Insurance Coverage Blog

Thanks to Marjory Morford, Dunn Carney's marketing director, for sending me the link to this story by Mike Kunzelman of the Associated Press.  (Marjory frequently helps me with this blog -- for example, on days where I'm too busy to review and publish comments, she does it.  When I'm traveling and away from a computer, I've been able to call her and dictate posts and updates).   This story completely slipped by me.  It says, following the disqualification of the Katrina(less) Litigation(less) Group(less), some dozen policyholders formerly represented by them have settled their Katrina claims with the insurer. Gotta think some of those policyholders are at least a little miffed at their lawyers.

Posted By David Rossmiller In First Party Insurance
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I've said it was coming Monday, and when I make a promise, I aim to keep it.  Even though as I write it is once again into the wee hours, due to day job responsibilities.  Good Lord, I miss seeing my family. 

Here is a copy of the article as it appeared recently. 

Some malfunction of the Dunn Carney servers, as of the moment I write this, has lost me my connection to Microsoft Outlook.  Therefore, I cannot retrieve right now from my friends at LexisNexis the exact language of the copyright notice I was supposed to include with this reprint.  Nor can I access the other articles that appear in the current edition of the quarterly publication New Appleman on Insurance: Critical Issues in Insurance Law, which I said I would talk about. 

So I will wing, for the time being, the copyright notice:

Copyright © Matthew Bender & Company, Inc., a member of the LexisNexis Group. Republished with permission from New Appleman on Insurance: Current Critical Issues in Insurance Law. All rights reserved. 

I think that's it, it's the one I've used before.  I'll fix the rest when my e-mail access is restored.  Again, thanks to the good people at LexisNexis, who have always treated me well, for whom I have high regard, and who know how close to my heart are these anti-concurrent articles over which I have struggled and suffered. Incidentally, are there any others out there like me, who like to use the who/whom distinction whenever possible?  I remember working hard in grade school to master this, and no matter that "whom" has passed into obscurity, I'm not letting all that effort go for naught.

UPDATE:  On Friday, Judge L.T. Senter Jr. gave a further opinion in the Dickinson v. Nationwide case I mentioned earlier, the one in which he endorsed the anti-concurrent cause methodology and analysis I have explained in these articles.  The new opinion is a denial of Nationwide's motion for reconsideration and denial of its motion for an interlocutory appeal to the Fifth Circuit.  For non-lawyers, interlocutory means before the case is done.  Another very clear and precise ruling from Judge Senter.  His focus on what the "loss" is under the policy is exactly right, and in reading this opinion and comparing it to other court opinions on anti-concurrent cause, you can see how this methodology cleans up the analysis and gives it direction. I hope all courts will eventually adopt this way of analyzing anti-concurrent cause. Here's a copy of the opinion.  

Posted By David Rossmiller In First Party Insurance
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The McIntosh v. State Farm, easily the most contentious of the State Farm Katrina cases, has long been dark and bloody ground where lawyers clashed by night.  This is the case where Kerri Rigsby herself approved the flood payment, then turned around and accused State Farm of overpaying flood damage with government money to minimize the company's liability for wind.

It is also the case where those dumb engineer e-mails were so incessantly touted, it's one of the cases with two engineer reports, it's the case with the note in the file that said "put in wind file, do not pay bill, do not discuss." That last part deserves some comment: it was often erroneously rendered as "do not pay claim," which the note did not say. Instead, it seems obvious that it is a reference to the bill of the engineering company for engineer Brian Ford's first report, which strangely (considering Kerri Rigsby approved the flood payment) found no evidence of flood damage, and attributed all the damage to wind. But this schtick worked for quite a while -- just look at this story from CBS from the salad days of the Ride of the Rigsbys --  August 26, 2006: "Sisters Blew Whistle on Katrina Claims."  What a load of Scruggsism! But the media and a lot of other people just ate it up.  Looks pretty silly now, doesn't it? Maybe some editor should go back and revise the headline on the story to: "Sisters Met With Trailer Lawyers, Blew Up Careers."  

You may remember Dickie Scruggs had to withdraw from McIntosh and all Katrina cases after he was indicted (following a big dust-up with the other members of the then Scruggs Katrina Group over whether he was actually going to do so).  Then you may remember the relabeled Katrina Litigation Group being disqualified when Judge Senter ruled they were implicated in unethical conflict involving the Rigsbys' taking of the State Farm documents and the hiring of the Rigsbys, material witnesses in McIntosh and many other Katrina cases, as "litigation consultants."  You might also remember the Katrina Litigation Group had kind of a weird thing going with Brian Ford, where he was in discussions to make some $10,000 a month as a "consultant."  I'm leaving out a lot of weirdness that is an integral part of this case, I know, but honestly, trying to tell the story so it makes any sense in less than 8,000 words is really hard to do. And you wonder why I'm naming my musical The Katrina Follies?

OK, that brings us up to the new news -- Judge Senter dismissed the fraud claim in McIntosh against State Farm and also against the Rigsbys' former employer, Renfroe, an independent contractor claims adjusting service. He said even if the McIntoshes proved their allegations, it wouldn't amount to fraud because they failed to meet the element of reliance.  They didn't rely on State Farm's alleged underpayment of wind damage, instead they rejected State Farm's claims adjusting and sued.  Renfroe, which allegedly aided and abetted fraud, couldn't be liable if there was no fraud as a matter of law in the first place, the judge said.

This ruling is not the same thing as saying there is nothing wrong. Senter said if the allegations were proven, it would constitute bad faith and would justify punitive damages. So he made no factual finding, for example, that the amount of wind payment was correct, or that amounts owed for wind damage were not wrongfully pushed off on the federal flood payment.  Still, this is a  significant development in this case, and in Katrina litigation.  Part of the continuing deScruggsification of remaining Katrina cases.  

Oh, by the way -- here's a copy of the judge's decision.

Posted By David Rossmiller In First Party Insurance
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Anti-concurrent cause language in first-party property insurance is, believe it or not, something I enjoy writing about even more than I do about Katrina litigation in general, Dickie Scruggs, Jim Hood or even the Trailer Lawyers.  So I have been trying to squeeze in some time, not always successfully, to follow the Corban v. USAA case in Mississippi state court.  Time is finite, at least as we humans experience it, and let us never forget the wisdom of the great Vin Scully: on the line-up card of life, we are all listed as day-to-day.  If you never had the pleasure of hearing Scully call a game, or if you did and wish to remind yourself of how much he is missed, follow this link and read the transcript of his call of the last out of Sandy Koufax's perfect game of September 9, 1965. Even if you are not a baseball fan, there is joy in seeing one master artist explain the work of another.  Gather ye rosebuds while ye may, Old Time is still a-flying.

Corban is an important case because the Mississippi Supreme Court is being asked to interpret anti-concurrent language as it relates to hurricane damage for the first time.  The plaintiffs, Margaret and Dr. Magruder Corban, are petitioning the court to accept an interlocutory appeal of the Harrison County trial court's interpretation of anti-concurrent cause language.

So that you can follow along, here is the trial court's partial summary judgment order in this case. As the court said, it appears from the record that the second floor of the Corbans' home was damaged by wind and perhaps rain. The first floor may have sustained damage from both wind and Katrina storm surge, although the Corbans' experts said the home and other structures were destroyed by wind before the water arrived.  I did not quite follow this explanation by the court of the plaintiffs' characterization of the flood exclusion: "The Corbans maintain that storm surge is not included in the policy exclusion and that the policy exclusion applies only to water damage and not to any wind damage." That statement appears self-contradictory, if storm surge has the usual connotations of consisting of water damage. 

Be that as it may, the trial court characterized USAA's position as that "storm surge is included in the policy exclusion and that the policy exclusion operates to exclude coverage for all damage caused either by water alone or damage from any combination of water and any other peril." 

The court analyzed how the policy's anti-concurrent cause language, the standard Insurance Services Office version, fit in with wind and water damage.  This version of the anti-concurrent cause clause reads as follows:

We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.

The court seemed to be heading in the right direction with this statement:

[T]he exclusion provides that is does not cover a loss caused by water damage. The second sentence refers to "[s]uch loss" being excluded even if in combination with or in any sequence to other causes.  The term "[s]uch loss" can only refer to the loss caused by water damage mentioned in the first sentence of the exclusion.  It is that loss and that loss only that is excluded by the plain language of the provision.  The remainder of the second sentence goes on to elaborate on the exclusion by providing that the water damage is excluded no matter what other causes exist and whether the water damage occurs first, last, or simultaneously with some other causes.  This simple, basic interpretation of the language used and sentence structure bars coverage for water damage and only the water damage, whether occurring alone or in any order with another cause.

That is right. The anti-concurrent lead-in clause to the flood exclusion contractually overturns the common law efficient proximate cause doctrine and makes it so water damage cannot be covered, even if some other covered peril were judged to be the more important or moving cause of the damage. 

However, I would like to point out one step in the analysis the court did not take that it should have.  At that point, the court should have said in what circumstances either anti-concurrent cause language or efficient proximate cause are relevant -- when multiple forces combine to cause the same damage.  The word "loss" as used in the anti-concurrent cause provision must be understood in the context of the rest of the policy. The basic coverage grant of homeowners policies is for "accidental direct physical loss to the property."  The key is to understand that property is made up of many elements, and any given element can experience more than one direct physical loss before its value has been totally consumed.  I use the example of an $800 couch -- covered wind-driven rain could cause loss to the couch of $700, and then uncovered storm surge could cause further loss of $100. Two losses, two different forces that caused loss. Merely because they acted upon the same item of property does not mean the loss is the same -- they did not act in combination to cause $800 of damage, they acted separately to cause $700 and then $100 in damage.

Missing this step is what causes most anti-concurrent cause analyses to go off the rails at some point. I'm not sure why courts keep overlooking this -- it possibly is because they fail to fully appreciate that both anti-concurrent cause and efficient proximate cause deal with multiple causes of the very same loss. If this scenario is not present, neither mode of analysis has any use or relevance, so one would think courts would take the preliminary step of determining what the loss is before wasting time with a causal analysis that may not apply to the facts.  Some courts are getting it right, however, as Judge Senter did in Dickinson v. Nationwide and Judge Ortrie Smith did in Maxus Realty, two recent cases.

We can see how leaving out this "loss" step left the Corban trial court unprepared to figure out what the Fifth Circuit's 2007 Leonard v. Nationwide and Tuepker v. State Farm decisions stand for. The trial court, citing these cases, said the Corbans cannot recover "for any damaged caused by water as defined in the policy or a combination of that wind and water."   The quote the trial court used to come up with this conclusion is from Tuepker, which itself cited to the earlier Leonard case:

any damage caused exclusively by a nonexcluded peril or event such as wind, not concurrently or sequentially with water damage, is covered by the policy, while all damage caused by water or by wind acting concurrently or sequentially with water is excluded.  

When I see something like this, I call it a "yeah but" moment.  Yeah, but where's the analysis showing exactly how you think wind and water acted either concurrently or sequentially to cause the same damage? Those words, concurrently or sequentially, can have meaning only within the context of the clause's overarching purpose -- to address multiple causes of the same loss. And if there ain't no same loss, they ain't no good. 

So "concurrent" and "in sequence" have to have some specialized meaning within this context, or they make no sense -- they can't be used in a colloquial sense.  Merely because one thing follows another does not give it the meaning of sequentially within this context, nor are two things concurrent in this context merely because the forces act at roughly the same time or act on the same physical element of property.  You have to understand the purpose of those words, and once you do, it is relatively easy to see that Katrina wind and water were neither concurrent nor sequential.  They can't be, because they didn't cause the same loss at the same time, they caused different losses to property at different times. It is not important that the same element of property was damaged by different forces twice -- they are still distinct and so any form of causation analysis used to sort out what is responsible for the same loss is irrelevant.  I am still waiting for anyone to show me even one instance of Katrina wind and water acting concurrently or sequentially as I explain those terms. No one has yet, and I doubt anyone ever will. 

That gets us to the Corbans' briefing for the petition for interlocutory appeal.  Here it is.  I agree with this brief to the extent it cites Dickinson, Maxus Realty and my October 2007 New Appleman: Critical Issues anti-concurrent analysis, which is basically what I explain above, and which I go into further detail about in another Critical Issues article to be published this month. Obviously, I agree with myself.  As you might expect, I'm not on board with the alternative grounds for reversing the trial court, such as that the anti-concurrent cause language is against public policy or is ambiguous because different courts interpret it different ways.  Still, these alternative arguments are presented in a pretty sophisticated way, which is not always the norm, and I don't discount them out of hand. The arguments are too good for me to pick at with the little energy I have left as I write this in the wee hours, so I will just say they strike me as generally contrary to the way I see anti-concurrent cause clauses, but seeing the thought that went into them, I will give them some more thought myself. 

Lastly, one thing: you might notice I never use the acronym ACC for anti-concurrent cause, as most people do.  I have a bias against acronyms when they become a further form of jargon that makes legal analysis even more unapproachable than it already is.  I can't say I can express with any great clarity why I dislike using "ACC" -- something about how it gives aid and comfort to those who might be inclined to follow shortcuts in analysis and fall prey to false doctrine. I like to use the word "concurrent" wherever I can, not the least because it reminds me that the word has a specialized meaning in a specialized context. I don't want to forget that, nor do I want to forget that there's more to speaking the language with precision than just tossing around a few insider phrases.  Just one of those personal eccentricities, I guess.       

Oh, I almost forgot.  Here's a story on the petition for interlocutory appeal by Anita Lee of the Sun Herald.   You have to admire her for recognizing the importance of this case and taking on a tough issue like anti-concurrent cause for a publication with a mass general audience. 

Posted By David Rossmiller In First Party Insurance
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I base a lot of my evaluation about how good a written product is on how long it takes me to read it.  In this evaluation, time is relative -- I don't mind spending an hour reading something long, as long as I am able to progress from the front to the back without a lot of problems and unnecessary stops along the way to try to decipher the trail.  By those standards, the Fifth Circuit's Broussard decision was good writing -- relatively short, easy to read, easy to understand, not filled with judicial pomposity and ego-mania. I didn't have time on Monday to post commentary about the case, but I did read it, and because I was pressed for time, I appreciated all those attributes of the opinion.

Before we discuss the decision itself, here's another copy for you to follow along with.

I think it's a reasonable decision.  You may remember I have written quite a bit about the Broussard case, and from way back I have said that, in my opinion, a reasonable juror could have found for State Farm on the evidence presented, and therefore Judge Senter shouldn't have granted a directed verdict.  I can see why he ruled the way he did, I just disagree. I wouldn't want to commit to whether the jury that was in place at the trial would have found for the insurer -- it seems unlikely, given the benefit of hindsight.  But could a hypothetical reasonable juror find for State Farm?

You may remember Judge Senter's directed verdict from January 2007 -- here's a pdf of it if you haven't memorized it.  In it, he said that "No evidence has been introduced from which any finder of fact could reasonably determine what part of the loss of the Broussards' property is attributable to water as opposed to wind."  Now, this has perplexed me for a long time, and I have thought and thought trying to see how this could be right, and it has never quite added up for me. Instead, it has always seemed to me that, based on the evidence presented by State Farm's expert that there was a 75 percent chance that zero to 35 percent of the shingles on the roof were damaged by wind, and that a big storm surge hit that wiped out the house if it hadn't already been destroyed by a tornado, that this means you could take your pick as a juror and find along the entire scale.

You could find that no damage came from wind (zero percent of shingles times 75 percent chance of damage is still zero).  You could find that a little bit of damage came from wind.  Or you could find that a tornado destroyed the house and all the damage was due to wind.  I wasn't there, of course, at the trial, but I have talked to people who were, and I think I have some understanding of the evidence that was presented.  I could be wrong, of course, but this is how I see it.  The Fifth Circuit's reasoning appears correct.  

The burden of proof argument that State Farm put forward is one that, frankly, I did not understand in their appellate brief and saw as overly technical.  I tend not to pay a lot of attention to this business of who has what burden of proof at what point.  In reality, the practical rule is get the best proof you can, and then at trial, the insurer's proof has to be way better anyway to overcome the natural desire of the jury to smack them down.  I don't think much about who has the burden of proof -- instead I concentrate my energy on trying to work up the case so it's not close enough to worry about.  The Fifth Circuit said the State Farm "shifting back" argument wasn't correct under Mississippi law, and that seems like a reasonable conclusion -- the insured has to furnish evidence of an accidental physical loss to property, and the insurer has to prove exclusions.  I just never could buy into this shifting back and forth thing, it was like watching a tennis match, you had to keep turning your head to keep up with it.  I talked about that in some posts last year, too.

On the punitive damages portion of the opinion, it looks like the circuit court struggled for a while with the fact State Farm had paid nothing at all for wind damage even after its expert found evidence that some wind damage probably had occurred. 

Here, the circuit court's decision seems somewhat troubled by the insurer's conduct, but doesn't feel it rises to the level of punitive damages: "on remand the district court should consider whether additional actual or consequential damages are appropriate."  After the Broussard decision in the trial court, in Katrina cases I was keeping track of, I saw State Farm made sure to pay at least something before the case was ready to come to trial -- it was the fact they had basically paid nothing that led to the punitive damages, although the Fifth Circuit points out that the Broussards had in fact erroneously been advanced $2,000 for a flood policy that they didn't have.  This section of the opinion looks like it occupied most of the court's time and attention, and I think there must have been some considerable debate among the panel about whether the punitive damages should stick. 

The change of venue ruling, I can see that too. 

Of the four big Fifth Circuit Katrina decisions, Broussard, In re Katrina Canal Breaches, Tuepker and Leonard, I have real problems only with the last one. Not long after Leonard came out, I began to believe that the case's analysis of the anti-concurrent cause provision was erroneously overbroad and would cause mischief down the road unless it was corrected.  I said this because during Katrina litigation, insurers actually did not claim that the presence of any amount of flood damage obviated the requirement to pay for separate wind damage, even if the house was destroyed by flood.  However, now it appears that, based on the Leonard case, some insurers are doing just that. (Read down near the bottom of this post and take a look at the two opinions I cited, the Dickinson opinion by Judge Senter and the Maxus decision by Judge Smith in Missouri). 

Could the Fifth Circuit actually have intended that result, to allow an interpretation beyond that claimed by insurers? I doubt it, but Leonard is a good example of why you don't say more than you need to to make your point.  It is quite obvious Judge Jones did not fully know what she was talking about -- the fuzzy grasp of the terminology in the case, and the substitution with empty buzzwords  like "synergy,"  is a dead giveaway -- but that didn't diminish her confidence or her willingness to press ahead anyway.  There was a lot of loose talk in Leonard, all of it completely unnecessary to the decision too.  I wouldn't call Leonard judicial activism so much as I would call it proof of the truth of Will Rogers' maxim: "It ain't what you don't know that hurts you, it's what you think you know for sure that just ain't so."

Posted By David Rossmiller In First Party Insurance
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I don't know that much about this case -- I only learned of it yesterday when the reporter called me -- but it has something to do with a pipe bursting under the slab of the house, I believe. In any event, the punitive damage award was a whopping $3.5 million.  That's huge, considering the underlying breach of contract and emotional damages were only $84,000 and $50,000, and will likely be reduced somewhere along the way as exceeding the constitutional boundaries for punitive damages.   Here's a blog post I saw on the story, where the commentary appears to be limited to which category the item was placed in.

It's funny, every time I talk with a reporter, I wish I still was one, but that's about the only time that happens. 

Posted By David Rossmiller In First Party Insurance
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I happened to be up late Monday night reading the Court of Appeal's decision, so it was fresh on my mind when the Louisiana Supreme Court handed down its decision Tuesday morning.  Here's a copy of the Supreme Court's decision, and here's a copy of the Court of Appeal decision.

Now, take a look, at the flood exclusion in the policy, it's the standard form ISO version: 

1.  We will not pay for loss or damage caused directly or indirectly by any of the following.  Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss:

g.  Water.  Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, whether driven by wind or not . . . .

OK, now let's read what the Court of Appeal, Fourth Circuit, wrote in concluding this language was ambiguous.

A review of the Policy reveals that the parties intended to cover and include all risks that were not specifically excluded or limited.  Lafayette failed to specifically exclude all floods because of the ambiguity contained within the flood exclusion.  While the Policy states that it does not cover damage caused by a "flood," it also states that it does not cover "waves, tides, tidal waves," and the "overflow of any body of water  . . . whether driven by the [sic] wind or not."  This exclusion includes "flood," but then continues to list specific natural disasters that cause inundations of water, commonly labeled as "floods."  For example, a varying cause of a flood can be man-made or natural, as documented in La. R.S. 29:762, which states that a "flood" is a "natural disaster."    

A contract must be interpreted to achieve its purpose.  La. C.C. art. 2054. The purpose of the policy was to provide insurance coverage for all risks not specifically excluded or limited. There, in case of any doubt, when interpreting a contract of a standard form, the contract must be interpreted against Lafayette as the issuer of the Policy.

As such, after a de novo review, we make the legal determination that the Policy with Lafayette is ambiguous as it relates to the water exclusion because it is unclear what types of floods are excluded.  Therefore, strictly construed against Lafayette, Mr. Sher is covered for the damage to the basement level of the Building.   

You might not believe me, so you can go check it out for yourself on pages 7 and 8 of the Court of Appeal's decision, but that is the extent of the analysis of the ambiguity of the flood exclusion. I don't care where your ideology is in this thing, can anyone honestly say they think this reasoning is strong analysis, something you'd be really proud to stand behind?   I mean, they wanted to throw this gloss of man-caused versus natural flood over the decision, but then they didn't even care enough to bother to do a decent analysis. I said the same thing when the decision came out. 

For example, who wants to defend this statement? 

This exclusion includes "flood," but then continues to list specific natural disasters that cause inundations of water, commonly labeled as "floods."    

As a matter of analysis, does that make any sense at all? No, it doesn't.  The court made no effort whatsoever to show how the words in the exclusion were incompatible with each other or how that made the word "flood" ambiguous.

As the state Supreme Court decision points out, it is "more result determinative than legally oriented," and would lead to absurd results, such as someone who is within a flood control levee being covered, but someone outside the levee structure being uncovered. Also, contrary to what the Court of Appeal said, of the words in the exclusion, only one, tides, is exclusively a "natural" event, and the flood was not caused by man, it was caused by Hurricane Katrina.  This is a good point, one that others have made: if you say a flood is man-caused because man was involved somewhere in the chain of events, all floods are man-caused and nothing is excluded. 

I've heard this decision came as a surprise to some, who expected the court to go strongly the other way.  These people, I would have to say, have waved bye-bye to reality and have given in to the attractions of ideology, wishful thinking, day dreaming and homerism.   Flood exclusions are almost always upheld, certainly as applied to infrequent, high-severity events like hurricane flooding.  This man-caused vs. natural distinction is more designed for dealing with stuff like a water main bursting, and is difficult to apply in these circumstances -- and the Court of Appeal did a poor job of doing so.  For the Supreme Court to go against the mainstream of judicial interpretation and to utterly disrupt insurance markets in the state of Louisiana, sending prices skyrocketing, would have been the really surprising development. 

Posted By David Rossmiller In First Party Insurance
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Here's a pdf of the opinion, just out. Not much time right now to blog, but for now, this excerpt at the end of the case says it all:

We REVERSE the judgment of the district court entering JMOL in favor of the Broussards. We REVERSE and VACATE the jury’s award of punitive damages. We AFFIRM the district court’s admission of testimony from the Broussards’ expert witness. We AFFIRM the district court’s denial of State Farm’s motion to change venue. We REMAND the case for a new trial.

Posted By David Rossmiller In First Party Insurance
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Anti-concurrent cause language is one of my favorite areas of insurance coverage, one I will talk about at any time and one I have put a lot of work into mastering.  It might be the kind of thing that annoys others, like someone who insists on playing the Pan flute for everyone because he has spent so much time practicing, but there you have it.

The LexisNexis Insurance Law Center is offering, through the end of this week, I think, a free download of the anti-concurrent cause article I wrote for New Appleman: Critical Issues last October. Here's the link, where you will be greeted by a video of a guy with a snake tattooed on his face, screaming "100 percent off list price this week. How can I afford to give this stuff away?  I can't, but I'm Crazy Larry, the guy with the snake on his face.  For a limited time only. Come on down and get it before they take me away."  Just kidding.  I don't think Lexis has the video ready yet, it's still being shot.    

UPDATE: I wasn't going to mention this because doing so seems to smack of self-promotion, but the person who sent me the opinion wants me to, and the LexisNexis folks who published the article want me to, so here it is.

In this opinion from Dickinson v. Nationwide, a Katrina case in the Southern District of Mississippi, on Friday Judge Senter favorably cited the anti-concurrent cause analysis of the New Appleman: Critical Issues article above, in deciding that an anti-concurrent cause provision did not apply to the facts because the wind and water damage were separate losses caused by separate, single forces.  Anti-concurrent cause language is relevant only where multiple forces cause the exact same loss, and where those forces meet the criteria of acting concurrently or sequentially within the strict meaning of those terms of art.  Anything else is merely single-force damage.  In the opinion, Judge Senter declined to give a broad interpretation to the Fifth Circuit's decision on anti-concurrent cause in the Leonard case.  Incidentally, I have another Critical Issues article coming out sometime this month.  It is called Katrina in the Fifth Dimension, and it is about Katrina cases before the Fifth Circuit.  I spent by far the most time looking at the Leonard case, finding some fault, OK, a lot of fault, with the Fifth Circuit's anti-concurrent cause analysis. 

One of the policyholder lawyers in Louisiana also told me the analysis in the October article was cited and used in a Katrina case in the Western District of Missouri late last year.  I looked it up, and it's true: Maxus Realty Trust, Inc. v. RSUI Indem. Co., 2007 U.S. Dist. LEXIS 92417 at *6.  Here's a pdf of the opinion.  I note in this case that the judge, Ortrie Smith, sidestepped the Leonard case and relied instead on more moderate language in the Fifth Circuit's Tuepker decision.  Leonard was just too loose with terminology, too fuzzy in its analysis, and it went off the rails. I wouldn't mind the case half so much if it wasn't so cocky about being wrong.

Making the article available for a free download is just coincidence, has nothing to do with either of these opinions.  Lexis just decided to do it as part of their Catastrophe Month on the Insurance Law Center. I heard they were going to do it before I heard about Judge Senter's ruling.   If you haven't visited the ILC, you should, there is a lot of good insurance stuff there, and the writing is more and more veering sharply away from the nauseatingly dull and pompous prose that has for so long enslaved legal writers.   I've said it before, so you know what I say -- you have nothing to lose but your chains. Choose freedom and it will be yours. 

Posted By David Rossmiller In First Party Insurance
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Citing ethical lapses including the payment of the Rigsby sisters as material witnesses, Judge L.T. Senter Jr. has disqualified the Katrina Litigation Group from remaining Katrina cases, and has also booted the sisters as witnesses from all cases in the Southern District of Mississippi.  Here's the opinion, and here's a rather extended excerpt -- the language is Senteresque, which means stunningly blunt when the occasion calls for it:   

State Farm and Renfroe have charged Scruggs with two basic types of ethical misconduct and with conflicts of interest, all of which relate in one way or another to the relationship between Scruggs and the SKG and two former Renfroe employees Cori and Kerri Rigsby (the Rigsby sisters). State Farm and Renfroe allege 1) that Scruggs participated and encouraged the Rigsby sisters to wrongfully appropriate and disclose confidential documents in which both State Farm and Renfroe had a legitimate right to confidentiality; and 2) that Scruggs paid the Rigsby sisters a substantial sum in furtherance of Scruggs’s efforts to encourage the misappropriation of these documents.

State Farm and Renfroe have alleged additional acts of misconduct relating to other witnesses and to the plaintiffs’ counsel having obtained documentary and physical evidence without following the established procedure for the use of out-of-state subpoenas in the discovery process.

I have determined that disqualification is required because Scruggs, acting in furtherance of the SKG joint venture, paid the Rigsby sisters a substantial sum of money (a consulting fee of $150,000 per year) despite Scruggs’s knowledge that the Rigsby sisters were material witnesses in connection with many hurricane damage claims that were likely to become the subject of litigation. While Scruggs made the arrangements for these payments, the other members of the SKG joint venture knew or should have known that the payments were being made, and I am of the opinion that their failure to take timely and reasonable remedial steps or to object to this arrangement amounts to a ratification of Scruggs’s actions. While the other ethical misconduct alleged by State Farm and Renfroe are substantial, the payments to the Rigsby sisters are, in and of themselves, sufficient to warrant disqualification.

It is apparent to me, from my review of the deposition testimony of the Rigsby sisters, that there was no legitimate reason for these payments and that the “consulting” work that ostensibly justified these payments was a sham. Even if this were not the case, the performance of legitimate work that is closely related to a matter in litigation cannot justify an attorney’s payment of a substantial sum of money to a non-expert material witness.

Payments to non-expert witnesses are specifically limited to statutory witness fees; reasonable expenses actually incurred for mileage, meals, and lodging; and reasonable compensation for time lost from work while attending a trial or testifying by deposition. (Opinion No. 145 of the Mississippi State Bar Ethics Committee, March 11, 1988). The payments Scruggs made to the Rigsby sisters bears no reasonable connection to any work they performed or to any of expenses they incurred in testifying. These payments were clearly improper. N.L.R.B. v. Thermon Heat Tracing Services,Inc., 143 F.3d 181 (5 Cir.1998); Golden Door Jewelry Creations, Inc. v. Lloyds Underwriters Non-Marine Ass’n, 865 F.Supp 1516, 1526 (S.D.Fla.1994); Rentclub, Inc. v. Transamerica Rental Fin. Corp., 811 F.Supp 651, 653 (M.D.Fla.1992), aff’d 43 F.3d 1439 (11th Cir.1995); Wagner v. Lehman Bros. Kuhn Loeb Inc., 646 F.Supp 643 (N.D.Ill.1986).

Even though the payments to the Rigsby sisters originated with Scruggs, the other members of the joint venture were aware or should have been aware that the payments were being made and did nothing to prevent their continued payment. In these circumstances, all of the other members of the original SKG are responsible for this breach of ethics. Those whom these firms have subsequently associated must also be disqualified to prevent the appearance of impropriety in the remainder of this litigation. See MRPC 5.1(c) (“A lawyer shall be responsible for another lawyer’s violation of the rules of professional conduct if: (1) the lawyer orders or, with knowledge of the specific conduct, ratifies the conduct involved . . . or . . . knows of the conduct at the time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.”); See American Can Co. v. Citrus Feed Co., 436 F.2d 1125, 1128-29 (5th Cir.1971).

The payments made to the Rigsby sisters require the disqualification of the successors to the SKG and those whom they have added as associates from further participation in any litigation in this Court against State Farm and Renfroe arising from property damage attributable to Hurricane Katrina. The motions to disqualify will be granted. An appropriate order will be entered, and the plaintiffs in all cases affected by this disqualification shall be allowed a period of forty-five days in which to retain new counsel or to notify the Court of their intention to proceed pro-se. For good cause, this period may be enlarged at the discretion of the United States Magistrate Judge assigned to the case. The plaintiff’s failure to retain new counsel or to inform the court of the intention to proceed pro-se will make a case subject to this order eligible for dismissal without prejudice. The attorneys subject to disqualification by the terms of this order shall send, via United States mail, postage prepaid, a copy of the opinion and order in this case to each client affected by this ruling.

The Rigsby sisters will be disqualified as witnesses in any actions now pending on this Court’s docket against State Farm or Renfroe in which the SKG or the KLG has represented the plaintiffs, and any documents supplied by the Rigsby sisters to the SKG or the KLG or its associates shall also be excluded from evidence unless the plaintiffs can show that the documents were obtained through ordinary methods of discovery.

I joked about it before, but now it is a reality.  The Katrina Litigation Group is now the Katrina(less) Litigation Group, just as its predecessor, the Scruggs Katrina Group, became the Scruggs(less) Katrina Group when Scruggs was indicted. 

My goodness, the Rigsby sisters' rocket sure enough has run out of fuel.  I feel sorry for them, seems to like they were used. I know what some of you will say, they are adults, they made their own choices, and what they have done has resulted in a lot of money being spent and a lot of people being put through criminal investigations and other assorted nonsense for more than two years now.  All that may be true. But imagine some of the things that might have been said to them, the inducements, the promises.  Could turn the heads of a lot of people, maybe, under the right circumstances.  Doesn't mean I approve of what they did, merely because I have sympathy for them personally. 

UPDATE: Will the Mississippi State Bar now investigate what Judge Senter has said were ethical lapses?  

Posted By David Rossmiller In First Party Insurance
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If you missed my post from yesterday, go back and read it, it's got a roundup of some of the Scruggs stories of note, some stuff about Jim Hood, some Katrina litigation stuff -- it took me some time to put it together, so I hope you'll find something you like. I'll talk about a couple stories here that I didn't include in that earlier post. 

One is this story in the Clarion-Ledger [originally had the wrong link, now fixed] in which John Jones, formerly part of the Scruggs Katrina Group and whose attorney fee lawsuit against Scruggs and the SKG firms gave rise to the Scruggs bribery conspiracy, says he was completely shocked by Scruggs' plea agreement.  I myself don't think it was very hard to see coming at all.

But this part of the story was curious to me, so much so that I read it twice:

Although he was a millionaire, Scruggs saw himself as a champion of the little people, Jones said. "Dickie's emotions were all on the ends of the hairs of skin. He was the most sensitive guy about his own self-image."

As Scruggs once said in describing himself, he wanted to be one of the ones who killed the rhinoceros, "not just be one of the scavengers who ate the meat," Jones said.

In 1998, he bagged the biggest rhino of all, the tobacco industry, earning the largest civil settlement in U.S. history. Scruggs and that case were portrayed in the 1999 Russell Crowe-Al Pacino movie The Insider.

When two of Scruggs' former law partners sued Scruggs, Jones became one of his defense attorneys.

"I became convinced he was a really good guy who was being shaken down by others," Jones said. "He was a great client and did everything we asked him to do."

In 2005, Scruggs went to trial in one of those lawsuits.

U.S. Magistrate Judge Jerry Davis awarded Alwyn Luckey $17 million for legal fees due from the asbestos litigation.

Jones viewed the ruling as a victory since he had successfully protected Scruggs' interests with regard to any legal fees earned from the tobacco litigation. Luckey had argued in a second lawsuit that he was entitled to a portion of the tobacco fees because asbestos earnings helped fund the tobacco litigation.

Scruggs saw the defeat as a sour loss, Jones said. "He thought he couldn't trust the system."

From that point forward, Scruggs changed the way he operated, Jones said. "He always had to rely on some inside connection when he didn't need to."

Now, come on here, with all due respect, Scruggs "thought he couldn't trust the system"?  He got nailed in the Luckey lawsuit for holding back on a partner.  What does it mean, under those circumstances, to say "He thought he couldn't trust the system"? He lost a fair fight, so he decided -- as Joey Langston and Tim Balducci have testified -- to make his own unfair system?

And if so, how much different in concept is that from the way he conducted the tobacco litigation -- having P.L. Blake run around doing Lord knows what to earn his millions, making use of insiders stealing documents and mixing law and politics like a well-shaken martini?  It's time to take that standard profile of Scruggs and round-file it.  Let's admit that prior conceptions and explanations of the man were woefully wrong, let's admit that many or most of the people closest to him were the most wrong about him, and let's start again from scratch. Throw away all those newspaper and media stories sucking up to Scruggs, and let's start anew.  I don't say the man is all bad, far from it, I find many things about him to admire.  But now maybe both the good and the bad will get a hearing -- one where someone hasn't put the fix in. 

The second story is also from the Clarion-Ledger.  I'm going to criticize this lede and second graf:

Dickie Scruggs, the Oxford attorney who grew up poor in Pascagoula, had it all - the opulent private jet, the shiny Bentley, the 120-ft. yacht, the vacation home in Key West, reputed legal fees earned of nearly $1 billion and a reputation as one of the most respected and most feared trials lawyers in the world.

But on Friday, Scruggs was reduced - apparently by his own inexplicable greed - to just another felon copping a plea bargain in front of a federal judge. Scruggs pleaded guilty before U.S. District Judge Neal Biggers of conspiring to bribe a state Circuit Court judge with $40,000 in cash in exchange for a favorable ruling in a case over disputed legal fees.

First, what private jet is not opulent by any normal definition of that word? I mean, maybe the private jet of a Saudi prince is markedly more well-appointed than some corporate private jet, but in any meaningful sense, isn't ownership of a private jet itself one of the indicia of an opulent lifestyle?

Second, the juxtaposition of the list of the Magnificence of Himself in the first paragraph with the guilty plea by Fallen Scruggs in the second appears designed to support a "why would he risk it all on something like this" storyline.  But what if all that stuff in the first paragraph came his way because of activities that bear many similarities to the activities in the second paragraph?  The story doesn't consider this.

Third, if Scruggs is indeed "one of the most respected and most feared trial lawyers in the world," why didn't the Clarion-Ledger devout more resources to covering the case against him? Sounds like a criminal charge against a big shot like that in a newspaper's own back yard would be worth a heck of a lot more coverage than we saw.

On a somewhat different topic, I want to provide a description of the courtroom before the guilty plea from a reader who e-mailed me about it (don't freak out, all you e-mailers, I asked permission to use this):  

 It was quite a show. I found it remarkable that he was politicking and socializing with everyone just prior to the hearing.  Dick was on the prosecution side of the seating area shaking hands and speaking to folks like a politician.  Keker was in the seating on the defense side of the courtroom with Diane and called out to him "Dick" and motioned him back to his seat with his head rather firmly, in my opinion. He did not try to shake my hand thank goodness.  I doubt he knows who I am but chose to not make eye contact with him because I felt like that would bring him over. I had no clue what was about to happen and a chill ran down my spine when I heard the judge say that he had two plea agreements.

I find these first-person narratives of events so much more compelling than the typical inverted pyramid, dispassionate news story, don't you?  I'm pledged not to say more about this person's identity, so we'll just leave it at that. 

Lastly, thanks to the citizens of the Scruggs Nation for keeping me company these past few months.  Thanks for the e-mails of support, and a special thanks to all those who provided information and tips.  I've gotten to know a lot of people really well through this blog, I count many as friends.  Life never ceases to amaze me, how exactly I got in the middle of this, I don't think I could tell you.  To be honest, I didn't really want to do it, this Scruggs blogging, but I'm the kind who believes in omens, and in a way I really haven't been able to explain to myself, it seemed like this was the role that had fallen to me and it was what I had to do.  With all the people I've met, I'm glad I did it, and something tells me I'm not quite done yet.

We began this post with a time-honored icon, the shamrock, and we'll close it with a new one, the sweet potato, forever to be remembered as the symbol of the Scruggs Nation.  I'll tell you what, I don't ask for much, but if any of you are good at sewing and could slap together a Scruggs Nation sweet potato flag, I'd fly it proudly in my office for evermore. I'm thinking the most appropriate background color would be green, the green of a $40,000 bribe.   

Posted By David Rossmiller In First Party Insurance
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One of my friends who follows this stuff more closely than I have been able to do since the Scruggs Supernova happened has been sending me copies of court decisions on property loss causation.  This is a subject I take a great deal of interest in, and I'm going to comment on the causation analysis of two recent decisions, one from New Hampshire and one from Vermont.

The more recent case is Bates v. Phenix Mutual Fire Ins. Co., a February 13 decision by the New Hampshire Supreme Court.  A large rainstorm caused flooding behind a roadway, and a culvert under the road was inadequate to carry relieve the pressure of the built-up water, which burst through the roadway and flooded the policyholder's real and personal property. 

Although the insured's homeowners policy contained an anti-concurrent cause provision, the parties did not argue that it was relevant and the court did not analyze it as relevant -- which is correct all around.  The loss here was not caused by flying rocks or debris from the roadway, it was caused by water.  If the damage had consisted of a rock thrown a great distance because of a spectacular eradication of the road, then it would have been correct to examine the anti-concurrent, anti-sequential cause provision, because this type of loss would be an example of sequential causation (forces acting like dominoes).

But even though the plaintiff argued for payment under a clause covering "explosion" -- the road kind of exploded in a manner of speaking when it was swept away -- there does not appear to have been a credible argument that the damage was caused by anything but water, which was uncovered because of the flood exclusion.   In this case, then, we are dealing only with single causation, and anti-concurrent, anti-sequential language is applicable only where multiple forces cause the same exact damage.  Bates presents a fairly simple causation analysis, but fairly simple analyses are not always handled well.  I should note that it is not clear from the opinion, but the "explosion" definition appeared to apply only to personal property coverage, not coverage for the structure itself.  The court, however, did not make such a distinction.

The other case I want to talk about is from late last year from the Vermont Supreme Court -- Sperling v. Allstate Indemnity Co.  Allstate policies, of course, do not have anti-concurrent causation language in them.  Instead, they have language mandating analysis under the "efficient proximate cause" standard -- if loss is due to multiple causes, one must determine which is the primary or dominant cause, and if that one is covered, the loss will be covered.  Under anti-concurrent cause language, however, even if a covered cause was dominant, as long as an uncovered cause was a "but for" reason for the damage, it is not covered.  A harsher rule, anti-concurrent cause, but one that was thought by insurers to be easier for courts to apply and less subject to judicial misunderstanding, flights of fancy or creativity. 

In Sperling, the insureds fell victim to an incredibly unlucky event -- a suitcase fell off a shelf in the basement and broke a valve on a heating oil tank, releasing 160 gallons of home heating oil into the basement.  The insureds' homeowners policy had an exclusion for contamination and pollution, including language that said this type of damage was excluded where it was the predominant cause of loss.  This is usually considered the language of an efficient proximate cause analysis, but the court here gave a different interpretation of this language than I would have expected.

If I was arguing the insureds' case, the choice to me was obvious -- say that the predominant or moving cause of loss, the one that set the other in motion, was not heating oil contamination but a falling suitcase, and the resulting loss is therefore covered.  That is in fact one of the arguments used by the insureds.

The court rejected the argument, however.  It said that the language that I would characterize as efficient proximate cause language in fact was not.  The court said the language states only that if contamination is the predominant cause of the loss, it is excluded.  But, the court said, the clause does not state the opposite -- that if the predominant cause is a covered cause but pollution is a secondary cause, then the loss is covered.  This seems like a strange reading of the language, one that turns it into a de facto anti-concurrent cause provision, when it obviously is not.  I would have expected the court to say that the language, by stating that a loss is uncovered when an uncovered cause is predominant, implies the reverse -- that the loss is covered when the uncovered cause is secondary.

Anyone have any other thoughts on these decisions?

Posted By David Rossmiller In First Party Insurance
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In my post from Monday, I neglected to mention that in addition to Landry v. Citizens Property, the Valued Policy Law case, the Louisiana Supreme Court was also to hear oral arguments Tuesday for Sher v. Lafayette, a case where the lower appellate court found a flood exclusion in a homeowners policy ambiguous.  I don't know why I did, I've known Sher was coming up for oral argument for some time, but we all do dumb things.  Except Dickie Scruggs, that is, as his famous, rich friends like to point out. 

Forgetting to mention the case in the last post also means I missed a chance to rip into the decision in the Court of Appeals again, so I'll have to make up for it here.  Here's my analysis of the Sher opinion when it came out last year.  I note with some degree of nostalgia the date of the post, November 20, which is what I call P.I.O.S. (pre-indictment of Scruggs).  Life, and blogging, seemed somewhat simpler back then.  And should you need a reprise, here's my post from Monday on Landry with a link to my analysis from last year on the Court of Appeals decision.

My chief beef with Sher was the title of the case, it should have been Sonny & Sher v. Lafayette -- just joking.   My real chief beef with Sher is that it contains nothing that one could recognize as an explanation of the reasons the court declared the flood policy ambiguous.   The court, in a remarkably analysis-free analysis, said the policy failed to distinguish between natural and man-caused flooding.  In first-party insurance, the majority of courts -- some say an overwhelming majority of courts -- find earth movement exclusions ambiguous to the degree they don't clearly exclude both natural and man-caused damage.  With flood exclusions, this is not so -- the vast majority of courts extend the standard flood exclusion to all kinds of flooding.  This is something I will be dealing with in the chapter I'm writing on hurricane coverage for the Appleman treatise, and it is something I will discuss here on the blog when I have more time.  Now back to Sher: really, not an impressive job by the court, to say the least -- one expects a better analysis or at least some citation to authority in cases like this, particularly when diverging from the mainstream.   

Here is an Associated Press story by Mike Kunzelman story about oral arguments in both cases.  An excerpt about the Sher case:

Lafayette and other insurers say their homeowner policies don't cover damage from any type of flooding, including water from a levee breach.

"There is not a single case of record where a court has held that a flood exclusion didn't apply because of a man-made act," Ralph Hubbard, lawyer for Lafayette, told the court.

Justice John Weimer asked Hubbard if it is true some insurers modified some policy language after Katrina to specifically exclude man-made flooding from coverage. Yes, Hubbard responded, but he insisted changing policy language is not an admission that earlier language was ambiguous.

James Garner, a lawyer for Sher, said insurers are to blame for writing policy language that confused policyholders and resulted in conflicting court opinions.

"Judges disagree on this," said Garner, who also accused Lafayette of acting in bad faith in adjusting his client's claim.

I read the story looking for a clue as to how the court might rule, and saw this quote about the arguments in the Landry case: 

[T]he federal appeals court and several federal judges already have rejected similar arguments about the implications of the valued policy law. However, one of the high court judges hearing the case Tuesday indicated she would not be bound by the federal court cases.

"I'm not really interested in what the federal courts have to say about this, frankly," said Justice Catherine Kimball.

At first I thought, hmmmm, very harsh, must not like those cases.  Then I considered another alternative reading -- because the interpretation of contracts under state law is entirely up to the Louisiana Supreme Court and not to federal courts, what is she supposed to say, "Oh, there are some federal cases?  Well, I guess our opinion can be boiled down to one word: Ditto."  I would be quite surprised if the court found for the policyholders in either case -- I expect both to be reversed. 

This is not really something that the court should think about, but just as an aside -- if the court found for the policyholders in both cases, it would have a rather severe impact on Louisiana's insurance market, which is just now beginning to recover after Hurricanes Katrina and Rita in 2005.

Lastly, one more thing.  Here is a Rebecca Mowbray story in the New Orleans Times-Picayune on oral arguments. Now, the last graf of the story really caught my eye:

The Landry case was the first of two insurance cases from the 2005 storm season to hit the elegant Royal Street courthouse Tuesday in a blockbuster docket that drew insurance lawyers from around the country and forced people to line up on the steps of the marble building by 7:30 a.m.

Do you see that?  Do you see that?  It's what I've been saying for years now, insurance is the new rock 'n' roll!  You see, I chose to interpret the word "people" a la Scruggs, which is a phrase I have coined to describe the act of ignoring all other possible interpretations of language except the one, no matter how strained, that produces the result you want.  So here, "people" means people as in Power to the People, We the People, Up with People, thousands of people, fool all of the people all of the time, etc. As evidence for my position, I call attention to the word "lawyers" in the sentence, who are said to have come from around the country. 

After the conjunctive "and," we learn that the subject of the sentence -- the blockbuster docket -- not only drew the lawyers, but "forced people to line up on the steps" early in the morning.  Clearly, lawyers are not "people" in any meaningful sense, so the two words must refer to separate classifications of humans.  Also, had it been lawyers who were forced to line up on the steps, the sentence would have read "forced them to line up on the steps,"  or maybe "forced the lawyers to stand in line for once like normal people."  Blockbuster docket, people lined up: this stuff is so fascinating, the public doesn't care about an entertainment writers' strike, not as long as they've got spellbinding insurance issues.  Case closed.

Posted By David Rossmiller In First Party Insurance
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The docket for the Louisiana Supreme Court says that oral arguments will be heard tomorrow in Landry v. Citizens Property Ins. Co., a case featuring a remarkable opinion from the Louisiana Third Circuit Court of Appeal -- remarkable in the sense it makes you want to remark that it makes no sense whatsoever.  Of the many insurance coverage cases I have read in the last year, this one is certainly in the top two as far as sheer ability to cause frustration and pain to the reader. As I said in this prior post on the case when it came out, the dissent is somewhat more to the point but equally out to lunch.  There is no need to repeat the rest of what I said before, my opinion hasn't changed.  You can read about it in the prior post.  

Landry is about Louisiana's Valued Policy Law, and the case diverges from a U.S. Fifth Circuit Court of Appeals case, Chauvin v. State Farm, so it will be interesting to see which case, Landry or Chauvin, was a better predictor of where the state supreme court will go.  The Florida Supreme Court also gave an interpretation of Florida's Valued Policy Law that varies substantially from Landry.  You can read about that case, Florida Farm Bureau v. Cox, in this post from last year. Valued Policy laws are things, like anti-concurrent cause provisions, that seem scandalously incomprehensible on first blush, but when you look at the reasons behind them, they make a lot more sense.  I wouldn't claim that either are necessarily easy to master, but it can be done, and one can certainly get closer than the Landry court did.  

Here's a post that takes a closer look at Chauvin.  My guess is that the Louisiana Supreme Court will interpret the Valued Policy Law similarly to the Chauvin and Cox cases. 

Posted By David Rossmiller In First Party Insurance
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An AP story on today's hearing in Oxford, Mississippi.  Tick, tick, tick, the clock will strike March 17 o'clock before you know it (that's the final date for plea bargains in this case).  Are we going to see some kind of plea agreements coming soon?

Posted By David Rossmiller In First Party Insurance
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UPDATE:  This is somewhat more complicated than I have time to explain here at present, but who appealed from the Fifth Circuit decision were Xavier University and 68 plaintiffs who wanted to have a class action that was called Chehardy.  Some other plaintiffs who had been consolidated in In Re Katrina Canal Breaches case did not appeal -- the Vanderbrook proposed class action plaintiffs and maybe there are some more who I've forgotten about.  The plaintiffs had asked the Fifth Circuit to allow the Louisiana state courts to rule on the fl;ood exclusion issues in the case, the Fifth Circuit refused and that stood up with the Supreme Court's denial of cert.

Incidentally, one of the cases in the Louisiana court system is Sher v. Lafayette, where a division of the Louisiana Court of Appeals found a flood exclusion ambiguous.  Here's a post I wrote on that.  That decision has been appealed to the Louisiana Supreme Court.

The original post is below. 

---------------------------------------------   

The case that no one really knows what to call it, In Re Katrina Canal Breaches, was denied cert. by the U.S. Supreme Court today.  The case, dealing with flooding in New Orleans, had been appealed from the Fifth Circuit Court of Appeals, which reversed the district court judge and upheld flood exclusions of numerous insurers as valid and unambiguous. It's always a long shot to get the Supreme Court to take up an issue involving state law interpretation of insurance contracts.

Here's a breaking news story on developments. I got a kick out of the story's dumb lede:

The Supreme Court has refused to offer help to Hurricane Katrina victims who want their insurance companies to pay for flood damage to their homes and businesses.

As if the choice in a case is simply going where your sympathies lie, and when the court decided not to take the appeal, the halls rang with evil laughter and mocking statements such as this: "We will extend no help to Katrina victims because we love to see them suffer and we love to support our evil twins, the insurance companies who steal from them." 

If you want to see more background on the case, I've written a lot on the case all the way from the district court to the Fifth Circuit.  Just type in "In Re Katrina Canal Breaches."  Also try "Vanderbrook," there might be a post or two with only that name.

Posted By David Rossmiller In First Party Insurance
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It's a measure of heightened awareness of the whole scene in Mississippi: here is yet another story by John O'Brien of Legal Newsline reporting on State Farm's efforts to disqualify what's left of the former Scruggs Katrina Group from Katrina litigation, which would have the effect of forcing the group to change its name once again, I suppose.  I sometimes refer to the new group as the Scruggs(less) Katrina Group, after the Scruggs Law Firm withdrew following the handing down of the bribery indictments.  If State Farm's motion is successful, I might have to start calling them the Katrina(less) Litigation Group. 

I mean, when you are getting a news story about a reply brief, you know there's a lot of attention being paid to what's going on.  Here's the opening of the reply brief, if you bear with just a bit of legalese, it gives a pretty good summary of the dispute:

Although Plaintiffs argue vociferously that State Farm's Second Motion for Disqualification is an "attempt to revisit the allegations . . . in its First Motion," it is Plaintiffs -- not State Farm -- who wish to relitigate State Farm's First Motion for Disqualification. State Farm is well aware that this Court found that State Farm had waived its right to seek disqualification based on ethical violations arising out of Cori and Kerry Rigsbys' theft of State Farm confidential documents and their subsequent "consulting" relationship with Richard F. Scruggs and the Katrina Litigation Group. Contrary to Plaintiff's assertions, this motion is not predicated on any of that conduct.  This motion seeks disqualification based on the fact that SKG attorneys -- including those who are still in this case -- offered a different State Farm "insider" and material fact witness in this case, engineer Brian Ford, thousands of dollars a month to "consult" for them.

Here's a copy of the brief, with the accompanying exhibits.

Now, if you read this brief, you may remember what all the fuss is about Brian Ford.  Before we get ringside and watch the punches fly, let's reiterate: Ford was the engineer who did the first report on the McIntosh property -- oddly, he noted no water damage, even though Kerri Rigsby of later "whistleblower" fame subsequently approved a flood payment to the McIntoshes.  A second report, after State Farm requested a new one from the engineering company, found both wind and water damage.  And this makes both Kerri Rigsby and Brian Ford what?  Right, material witnesses to the facts.  That is the reference to Rigsby in the brief's opening paragraph -- a prior motion to disqualify featured uncontested and widely known evidence that Kerri Rigsby and her sister, Cori Rigsby, were paid $150,000 a year as "litigation consultants" by the Scruggs Katrina Group, an arrangement that came to an end only after Scruggs withdrew from the group (I do not know if Scruggs himself is still paying the two, but the Katrina Litigation Group no longer is).  Judge Senter, and later the Fifth Circuit, said State Farm had waited too long to bring that first motion to disqualify, and therefore waived its arguments.  So the new motion is founded, to the extent possible, on newly discovered facts.

Even those who are not lawyers can see the problems with paying witnesses big wads of cash -- either looks like or is a form of bribery or witness tampering.  And when you are peddling these same folks to federal and state grand juries, well, you may have had a good ride, but the credibility of that grand jury process is entirely and irrevocably shot down in flames, like Snoopy vs. the Red Baron (I know -- in this song neither the Red Baron nor Snoopy is shot down, but if you follow this epic struggle you know what I mean). 

So when Brian Ford testified in his January 11, 2008 deposition that he met with Dickie Scruggs on September 7, 2006 and Scruggs offered him $10,000 a month to become a litigation consultant for the SKG, well, at the very least that reeks.  And you really should look through the attached exhibits, including excerpts of the deposition of Maria Brown, whom you may remember as having filed suit against Nutt & McAlister, one of the remaining KLG firms, for wrongful termination and employment discrimination.  In the excerpts, Brown alleges that Nutt & McAlister coerced an employee of an engineering firm to surrender disks with computer hard drive info, which they then used to compile a spreadsheet of policyholders.  Kerri and Cori Rigsby then went over this spreadsheet presumably to give input as to the circumstances of each, and then the law firm sent out solicitation letters and eventually signed many up for lawsuits. 

And let's remember another thing -- the stuff in this post I wrote in October about the Forensic hard drive.  In light of all this new stuff, it gives you a creepy feeling that the U.S. Attorney for the Southern District of Mississippi was playing a little too much footsie with Dickie Scruggs.  Again, perhaps a question of who is using whom, but to the degree Scruggs and the SKG used Scruggs'  proximity to the prosecutor's office to enable tactics like those discussed in the reply brief, it makes you wonder who in that office it was that took leave of their senses to allow this kind of impression to be created.   

Posted By David Rossmiller In First Party Insurance
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I'm not so sure I'd get too excited by the developments reported in this Rebecca Mowbray story in the Times-Picayune, at least not yet.  The story says insurers are once again beginning to compete for many policies that, as of late, have been held by Citizens Property.  Citizens, of course, is the state-run insurer of last resort that has been marked by a level of incompetence that would be hilarious if it was not so injurious to the state's residents. 

More data needs to be seen to see if this is a trend or merely anecdotal evidence, but at first blush, a working hypothesis could be that Louisiana's approach of eschewing increased regulation -- in direct contrast to Florida -- has allowed market forces to begin to act to bring increased consumer choice.  It doesn't mean policies will be cheap, however -- we are talking about some high-risk properties here.  

Posted By David Rossmiller In First Party Insurance
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Here's a copy of something I wrote on Katrina litigation in the Fifth Circuit that ran as the featured article in the February 11 Bloomberg Law Reports -- Insurance Law.  I won't bore you with the terms of the copyright for this article, but it doesn't vest in me for a period of time, so I appreciate Bloomberg giving me permission to link to a copy of the article immediately.  A very pleasant bunch of people to work with.  Also, don't forget I have a much, much longer article on Katrina Fifth Circuit jurisprudence coming out in April in New Appleman on Insurance: Critical Issues. 

Posted By David Rossmiller In First Party Insurance
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This GAO report on insurers' adjusting of Katrina claims, which Congress ordered way back when in response to allegations insurers committed massive fraud, is one of the things I wanted to get to in my post from last Friday but didn't have time to. 

Here's one of the penultimate conclusions of the study: 

Other claims concerns can arise on such properties [those where wind and water are both claimed to have acted as causal agents of loss] when the same insurer serves as both NFIP's write-your-own (WYO) insurer and the property-casualty (wind) insurer.  In such cases, the same company is responsible for determining damages and losses to itself and to NFIP, creating an inherent conflict of interest.

A couple things:

One, this "inherent conflict of interest" certainly exists, just as it exists whenever you file a first-party property claim.  This is not very startling, because it has been said -- wait while my computer comes up with the final tally -- 3,456 kajillion times before in insurance literature.  For many of you the following explanation will be something you know already, but many don't know it, so I am going to set it down in writing here.  As you may or may not know, when someone makes a liability claim against you, say you ran into them with your car, your insurer owes you a fiduciary duty, assuming a duty to defend arises out of the allegations and the language of the insurance policy. A fiduciary duty is the highest duty imposed by law, and requires one to treat another's interests like one's own, resolving all conflicts of interest in favor or the insured.  These type of liability claims are called third-party claims.  In contrast, claims you file with your own insurer for damage to your house or other property are called first-party claims. An adversary relationship is assumed to exist between the insurer and insured from the time the claim is filed, and generally speaking, no fiduciary duty arises on the part of the insurer.  This doesn't mean it's OK for insurers to cheat you, merely that it is understood that an inherent conflict exists to an even greater degree than in third-party claims, where it could also be said that a conflict exists, because paying for the legal defense of an insured is expensive.  All this is inherent in the nature of insurance, and is why we have various rules ranging from bad faith laws to  interpreting ambiguities against the insurer in insurance law.

Two, there are inherent conflicts of interest in many things in life, and especially in the law, and some of these are viewed as unacceptable conflicts and others as necessary evils that will exist as long as human beings are the way the are.  An unacceptable conflict is where I want to represent both you and the person who is suing you -- "Hey, don't worry, have you ever seen a one-man show where the actor plays all the parts? Some of those shows are pretty good!  Just remember, when I'm wearing the blue jacket I'm on your side, when I wear the gray, I'm for the other guy, so don't tell me anything secret while I'm wearing the gray." Other conflicts we can't do anything about except to impose legal duties on those with the conflict.  An example of such an inherent conflict of interest could be, say, the U.S. Attorney in southern Mississippi looking into alleged insurer claims mishandling -- after two years of grand jury investigations, is there an inherent bias toward justifying the massive expenditure of taxpayer resources by finding wrongdoing?

Third, do you notice that this GAO report, like the prior reports in June and September 2007, buries the real news? Although the wind data FEMA needs to do a real study of this issue is available from state regulators, FEMA doesn't have it, and FEMA and the GAO lack the ability to actually review whether wind payments were improperly paid out under federally backed flood insurance.  One does not have to believe that insurers engaged in massive intentional fraud to believe this would be a productive study -- undoubtedly, in an endeavor as large as adjusting 1.2 million Katrina claims, some mistakes were made.  What kind and how many? We don't know. Any study by FEMA of Katrina payments under the flood insurance program is compromised by the fact FEMA is not looking at all the needed data. This latest report gives some indication FEMA is continuing its review, but it hardly seems worth the bother under the current circumstances.  

Fourth, I saw this editorial in the Times-Picayune on the GAO report.  That lawsuit they mention in the editorial? It was dismissed.  Not on the merits, true.  It was dismissed because the Ex rel. Rigsby "whistleblower" lawsuit was filed first by Dickie Scruggs and the Rigsby sisters and covers more or less the same general theory, although the specific allegations differ. But let's just remember, the allegations of the lawsuit have not been proven or even looked at by the public in any detail.  Still, the editorial makes some good points, as does the GAO report.  I doubt any of them will ever be implemented -- the National Flood Insurance Program is a national disgrace rife with folly and unsound practices, and every "overhaul" of the program amounts only to taking aspirin after falling four stories to the sidewalk. But good points nonetheless.

Posted By David Rossmiller In First Party Insurance
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It is a major story in Katrina litigation when an insurer goes to trial and doesn't get shredded by the jury.  By those standards -- by any standards, actually -- the $64,000 verdict against USAA yesterday in the Aiken case in federal court in Mississippi was a good result for the insurer and a less than satisfactory ending for the policyholders.

The case was somewhat unusual in that Rimkus Consulting Group, Inc., an engineering firm hired to evaluate Katrina wind vs. water damage to the home of David and Marilyn Aiken, was sued along with the insurer.   The Aikens alleged that Rimkus conspired with USAA to commit fraud and change an engineering report that was too favorable to the Aikens.

Allegations that insurers have falsified engineering reports are a standard part of many Katrina cases, but the allegations here didn't have quite the same steam behind them -- USAA paid the homeowners $178,000 in wind damages, unlike in some cases where insurers have paid little to nothing in wind damage for homes leveled by Katrina.  Still, the allegations against Rimkus and USAA were basically the same as those in another case last year involving Rimkus, Weiss v. Allstate, in federal court in Louisiana, where Allstate was pummeled by the jury, which awarded damages of more than $560,000 plus a bad faith verdict of $2.25 million. 

Here's a post I wrote about the Weiss case in April 2007, and here is a copy of the pretrial order in Weiss, where on pages 7-9 you can see the Rimkus allegations -- basically that the initial report was altered to deny wind damage, although Allstate did pay some $29,000 in wind damage.  In both the Weiss and Aiken cases, the insurer also paid, and the homeowners accepted, flood policy limits. 

In Weiss, the homeowners policy provided $343,000 in wind coverage plus a 20 percent rebuilding rider and $240,000 in personal property coverage.  In Aiken, the coverage was similar: $333,000 in dwelling coverage, plus a 25 percent rider for wind damage, and just under $250,000 for contents coverage.   In both cases, the plaintiffs alleged wind destroyed the home before storm surge arrived.

So why the big difference in the result between Weiss and Aiken? The difference in the amount paid by the insurer to the homeowner is one obvious difference, and the fact that the presence of Rimkus as a defendant in the Aiken case may have also made a difference.  In the Weiss case, allegations against Rimkus were not rebutted in the same way as they were in Aiken -- in the earlier case, it looked bad to the jury that the Rimkus engineer of record did not visit the site.  That was also true in Aiken, but with Rimkus as a defendant and its attorneys in the courtroom, there was more of an opportunity to explore what this meant -- according to those who closely followed the case, even the Aikens' experts admitted that they had issued reports on property damage without setting foot on the damaged property.  There may, of course, be other factual differences between the two cases I am not aware of, such as the credibility of the wind damage evidence presented by the plaintiffs.

The trial judge in Aiken, Judge L.T. Senter, Jr., last week granted Rimkus' motion for judgment as a matter of law and dismissed the engineering firm from the case. That had to make an impression on the jury. Here's a copy of his ruling on Rimkus, which is uncharacteristically lengthy. Whenever Senter goes past 20 pages, it's news, because often his writing is not just brief; by judicial standards it is downright laconic.  Not saying there's anything wrong with what he wrote here, mind you, I'm just sayin'.   UPDATE: As pointed out in the comments, I linked to the motion itself, not something written by Judge Senter.  It was late at night when I wrote, had another project due for the Bloomberg insurance publication that was distracting me, I should have known it wasn't his style.  My bad, apologies to Judge Senter, one of the best judicial writers around.   

Yesterday's verdict (here's a copy of the signed jury form) for $64,000 appears to consist of a reversal of some of the depreciation of contents taken by USAA and additional unpaid wind damage to a boat house. Considering that the Aikens were asking for $427,000 in damages plus punitives, the result was a good one for USAA.  Judge Senter did not send the case to the jury on punitive damages because, he said, "there was no substantial evidence that USAA was acting in bad faith."  

Here's a story on yesterday's verdict  by Mike Kunzelman of the Associated Press.  Here's a copy of the Aiken pretrial order.

Here is a story by Anita Lee of the Sun Herald about Judge Senter's dismissal of Rimkus from the case last week.  Here is an earlier story by Anita Lee on the testimony of Rimkus structural engineer James Jordan. 

Posted By David Rossmiller In First Party Insurance
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I really should have said more about this earlier, but time slips away.  As I've mentioned in passing before, I'm writing the sequel to my article last fall in Appleman Critical Issues on anti-concurrent cause language in Katrina litigation.  This one looks at the decisions of the Fifth Circuit in the appeals of those cases I talked about last time, as well as a few non-Fifth Circuit cases such as the Northrup v. Grumman case in federal court in California and some of the cases in Louisiana state court.  Not all of the cases are about causation analysis, of course, but most feature that element. 

The reason I should have said something earlier is I'm finishing the draft of the article this weekend and if you have anything to tell me about your point of view on these cases, there isn't much time.  I know, my timing for saying this could have been much better.  I've heard from some people with strong views, I'm sure there are more.  I do like to hear from as many people as possible when I work on these things -- keeps me honest, keeps the number of my mistakes down and makes for a better product.  The length and quality required of an article for Critical Issues is always a challenge, and that's why I like to do it, but it is easier with input from others. 

I should also mention I was asked to write a chapter on hurricane law for the Appleman treatise.  The draft is due at the end of March, and this is an even more massive undertaking, so I need to start on it right away after I finish this article.  The chapter in the treatise is more significant in the long run, because the Appleman treatise is considered the definitive authority for insurance law questions.  So I want to make sure I get it right.  If you have any hurricane case law, observations about case law, articles about hurricane cases, etc., please contact me at dpr@dunn-carney.com.

Lastly, I want to remark on how strange it is that I came to be in these circumstances.  Guy from NoDak, never been near a hurricane, practicing in Portland, Oregon and not involved in the slightest in any Hurricane Katrina case as a litigator or advisor, never even been to Mississippi or Louisiana, but writes daily about Katrina, not to mention offshoots like the Scruggs scandal.  Life's too mysterious, don't take it serious. 

Posted By David Rossmiller In First Party Insurance
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State Farm has moved to disqualify the remaining law firms of the former Scruggs Katrina Group from a key Katrina case for alleged "numerous egregious ethical violations."  PACER reveals that the motion was filed yesterday in Glenda Shows v. State Farm, which is a RICO case the SKG filed against the insurer earlier this year.  After reading the motion and supporting memorandum, I suspect that we may see a similar motion getting filed in at least some other SKG-State Farm cases in coming days.

You may remember that State Farm, earlier this year, moved to disqualify Scruggs, his law firm and the entire SKG from certain Katrina litigation based on alleged ethical violations on grounds similar to the ones alleged in the new motion -- paying material witnesses under the guise of making them "litigation consultants," working in concert with the state Attorney General to force civil settlements with the threat of criminal indictment, hiring insiders to illegally take documents, creating a phony storyline about the importance of these documents while allowing no one to see them to contest this storyline, abusing subpoena power, and the like.

The prior motion did not succeed, although courts did not rule on its merits.  Instead, Judge L.T. Senter Jr. said State Farm waited too long to bring the motion, that granting it would prejudice Scruggs' c