000 homes at high or very high risk, with a combined value of $1.3 billion. The study also takes a closer look at several high-value metropolitan areas with high fire risk, including Los Angeles, San Diego, and Boulder.

The report is free, although you have to register to read or download it.

It comes on the heels of a July statement by specialized insurer Lloyd's, which predicted "more frequent and severe wildfires as a result of climate change." Lloyd's warned that traditional risk assessment and pricing by insurers could understate the actual fire (and financial) risk.

Production of Statements Made Following an Accident

A recent motion decision deals with two issues that can arise in defending claims: the extent of litigation privilege with respect to statements made following an incident, and whether reviewing such a statement prior to examination for discovery waives privilege.

In Knox v. Applebaum Holdings, 2012 ONSC 4181 (CanLii) the plaintiff brought a motion seeking production of a statement prepared by the defendant’s property manager following an accident in its parking lot.  The accident occurred at 8:55 p.m..  The property manager was quickly notified, travelled to the parking lot, took pictures and called her risk manager to report what she had found at 12:35 a.m.  At this point, she was aware that two people had been injured.  She typed up a statement detailing her recollection of what she had seen and learned of the accident while it was fresh in her mind.  The statement was delivered to the adjuster later that day.

On the motion, the issues were whether the statement was protected by litigation privilege and whether privilege was lost when the property manager reviewed it when she prepared for her examination for discovery.

Justice Hockin held that litigation privilege attached to the document.  The property manager knew there was an accident and that two people had been injured.  She believed that litigation would follow.  It did not matter that the defendant was not represented by counsel at the time.  The dominant purpose of the document was to facilitate her employer’s defence and to assist in her forensic involvement of the case. 

Privilege was not waived.  Justice Hockin relied on Wronick v. Allstate (1997), 7 C.P.C. (4^th) 285 (Gen. Div.) where Justice Leitch held that reviewing a privilege document to refresh one’s memory in preparation for examination for discovery does not amount to a waiver of privilege.

"I own a business, but don't offer health coverage. Will I be penalized in 2014?"

Starting in 2014, under federal health care reform, some employers who fail to offer affordable health coverage to their employees will have to pay penalties of $2,000 to $3,000 per employee.

Small businesses won't be affected. Under the law, if an employer has fewer than 50 employees, the penalties do not apply. (If you have 25 or fewer workers and average wages up to $50,000, your company may be eligible for a health insurance tax credit to help offer coverage to your workers.)

If you're a medium- or large employer, though, you could be hit with the penalty unless you offer employees affordable coverage.

So what's affordable? The Kaiser Family Foundation has built this simple flowchart to determine what qualifies as affordable health coverage and what doesn't. It also explains which penalties apply in each case.

CRITICAL TIPS: TEACHING KIDS TO DRIVE

FIVE TIPS ON TEACHING YOUR KIDS TO DRIVE

Teaching your kids to drive safely may be one of the most important lessons you ever pass onto them. I do nothing but injury law, so I see injuries from car and truck accidents literally every single day. Driving is the most dangerous thing we do, much more so than flying or even tornadoes and earthquakes. In fact, traffic accidents kill more than all natural disasters combined. Here are five critical things to stress with your kids.

1. SLOW DOWN!
Between the ages of 16 – 24, you know that insurance is outrageous. This is because this period is the most dangerous time for drivers, though boys are twice as likely to die by accident than females.  It is risky behavior, like texting, speeding, and illegal passing that kills. Tell them any risky moves seen by anyone, and the car will be sold.  Then do it. You are the parent, not the friend!

2. NOT EVEN A SIP!
For drivers 21 - 44 alcohol plays a role in almost 50% of all fatalities! Tell them, not only are you likely to kill a friend drinking and driving, but you also get a felony conviction, never get to own guns or vote, you have to go to jail and your family likely loses their house.  All that for a beer or a buzz, is just crazy!

3. WEAR SAFETY BELTS!
There is really no excuse for leaving the driveway unrestrained. Almost 70% of people who die in vehicles are not properly wearing safety restraints.  Set the example. They won’t drive without their music, and they should not drive without their belts. No exceptions. (You too, Mom and Dad).

4. DON’T OVERCORRECT!
This is critical. Go to a safe place and let them feel how long it really takes to go from highway speed to a stop. It might surprise them. Let them put two wheels on the gravel shoulder and just hold. The sudden sound of gravel will often cause them to jerk left violently and lose control. Steady controlled movement will put them safely back on the asphalt. Do it until they do not panic anymore. It is sadly better to hit an animal than to wreck, so cover that, too.

5. LOOK TWICE!
It is not enough to “look both ways.” They must do that, but twice! Motorcycles are much harder to see, and even cars can seem to hide. Many people who hit and injure my clients say they “never saw” our car.  They did not see it, because they did not look twice.  Safe motoring!

Good news: We're back online

We've got our website back online. Thanks for your patience.

Our website's down; we're working to fix it

Our agency website (www.insurance.wa.gov) is currently down, due to a major network problem affecting multiple state agencies.

Even if you can access the site, you won't be able conduct transactions or do use our other online applications.

We and others are working hard to resolve the problem.

Who will have to pay a penalty for not having health coverage?

If federal health care reform takes effect as planned in 2014, some people will pay a penalty of $95 if they do not have health coverage. (This is what's known as the individual mandate.)

And the penalties would get bigger. In 2015, it would be $325. In 2016 and beyond, it would be $695.

But will you have to pay?

For most people, the answer's no. There are a number of exemptions. There's a religious exemption, for example. Members of Indian tribes are exempt. Very poor individuals and families -- such as a family living on less than $18,700 a year) are exempt. So are those that have to pay more than 8 percent of their income  for health insurance.

Also, most people already have coverage that already satisfies the requirement. If you're on Medicare, for example, there's no penalty. If you're on TRICARE (the health plan for members of the military, retirees and their families), there's no penalty. If you get coverage through the VA, through your employer, Medicaid, or the Children's Health Program, there's no penalty.

The Kaiser Family Foundation offers an excellent, simple flowchart that lays this out in more detail. It includes estimates on the cost of insurance through the new health care exchanges, and a link to a KFF online calculator to help figure out premiums and tax credits to help you buy coverage.

Failure to Add Property Owner as Additional Insured

Many winter maintenance contracts require the contractor to add the property owner as an additional insured on its policy.  But what happens when the contractor fails to do so and the owner is sued?

In Papapetrou v. 1054422 Ontario Ltd., 2012 ONCA 506 (C.A.), the plaintiff sued the Cora Group, alleging she slipped and fell on black ice on its property.  Cora contracted with Collingwood Landscape for winter maintenance services.  In the service contract, Collingwood agreed to name Cora as an additional insured on its CGL policy, but failed to do so.  On a motion for summary judgment, Collingwood was ordered to assume Cora's defence and indemnify it for damages.  Collingwood appealed.  Cora conceded that the order to indemnify was premature so the primary issue on appeal was whether the motions judge erred in ordering Collingwood to assume Cora's defence.

The Court of Appeal set aside the original Order and substituted an Order that Collingwood pay for Cora's defence.

Simmons J.A. held that Collingwood's breach of its contractual obligation to name Cora as an additional insured did not create a duty to defend; rather, it gave rise to a remedy in damages.  The quantum of such damages is the amount Cora will be required to pay for a defence of the claims that Collingwood's insurer would have paid had Collingwood fulfilled its contractual obligations.  The costs would include all of the costs of Cora's defence except for those incurred exclusively to defend claims that do not arise from Collingwood's performance or non-performance of the contract.  Cora was entitled to separate counsel given there were distinct claims against the two parties, which meant there would be an inherent conflict between them.

My neighbor damaged my back yard, but won't file an insurance claim. What can I do?

Q: My neighbor damaged my back yard as the result of one of his do-it-yourself projects. Now he won't turn in a claim to his insurer. And he won't tell me who his insurer is. What can I do?

A: We get variations on this question a lot. Common ones involve a neighbor driving over a mailbox or into a fence. And we periodically get calls from people wondering if we have a database listing who insures who. (We don't.)

First, try to deal directly with your neighbor to get him to pay for the damage. If he's worried that the claim will drive up his premiums (or lead to his policy being cancelled), he may still be willing to compensate you for the sake of the relationship and to stave off the possibility of your taking him to court.

If that doesn't work, you can contact your agent or insurer to see if the damage is covered on your own policy. Or you could decide to take legal action against the neighbor, either in small claims or a higher court.

First circuit rules on gradual detioration and faulty construction or maintenance exclusions

Insureds Paul Gargano and his wife sought coverage from Vigilant, who provided them with a homeowner's policy, for the cost to remedy failed staining on shingles on their house.  The stain was peeling off the shingles.

Vigilant denied coverage on the basis of two policy exclusions.  The first excluded  coverage for "gradual deterioration . . . however caused, or any loss caused by . . . gradual deterioration."  The second excluded losses resulting from faulty acts, errors or omissions in planning, construction or maintenance.  "Construction" was defined as including materials and workmanship used for construction or repair.

In Gargano v. Vigilant Ins. Co., 2012 WL 3632442 (1st Cir.), the United States Court of Appeals for the First Circuit rejected the Garganos' argument that the policy exclusions were ambiguous.  It held that the Garganos' argument that the deterioration of the stain was progressing "rapidly," not gradually, "did not rise above word play."  "While, to be sure, 'gradual' has no mathematically fixed range, the pace of the detaching stain was a long way from a lightning bolt or a falling tree, and in calling it gradual the district court was drawing no fine line."

The court also held that in the faulty construction or maintenance exclusion, "'faulty' does not mean negligent or blameworthy on the part of a homeowner or his contractor, but simply tainted by imperfection."