Insurance Coverage Blog

Kodrin v. State Farm is one of the Katrina cases, which I wrote about previously here and here.  It was different from many Katrina cases in that, at least as far as what was presented to the jury, there was nothing to sort out about wind vs. water and what damage had been caused by each.  So this is not one of the cases where anti-concurrent cause language became an issue -- although as I repeatedly talk about, under the facts of Katrina damage, anti-concurrent cause language should never have been an issue, because the facts of Katrina damage do not support analysis of the damage as caused by concurrent causes. 

I never get tired of saying this: I will be saying it in my speeches at the PLRB conference in Seattle later this month, and I probably will still be saying it when I am a little old man sitting in a rocker in front of the TV complaining about how the neighbor kids are so loud I can't hear my programs and by the way, why doesn't the milk wagon come anymore? No set of facts I have looked at -- and I have looked at a lot of them -- shows that any Katrina damage was caused by anything other than single forces working independently.  A lot of you may have heard this before, so you can skip the rant and jump down to a further discussion of Kodrin, but I think it bears repeating because this point is so easily lost in time.  Homeowners policies insure against damage to property, property has various elements.  Unless multiple concurrent forces cause the same damage to the same element of property, that is, unless they worked together to cause that result and unless it would not have occurred except for the combination, concurrent causes were not at work.

Kodrin is the ultimate in single causation questions: that's all the jury heard, a dichotomy between the Kodrins' claim that wind alone destroyed their house, and State Farm's claim that flood alone destroyed their house.  This may sound like a strange set-up to you, until you look at the facts of the case: the whole neighborhood was hit by Katrina flooding, which washed the rest of the houses off their foundations and kind of pooled them in one location.  These homes, although severely damaged, were not utterly torn down and demolished.  The Kodrins' home, among all of them, was the only one obliterated. 

This led them to,  as the Fifth Circuit put it in their opinion from a few days ago, "speculate" that a tornado destroyed the house.  Their claim was belied by their acceptance of the policy limits of their flood insurance.  I don't say this to be a smart alec, but rather because I wonder about this flood payment in Kodrin and a number of other instances: did they give the flood money back or did they keep it? I ask this because the choice before the jury was all wind or all flood, and the jury found all wind. So what happened to the federal flood money?   

The jury, as the first link above shows, felt the Kodrins had been treated unfairly and awarded them the maximum amount under the policy plus punitive damages under Louisiana law.   I'm not sure if I'm adding it up correctly, but it looks like the punitive damages were about $135,000, plus about another $140,000 in statutory attorney fees and costs, not a huge amount in the scheme of things, but the precedent was important to State Farm, I imagine. 

The challenge to the verdict on the damage itself, as opposed to the punitive damage portion, was a steep climb uphill -- you have to show that the jury instructions were wrong and prejudicial, and stuff of that ilk.  Most of the time such challenges don't succeed, and this one was no different.  Even though it wasn't necessary for the court to parse out causes -- because whether you believed it was wind or water that caused the damage, it was presented to the jury as an instance of single force causation -- I was pleased to see the Fifth Circuit panel recognized that merely because flood destroys a house does not mean that covered wind damage didn't previously occur.  This is the example they used, in footnote 15 on page 7:

It is important to distinguish between this dispute over which force totally destroyed a home and cases in which the parties disagree as to the causes of various damaged elements of a home. Distinct elements of damage would have to be considered separately. Flood damaged carpets, for example, would not bar recovery for a wind-damaged roof.

Now, this gives me some hope that this panel gets it when it comes to an understanding of the proper analysis to differentiate between single and multiple force damage: first determine what the loss is.  The example used, flooded carpets and wind-damaged roof, was a fairly common scenario in Katrina damage, but it really doesn't present any analytical problems, only problems of proof.  The real test of understanding is the realization that the carpet itself, or the roof itself, could be damaged by two single forces that caused separate damage, one covered and one uncovered, and that this does not make them concurrent forces. 

A house is not a unitary phenomenon of property, it has constituent elements that themselves are property.  Constituent elements such as carpet, likewise, are not monolithic, but have various degrees of worth as property -- merely because wind tears some pages out of a book does not make the book worthless, although its value might be lessened considerably.  There is still some value there when the book is destroyed by flood -- the two forces worked separately to cause separate damage, and the damage from the first force still occurred and caused damage even though the second force would have taken all the value of the book away.  The key is would have: in the hypothetical I pose, that is not actually what happened, and so would have doesn't matter.  However, as I said, it wasn't necessary for the Fifth Circuit to consider that issue this time, and so they didn't, and this is just as well, because explanations from the Fifth Circuit of Katrina causation analysis usually haven't been that great.

Although the court left standing the jury verdict on property damage, it vacated the award of punitive damages.  The court said, in light of the evidence, there could be an honest dispute about what caused the damage to the Kodrin home.  Again here, I don't know what happened with the flood payment, whether that was returned or not, or the precise circumstances under which it was applied for, paid and accepted, but the very fact of a flood payment creates an idea in my mind that there could be an honest belief that flood caused the damage. 

Here's what  the court said about bad faith, when it exists and when it doesn't: 

State Farm declared that it determined flooding was the more likely cause of the damage to the home because (1) the Kodrins’ neighborhood was inundated when a levee was overtopped during Hurricane Katrina, (2) the Kodrins’ home was just one house away from that levee, and (3) many other houses in the area were lifted off their foundations and destroyed by the floodwaters. The Kodrins themselves acknowledged that their claimed wind damage to their home was unusual in their neighborhood, advancing that a tornado must have caused the damage as their speculation why their home was the only one in the area destroyed by wind, not flooding. On these facts, we perceive no probative evidence that State Farm acted in bad faith. State Farm’s refusal to pay was with reason, even if the jury ultimately rejected that reason. The Kodrins have failed to prove otherwise; they essentially ask this court to find bad faith any time an insurer denies coverage and a jury disagrees. This would unduly pressure insurers to pay out claims that they have reason to believe lie outside the scope of coverage, solely to avoid penalties later. Such a rule would pervert the presumption that insurers act in good faith unless the insured proves bad faith, and this is foreclosed by Louisiana law.

Posted By David Rossmiller In First Party Insurance , Industry Developments
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Despite the fact that anti-concurrent cause language has been around for quite a few years, if you go looking for the Anti-Concurrent Philosophy Library, you won't find it -- you'd be lucky to find enough to make up a slim book, much less a library or even a shelf in a library.  In other words, as with many insurance coverage issues, there is a great deal of room for scholarly examination.  You might have noticed the same thing I have -- when you research just about any tough question, it's not hard to find stuff that appears to be about the subject, but when you drill down into it, most of what you find is surface area with no core underneath.  The emphasis in the mass of legal literature on discovering what courts do -- the search for rules -- is often a chimera because, and I say this without rancor, courts often don't know why they do what they do.  They have to do something so they do it.

Anti-concurrent cause theory is just one example of how a lack of philosophical inquiry and lack of curiosity as to "why" can harm the debate.  If you recall, during Hurricane Katrina litigation, anti-concurrent cause became politicized in large part because there was a very imperfect understanding of what anti-concurrent language was, what it does or why it exists.  That lack of understanding continues today: witness this editorial from Wednesday's USA Today.  While I generally agree with the main thrust of the editorial -- that proposals to "fix" the National Flood Insurance Program by increasing moral hazard and expanding the size of the program are utter folly -- I'm suspicious of the depth of understanding of the writers based on these sentences about seven-eights of the way through the article:

Backers of the wind-damage proposal do have one thing right.  Private insurers should not be able to lull people into believing they are covered for hurricanes and then try to dump all the claims on the government.  That's what some insurers did in 2005. 

Such bait-and-switch tactics could be handled with smarter regulation. Or, better yet, by the government getting out of the flood insurance business and leaving the issuance of policies to the private sector. 

Huh? Where are these guys getting their information, from the Third Book of Scruggs, Chapter 7, Verse 36?  If you're going to go with the faux populism, at least try to use a line that hasn't been totally discredited.  Bait and switch?  This issue has been tried in court, and found wanting -- the "bait and switch" argument is as mythological as that photo of Sarah Palin with a dead Bigfoot she  shot.  These folks are behind the times -- they probably walk into a drugstore and wonder why there are no bottles of laudanum on the shelf, they're probably sitting around in rocking chairs emitting some Grandpa Simpson-like rant about why the milk wagon is always late, they're probably trying to figure out how to play CD's on their Victrolas.  

Which brings me to the question in the headline on this post.  You may recall some time ago I wrote this post about an anti-concurrent cause case in the Colorado Court of Appeals that had cited my work and theory on anti-concurrent cause -- Colorado Intergovernmental Risk Sharing Agency v. Northfield.  (I see the link to the case has gone bad in the post, here's another better link.) A roof on a building collapsed.  At trial, a jury said the damage was 90 percent attributable to the weight of snow on the roof, and 10 percent to rot caused by humidity from a swimming pool.  Damage caused by snow is a covered cause, rot is uncovered.  Therefore, potentially, this is a classic case for consideration of an anti-concurrent cause clause -- if the two causes resulted in the very same damage and that damage would not have happened but for the combination of the two forces.  Remember, I said potentially.

The Court of Appeals looked at the damage as being one loss, caused by a concurrent of the two forces.  Since one was uncovered, the anti-concurrent cause language made the entire loss uncovered, the court said.  However, the losing party in the appeal, CISRA, filed a petition for rehearing before the full Court of Appeals (a unanimous three-judge panel decided the case earlier).  It's been a number of weeks since the petition, and the court has yet to accept or reject the petition, but the fact that it has not rejected it yet might be a favorable sign for CISRA that the justices are seriously considering taking another look at the case. 

The petition for rehearing, which you can see here, comes up with a good argument -- did the weight of the snow (a covered cause) actually combine with the rot (an uncovered cause) to result in the loss, or were they two separate forces causing separate damage?   This is the very question I asked regarding Katrina damage, and the answer I came up with, which is now pretty well accepted, was that uncovered flood and covered wind had not acted concurrently in Katrina damage and therefore anti-concurrent language was not implicated at all.  This petition for rehearing is pretty shrewd in driving for the same point -- it says that the jury verdict and the evidence at trial were only that two independent causes resulted in different property damage.  I call this shrewd, because if you are going to fight anti-concurrent cause, you don't win by weighing yourself down with bogus arguments about "bait-and-switch" and such amateur theatrics.  That's like going into combat carrying an 80-pound cast iron kettle in your arms instead of a battle-ax.   Taking on anti-concurrent language as ambiguous or the like is, in my view, often not the best course. Instead, working within the framework I have explained is the best way to have a sophisticated, informed debate, and this petition does so.

Essentially, the petition considers the concept of "loss,"  which in the analysis I advocate, is the first step.  If you can find two losses, you can find a way to argue that anti-concurrent cause does not apply.  If you can find only one loss, it's much harder, because then you have to try to peg the covered cause with 100 percent of the loss, and that is a harder row to hoe -- many anti-concurrent cause clauses explicitly say any combination of covered and uncovered causes (theoretically 99 percent versus 1 percent) results in non-coverage.  So again, it's vital to find different losses caused by separate forces acting independently and not concurrently. 

Does this petition for rehearing do a good job of that?  I think yes.  The facts of this case are more involved than I gathered upon just a reading of the Court of Appeals decision.  Whether this will convince the Court of Appeals to rehear the case or not, or to reverse it upon rehearing, I don't know.  It is a very sophisticated argument, though.  One component of the argument, it seems to me, is somewhat different than just looking for two separate causes of loss, it ventures into uncharted territory -- if a covered cause was sufficient in and of itself to cause the damage, can it truly be said the two causes contributed to the loss.  To use an extreme example, does it matter if a garage was weakened by rot if it is blown into toothpicks by a falling meteorite? Could the rot be said to be a concurrent cause of the loss in any meaningful sense?  I think if we ask for a show of hands or commission a Gallup poll, most people will say no.  So my question is this: if the weight of the snow on the roof would have caused its collapse regardless of the presence of rot, is the rot a concurrent cause?  Just asking.  Seems to me if the Court of Appeals takes up that issue, there is some new ground to be broken. 

Posted By David Rossmiller In First Party Insurance
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Here are some additional thoughts I promised about the end of the McIntosh case.

-- You may remember my post from last week about the plaintiffs' dismissal of extra-contractual claims, or in other words, bad faith and punitive claims against State Farm.   Well, the entire case is over now.  The insurer announced in a press release Monday that the contract claims were settled for $250,000, and you can look at Judge Senter's order of dismissal and see that each side bears its own attorney fees.  However, seeing as how the McIntoshes got the full federal flood payment for their home, $250,000 seems like somewhat more of a sum than you would suspect would be directly linked to covered wind damage to the house, especially as the plaintiffs admitted in their motion to dismiss the bad faith claims that "State Farm properly tendered payment to Plaintiffs for wind damage covered under their homeowners insurance policy prior to the time that the dwelling was inspected by an engineer."

The way these things often work, the settlement includes some consideration that the plaintiff's lawyer has to eat, and that gets built into the settlement if it isn't otherwise explicitly paid.  I don't know what arrangement the Merlin Law Group had with the McIntoshes -- almost certainly it was a contingency fee case, and contingency fees typically run from around 30 percent to as high as 40 percent. Incidentally, I see nothing on the Merlin Law Group blog about the case.  It's also not unheard of for an insurer to up the amount just a little, giving all possible benefits of the doubt and then some to the plaintiffs, to get something to go away if the insurer gets something it wants out of the deal.  And in this instance, what State Farm gets is the chance to say that the signature Katrina case against it brought by Dickie "I'll Fly Away" Scruggs was bunk of immense, Scruggsian proportions.   

-- Just think again for a moment what the plaintiffs' motion said: "no credible evidence that State Farm engaged in bad faith with respect to the adjustment of Plaintiffs' claims under their homeowners policy."  I mean, that's a heck of a thing to say, isn't it?  That is what is supposed to happen when a lawyer realizes claims are unsupportable -- dismiss them -- but in the real world it happens all the time that lawyers hang onto dubious and even obviously bogus claims until you pry them from their cold, dead hands.  When such claims are dismissed in a settlement, the settlement is almost always a confidential complete release with both sides saying no one makes any admissions about nothin'.  So to see that in writing was startling to me, and could only happen where a) a plaintiff's lawyer had no stake whatsoever in defending the conduct of his predecessor, b) his clients would benefit by distancing themselves from that conduct and c) the claims truly were unfounded and the lawyer would face ethical problems by saying otherwise (if "c" were not true, the lawyer would just be supplying ammunition against himself and other clients in other lawsuits, which itself would give rise to ethical problems). 

-- Let's talk about the State Farm press release for a bit.  The tone of it, to me, is remarkably restrained, considering they could have climbed on top of Scruggs' burial mound and crowed and crowed about this.  Go back and read it again -- it works better to undersell it, don't you think? 

-- I was interviewed last week by Chad Hemenway of A.M. Best about the insurance landscape after Katrina.  Chad, by the way, is one of my favorite interviewers -- great sense of humor and, of course, dude knows insurance. One of the things I told him (I think I did, I tended to ramble on somewhat in the interview) was what I've said before, the State Farm merger of Katrina legal and public relations strategy was the most sophisticated I have ever seen or heard about from a corporation.  And I say this as both a lawyer who knows a few things about insurance and as a former journalist (and current interested observer of press and public relations matters).  No matter what you think of State Farm. I think it's beyond dispute that, beginning about early 2007, they could not have handled the Katrina controversy any better, from their perspective, than they did.   

Let's just take a look in the rear-view mirror at some of what happened.

• Scruggs and the Scruggs Katrina Group disqualified from Katrina cases.
• The Rigsby Sisters barred from testifying and driven off into the wilderness in disgrace for the "sham consultancy" with the SKG.
• A successful federal court lawsuit against Jim Hood, the Mississippi Attorney General, that forced him to back off further criminal investigations of the insurer.  
• Hood's later dismissal of the civil suit he filed against State Farm for allegedly breaching an agreement with Hood to institute a claims procedure re-evaluating thousands of Mississippi Katrina claims (the agreement fell apart when Judge Senter refused to approve parts of the deal, and State Farm later reached a similar agreement with then-Mississippi Insurance Commissioner George Dale). 
• The Trailer Lawyers were run off Ex rel. Rigsby, the ever-shrinking False Claims Act case.
• Federal prosecutors have apparently ceased their investigation of alleged insurer fraud, which had been pursued for years with an Inspector Javert-like tenacity.  Someone remind me -- how many millions of taxpayer money was spent on that investigation?  

You can probably supply some additional bullet points, but you get the idea.  Some of this, you might say, was luck -- like the conspiracy to bribe Judge Lackey totally discrediting Scruggs and anyone connected with him, and forcing a new look at the "whistleblower" Rigsby sisters and the entirety of the Katrina Follies.  I wouldn't use the word "luck," however.  Chance always plays a part in human designs, but you always have a choice about what to make of the chance.  Also, was it really luck that Scruggs Scruggsed himself, or given the way he'd comported himself since the beginning of Katrina litigation, was it more likely than not that the Scruggs Katrina Group would fall into infighting, leading to The Great Unraveling? 

-- You know, I mentioned last week I heard some journalist is going to write the definitive Scruggs story, and I wish him all the best.  If asked, I'll provide whatever help I can, including possible book titles such as The Rise and Fall and Kersplat of Dickie Scruggs.  

-- How long till that Mississippi Insurance Department market conduct survey comes out on State Farm?  You can tell what it's going to say, if you've been paying close attention to the smoke signals.  It will cite instances where State Farm made mistakes in adjusting, but will find no evidence of malicious intent or a company-wide plan to underpay.  However, it will cast shadows on Scruggs, Hood and the Rigsby sisters, among others. 

-- One thing I hope someone writes about is the mindless tribalism that rode the Scruggs Express down the tracks.  You could paint some other names on the side of that train -- such as Hood, Lott, Taylor.  How stupid do those Congressional hearings look now?  I said as much at the time.  Emotions are hard to contain during times of actual or perceived crisis, I know.  But I also know what Thucydides said about the Peloponnesean War: war is a harsh teacher that lowers the character of men to the level of their fear.  And believe me, it's not just war -- you can see the same thing in the political rantings going on right now.  Things haven't changed much since the time of Thucydides, which is why he called his history a gift for the ages -- because the things that were are the things that will be, as long as human beings are the way they are.   And they ain't never gonna change.  If they were, they'd have done it by now.

-- Hard to believe, I know, but there is still a lot to tell about this Katrina saga.  We'll talk more about this soon.      

Posted By David Rossmiller In First Party Insurance
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Holy Cow! The McIntosh case, which I have referred to as the Verdun of insurance litigation, has been dismissed by the plaintiffs' own motion.  Given this litigation had long been the scene of intense trench warfare, consuming attorney fee dollars like five NFL offensive linemen chowing down on popcorn shrimp at an all-you-can-eat  buffet, it is surprising to see this turn of events.

If you remember, Thomas and Pamela McIntosh v. State Farm is the granddaddy of Katrina litigation, or perhaps more accurately, the Mother of All (Insurance) Battles.   This is the case where Kerri Rigsby of Rigsby sisters "whistleblower" fame approved the flood payment to the McIntoshes, and where, strangely enough, the original engineering report on the damage to the home said the damage was from wind, not flood.  Alexis "Lecky" King, a State Farm catastrophe team leader, found fault with the report and asked the engineers to re-evaluate.  The second report noted the presence of both wind and water damage.  Before we move on with the recap, remember that the first report was done by a man named Brian Ford, because his name will come up again. Ford did not work on the second report. 

Now, the McIntosh claims file was among those taken by the Rigsby sisters and fed to Dickie Scruggs for use in lawsuits he was bringing and planned to bring against State Farm.  This is the case that really started all the public uproar about changed engineering reports, insurer fraud, etc. etc.  Keep in mind that Kerri Rigsby and her sister, Cori, who like Kerri was another claims adjuster working with State Farm, both quit and went directly to work for Scruggs in what federal judge L.T. Senter called a "sham" consultant arrangement -- but not before they had performed a massive "data dump," where they and some friends spent the weekend copying State Farm claims files to give to Scruggs and his good friend, Mississippi AG Jim Hood.  (Don't forget Hood once called Scruggs his "confidential informant" and helped him play keep away with the documents the Rigsby sisters took. Jeez, talk about backing the wrong horse -- if you go to the track with Jim, use him as a reverse barometer.)

You may also remember that the Scruggs Katrina Group, besides "employing" the "whistleblower" Rigsby sisters, also discussed hiring Brian Ford as a consultant.  Ford wanted a similar deal to those of the Rigsby sisters, somewhere in the neighborhood of 10-Large per month.  Entrepreneurism at work, you say?  Maybe.  But of course, payments by a party to material witnesses they would be calling to support their case is frowned upon, and in the end, that led Judge Senter to disqualify the Rigsby sisters as witnesses and to disqualify the Scruggs Katrina Group itself as counsel for the McIntoshes. 

Their present counsel, the Merlin Law Group, went a different direction with this than Scruggs did.  Here's a copy of the motion, and here's part of what the motion says:   

After engaging in extensive discovery, the Plaintiffs have determined the following:

(a) the McIntosh dwelling was damaged as a result of Hurricane Katrina;

(b) the majority of the damage to the McIntosh dwelling was caused by flooding;

(c) the McIntosh dwelling sustained flood damage of at least $250,000 to the structure and $100,000 to its contents;

(d) State Farm promptly and properly paid Plaintiffs the full policy limits of their flood insurance policy; and

(e) State Farm promptly tendered payment to Plaintiffs for wind damage covered under their homeowners insurance policy prior to the time that the dwelling was inspected by an engineer.

This has got to the most surprising development since those German and English soldiers met on that World War I battlefield for a soccer game during a Christmas truce.

The motion, which was granted yesterday by Judge Senter, dismissed with prejudice all the punitive claims.  That left only the contract claims, and my understanding is that those were settled. 

I'll discuss this more later. 

Posted By David Rossmiller In Bad Faith , Duty to Indemnify , First Party Insurance , Industry Developments
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I know a lot of people are disappointed I haven't been able to devote my usual time to this blog.  The workload I've had the last few months has been not only heavy -- that's normal for me -- but full of a vast number of motion practice deadlines.  As those of you connected with the law know, filing and responding to motions is time consuming and exacting work, and I've had more than my fair share to deal with recently. 

I keep thinking tomorrow or the next week will be that mythical Shangri-La where some time frees up for blogging, but so far time remains tight.  If I can't do a good job blogging, it's better not to do it at all -- which explains the infrequency of my posts.  Many days, I've been too busy to respond to e-mails, so if you've sent me one and I haven't answered yet, I hope you understand.  So, with that said, on the road to Shangri-La, I'll try to regroup next week, catch up on some of what I've missed, and re-evaluate where to go from here. 

Posted By David Rossmiller In First Party Insurance
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Thanks to one of my loyal readers who often points out anti-concurrent cause cases for passing along the Colorado Court of Appeals July 24 decision in Colorado Intergovernmental Risk Sharing Agency v. Northfield Ins. Co.

This opinion is right on the money in its analysis of how anti-concurrent cause language works.  In the case, a roof on a building containing a pool collapsed from the weight of snow, but the timbers supporting the roof were rotted from humidity and chemicals from the pool (this kind of rotting due to pools happens more often than you would think).  The way the case came to trial was this: CIRSA (I hate acronyms as much as the next English major/former journalist, but in this case the name is a real mouthful, so I'll compromise my standards a bit) had the primary level of insurance, and Northfield had the second layer.  CIRSA paid out on the loss, and Northfield declined to pay CIRSA for any of the money CIRSA had paid, citing an anti-concurrent cause provision in the Northfield policy.  The anti-concurrent cause language was the standard Insurance Services Office clause:

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.

The trial court correctly said Northfield didn't have to pay for any of the loss that was due to excluded rot, but incorrectly allowed the jury to apportion the damages between covered snow weight and uncovered rot.  Question: what do you think the jury's apportionment was?  C'mon, just take a guess, knowing how juries love to stick it to insurance companies, even when the plaintiff is a government agency.  That's right: 90 percent due to snow.

On appeal, the Colorado Court of Appeals got it right.  This case presents a classic example of a true concurrent cause: the loss was caused by a combination of factors that arose independently, but the loss would not have occurred but for the combination of the two.  That is the best, shortest definition I have come up with of what a concurrent cause is.  The key, once again, and I've said this as often as I can because I've come to see that it is counterintuitive to most people, is to look first to what the loss is and define the loss.  Unlike in Hurricane Katrina cases, the damage to items of property was not due to discreet and separate causes -- for example, first covered wind causes some damage to an item of property, and then uncovered flood causes some more.  That is not an example of concurrent cause, because a given item of property acted upon by each force was damaged by each force separately and in its own way.  The "loss" in Katrina cases was not the total damage to the house, but rather loss to specific items of property -- a house consists of many items of property. 

In the CIRSA case, however, the "loss" was to the whole -- apparently there were no items of property where you could segregate out damage from covered snow from the involvement of rot in helping the snow cause damage.  To put it another way: under normal circumstances where there was no uncovered rot, the roof would have held up the snow without collapsing.  In Katrina cases, the wind damage was not dependent on the existence of flood, so the "loss" in those cases cannot be caused by concurrent forces. 

Also, thanks to the Colorado Court of Appeals for favorably citing my work on anti-concurrent cause: the particular article they cited was Katrina in the Fifth Dimension, which appeared earlier this year in New Appleman on Insurance: Critical Issues, and which examined the U.S. Fifth Circuit's Katrina decisions.  I think it's the third case -- that I'm aware of -- that has cited to my analytical methodology, the first state court case and the first non-Katrina case.  I hope my methodology continues to catch on, because it truly is easier to use and brings more predictable results than any other.  In reality, there really aren't any competing methods of analysis, other analysis is more like what happens when you stub your toe -- hopping around, shouting and hoping the pain will just go away. 

So the analysis and the result of this case are correct: in this instance, unlike a lot of things people have come to think of as concurrently caused, the loss actually was due to concurrent forces, and therefore none of the loss was covered by the Northfield policy.  Now some people will see this as crazy and unjust no matter what I say, and I will only point out that I am describing what I see in how anti-concurrent language works, without regard to which side is going to win in any given case.  As it turns out, the prior two cases that cited my anti-concurrent methodology found for the policyholder.  Whether anti-concurrent language exists or not is of no particular concern to me, but since it does exist, I'd like courts' analyses of it to be as focused, sharp and correct as possible, that's all. In other words: I'm just sayin'.   

Posted By David Rossmiller In First Party Insurance
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This decision in a little long in the tooth, blogosphere-wise, but I've had it sitting around for a while and was reminded of it when I saw it recapped in Mealey's recently.  U.S. District Court Judge Peter Beer, of the Eastern District of Louisiana, granted partial summary judgment on May 2 to State Farm and one of its agents, Nora Vaden, over a claim that they were negligent in failing to procure a flood insurance policy for the homeowner, Liselotte Morice.  Here's a copy of the very short order written by Judge Beer.  

According to the order, Morice maintained a flood insurance policy since 1987 on a rental property in Metairie, Louisiana.  In 2003, she allegedly wanted to transfer her coverage from one property to the other, and contacted Vaden, her agent, about doing so.  She also allegedly completed a flood insurance application, but State Farm has no record of receiving an application for flood insurance on the property and has no record of receiving a policy premium to purchase flood insurance for the second property. 

After Hurricane Katrina hit in 2005, Morice spoke with Vaden at a State Farm mobile disaster claims office, where she learned she had no flood insurance on the second property.  She sued in state court, and State Farm removed the lawsuit to federal court based on diversity of citizenship. 

The basis for the judge's decision was that Morice should have known as early as 2004 that no flood policy was in effect.  She thought that higher premiums withdrawn directly from her account, she said, meant the payments were going for flood insurance.  However, they apparently were merely a rate increase on the insurance she already had.  According to Judge Beer's order, she admitted she received no confirmation of the flood policy, nor did she receive any documentation from Vaden about the supposed flood coverage.  The claims were therefore pre-empted by a Louisiana statute creating a one-year limitations periods for suits involving agent negligence.

Posted By David Rossmiller In First Party Insurance
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A reader sent me this fascinating, and pretty good, story from the L.A. Times.  The story looks at recent homeowner losses to wildfire -- where a major problem was homeowners having property insurance for less than the value of the home -- and debates who is to blame for underinsurance, agents and insurers, or homeowners. 

 Like many other fire victims across California in recent years, Newman found out that the value of his insurance had failed to keep pace with the rising cost of home construction. He learned too late that he was underinsured.

Just how widespread this problem has become was highlighted in a survey scheduled to be released today by a consumer group that showed [homeowner Stan] Newman's anger and frustration is far from unique.

He is one of 274 victims of last fall's Southern California fires who took part in a study about their losses. Three-quarters of respondents complained that they didn't have enough insurance to pay their rebuilding costs.

About six weeks ago, the California Court of Appeals decided a case, Everett v. State Farm, that placed the responsibility for adequate insurance -- in the absence of "guaranteed replacement cost" and assuming adequate and prominent notice to policyholders -- on homeowners.  I  wrote about the Everett case in this post from May 8. 

I found it intriguing that, according to the story, the California Insurance Commissioner wants to ask the court to "depublish" the opinion to take away its precedential value.  Although this is not unheard of in a settlement between an insurer and a policyholder, particularly where the insurer lost the case on appeal, I'm not sure under what authority the Insurance Commissioner can ask for depublication.  

California courts, for now, are backing insurance companies. In a recent case stemming from the 2003 Southern California wildfires, a panel of judges from the 4th District Court of Appeal ruled that State Farm General Insurance Co. did not misrepresent its coverage limits when it declined to pay full replacement value to a San Bernardino woman, who lost her home in an October 2003 blaze. [The Everett case].

[Insurance Commissioner Steve] Poizner said he disagreed with the appeals court and planned to ask the judges to "depublish" their April 29 decision so that it would not be considered legal precedent.

An insurance analyst made a good point in the story -- it doesn't make sense to conclude insurers are being deceptive because they would make more money charging more premiums for more home value.  Another point, not made in the story, that follows from this comment: insurers want to place the responsibility on the homeowner to value the house adequately and pay commensurate premiums, rather than bearing the risk of getting too little premium for guaranteed replacement cost. 

The analyst, Brian Sullivan, also made another point that deserves discussion -- he said that some agents may have an incentive to offer insurance at the cheapest rate possible to get the business from a rival agent -- although it seems to me that homeowners have more of the responsibility for such a transaction than agents, because they, not agents, are the ones who will cut corners on insurance to get a lower price.  For the companies that still offer guaranteed replacement cost, usually for not that much more of a premium than without replacement cost, it would be interesting to see how many people take the lower premium, even if it is a relatively small amount. 

Posted By David Rossmiller In First Party Insurance
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The Disqualification Wars continue. 

First, after an initially unsuccessful effort by State Farm late last year to disqualify Dickie Scruggs from Katrina litigation on ethics grounds, Scruggs in essence disqualified himself on, uh, ethics grounds.  Then State Farm -- with new evidence gained in depositions including further depositions of the "whistleblower" Rigsby sisters, they of the sham consulting agreements featuring no-show or low-show $150,000 jobs from Scruggs, they of the 15 minutes of fame and 30 years of infamy -- successfully moved to disqualify the Scruggs(less) Katrina Group, later known as the Katrina(less) Litigation Group.   Then, of course, we all had a great time when the Trailer Lawyers hit the stage of the Katrina Follies, but regrettably they too were disqualified from the False Claims Act case Ex rel. Rigsby.

(As an aside, I sorely miss the Trailer Lawyers -- Trailer "Snake Farm" Chip and Trailer Tony, Trailer Todd and Trailer Mary -- and I especially miss writing the Trailer Lawyer songs. I'm working on one last song, tentatively entitled Since You Went Away the Trailer's So Quiet I Can Hear My Teardrops Falling.  Well, maybe it's not really the last one, I've got another I'm working on called Don't Park Your Trailer in the Middle of a Snake Farm.  I also have a third song, sung to the tune of that State Farm jingle "like a good neighbor, State Farm is there" -- it starts out "You can hide in your trailer, but Snake Farm is there"). 

Then there were various disqualifications of other firms that tried to step in to represent policyholder former clients of the KLG, but these firms were struck down in the wings before they even hit the floodlights.  Now, the latest broadside is a motion by E.A. Renfroe, the contract claims adjusting firms the Rigsbys were working for when the illicitly took State Farm claims files and gave them to Scruggs.  This particular motion is in the Shows case, which is the RICO folderol  Scruggs filed about this time last year.  I haven't checked other cases, so it might be filed in them too.  The motion asks Judge Senter to consider whether new counsel Provost-Umphrey, a Texas firm recommended by tobacco lawyer Don Barrett, of the late Katrina Litigation Group, to former clients, has ever been "associated" with the KLG in Katrina litigation.  If so, the legal memorandum argues, Provost-Umphrey would have to go (I included the exhibits to the memorandum as part of the link).

The motion is really only a motion to consider whether they are associated counsel -- it admits the facts aren't yet known, but says two other firms that were disqualified were booted only because they self-reported on Katrina litigation links to the KLG.  The Renfroe motion encourages the Provost firm to do the same, points to the firm's own publicity about representing policyholders in Katrina and Rita litigation, and wonders whether that representation included working with the cast of the Katrina Follies.

Paragraph 16 of the memorandum is the key one to read.  Up until that point in the memo, I would have said there is nothing there.  That paragraph, however, makes me want to know more.  It certainly puts pressure on the Provost firm to disclose anything that might resemble the type of association that is covered by Judge Senter's disqualification order. 

Posted By David Rossmiller In First Party Insurance
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I heard about the Louisiana Supreme Court's decision in Landry vs. Louisiana Citizens Property Insurance Corp.  yesterday morning, but had no time at all to do a post.  Got too busy even to do an emergency post linking to the decision.  But now I've read it, and I have a few moments to comment briefly.  By the way, here is the Landry decision.  Here is a link to a story by Rebecca Mowbray in the Times-Picayune.

This decision is the first thing I've read in Landry that has made sense to me.  The Court of Appeals' decision was more or less completely incomprehensible.  The state Supreme Court went for the simplest analysis, which is always a good idea and keeps courts out of trouble, and that analysis is basically as follows: when the state's Valued Policy Law was re-enacted in 1991 after being eliminated three years before, the Legislature reached an apparent compromise with insurance lobbyists that inserted into the law a provision allowing insurers to determine a loss by a different calcualation than that contained in the statute, as long as this was announced in both the policy and the application for the policy. 

The loss calculation of the statute is that the insurer must pay the full value of the policy if the property is a total loss because of a covered loss.  The exception allowed in the statute, of course, swallows up the rule, because what insurer will stay with the statutory formula when it can write a more favorable and more clearly defined one?  The Supreme Court found that the method of loss calculation in the policy -- in essence, the cost to replace or repair -- was valid under the exception noted in the Valued Policy Law. 

This is significant because the plaintiffs' argument was that the Valued Policy Law requires the insurer to pay the face value of a policy whenever a covered loss factored into a total loss, even if much or most of the loss was due to an uncovered cause.  In the case of the Landrys damage from Hurricane Rita, it appears to me highly likely that most or all of the damage was due to the uncovered cause, flood, rather than the covered cause, wind.  Under the Supreme Court's decision, the insurer will be liable only for the share of the damage that can be attributed to wind.  

The court appeared ready to limit the Valued Policy Law strictly to its literal terms -- fire insurance policies, rather than policies like homeowners insurance that happen to have fire coverage -- but said this was not necessary because its other analysis produced the same result.  The court noted that insurers have typically interpreted the law as applying not just to fire insurance policies but to all policies with fire coverage, and the court encouraged the Legislature to clarify the law.  

Lastly, in looking at the list of concurring justices, I see one of them is named Jeanette Theriot Knoll, and I am just guessing, but Theriot is probably not pronounced "the riot."

Posted By David Rossmiller In First Party Insurance
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A huge development: the Mississippi Supreme Court has agreed to hear the interlocutory appeal of Corban v. USAA, which I have written about here.  Being as this case is about anti-concurrent cause, my favorite subject next to Scruggs and the Trailer Lawyers, I wish I had more time to write about this, but I don't.  So this Anita Lee story will have to suffice for today.  

Posted By David Rossmiller In First Party Insurance
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I've got a lot of catching up to do, but thanks to all those who e-mailed ideas for posts.  I'll work my way through those as time allows, but for now, let's look at Magistrate Judge Robert Walker's rulings on Friday in the Verdun-like battle of McIntosh v. State Farm. 

As you may recall, State Farm issued a number of discovery requests in this case last year when it noticed the depositions of Dickie and Zach Scruggs, and these depositions have been held up while various other things happened:

• Scruggs got indicted and pleaded guilty;
• Scruggs withdrew from the case and all other cases;
• the Katrina(less) Litigation Group, the rump successor to the Scruggs(less) Katrina Group, was disqualified from the case for ethics reasons:
• the Rigsby sisters were disqualified as witnesses for ethics reasons;
• the illicitly obtained State Farm documents were barred as evidence for ethics reasons, except where they had been obtained through lawful discovery; and
• the February trial date was postponed as totally impractical.   

Scruggs and the Rigsbys objected to this discovery, and in a series of rulings dating to December, including this one Friday, Walker has largely said these objections based on attorney-client privilege are bogus.    

Let's look at a paragraph from Judge Walker's ruling:

The Rigsbys appear to claim some protected interest in the State Farm documents they provided the Scruggses and law enforcement agencies. The Court has previously ruled that the Scruggses undertaking representation of the Rigsbys does not transform “everything [the Rigsbys] ... physically took from [Renfroe/State Farm] into privileged information...” Those documents are discoverable, and are not protected by attorney-client privilege or attorney work product. The Rigsbys attempt to be more specific in their objections to the subpoenas, but their opposition, like that of the McIntoshes, is essentially a broad claim that the subpoenas call for documents protected by privilege. As with the McIntoshes’ motion, the Court has simply not been presented sufficient information to hold that any particular document request infringes on any legitimate privilege. The Court is not omniscient and cannot bar discovery based on speculation that a request might lead to disclosure of privileged information. 

That is a remarkable position, isn't it? That the documents you illicitly take from someone are protected from discovery by that person?  Wow.  It's embarrassingly foolish, to put a word on it.  Lots of things are not covered by attorney-client privilege, including actions like taking documents and the documents themselves.  As said in the immortal Coen brothers movie The Big Lebowski, "This isn't Vietnam, there are rules." 

Let's look at something else, from Judge Walker's rulings on specific State Farm discovery requests. 

Request No. 23 seeks documents “picked up or otherwise retrieved by Richard Scruggs from a highly placed source at State Farm on a trip to Bloomington, Illinois, which Richard Scruggs referenced in a March 30, 2006 interview.” The Scruggses’ objection to this request is that it is “not reasonably calculated to lead to discoverable evidence” in the McIntosh case and that the documents are privileged “to the extent that they were provided by individuals who are clients or former clients of Messrs. Scruggs.” The Court has been provided nothing upon which to base a finding of privilege, and orders Richard Scruggs to produce the requested documents.

I don't recall this interview that is mentioned here.  What is this, a case of Scruggsian bombast and psychological warfare?  Who at Bloomington, the headquarters of State Farm, would have so lost any remaining impulses of self-preservation as to give documents to Scruggs?  No one, I suspect, but I guess we will find out, because the Court ordered Scruggs to turn over these documents.

As I said, I'll work my way through the stories that have piled up as I have time over the coming week, which will be another very busy one.  Catch you in the next post.

Posted By David Rossmiller In First Party Insurance
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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' clients, and that State Farm therefore had waived its right to bring a disqualification motion.  The Fifth Circuit, on November 19, denied State Farm's petition for a writ of mandamus requiring Judge Senter to change his ruling.  The new motion, of course, does not seek to disqualify Scruggs himself or his law firm, because they withdrew from Katrina litigation following the indictment of Scruggs and two other key members of the firm.

The Shows case appears to have been chosen for this motion because the previous motion had been brought in McIntosh v. State Farm, a Katrina case that was well-developed at the time the motion was made, a large part of why Senter gave an adverse ruling.  In Shows, in contrast, the first case management conference is just being held.  

With that background, first I'll list the most relevant pleadings, and then give a few observations.

• Here is a copy of the motion.
• Here is a copy of the supporting legal memorandum.
• Here is a copy of the declaration of Charles Wolfram, a very well-known expert on attorney ethics. 

The list of the reasons State Farm believes the SKG should be disqualified is given above.  You can read it for yourself in the memorandum -- a scan of the table of contents will take you right to where you want to go.

But there are a few facts listed in the memo I would like to highlight.  After following Katrina litigation very closely for more than a year now, I keep thinking nothing more is going to surprise or shock me, and I am always wrong.  One thing that shocked me was one of the entries in the notes of Brian Ford, an engineer who had done a key engineering report on the property of Thomas McIntosh -- remember that his report was rejected by State Farm because the report said the damage to the property was due to wind only, because I am coming back to this point.  The SKG and others say this is evidence of State Farm's fraud -- that it changed engineering reports to get the conclusion it wanted -- uncovered flood damage -- and also that it avoided its obligation to pay wind damage and instead pushed the damage onto federally backed flood insurance.  Again, please remember this, because I am coming back to it.

Now I have seen some of Brian Ford's redacted notes before.  I wrote about them in this post earlier this month.  But Judge Robert Walker on December 12 required Ford to turn over the unredacted notes, and wow, there was a lot of stuff missing from the redacted version.  I know this because Exhibit 36 to the State Farm motion is a good chunk of his unredacted notes, and you can see them by clicking here.  

Look on the page with the Bates stamp Ford 0012 in the lower right corner.  At the top of that page, Ford's notes recount an apparent conversation between Special Assistant Attorney General Courtney Schloemer and an SKG attorney: "they agreed that a criminal conviction could help civil cases." If you don't believe me, you go read it for yourself, that's what it says!  An assistant to Jim Hood discussing with a private litigant the potential indictment and conviction of the other party and how that might aid that litigant.  If the Ford notes accurately reflect what happened, that is outrageous. (NOTE: my guess would be this conversation contemplated an indictment of a State Farm official, not Dickie Scruggs).

Recall also that Schloemer is implicated in the dealings involving Hood and Scruggs, whereby Scruggs sent his copies of the Renfroe documents taken by the Rigsby sisters to Hood, in what Judge William Acker said was a deliberate violation of his order to turn them over to Renfroe's lawyers. (Hood had his own copies and didn't need Scruggs').  After Hood and Scruggs had a conversation about this plan immediately after Acker issued his injunction on December 8, 2006, Schloemer on December 12, 2006 sent a letter to Scruggs saying she was "not comfortable that the protective measures put in place by the Court will be effective in keeping these documents out of the grasp of State Farm" and asked Scruggs to send the documents to Hood, which he did that same day. See Acker's criminal contempt order, page 8. 

One could also point out the problems of hiring material witnesses like the Rigsby sisters as litigation consultants of the SKG at $150,000 per year with no set duties or hours, and of attempting to hire Brian Ford in a similar role while simultaneously offering him as a witness.  Incidentally, on the same page of the Ford notes, Ford 0012, just a few lines from the top, it says that Schloemer did not want Ford to become a paid consultant until after he testified before a grand jury. This is merely what Ford says in his notes, so it's not absolutely sure to be true.  We'll find out, Ford is being deposed again next month in the McIntosh case, probably to talk about what the previously redacted notes say. What if what he says in the notes is accurate? Then what? Do you see a problem with such conduct by a state official? I do. 

One final point.  Look on page 33 of the memorandum in support of the motion.  This makes a point I had not really thought of in this way before. Kerri Rigsby, one of the Katrina stars who has been discussing insurer fraud for the past 17 months, is the one who approved a federal flood payment for the McIntosh property.  I either did not know that, or forgot it.  So if McIntosh is supposed to be an example of fraudulently pushing flood payments so that the insurer didn't have to pay wind damage, Kerri Rigsby herself was responsible.  Also, the original Brian Ford engineering report on that property, and I have read it so I know this is true, mentions wind only and no flood damage.  So now remember that the Brian Ford report and what happened to it is also held out as an example of insurer fraud, because its conclusions were later changed by a second engineer's report that found both wind and flood damage. 

Do you see the problem here? If the Brian Ford report was correct and only wind damaged the structure, then why was Rigsby approving a flood payment to the McIntoshes?  If the flood payment was fraud, then why did Rigsby approve it? If Rigsby was correct, then why didn't Ford's report mention flood?  

If you are new to this, see my post of a few days ago re-evaluating the role and significance of the Rigsby sisters. 

Lastly, what does the Prisoner of High Street think of all this? No one knows, because he's not talking.  Where in the World is Jim Hood? 

Posted By David Rossmiller In First Party Insurance
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PACER reveals this has been a busy day in McIntosh v. State Farm, a Verdun-like litigation war between State Farm and the Scruggs(less) Katrina Group. 

Among the items of interest:

• Dickie Scruggs' deposition has been noticed for January 15.  Click here to see the notice.  You may recall that earlier this week I wrote that Judge Robert Walker had decided against Scruggs' objections to this deposition, originally noticed in August, and that he would have to testify.  If you look at the list of documents State Farm requests he produce for the deposition, they include communications, dating to August 2005, to and from the Rigsby sisters, Mississippi AG Jim Hood, the FBI and the U.S. Attorney's Office (one assumes this does not include inadvertent communications through wiretaps or body wires in the alleged bribery case) and various journalists and news organizations.  Among the purposes of the deposition and the request for documents, it is evident, is to test Scruggs' assertions that his relationship with the Rigsby sisters began in February 2006.  State Farm suspects that the sisters were working for both Scruggs and Hood much earlier than that to covertly take State Farm claims documents.  You say what of attorney-client privilege between the Rigsby sisters and Scruggs? Supposedly they did not form such a relationship until sometime in 2006, so communications before that would be non-privileged.
• Zach Scruggs' deposition has been noticed for earlier on the same day.
• The depositions of the Rigsby sisters have been noticed for January 22.  Click here to see the notice for Kerri Rigsby, click here to see the notice for Cori Rigsby.

Posted By David Rossmiller In First Party Insurance
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With the continuing drama of the Scruggs scandal unfolding daily, sometimes hourly, I almost forgot to blog about the Katrina case that I have written about perhaps more than any other -- Broussard v. State Farm.  As this story by Mike Kunzelman of the AP says, oral arguments were held before the Fifth Circuit in New Orleans on State Farm's appeal of the $1 million punitive damage award -- reduced by Judge L.T. Senter Jr. from $2.5 million awarded by the jury.

Broussard is not about the anti-concurrent cause provisions of policies, as some of the other well-known cases have been, it is about who is allocated the burden of proof of damages, and it is about whether bad faith punitive damages are justified when an insurer fails to pay when some small amount of covered damage may have occurred, but the insurer believes the evidence indicates that almost all if not all the damage was caused by an excluded force.  As I mentioned, I have written a great deal about the case, and if you have more interest you can go to my blog's search bar on the right, type "Broussard" and hit the enter key. (Frequent readers may tire of me explaining how to do this, but this is far and away the number one question I get asked -- how do I find something on your blog).

The Broussards were Mississippi Gulf Coast residents whose home was destroyed by Katrina, one of the so-called "slab" cases where nothing was left.  State Farm was their homeowners insurer, and at the time of trial had paid nothing, saying there was substantial evidence of flood destruction and that the Broussards had failed to present sufficient evidence of wind damage (their expert said the home was destroyed by a tornado). In case you are wondering, the Broussards were represented by William Walker, not the Scruggs Katrina Group. 

In the case, Judge Senter directed a bad faith verdict against State Farm, saying no reasonable juror could have found otherwise.  He based his decision on the fact that State Farm's expert testified that there was a 75 percent chance there was zero to 35 percent damage to the Broussard's roof.  With all due respect to Judge Senter, I'm skeptical that this means the verdict must be directed.  Why couldn't the jury have been allowed to decide? When you multiply a 75 percent chance times zero, you still get zero damage, so in my mind a reasonable juror could have decided State Farm was correct.  They could also have decided the other way.      

Most of the time with other big Katrina cases, I would have already read the briefs at this point.  But to tell the truth, Broussard slipped right out of my mind on Scruggs Nation: Day One, and even if I had remembered, I wouldn't have had any time to read the briefs.  However, reading the tea leaves of the Fifth Circuit's recent Katrina decisions, seeing who is on the judicial panel (notably, Edith Jones) tand seeing some of the comments by Judge Jones in the story, I'd say there is a pretty good chance this one will be reversed.   See what you think after reading this excerpt from the story:

State Farm attorney Clarke Holland said Senter made "numerous errors" in evaluating evidence in the case and shouldn't have allowed jurors to weigh punitive damages.

"There was clearly an arguable basis for State Farm's position regarding coverage," Holland told Judges Edith Jones, Jacques Wiener Jr. and Edith Brown Clement.

William Walker, a lawyer for the Broussards, defended Senter's rulings.

"He viewed this in a very rational and careful way," Walker said.

Senter concluded State Farm acted in a "grossly negligent way" by denying the Broussards' claim. The judge also said the company denied policyholders' Katrina claims based on a new "wind-water" protocol that is "at odds with other express terms of the insurance contract."

State Farm claims Senter erred when he ruled the company had to prove that the Broussards' home didn't sustain any wind damage or that it had to segregate wind and water damage to the residence.

Jones, the 5th Circuit's chief judge, questioned why Senter didn't let a jury decide whether Katrina's wind or water was responsible for destroying the Broussards' home.

"All (State Farm) had to prove is that storm surge was a cause, and then a jury had to prove how much was storm surge and how much was wind," Jones said while questioning Walker.

The exchange between Jones and Walker grew testy, as the judge accused the lawyer of "playing with words."

When Walker punctuated one of his points by saying, "I don't mean to be flip," Jones responded by saying, "Most of your argument has been flip."

"Thank you, ma'am," Walker said. "I hope it was sincere."

"It was sincere," the judge said.

State Farm also argues that Senter shouldn't have allowed jurors to consider punitive damages and that he abused his discretion in refusing to transfer the case from Gulfport, Miss., to northern Mississippi.

State Farm's lawyers say the company couldn't get a fair and impartial jury on the Gulf Coast due to "pervasive and extreme negative publicity regarding Katrina insurance claims."

State Farm is asking the 5th Circuit to throw out the verdict and either rule in the company's favor or order a new trial, preferably in north Mississippi.

I'm not sure if I follow the nuances of the flip/sincere dichotomy posited here.  Can one be flip, yet still sincere?  I would have thought not -- for example, I have never heard the phrase, "he was flipply sincere," nor have I heard "he was sincerely flip" -- but apparently William Walker and Judge Jones disagree with me.   

Posted By David Rossmiller In First Party Insurance
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The Louisiana Fourth Circuit Court of Appeal came out with a case yesterday that I didn't learn of until about 8:42 p.m., and on this night I was safely home at that hour, but if I had been at work, I just may have been holding my red Yellowstone mug of decaf with the white moose silhouette, and had this been so, I surely would have dropped it in dumbfoundment when I came to pages 7 to 9 of this case.

The name of this case is Sher v. Lafayette Ins. Co., et al., and it is a case in which the trial court granted partial summary judgment for the policyholder, saying the insurer's flood exclusion was ambiguous.  The appellate court agreed.  Now, I am quite familiar with arguments positing a dichotomy between natural and man-influenced physical forces, and I am quite familiar with arguments that draw this distinction even more intricately in discussing the difference between natural causes and human causes.  Sometimes parties present these arguments with great skill, other times they don't.  Sometimes courts write about these issues with sophistication, and although I may not agree fully, I can appreciate the reasoning.  Sometimes, however, courts don't seem to care what appearance they make for the rest of the world, and they write conclusions like the Sher case.

Here is a copy of the decision. What happened was that Joseph Sher's commercial building in New Orleans was flooded by Katrina waters.  This is not a "wind vs. water" case in any way that is obvious to me, it appears to be just a pure flood case.  The court mentioned early in the decision that the Corps of Engineers flood levees failed, and one would suspect this negligent human involvement in the flooding was a factor in the court's analysis, but the court refused to make this absolutely clear.  Here is what is excluded by the flood exclusion:

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 . . . .

This language is analyzed by the court as follows in a passage that is about as close to being completely incomprehensible as one would dare to come:

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."    

Mind you, I am not against arguments about the distinction between natural and man-made causes and whether insurance policy clauses encompass both, and I can picture sophisticated reasoning on this particular clause that could come out either way.  The Sher reasoning, however, is primitive and cursory, all the more noticeable because the court found time to go on for page after mind-numbing page examining damage issues. Further, what role the lead-in anti-concurrent cause language might or might not play in working to exclude human negligence as a covered cause was not discussed.  

The court's decision is perhaps particularly surprising because outgoing Louisiana Attorney General Charles Foti sided with the policyholder -- Foti's involvement is usually a sure sign a case will be lost. 

Posted By David Rossmiller In First Party Insurance
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This is a very good Becky Mowbray story in yesterday's Times-Picayune following up on the recent Kodrin v. State Farm jury verdict.   I say that with some bias, as I was interviewed for the story.     

Here's the story's lede:

When the first federal insurance trial in Louisiana against State Farm Fire and Casualty Co. wrapped up last week, the jury's message was clear: If companies want to deny payments under homeowners insurance policies because the damage was instead caused by flood, they darn well better be able to prove that flood was indeed what destroyed the home.

I think that is correct.  Legal arguments over the allocation of the burden of proof will be considered in the Fifth Circuit appeal of the Broussard v. State Farm case, but when you have a jury pool where everyone knows someone who was hit heavily by Katrina -- or maybe they themselves were -- the practical reality is that jurors are sharpening their knives and waiting to slice and dice any insurer's trial presentation if they sniff any odor they don't like.  Read the whole story, it provides some trial details I didn't know about, and refers to the interview I did with a Kodrin juror  that was published on my blog.  That juror's story was powerful testimony, and although I obviously haven't conducted any kind of scientific survey, I'm betting it's pretty typical of the way most jurors have seen or would see these kinds of cases.  

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This San Diego Union-Tribune story from 2005 explores that question. In light of the recent California wildfires, it is worth a look back to see what resulted from the supposedly large numbers of people who were underinsured in the 2003 wildfires:

More than 96 percent of Scripps Ranch fire victims are building bigger houses, and 69 percent are getting houses at least 500 square feet larger than before, according to a San Diego Union-Tribune analysis of city records.

New homes now stand shoulder-to-shoulder on the lots, with less room in between for privacy. In a neighborhood where 60 percent of fire victims said in one survey that they were underinsured, how did they do it?

Read the whole thing, as they say.

By the way, here are some stats from the State of California on insurance complaints stemming from the 2003 wildfires. As you can see, a lot of people said they were underinsured. 

Posted By David Rossmiller In First Party Insurance
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After the verdict came in late yesterday in the Kodrin v. State Farm case in Louisiana, I was contacted by one of the jurors who told me more about the jury's thinking in finding against State Farm and awarding $100,000 in punitive damages to the Kodrins.  Complete surprise to me to be contacted by her, but much appreciated to hear the words of this juror. 

Here's what she said (she gave me permission to quote her but asked I leave her name out): 

• "It was upsetting to everyone, especially afterwards to see the uncontrollable tears afterwards by Mr. and Mrs. Kodrin, even when they were leaving and getting into their car, they were still crying. We were told not to award based on sympathy and I truly believe we did follow the judge's instructions. We all agreed at the onset of our deliberations that the insurance company did not 'do right' by the insureds and that they were treated very poorly. We wanted to try to 'make them whole' as we say." 
• "This case was very upsetting to all of us since every person on the 8 member jury has suffered or has a close relative who has suffered due to Katrina. State Farm continued to pursue the 'Flood' claim on the telephone with the Kodrins and the couple did not want to file the flood claim since they felt it was wind damage first (and since obviously there were no witnesses, no one can say which came first, the wind or the water)." 
• "Since we were not allowed to read or listen to news, I was curious what had been reported the last couple of days and when I came upon this blog and this statement: the Kodrins have agreed, by accepting the flood money that at least that amount of damage to the home was due to uncovered flood. This infuriated me since this was exactly why they did not want to file a flood insurance claim (which is paid by the government, not the insurance companies). It proved after the fact that State Farm was trying to get away with not paying on the wind policy that this couple has paid to them religiously since 1993 and it was brought out by the plaintiffs' attorney in the trial that State Farm 'encouraged' their claims reps to write flood claims rather than wind claims in the area of Port Sulphur. We decided that it is very possible and probable that when the water topped the levee, the wind had already damaged their home an hour prior. We decided to give them the maximum allowed on their wind policy and for lost contents, loss of garage, cost of living in another city and having to relocate to another town (from what was Mrs. Kodrin's childhood home and property). Through all of this the past 2 years, Mrs. Kodrin was having serious health problems and although it did not sway our decision, we knew it was exacerbated by this stress. Had State Farm simply honored their agreement with the Kodrins back in 2005, they would have saved a lot of trouble and expense. We awarded as much as we thought we could without being extravagant but some of us would have given them more if we could have. It was not our goal or task to set a precedent for future claims against insurance companies for Katrina or Rita claims."  (The underlined material in her quote is a reference to my post of yesterday on the Kodrin case). 
• She said the jury also awarded $50,000 each in punitive damages to Mr. and Mrs. Kodrin. "I feel very good about what we decided as did the other 7 jury members and we all felt that we did what was right and would be able to sleep tonight because of our decision."

Eloquent words, I will let them speak for themselves.  As a lawyer, I am grateful for the service of jurors such as the one who contacted me and the others in the Kodrin case, and all people who serve and make our justice system work.  I am also grateful for the chance to hear this valuable perspective and to tell this story. By the way, here's another link to the AP story on the verdict.

Posted By David Rossmiller In First Party Insurance
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The Fifth Circuit's decision is in.  Looks like a significant victory for State Farm -- flood exclusion upheld, anti-concurrent cause provision upheld, Fifth Circuit avoided some of the folly of another panel of the court in Leonard v. Nationwide. I will be writing more shortly.

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What is said to be the first Katrina trial in Louisiana involving State Farm began yesterday.  The case is Kodrin v. State Farm, and here is a story by AP reporter Mike Kunzelman on the first day of trial. The story explains:

The eight-member jury will be asked to decide whether Katrina's wind or floodwater was responsible for demolishing the Port Sulphur home of Michael and Judy Kodrin, who sued State Farm for denying their claim after the Aug. 29, 2005, storm.

'That's going to be the main issue in the case,' U.S. District Judge Carl Barbier told a 30-member jury pool.

State Farm, which says its homeowner policies cover damage from wind but not rising water, concluded Katrina's storm surge destroyed the Kodrins' house and denied the couple's claim.

The Kodrins, however, argue that hurricane-force winds destroyed their wood-frame home hours before water overtopped a nearby river levee and flooded their Plaquemines Parish neighborhood.

Before I go on, one thing perplexes me.  Well, two things, actually. Maybe more than two, but let's just say two because life is short and we have to get on with this post and end it somewhere. In a preview story on the trial, the Times-Picayune wrote: 

The case will be a test of State Farm's anti-concurrent causation clause, which the company has used to deny payment for wind damage on a home when it occurs in concert with flood damage. These controversial clauses have been the focal point of litigation in Mississippi, but State Farm insurance contracts in Louisiana are worded slightly differently.

I am not sure I can agree with the first sentence and I'm not sure I understand the second one. If you click here, you will see a copy of the certified policy attached as an exhibit to one of the summary judgment pleadings in the Kodrin case.  That certified copy contains the exact same anti-concurrent cause language that is in, for example, the policy at issue in the Tuepker v. State Farm case pending before the Fifth Circuit.  Either its my Adobe Acrobat display, or the Kodrin policy was copied for the court file so that only the even-numbered pages show, but look on page 10 of the policy.  The relevant anti-concurrent language preceding the flood exclusion is as follows:

We do not insure under any coverage for any loss which would not have occurred in the absence of one or more of the following excluded events.  We do not insure for such loss regardless of: (a) the cause of the excluded event; or (b) other causes of the loss; or (c) whether other causes acted concurrently or in any sequence with the excluded event to produce the loss; or (d) whether the event occurred suddenly or gradually, involves isolated or widespread damage, arises from natural or external forces, or occurs as a result of any combination of these:      

If you click on this link to the Tuepker policy, which was sold in Mississippi, you will see that on page 10 of that policy the anti-concurrent language is just the same.  The Kodrin Pre-Trial Order, page 11, recites the same language -- minus the first sentence -- and you can click here to view it.  Perhaps there is some other small difference in the policy that I don't see, but it appears the anti-concurrent cause language is unchanged.

However, under the facts of the case as outlined in the Pre-Trial Order, I do not see anti-concurrent cause language as being relevant, nor is it apparent in any way to me that State Farm denied coverage for damage to the Kodrin home based on the anti-concurrent language.  I have looked repeatedly for evidence that insurers have denied coverage for Katrina wind damage on the basis that it occurred concurrently or in sequence with flood damage, and I have not found such evidence, despite the fact this is the popular conception of what has happened.  I have repeated this so often I could say it while juggling knives -- anti-concurrent language applies only to multiple causes of the same damage.  It does not apply to single causes of single losses.  Merely because a house sustains damage from two forces does not mean two forces have combined to cause a loss as defined by the policy.  I do not say that this could not occur, but under the facts of every Katrina case I have examined, and it is a lot of them, alleged wind damage caused a distinct single property loss and flood caused a separate distinct single property loss. This is not an issue of multiple causation, so any analytical methodology that is used to sort out multiple causes of the same damage is not appropriate.  This means anti-concurrent cause language is not relevant, nor is the default standard, the efficient proximate cause analysis, relevant. 

Instead, this case looks to me like many, many others.  State Farm denied coverage based on its assertion that the damage was caused exclusively by excluded flood.  It said it found no credible evidence of wind damage to the home, which was built on piers and was destroyed by a 12-foot flood surge.  Now, this means that there is an issue of who has the burden of proof about the wind damage: does State Farm have to show that no wind damage at all could have occurred, or do the policyholders have to show that wind damage occurred?  Let me reiterate that the question of who must prove the existence or non-existence of wind damage is as different from the question of concurrent causation as lightning is different from a lightning bug. Nothing about the issue of allocation of proof implicates a causation analysis -- no matter which view you hold, it does not affect your analysis of whether two forces combined to cause the exact same damage, or whether two forces acted separately to cause distinct and different damage.       

I am not there on the scene, of course, and I don't have time to do a bunch of interviews, which in any case would probably just freak out the policyholders and the attorneys for both sides without producing a lot of information to me, so I must check my assumptions about the case through the materials available -- the stuff filed on the court's docket.  Here is the complaint in the case. 

Here is the motion for partial summary judgment on the issue of burden of proof filed by the Kodrins.

Here is the State Farm motion for partial summary judgment on burden of proof.

And here is State Farm's motion for partial summary judgment on the issue of offset: State Farm points out that the Kodrins accepted the limits of their flood policy, which belies their assertion that the house was destroyed by a tornado.  The value of the home was considerably in excess of the value of the flood policy, so it is possible that covered wind damage exists above the figure paid for flood damage. It seems undeniable, however, that the Kodrins have agreed by accepting the flood money that at least that amount of damage to the home was due to uncovered flood. In all this stuff, I once again don't see anti-concurrent language being asserted.

So with all that being said, we will have to wait and see how this trial turns out.  Whether State Farm or the Kodrins will be found to have the correct position on allocation of the burden of proof I do not know, but I fail to see how this trial has anything to do with the State Farm anti-concurrent cause language. 

UPDATE: I originally misattributed the second news story mentioned above, the preview of the trial, to Mike Kunzelman of the Associated Press.  The story I was referring to originally appeared in the Times-Picayune, which I should have know because I e-mailed the story to someone earlier yesterday. I've also fixed the link so it goes back to the Times-Picayune story rather than the version that went out on the wire.

Posted By David Rossmiller In First Party Insurance
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This post is from the LA Times opinion page blog, it's by LA Times Assistant Editorial Pages Editor Matt Welch, it's about AIG's use of a private firefighting force in the southern California wildfires, and it's very good.  An excerpt:

No one in Southern California fire country knows that their house is protected; not even the most gilded of solidarity-crushing insurance premiums can control nature. But it's true that the rich will occasionally spend their money to improve their chances, whether in beating fire or traveling by private jet instead of Amtrak. The choice confronting the rest of us is how to use tax money best to fight fires. In that discussion, I'm far less concerned by the extra-public choices made by the fire-vulnerable rich, and much more worried that available public resources -- aircraft and military personnel, especially -- went unused while my brother was evacuating his house in San Diego. The fact that some commentators are far more exercised by the former than the latter speaks volumes about their priorities.

Read the whole thing, as they say, plus Welch's column of the day before on the same topic.  Some outstanding logic.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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This Dave Carpenter story, I thought, is a refreshingly sober and even-handed look at Allstate's strategy to reduce risk from homeowners policies.  A couple excerpts:

The Consumer Federation of America says the Northbrook, Ill.-based company favors investors at the expense of consumers and has engaged in price-gouging. Sen. Trent Lott, R-Miss., has repeatedly assailed Allstate and other big insurers for what he claims is negligence since Katrina and even sued State Farm for related claims, ultimately settling the lawsuit. He is pushing to crack down on the industry through various legislative initiatives.

"It's OK to make a profit, but they are ripping people off," said J. Robert Hunter, the consumer group's insurance director. "Why are they so risk-averse? If they're not going to take on risk, what do we need insurance companies for?"

Despite the fact that Allstate failed to make an executive available to be interviewed for the story, citing its mandated quiet period before its earnings announcement, the writer didn't burn the company, but instead found other people to give the other side of the story:

Banc of America Securities analyst Alain Karaoglan said in a research note last week that heavy exposure to catastrophes in its homeowners' business has long been Allstate's Achilles' heel.

He applauded the company's increased pricing discipline, reflecting the prevailing view on Wall Street.

"It's purely model-driven, it's purely risk-driven _ it's not like they hate Florida or anything," said Morningstar analyst Matt Nellans. "What people don't see is that for 10 years they were writing underpriced insurance and nobody complained about that."

Increasingly, the story says, Allstate is banking on more profitable auto lines than on homeowners policies.  In a related development, here is a story by Lavonne Kuykendall about the growth of Geico in the auto insurance market.  Gotta love that caveman.  Geico, however, better enjoy the caveman's ride while it can -- when CNA once again breaks out the CNA Polka Boys for their ads, the caveman will be ancient history.   Just out of curiosity, does anyone know the Polka Boys?  Are they still polkaing?

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I was reading a recent opinion by Judge L.T. Senter Jr. about a question of estoppel -- does an application for payment under a federal flood insurance policy, as distinct from acceptance of flood policy money, serve to estop an insured from later claiming wind damage under a homeowners policy? According to Judge Senter, the answer is no, although of course actual acceptance of the flood money means at least that amount cannot be re-compensated as wind damage.  The case is Robichaux v. Nationwide, click here to read it.

I read this case to say the same thing that other Katrina cases, such as Esposito v. Allstate, have said: acceptance of flood policy money means that you can't have a double recovery for wind from some other policy.  You can call this estoppel, you can call it a prohibition against redundant indemnity for the same loss, you can call it an admission, whatever, it all comes out the same.  Here's a post I wrote earlier this year on the Esposito case and others concerning the effect of acceptance of flood money. 

Robichaux focuses on a somewhat different issue, however -- whether the flood application, apart from the acceptance, binds the insured's ability to later claim wind damage.  Judge Senter said no.  This sounds right.  Under the circumstances of Katrina, where FEMA waived the requirement for proof of loss statements, holding that the flood application alone estops the policyholder from claiming wind damage, to the degree there is damage to the home that is uncompensated by flood money, would seem a harsh application of estoppel.  Also, as Judge Senter pointed out, in the aftermath of Katrina, many people didn't really know whether their loss was caused by wind or flood.  I suppose if you did have reason to know the cause of the damage, however, the application could constitute an estoppel.

Unusually for a legal ruling, Robichaux has a surprise ending. As it turns out, Judge Senter said there was no diversity of citizenship, so the court had no jurisdiction over the case -- nevertheless, he took several pages to clarify the court's position on the estoppel issue.  

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State Farm and homeowners Ray and Marie Van Meerten, in what is said to be the first Katrina case in Mississippi state court to go to trial, settled last week before a jury verdict was returned.  As usual, terms were undisclosed.  This case featured an interesting bit of testimony by a State Farm claims adjuster.  Read this excerpt from an excellent story by Anita Lee of the Sun Herald:

A great fuss has been made over State Farm's wind-water protocol and whether the company circulated it through the ranks to wrongly deny or minimize Hurricane Katrina claims.

But one catastrophe team leader, who managed adjusters for the company, said she'd never heard of the protocol, much less seen it.

Circuit Judge Steve Simpson questioned team leader Sharon L. Collins out of the jury's presence to make sure, but she stuck to her statement. Collins said she deployed short term to the Coast after Katrina and worked here as a team leader for 60 days.

The protocol says when wind acts concurrently with flooding to cause damage, there is no coverage under State Farm policies. "In this storm, they didn't act at the same time," Collins said. "I've never had claims where they acted concurrently."

She was asked if wind-driven rain soaked a couch and it was flooded, would the loss be covered. "Yeah," she said, "I guess it could be."

She was later shown a State Farm operations guide that said if an excluded peril, in this case water, caused or simply contributed to the loss - regardless of the sequence of events - "coverage will not apply to any portion of the loss."

"I don't remember reading this before," said Collins. "I don't have these memorized. I learned to look for coverage, so if I could prove there was wind damage to the couch, I would pay for it."

Although the central point of this excerpt is that Collins said he hadn't heard of the fabled State Farm wind-water protocol, frequently cited by policyholder attorneys as evidence of the insurer's determination to deny even legitimate wind claims, I found the last four paragraphs more interesting.  This is exactly what I've been saying for many months -- in almost every Katrina case, anti-concurrent cause language is not implicated because wind and water acted as separate causes of distinct damage.  Therefore I don't see any contradiction between the State Farm operations guide cited and Collins' testimony -- the State Farm anti-concurrent language says that flood damage will not be covered regardless of whether it occurred concurrently or in sequence with covered damage.  It does not say that covered damage will not be covered regardless of whether it occurred concurrently or in sequence with uncovered damage.

The example of the couch, then, is entirely right, as was Collins assessment of adjusting the damage.  Merely because flood later damaged property that had been damaged previously by a covered force does not mean the prior damage and the wind loss failed to happen. 

The trouble many people have in understanding anti-concurrent language is more because of its name than the actual theory behind it -- it sounds as if it concerns things that take place close in time or at the same time, but this is not necessarily so.  Take one of the landmark cases on concurrent cause theory, Partridge v. State Farm, California Supreme Court, 1973.  In that case, two negligent acts -- filing a gun mechanism to create a hair trigger and careless driving over bumpy ground -- combined to cause the gun to go off and shoot a passenger.  The acts themselves took place a considerable span of time apart.  However, the harm that occurred would not have happened unless each act took place.  Those truly are concurrent causes, in that they combined to create one harm.  Say rain inundates a couch, effectively ruining it, then two seconds later flood comes along and covers it.  If you could prove what happened, the rain and flood are not concurrent causes of the couch's damage.  It was already destroyed by a covered cause when the flood came along.  Say the couch was only 50 percent ruined by the rain.  That 50 percent was not caused concurrently by flood and is covered. The other 50 percent is not.

The "in sequence" language also is a hang-up to many, but in the couch example, the damage is not sequential as that term is used in this context.  Sequential causes are where one cause starts another in motion, like dominoes: for example, a lightning strike causes an earth slide.  The causal relationship is dependent -- one thing leads to another.  In the couch example, the rain did not cause the flood.

If you want to read more, here is a story by Lee about the settlement of the case, and here is a story from earlier in the week about the trial. 

Posted By David Rossmiller In First Party Insurance
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The insurance situation down in Florida is beginning to look a little like the Harlem Globetrotters vs. the Washington Generals, the Nebraska Cornhuskers of 10 years ago running up the score on some Division II chump of the week, or the New England Patriots of this year against any other team on the planet.  Reminds me of this board book my kids love: We're Going On A Bear Hunt -- a family is all keen to go catch a big old bear, boasting how they're not afraid as they cross a river, wade through mud, go through a blizzard and a scary forest until they find one sleeping in his lair.  Then the bear wakes up and chases them clean out of his cave, back across the river, through the mud, through the blizzard, through the forest and right to their own house, where they bar the door and go hide under the covers. 

Right about now Florida Gov. Charlie Crist might be turning through the pages of that book under the covers to see if there is a second chapter, or an alternate ending, because back in January he and Florida lawmakers boasted how they were gonna catch a big one, gonna fix the insurance crisis, they're not afraid.  They dumped a lot of risk on Florida taxpayers, came up with some ideas like making the state a reinsurer, while Crist did his imitation of Triumph, the Insult Comic Dog, ripping into insurers as enemies of man and nature.  But the realities of the market are that central planning does not work, nor do price controls, and the market stood up on its hind legs and bared its fangs and stampeded Charlie and his crew.    

This kind of thing has happened before, of course.  It seems incredible that it could have occurred just 35 years ago in this country, but Pres. Richard Nixon actually imposed wage and price controls nationwide, a disastrous move that hid the workings of the market but did not eliminate it, and when the controls were finally lifted, resulted in runaway inflation, high interest rates and high unemployment.  You can read a bit about that by clicking here for an excerpt from the book Commanding Heights. 

Why do I mention this?  Because I saw this item in the Palm Beach Post's insurance blog about Allstate requesting a premium hike of 41.9 percent, after Crist more or less promised rates would be rolled back.  This is only the latest of requests from dozens of insurers for substantial rate hikes.  Pretending the state can central-plan or scream its way out of this mess is just whistling past the graveyard.  Pretending that selling property insurance in Florida is not risky and trying to manipulate the market, or create a fake state-run market, is destined to be as spectacular a flop as Nixon's wage and price controls.

Incidentally, when I poke fun at Mississippi AG Jim Hood, some folks actually take me on and stick up for him.  When I make fun of Crist, no one says boo.  Isn't there someone out there who thinks he's doing a great job?  What is that sound I hear? Crickets?

Posted By David Rossmiller In First Party Insurance
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I enjoy reading the blog A.M. in the Morning, although I doubt the author, Ana Maria, and I would agree on much other than what day it is. She also is a diary writer for the Daily Kos, a left-of-center political blog, which is where I saw this post about a guy self-financing some kind of documentary film project on Hurricane Katrina.   

What I found most interesting about the post, however, was a quote from Congressman Gene Taylor of Mississippi, which I reproduce below at the risk of once again drawing the ire of his policy director, Brian Martin.  Here's the quote: 

"People say ‘Well, gee. How is it the flood program loses $19 billion the same year that the insurance industry collectively cleared about $60 billion?’ Well, it’s no coincidence. The tax payers paid bills that the insurance companies should have paid."

Now, I have nothing against Gene Taylor, he looks like someone who fights hard for his constituents, but he seems to have developed a kind of tunnel vision as he pursues his multi-peril insurance bill that would make taxpayers responsible for federal wind insurance as well as the messed-up flood insurance program that Congress can't seem to fix.  So what I'm saying here is this quote needs Fisking. 

What has the fact that Congress, which includes Taylor, can't create a federal flood program with reserves and real actuarially sound operating procedures got to do with insurance industry profits? The National Flood Insurance Program owes $19 billion to the taxpayers because Congress makes it subsidize certain risky properties, many of which get flooded again and again and again. Its premiums are adequate to cover a normal year's losses, but the program does not operate with any concept of reserves, meaning the taxpayers are the reserves. 

What Taylor implies is that the $19 billion NFIP had to borrow from the Treasury to pay flood claims was so big because insurers didn't pay covered wind damage and instead paid out flood insurance damages through the Write Your Own program.  You can either do some quick math or read about some of the cases to see that this doesn't make sense across the board.  Take a well-known example, the destruction of the home of Sen. Trent Lott by Katrina.  He had a federal flood policy for the maximum $250,000 and federal contents coverage of $100,000.  He received the entire $350,000.  But his home was worth more than $350,000.  He claimed State Farm failed to pay him wind damage he was owed (his lawsuit was eventually settled on undisclosed terms).  If this is true, it does not amount to a transfer of private insurer wind payments to federal flood payments unless the damage Lott suffered from flood was actually less than $350,000.  

How do we know his flood damage was at least $350,000?  Well, he said it was when he accepted the check, and let's presume the man is telling the truth.  (By the way, some months back Lott said he was going to keep kicking insurance company fanny until the Reaper taps him on the shoulder -- but he must have sprained his kicking leg because I've hardly heard a peep from Lott lately, much less seen any insurance tails getting kicked by him).  In fact, everyone who accepted flood insurance checks said their home was damaged by flood at least in that amount.  So preliminarily, if what Taylor says is true, those people did not tell the truth.  I don't mean this to be accusatory, it simply is the logical conclusion of the Taylor paradigm. 

In addition, where is the proof of what Taylor says?  He has been harping on this point for more than a year, with Congressional investigations going on, and last I saw, Brian Martin says there is evidence of "dozens" of cases of improper wind-water payment transfer.  Dozens? Dozens don't add up to no $19 billion deficit!  In the mass of thousands upon thousands of Katrina flood claims, dozens is more likely attributable to errors on claims forms because adjusters were watching All My Children while filling them out.

Posted By David Rossmiller In First Party Insurance
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Remember that unholy mess down in Louisiana a few weeks back, that Landry case? That's the Valued Policy Law case where the Louisiana Court of Appeals got more lost than those documentary filmmakers in The Blair Witch Project.  They got so lost we're going to have to gather up their robes, have the hounds take a sniff, and send the dogs off into the swamp to find them.  If you want to refresh your memory and read about Landry, here is a post I wrote about it.  If you imbibe adult beverages, you might want to have one handy if you read the case.  Or two.  Three, tops. 

The Florida Supreme Court decided a Valued Policy Law case yesterday -- Florida Farm Bureau v. Cox -- that makes more sense.  Click here for a pdf of the court's opinion. 

The state supreme court quashed the decision of the First District Court of Appeal, which had held that the Valued Policy Law requires, in the event of a total loss of the covered property, that the insurer pay the full value of the policy if a covered cause of loss formed any part of the loss. The lower court had considered the 2004 Mierzwa decision, a case by the Fourth District Court of Appeal with the same reasoning, as controlling and binding.  The outcome of cases like Mierzwa was later changed by the Florida Legislature through amendments to the state's Valued Policy Law, but the changes applied only to the future, and not to events that had already happened, including the Cox lawsuit and any damage done in Florida by Hurricanes Katrina and Rita. 

The state supreme court -- I never say "the supremes," but after Randy Maniloff of White and Williams ridiculed this expression I stay even further away from it --  went back to a case from 1904 that considered the constitutionality of the Valued Policy Law, which had been enacted in 1899.  The analysis of the 1904 decision, the court said, showed that the intent of the law was merely to fix the value of the property.  As the U.S. Fifth Circuit pointed out in the recent Chauvin v. State Farm case, such laws were enacted to prevent insurers from charging a premium based on a high value for property, but then claiming the actual value of the property was less after a loss occurred.  The face value of the policy cannot be contested by the insurer in the event of a total loss.

The Florida high court -- dang, ever since Maniloff put down "the supremes," it keeps jumping into my head, I never even thought about it before -- pointed out that the Valued Policy Law says nothing about causation, and so imposing a causal analysis of covered vs. uncovered causes on the plain language of the statute is judicial reordering.  The court expressly disapproved of Mierzwa, which is now dead, or as Dickie Scruggs might say, "judicial toast."  By the way, I thought Justice Charles Wells did a fine job of writing a clear, reasonably concise opinion.  This is always to be commended in legal writing, as it happens too infrequently.

If you're interested in more about Valued Policy Law cases, here is a post where I wrote about Chauvin v. State Farm, where the court found similarly to the Florida Supreme Court.  Here is another post about the Turk v. Citizens Property case in 2006 from the U.S. District Court for Western Louisiana.  This post contains links to the Mierzwa case mentioned above, and to the Valued Policy Law statutes of both Florida and Louisiana. 

Incidentally, Maniloff's firm held their Coverage College a couple days ago, September 19, on International Talk Like A Pirate Day.  I wonder, did the introductory speech go something like this?  "Ahoy, coverage mateys, thar be much treasure in them thar insurance policies."  Adjusters and company side lawyers -- a suggestion for spicing up those denial letters.  Here's an English-to-Pirate translator that will come in handy.  For example, why not try "We regret t' inform ye that yer loss be nay covered under th' terms o' th' policy, ye scurvy landlubber."

Posted By David Rossmiller In First Party Insurance
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• 47 down, 1,949 to go.  State Farm has settled with 103 policyholders represented by the Merlin Law Group, 47 of whom had actually filed suit.  State Farm still faces nearly 2,000 lawsuits in Alabama, Louisiana and Mississippi.
• Up to 50,000 Louisiana recipients of Road Home grants for Katrina recovery find that they may have to pay up to 35 percent of the amount received for income tax.
• I read this story from the Dallas Morning News about State Farm and Allstate battling Texas insurance regulations and, to tell the truth, I can't quite figure what is going on.  It's a little light on comments from the insurer side, and I would suspect there are some market reasons for the so-called "runaway" premiums, but these reasons are not disclosed.  Here's the story's lede: 

Four years after the Legislature took aim at runaway premiums for home insurance, two of Texas' biggest insurers are battling state efforts to lower their rates, and sponsors of the 2003 insurance reform law say homeowners are still paying too much.

Are the premiums really "runaway?"  I mean, I bought some oranges recently, I couldn't believe the price, it was something like a dollar an orange.  Does it seem appropriate to talk about "runaway orange prices"? 

• Katrina has spurred the growth of CAT bonds, according to this story by Becky Mowbray in the Times-Picayune.

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The complaint in this case, Hohan v. State Farm, is one that was filed just before Louisiana's statute of limitations expired late last month.  This case presents an interesting allegation: under a federal flood policy adjusted by the insurer through the Write Your Own program, State Farm paid Hohan some $86,000 while his neighbor received in excess of $162,000, although Hohan and his neighbor own adjoining halves of a double townhouse unit.   Allegations are merely that -- sometimes they turn out to be true, sometimes they turn out to be partially true, sometimes they turn out to be strangers to the actual facts. But what's more interesting is the theory pleaded:

Pursuant to a directive issued by the director of the National Flood Insurance Program State Farm failed to treat the Plaintiff in the same manner as all other residents of the same geographic area, when it failed to tender the Plaintiff's policy limits.

The complaint makes a claim for bad faith damages under Louisiana statutes.  I haven't seen this particular theory before, whether the damage payment was correct or not is one thing, but if your damage is different from someone else's, is an insurer really required to pay you the same amount merely because that's what your neighbor received?

I saw this Mike Kunzelman story recently about another case before the Fourth Circuit Court of Appeal in Louisiana.   Like the U.S. Fifth Circuit in In Re Katrina Canal Breaches Litigation, the Louisiana Court of Appeals is considering a lower court ruling that said a flood exclusion was ambiguous in the context of man-caused flooding as opposed to "natural" flooding.  Here's an excerpt of the story:

Sher, who lived in one of the five units at his apartment complex, rode out the storm at home and blames much of the damage to his property on water from levee failures in Katrina's aftermath.

Lafayette [Insurance Co.] paid Sher about $2,700 for wind damage, but he estimates his home sustained a total of $223,488 in damage that should be covered.

In March, a jury awarded Sher $369,077 for property damage and lost rent, plus $184,538 in penalties. Giarrusso also ordered Lafayette to pay $258,728 in attorney fees.

Lafayette says its policies cover damage from wind but not flood water. Water from a levee breach is clearly excluded from coverage, whether it's a man-made event or an act of God, the company argues.

"No non-flood policy has ever been called on to cover flood damage,'' Lafayette attorney Howard Kaplan told a five-judge panel of the 4th Circuit, which didn't immediately rule on the company's appeal.

Sher's attorneys argue that water damage from a man-made event, such as a levee breach, aren't specifically excluded from coverage under the company's policies. The U.S. Army Corps of Engineers has conceded that the city's levees were poorly designed and constructed.

James Garner, one of Sher's attorneys, said Lafayette could have written policy language that specifically excluded damage from a levee breach from coverage, but didn't. "They wrote the contract,'' he said. "It's their job to make it clear.''

Sher's lawyers cite a ruling last November in New Orleans by U.S. District Judge Stanwood Duval Jr., who sided with policyholders against several insurance companies and ruled that policy language excluding flood damage from coverage was ambiguous. But the 5th Circuit overturned Duval's decision and ruled that water from a levee failure is a "flood'' and is unambiguously excluded from coverage.

Lafayette attorney Ralph Hubbard said the issues raised in the federal appeal are virtually identical to those in Sher's case.

"While you have your own road to follow, the 5th Circuit has given you a road map that will show you the right way,'' Hubbard told the 4th Circuit panel.

The Fifth Circuit's opinion in Canal Breaches was probably the best of the court's recent Katrina decisions, but even in that case, as I noted at the time, the court misunderstood when a cause is independent of another cause. (Scroll down to the sixth paragraph).  

Posted By David Rossmiller In Bad Faith , First Party Insurance
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I said I was going to make some further observations on the Fifth Circuit's decision in Leonard v. Nationwide this week, but unfortunately yesterday afternoon a construction crew apparently ruptured a natural gas line in downtown Portland, which forced the immediate evacuation of my building.  I am not making this up.  Like most so-called emergencies, I assumed this was merely an instance of people panicking about little or nothing, and so I intended to continue working, but I was told in unmistakable terms by my firm's safety committee that the evacuation order also included me.  Since my secretary is on this committee, and since she had a walkie talkie, which lends a certain authority to any pronouncements and potentially enabled her to report me to whomever was on the other end of the walkie talkie, I thought it best not to argue and to leave.  Regrettably, however, while I remembered to grab my keys, I left behind a stack of Leonard briefs I have been consulting during the odd free moment.  Therefore, I'm still not ready with the post. 

But there are many other things to discuss, and among these are two recent papers I have become aware of that analyze insurance causation theory in Canada.  These papers, Proximate Cause in Insurance Law -- Before and After Derksen and Causes, Exclusions and the Search for Meaning in an Ambiguous Universe, by Anthony Saunders, a lawyer in Vancouver, B.C. who is also an adjunct law professor at the University of British Columbia. These papers were eye-opening -- from my first reading, it appears that the Supreme Court of Canada has endorsed a concurrent cause methodology for property insurance analysis, one which would send U.S. insurers dashing down the hallway, hysterically shrieking, to be later rounded up by the walkie talkie-wielding safety committee.  Here's what I mean:

Derksen seems to have brought us to a state in which all causes are, by default, to be treated as having equal legal relevance, and where no cause is by itself sufficient to overcome the effect of any other cause.  The broad reading of Derksen is that the existence of any causal connection between a peril or a state of affairs that is covered, no matter how remote or seemingly inconsequential, and a loss, may effectively nullify any exclusion clause that does not incontrovertibly apply to that remote risk.

You might want to re-read that paragraph and let it soak in for a moment.  It's a tort analysis, pure on simple, overlaid on property insurance causation, the dream of folks like former Justice Stanley Mosk of the California Supreme Court, the Big Rock Candy Mountain of policyholder lawyers.  Read the papers for further details and analysis.

UPDATE: the link to the second article was broken, it has since been fixed.

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Remember that article I said I wrote on Katrina litigation and anti-concurrent cause language?  You were beginning to think I was just making this article up, weren't you?  But no, and here is a pdf of the article to prove it.  If the ink on any of the pages looks blurry, it's from my blood, sweat and tears. 

The actual publication does not come out until next month, so this is a special sneak preview because of the importance and topicality of this issue.  Please feel free to e-mail me at dpr@dunn-carney.com if you have confidential comments or want to discuss off the blog.  As those of you who contact me know, I keep the information to myself unless you say otherwise and I keep mum about your identity -- as a lawyer and a former reporter, I've gotten pretty good over the years at keeping secrets. Folks are also welcome to call me, if they can find me at my desk, at 503-306-5311.  Also, it wouldn't hurt if someone would suggest to the Fifth Circuit that they read the article. 

Finally, here is something I promised Lexis I would post about the article: 

Copyright © 2007 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.

This article is also the subject of a New Appleman's™ Insurance Coverage Teleconference: The Impact of Mass Catastrophies on Insurance Coverage to be held on October 16, 2007. For information on the teleconference, here is a link. (For what's it worth, I looked at the cost to sign up and thought it was priced pretty reasonably, and like my father before me and many a NoDak, I'm noted for being tight with a buck).

Posted By David Rossmiller In First Party Insurance
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Judge Senter ruled yesterday that State Farm waited too long to object to allegedly unethical conduct of attorney Dickie Scruggs, and denied the insurer's motion to disqualify Scruggs, his law firm and other attorneys in the Scruggs Katrina Group from representing policyholders against State Farm in about 170 pending cases.  Here is a pdf of Judge Senter's order, typically brief, to the point and well-written.  I wish more judges wrote like him.

Here's a key part of the judge's ruling:

A motion to disqualify should be filed at the earliest practical opportunity.  It is not permissible to hold this right to relief in reserve in order to assert the right at a tactically advantageous time and thereby put an opponent at an unfair disadvantage . . . .  I am of the opinion that regardless of the merits of State Farm's claims of misconduct on the part of Scruggs and his law firm in connection with the Rigsbys, a matter on which I express no opinion, State Farm's delay of over a year from the time it learned of these actions before raising the issue of disqualification constitutes a waiver of its claim that Scruggs and his firm should now be disqualified . . . .

For those who are having trouble remembering what this is all about, it's one of the most fascinating of the Katrina sideshows, and you can read more about it here.  If you need more background on how Scruggs' troubles began with his representation of the "whistleblower" Rigsby sisters, read this post or this post, or just type "Rigsby" in my blog's search box and hit enter.

This motion to disqualify, of course, brought about the supplemental briefing by Scruggs that I wrote about in this post.  Featured as an exhibit was the now infamous and ridiculed letter from Mississippi Attorney General Jim Hood to U.S. Attorney Alice Martin asking her not to prosecute Scruggs for criminal contempt because Scruggs was Hood's "confidential informant." 

Posted By David Rossmiller In First Party Insurance
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When a very good reporter like Randy Diamond of the Palm Beach Post is writing the following:

In the wake of Hurricane Katrina, many insurers have pressured state lawmakers to implement what is known as Anti-Concurrent-Causation Clauses. Insurers can use the clause to refuse to pay for wind losses on homes that had also experienced flood damage. The purpose of the clause is to override coverage for an insured claim if, at or about the same time, an uncovered event occurs. Insurance policies don't cover flood damage so insurance companies can use the clause to deny a claim . . . . 

then you know there is a problem with the way insurance companies are being perceived by the public regarding Katrina claims, and the way anti-concurrent cause language is being explained.  Here's a link to Randy's story.  You know what I think about this, just a few days ago I wrote a post on this subject that was, as they say in NoDak, as long as an ex-wife's memory. 

Last week, I said I was going to write another post on the Fifth Circuit's Leonard decision, and specifically address some points raised in a very good post on the Merlin Law Group's blog.  I intend to do that, but I'm not ready just yet, I'm still studying a few things in the briefs.  Now Chip Merlin -- at last they put a name on their posts -- has written another good post on anti-concurrent cause language and the Tuepker oral arguments at the Fifth Circuit.  I part ways with some of this analysis, but it is good analysis nonetheless.  I'll explain in greater detail later this week.  

In yet more anti-concurrent news, I am told that the arrival of the Appleman's anti-concurrent cause article I wrote is so close that, if it was Santa Claus, we could hear sleigh bells jingling.   

Posted By David Rossmiller In First Party Insurance
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This story from National Underwriter about the Fifth Circuit's Leonard v. Nationwide decision has some interesting quotes from Brian Martin, policy director for Rep. Gene Taylor, D-Miss., and because when Martin speaks on insurance matters it announces the start of the Silly Season, this stuff is in serious need of an industrial-strength Fisking. I will get to that by and by, but first I need to correct some misunderstandings in one of first paragraphs of the story.  Here is the paragraph: 

The anti-concurrent causation clause is used to override a damage claim from a covered cause such as wind when an event such as flood, which is excluded in the policy language, occurs in the same time period.

A couple things (those of you who have heard all this before can skip down to the Fisking):

I.  Let's start off with preliminaries so we have a frame of reference.  Now, what follows is a little technical but not all that hard to grasp, and it must be clearly understood or these mistakes will get perpetuated from one generation to another down to the end of time. We owe it to our children and our children's children to make it stop right here!  Anti-concurrent cause language contractually defines the causation analysis that must be used in evaluating damage.  It alters the causation analysis so that neither efficient proximate cause (the traditional analysis used by courts in property insurance) nor concurrent cause analysis (borrowed from the field of torts, used by a few states regarding property insurance) can be selected as the methodology. 

Anti-concurrent cause methodology is not, strictly speaking, an analysis of the damage claim but rather of the cause of the "property loss."  Property loss is the initial requirement, under the contract, for further analysis.  Once it has been established that property loss occurred, the next step is to see what kind: has more than one type of loss occurred to the property? The inquiry then turns to what is the cause or causes of the loss -- does each distinct, separable type of damage have one cause, or does it instead have more than one cause?  If each kind of damage has just one cause, this is called single causation and anti-concurrent cause language is not needed, because it is operable only where multiple causes contributed to the same kind of loss to the property. 

Remember, damage to a house does not necessarily represent just one loss of property -- if damage is distinct, there can be two or more property losses, each due to separate causes.  "This must be distinctly understood," as Dickens said of Marley's death at the beginning of A Christmas Carol, "or nothing wonderful can come of the story I am going to relate."  If this is not understood, all that one says about anti-concurrent cause language is quite possibly going to be seriously wrong.  With all due respect to the judges out there, it has been a bad couple years for judicial analysis of anti-concurrent cause language, and the Fifth Circuit's Leonard analysis, while not a fiasco, contained elements that were the product of false doctrine, unclear thinking or other error.  Leonard creates problems for future litigants and judges, and I hope the incorrect elements of the case's causation analysis are not replicated in the Fifth Circuit's upcoming decision in Tuepker v. State Farm.   Fifth Circuit, you still have a chance to set things right.       

II.  It is not correct to say that anti-concurrent cause language overrides a covered damage claim, as the story says. That makes it sound like the language is some final trapdoor for the insurer to trick the policyholder out of what is rightly his, after he has been lucky enough to escape the insurer's prior snares.  In this context, it is improper to speak of damage or a claim that is covered until you are done with the causal analysis and damage turns out to be covered.  Instead, at this stage of the analysis we are concerned with whether causes themselves are covered or uncovered.

Obviously, if discreet property loss is caused by multiple covered causes, there is no problem, it gets paid, under any type of analysis. Likewise, if the loss is caused by multiple uncovered causes, the result of the analysis is fairly obvious under any type of causal analysis that could be used.  Also, if loss is due to one single cause, the outcome of the analysis is usually pretty clear.  Under none of these scenarios is there a call to resort to the anti-concurrent cause language.  But when one distinct property loss has two or more causes, at least one covered and at least one uncovered, anti-concurrent cause language defines the causation methodology. 

III.  Losses are not concurrent merely because they happen at the same time or in the same location.  Don't reach for that  dictionary, it's not going to help.  In the sense we are talking about -- legally significant causes -- concurrent refers to losses that result from causes that are independent of each other but combine to create the same damage.  Sequential losses are those that are dependent on one another, like dominoes, in causing the same damage.  Both are often broadly referred to as concurrent causes for purposes of this sort of analysis.

Consider an example: your neighbor, a dump truck driver, accidentally jams his truck in reverse while flooring the gas and caves in the side of your house.  At exactly the same moment, his wife absent-mindedly flips her cigarette into an open 250-gallon tank of gasoline in their back yard, and the explosion sets fire to your roof.  Simultaneously, a nearby dam collapses and the flood sweeps away your home. I cannot stress too strongly, these are not multiple, concurrent causes of the same loss in the sense we are talking about here!  They are single causes of single losses. The fact they occurred at exactly the same time to the same house might present problems of allocating or distributing the damage between the causes, but it does not engage the anti-concurrent cause provision. The fact that the flood destroyed your house does not mean the two other, covered causes of loss stop being covered.   The uncovered cause must be a "but for" cause of the same property loss for the anti-concurrent cause language to be activated.  (Yes, it is true, some might claim the flood itself is a product of concurrent forces and therefore that the flood damage has more than one cause, but let's be satisfied with making this point and leave that issue for another day). So I repeat, three individual separate causes, leading to three distinct kinds of property loss, two of which are covered and one of which is not.   

All right, that's enough of that for now.  I certainly don't want to pick on the National Underwriter reporter, who does a fine job and wrote a good story.  I'm just sayin'.  If I were writing the same kind of quick explanation for a newspaper or trade magazine, I probably would write it something like this, but that's just me:

Anti-concurrent cause language in property insurance policies is intended to prevent property damage that is due to uncovered causes, such as flood or earthquake, from becoming covered when covered causes contributed to the same kind of damage. It does not prevent losses from being paid when covered causes of loss, such as wind, result in different or distinct damage.

Now, on to statements made by Brian Martin. Keep in mind his boss is peddling a bill that would add wind coverage to the National Flood Insurance Program, and a little outrage wouldn't hurt its chances.  Here's how the story quotes him from a press release: 

In his comments, Mr. Martin said that in its decision, “the appeals court is saying it is okay for a company to sell a policy that is likely to be worthless for a major hurricane if you also have flood risk.”

 He added, “If the wind insurance does not cover wind damage, that means it is impossible to buy insurance and know that you are covered.”

“The flood policy is not supposed to pay for wind damage,” Mr. Martin added. “Congress should ban any company with an anti-concurrent causation clause from participating in the flood program. I think this also helps our case that the antitrust exemption has to go and the federal government needs to take over regulation of insurance. Consumers and taxpayers need federal intervention.”

All right, where to begin?

• "Worthless for a major hurricane if you also have flood risk." In the bench trial in the underlying case, Judge Senter awarded the Leonards an additional small amount on top of the roughly $1,600 Nationwide had paid them for wind damage.  The Leonards dropped their appeal of this and all other issues, and so this stood up in the Fifth Circuit's opinion.  So the policy wasn't worthless for wind, was it?  It just so happened the trier-of-fact found that little wind damage occurred. Obviously the policy was not worthless for wind coverage where there was also flood risk. 
• “If the wind insurance does not cover wind damage, that means it is impossible to buy insurance and know that you are covered.”  In Katrina litigation, time and time again, insurance companies have taken the position that wind that is a separate cause of a separate loss is covered.  So this statement is a false hypothesis.
• “The flood policy is not supposed to pay for wind damage.”  This is a hobby horse Martin, Taylor and some others have been riding for months. According to them, insurance companies failed to pay covered wind damage and instead paid out the damage under federal flood policies they adjusted under the Write Your Own program of the National Flood Insurance Program.  So far the proof has been underwhelming.  According to another story in National Underwriter, an interim report to Congress by the Department of Homeland Security found no evidence in support of these assertions. Note that the story says Martin claims to know of "dozens" of cases where this happened.  Is that all?  He's been claiming for months this was widespread, pervasive, all-encompassing.  Dozens doesn't even make a rounding error in the thousands upon thousands of Katrina flood claims adjusted. 
• “Congress should ban any company with an anti-concurrent causation clause from participating in the flood program."  Since anti-concurrent cause language has not in fact been used to deny wind coverage in the overwhelming majority of Katrina claims, this statement makes zero sense.  In addition, if you banned the companies with anti-concurrent cause language from the flood program, you'd be left with one or two companies.  Is that smart public policy?  They are not going to rewrite their property insurance policies merely to be able to participate in the flood program.
• "I think this also helps our case that the antitrust exemption has to go and the federal government needs to take over regulation of insurance. Consumers and taxpayers need federal intervention.”  Right.  He thinks this, and some other people think that a spaceship is coming to pick them up to rendezvous with a magic comet.  What has anti-concurrent cause language got to do with the limited antitrust exemption?  What aspects of insurance regulation is the federal government going to take over?  Approving policy language?  Approving rates?  Would the federal government overturn the acts of 50 legislatures and insurance commissioners?  What about the common law precedent in each jurisdiction, would that just be done away with? As I said, the Silly Season is once again upon us. One final point: doesn't Martin work for Taylor?  Why is he putting out a press release in his own name instead of in Taylor's name?

I might also note that I don't fully agree with the Robert Hartwig quote in the story either.  Here's what he said:

But Robert P. Hartwig, president of the Insurance Information Institute, disagreed. “The decision does not back Mr. Martin,” Mr. Hartwig said. “It contradicts his conclusion and backs the insurance industry’s position that 'purchase of a flood insurance policy along with a homeowners’ insurance policy will provide complete protection to homeowners in the event of a catastrophic event.’”

Complete, unless your house is worth more than $250,000, which is the policy limit for federal flood insurance. 

Posted By David Rossmiller In First Party Insurance
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Insurers have been successful in their Katrina appeals to the Fifth Circuit, and given the appellate court's analysis in two big cases -- Leonard v. Nationwide and In Re Katrina Canal Breaches Litigation -- I would flat out drop my red Yellowstone mug of decaf with the white moose silhouette in amazement if the result were any different in State Farm's interlocutory appeal of Tuepker v. State Farm, even though none of the three-judge panel in this case was on the panel for either of the other two cases. 

I read the briefs again, and I have a very hard time seeing it go the Tuepkers' way.  Here is their brief -- as you may know, Dickie Scruggs is their attorney.  Here is State Farm's brief. The Tuepker brief deals a lot with their supposed reasonable expectations that they would be covered for all hurricane damage -- a tough sell, considering that the Water Damage exclusion lists "surface water" and "waves ... whether driven by wind or not" as uncovered, not to mention that they issue a pretty fair number of federal flood insurance policies in coastal Mississippi to supplement homeowners policy coverage and people know this.  Why else would there be flood policies?

Just to recap, the State Farm brief is not saying wind damage that can be proven is uncovered because of the policy's anti-concurrent cause language.  State Farm admits that that damage, if proven as a distinct loss due to a distinct physical force, would be covered.  Just in case someone has not heard me say it, anti-concurrent language applies only to multiple causes of the same loss.  That didn't happen here.  The loss, in cases like the Tuepkers (assuming they can prove separate wind damage), involves multiple causes -- wind and storm surge -- but the damage is not the same.  Under this scenario, each force caused its own distinct property loss.  Multiple causes of separate loss is another way of saying each loss has a single cause, therefore there is no need to bring anti-concurrent language to the table. Within a few days you will be able to read me talk about this for 42 pages, if you care to, when I get back the final printer's proof of my Appleman's anti-concurrent article.  As usual, I did my best to add a little entertainment value to it.    

Here's a story previewing the oral argument, by Mike Kunzelman of the Associated Press.  Here's another story by him reporting on the arguments after the fact.  Which reminds me, there has been some excellent daily reporting done on Katrina litigation and developments, and some of the very best has been done by Kunzelman, by Anita Lee of the Sun Herald and by Becky Mowbray of the Times-Picayune. Folks shouldn't underestimate how tough it is to do what they do, trying to figure stuff out and explain it to people in a simple way under tight deadlines.  They sure have made it easy for me to follow what is going on.  

Here's a take on the case by Martin Grace, the RiskProf, citing the first Kunzelman story. He's right, it does bring a smile to your face to hear the Tuepkers' argument about how crafty State Farm was in hiding the secret intent of their policy language.  Why, not since Edgar Allan Poe's The Purloined Letter has anyone so cunningly hidden something in plain sight!  Incidentally, if you have not read this short story, I highly recommend it, it is one of Poe's best and, along with two other Poe stories about C. Auguste Dupin, created the archetype for the brilliant amateur detective solving cases that befuddle the rather obtuse regular police. Better than the later Sherlock Holmes, and that's saying something.  (I love Poe -- I studied all his works in a Major Writers class in college.  Did you know that his poetry was looked down upon by contemporaries like Emerson, who called him "the Jingle Man"?  (Scroll down a bit on the link to see).  His poetry is not T.S. Eliot or Yeats for certain, but I like it.  Emerson, on the other hand, never did much for me).  

One final thing: all this talk of poetry makes me think of one of my favorite poems, one that is poignantly apropos when considering all the losses Hurricane Katrina caused -- W.H. Auden's Musee des Beaux Arts.  Don't feel put off by its fancy-shmancy title, it is a wonder of expression on the subject of human suffering -- see if you agree. 

Posted By David Rossmiller In First Party Insurance
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The folks at the University of Virginia Law Review sent me a link a few weeks back to this short article on Hurricane Katrina insurance issues by Kenneth Abraham, a law professor at Virginia. I think highly of Prof. Abraham's work, and cited his writing on mandatory rules, default rules and the role of standard form contracts in my upcoming anti-concurrent cause article in Appleman's.  (And yes, it is indeed coming shortly, I got the final proof from the printer yesterday and have made the last corrections, it should be all done shortly and up on this blog). 

This Abraham article contains an interesting assertion about actions that were taken by courts and public officials to create an incentive for insurers "to settle Katrina claims rather than to force the courts to confront head-on the legal issues these claims pose." One of the cases cited to support that is Broussard v. State Farm, a case from January where State Farm was assessed punitive damages for failing to pay wind damages when its expert had evidence that some covered wind damage may have occurred to the homeowners' roof.  (The case is on appeal to the Fifth Circuit).  The threat of punitive damages, of course, is always an incentive to settle, and there are numerous other incentives for insurers to settle, such as avoiding a jury at all.  However, I don't believe the judge or jury in this case took their actions with the intention of creating an incentive for State Farm to settle other cases -- they may or may not have got the law wrong, but I don't suspect them of finding other than the way they actually saw the law and the facts in this individual case.  

You could point to the fact that cases did begin to settle after the Broussard verdict, but in reality, cases would have begun to settle even if the decision went the other way -- they merely would have settled for less money, because the valuation of the case would have been different.    The effect may have been to create an incentive to settle for more money, but to imply that their actions were intended to create that incentive implies the verdict would have been otherwise had they lacked that macro desire.  This I think is an overly simplistic view of jury dynamics and is not an accurate picture of the way judges think either.  And so I don't accept this as evidence of the premise, but as you know, I accept the premise itself that numerous political, legal and public relations maneuvering was obviously designed to create an incentive for insurers to settle for higher value.  That is largely what I have been writing about for the past eight months.  And that is all Trent Lott's threat to repeal McCarran-Ferguson, for example, ever was, a threat designed to raise the stakes for insurers -- it was more or less an empty threat, because most large insurers wouldn't care if it was repealed, but it undoubtedly raised concerns about what kind of federal regulatory idiocy might arise from the debate once lawmakers began showing off for the cameras, trying to pretend they know something.

Here is the final paragraph of the Abraham article:

In the field of insurance, legal rescue of this sort is thus a double-edged sword. The price that is paid to ensure that current policyholders have insurance for their losses may be that future policyholders find it difficult or impossible to obtain coverage at current levels or for current premiums. As a result, coverage becomes scarce and premiums skyrocket. This phenomenon occurred in the 1980s in connection with insurance against liability for pollution, and now it is occurring again in the homeowners insurance market. The whole phenomenon poses a public policy dilemma, for it pits the interests of those who have current losses against the interests of those who need coverage in the future. Yet as so often happens in our system, that dilemma is being addressed obliquely, in the language of rules governing the interpretation of insurance policies and by threatening legislation that will address broader or different issues. This is how the seemingly simple question of whether the Katrina losses were caused by wind or flood has been transformed into a far more complex problem.

For the reasons I explained above regarding the Broussard case, I don't prefer the phrase "legal rescue" to describe the phenomenon of courts and juries finding coverage in instances where insurers insist their policies were drafted with no thoughts of coverage.  The implication is that legal decisions would have been different had Katrina involved 170 claims instead of 1.7 million.  That I do not believe -- almost all law that insurers regard as bad law came not out of mass catastrophes but merely out of isolated cases. 

The article linked to above does not include the footnotes, but this pdf of it does.  The pdf is in a typeface and style that is harder to read however, so you may want to use it only for checking the footnotes. 

Posted By David Rossmiller In First Party Insurance
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I found this NY Times story on another blog, it's a recap of some of the stuff we've been talking about here for the last eight months.  Nothing earth-shattering, but a good story, thought you might be interested.  (I'm not sure what's up with the boldface type, or what the point of it is, but it's not my doing).  I'm well-versed in just about everything the story talks about, but I admit this paragraph was news to me:

The usually eye-glazing topic of homeowners insurance is so incendiary now that State Senator Walter J. Boasso, a Republican turned Democratic candidate for governor, has proposed jailing insurance executives found to have acted in bad faith.

Holy Toledo, only prison sentences?  Why not death by stoning?  You see how this stuff gets carried away?  You can read the Robert Hartwig quotes in the story -- all due respect to Hartwig, who is an excellent, knowledgeable spokesman, but read the quotes objectively, they won't convince anyone who isn't already in the choir. Hartwig isn't sufficient.  I'm not privy to insurers' brand research -- maybe it shows that Katrina really didn't hurt them, or it hurt everyone across the board.  But I've said it before and I'll say it again, insurers -- by and large, there are some exceptions -- have acted ineffectively throughout the Katrina aftermath in the public arena, and got played by people like Dickie Scruggs and Jim Hood who used that arena more adeptly.  Even Trent Lott connected with a few punches, until his legal and media offensive collapsed under the weight of his own absurdity, and the tank fueling his outrage went dry after his own lawsuit was settled.

Posted By David Rossmiller In First Party Insurance
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The Louisiana Court of Appeals handed down a decision yesterday in a Hurricane Rita case -- one of my Louisiana friends called it "causation Cajun style."  I hope not: the court's opinion is very confused on several causation issues, and this opinion, despite lingering for 29 pages, is remarkably opaque and seems to have some kind of allergic reaction to getting to the point.  

Here's a pdf of the case, Landry v. Citizens Property Ins. Co.  Here is a pdf of the dissent, which is more to the point but makes just as little sense.  I spent much of last night writing about the Leonard v. Nationwide decision from the U.S. Fifth Circuit, and was going to leave this case for another day, but since I won't be posting until Tuesday, I may as well say what I have to say today.

The case is about whether the Louisiana Valued Policy Law requires an insurer to pay the whole value of a house when a covered cause contributes to the total loss of the home, or whether the insurer must pay only the portion of the loss attributable to the covered cause.  Things start off badly in this decision and don't get much better, and honestly, I'm not quite sure how the court answered the question.

Here are some things I see wrong with this case.  

• The first sentence of the opinion contains several conceptual errors in discussing causation.  It poses the issue of whether the law requires full payment "when concurrent perils (covered and non-covered) combine, during the course of a single climatic event, to render the home a total loss."

 1.  The first error is that merely because a house is destroyed by two or more forces does not make the forces concurrent.  Property insurance does not insure against destruction of a house, it insures against direct physical loss to property.  Multiple forces can each cause separate damage to property.  In fact, in the overwhelming majority of Katrina and Rita cases involving multiple forces -- wind and flood -- they created separate damage and were therefore single causes creating single damage.  Concurrent forces are those that each contribute to the same damage, which would not have occurred but for one of the forces. 

2.  It talks of concurrent causes without ever again mentioning in the opinion that the policy at issue contained an anti-concurrent cause provision.  That's like writing War and Peace and forgetting to talk about war. 

3.  The sentence talks of the perils "combine."  What if they didn't combine, but instead acted separately, and the house was still destroyed? Does that make any difference?

4.   The sentence mentions "a single climatic event" as if that has anything to do with the causal analysis.  It doesn't.  For one thing, concurrent perils by their nature are considered independent in origin and force, working together only to cause certain damage, which would not have occurred in the absence of each.  For another, sequential perils also need not stem from a single "climatic event." 

5.  There is no hint in this sentence or elsewhere that the court considered the possibility that the causes of damage to the house were independent of each other and caused separate, distinguishable damage.  The fact that I steal $10 from you and my brother steals $20 from you means you have lost $30, but it does not mean either that we worked together or that we caused the same damage. 

• The court apparently did not want to say the Valued Policy Law requires a payout when a total loss involves a covered loss that is responsible for only a small part of the total loss. On the other hand, it didn't want to say that where the covered loss is not completely responsible, the payout should be in proportion to the extent of the damage attributable to the covered cause.  So it came up with an absurd formulation involving efficient proximate cause.  The best I can figure this out, if there are multiple causes, the court is supposed to search for the dominant one and if that one is covered, the total value must be paid out.  Good Lord! Don't they realize that the damage to the house was most likely two single causes of separate damage?  With single causation you don't use the efficient proximate cause doctrine, which is only for multiple causes of the same damage.  Ah, you say, but the Valued Policy Law talks of total loss, so that creates a different causation matrix: the loss is, by statute, considered indivisible when it is total.  To which I say, even this court admits the statute is not a causation statute, it is only a value statute.  So that argument cuts no ice.
• If the court is going to view the damage a unitary whole caused by multiple forces, what role does the policy's anti-concurrent language play?  Does the statute overturn it? This would have been a question to ask and answer, but it is not mentioned in the opinion?
• Did the court consider this absurdity? Consider this example: a house is 99 percent destroyed, one-tenth of the damage caused by covered wind and 90 percent by excluded flood.  The loss payout would be only 10 percent.  However, if the property is 1 percent more destroyed, so that the loss is total, the insurer will owe all the value of the house if the wind, apparently, is determined to be the efficient proximate cause.  Huh? Efficient proximate cause of what? The 10 percent, the 100 percent?  The formula suggests that if the wind is the dominant cause of loss, or in other words accounts for more than 50 percent of the damage, the total value should be paid out. But don't they realize that saying that distinct damage occurred from a separate cause is incompatible with an efficient proximate cause analysis?
• The court said the purpose of the Valued Policy Law was "to prevent insurers from placing  clauses and exclusions in the insurance contract which, in effect, would reduce or nullify their contractual responsibility to fully indemnify insureds for losses caused by specified perils."  (Emphasis in original).  No authority for this statement is given.  How does that square with the U.S. Fifth Circuit's recent Chauvin decision, another Valued Policy Law case, where the court quoted another Louisiana court of appeal, the Fourth Circuit, as follows:

The legislative intent of these laws was to prevent over-insurance and other abuses, that is, to keep insurers and their representatives from writing insurance on property for more than it was actually worth.

A second reason for valued policy laws is to encourage insurers and producers to inspect risks and assist prospective insured in determining insurable value of properties  . . . . It follows that failure of an insurer to inspect a risk for valuation purposes can lead to over-insurance and can product a moral hazard as well.  In other words, if a building is insured for more than its actual worth, an insured might be indifferent about loss prevention.  This situation might even give an insured incentive to intentionally cause damage to his structure. 

(I've written about the Chauvin case on this blog, for more analysis and a pdf of the decision, just use the blog's search feature).

That is not at all like the justification for the law given by the Louisiana Third Circuit in Landry.  Which do you think comes closer to the actual reason for such a law? 

Much more could be said, and maybe next week I will have additional points to make. 

Posted By David Rossmiller In First Party Insurance
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The Fifth Circuit yesterday, in the Nationwide v. Leonard appeal, reversed Judge Senter's ruling that the anti-concurrent cause language in the Nationwide homeowners policy was ambiguous. Here is a pdf of the opinion.  Here's an Associated Press story about the decision.

The Fifth Circuit reached the result I agree with, but the court said too much.  Its reading of the contract language was right, but its causation analysis was not entirely correct.  The court unnecessarily spent time talking about storm surge as involving concurrent causes -- covered wind and uncovered flood.   In saying this, it was as if the court didn't pay any attention to its later analysis of the flood exclusion, which clearly classifies "flood, surface water, waves . . .  whether driven by wind or not" as excluded water damage.  As the court said, storm surge has been held by many courts to fall within this exclusion, and all things within the definition of the exclusion are water damage, or if you prefer, flood.  All these things, therefore, are one cause.

So we can see the court is dead wrong when it analyzes storm surge as being the product of concurrent causes.  Perhaps in a philosophic sense it is correct, perhaps not, that wind that drives waves is two forces or two causes.  In this philosophic sense, I still see flood as flood, whether it human negligence, earthquake, wind or some other factor can be said to be in the causal chain, but I can see the argument for the other side.  But we are not talking about philosophy with this case, we are talking about the contract language.  There is absolutely no need to discuss storm surge as involving concurrent forces once you accept that it is flood.  By definition, it becomes one force, one peril, one cause.  It will only confuse others, and perhaps the court itself, by trying to get fancy with a causation analysis that can't lead anywhere. 

Before looking more closely at this causation analysis, let's recap the underlying case and its reasoning. The Mississippi home of Paul and Julie Leonard was extensively damaged by high winds and then by storm surge flooding during Hurricane Katrina.  Nationwide paid the Leonards some $1,667 for wind damage, and said the rest of the property damage was caused by excluded flood.  In the end, in a bench trial Senter agreed with that formulation with some minor revisions, and he also said the Leonards' insurance agent was not liable for alleged misrepresentations, which the Leonards would not have been justified in relying upon had he made them, because the policy clearly excluded flood damage.  Senter also got it right that storm surge is just another name for excluded flood, and the fact that wind is involved does not change the fact it is defined as flood -- one cause, in other words.  However, where I have differed with his underlying opinion is that he said the anti-concurrent cause language that leads in to the flood exclusion was ambiguous, because, in his view, it would mean that even just an inch of flood would remove coverage for a vast amount of wind damage. 

Here is the anti-concurrent language that precedes the flood exclusion:

1. We do not cover loss to any property resulting directly or

indirectly from any of the following. Such a loss is excluded even if

another peril or event contributed concurrently or in any sequence

to cause the loss. . . .

Now, perhaps where Judge Senter went wrong was in not seeing the hypothetical wind damage and the hypothetical flood damage as causing separate "loss to property," as the clause says.  (Remember also that the coverage grant of the policy covers "accidental direct physical loss to property").  If they cause separate damage or loss to property, they obviously have not caused the same damage and each is a single cause of a single property loss.  The overall damage to the house itself is not the loss, in this sense, as long as individual separate forces inflicted unique damage. In the hypothetical that Judge Senter posed, anti-concurrent language would not come into play, nor would the situation he worried about -- lack of payment for covered wind damage -- have occurred.  Even if it was relevant, the anti-concurrent language merely says that the excluded causes following it are excluded regardless of other causes, it does not say that property damage that is separately caused by a covered cause becomes uncovered merely because it occurred at the same time as the other damage.  Concurrent does not connote proximity in time, it means that two causes combined to create the same damage, and the damage would not have occurred but for each.  In the sense the policy speaks of, concurrent therefore means multiple causes of the same damage.  Where single causes result in single damage, even if they occur at or about the same time, there obviously are no multiple causes and it is not necessary to consider the anti-concurrent cause provision.

I had hoped this would get straightened out by the Fifth Circuit, but the court did not make these observations and furthermore, it also got part of the causation analysis wrong.  Look at this passage from the Fifth Circuit's decision:

The inundation of the Leonards’ home was caused by a concurrently caused peril, i.e.,

a tidal wave, or storm surge — essentially a massive wall of water — pushed ashore by Hurricane Katrina’s winds.

Later in the opinion, the court goes into an extensive analysis of how storm surge has almost always been viewed as flood, and that the language of the flood exclusion encompasses storm surge.  So the court's use of the term concurrent is loose, inaccurate and not helpful.  By its own logic, flood itself is a cause.  You may say wind and water are the forces that make up one type of flood, storm surge, and I respond that under the contract it is nevertheless defined as one cause.  So it cannot be concurrent with itself, it could be concurrent only with some other cause.  If, on the other hand, storm surge did not fall under the definition of flood, then I could more readily see it falling under the operation of the anti-concurrent language. If you insist on seeing it as two causes, then one is covered wind and one is excluded water, and because they would combine to create the same damage, they could be analyzed as concurrent, except that concurrent is often considered, in the strictest sense, to apply to independent forces that operate together to bring about a result.  Sequential forces are those, in this strict sense, that are dependent on one another, which is probably a better analysis.  But that is all murmuring, because storm surge is defined as water damage and water damage is excluded.

In the end, the court got to the right result: it upheld Senter's verdict on damages, but corrected his reasoning about the ambiguity of the anti-concurrent language.  Most of the court's opinion was lucid and admirably direct, however, its explanation of causation was not its shining moment and does little to clear up misconceptions and false doctrine regarding causation analysis.

Both Nationwide and the Leonards appealed from Senter's verdict, although somewhere along the way the Leonards' attorney, Dickie Scruggs, apparently decided that chances were pretty good Nationwide would get the ruling on ambiguity of the anti-concurrent language reversed.  The Leonards then dropped their appeal regarding coverage of their homeowners policy, hoping that, without the damages being at issue, Nationwide would have no actual controversy on which to base its appeal.  The Fifth Circuit gave this argument the skunk eye. 

One final thing: the AP story above says that Scruggs vowed the Leonards will appeal. Really? They are going to appeal this thing to the U.S. Supreme Court? You know as well as I do the chances of cert. being granted on this case, an issue of state insurance law, are between slim and none, and slim just left town.

Posted By David Rossmiller In First Party Insurance
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I blogged earlier this week about this case and thought about it some more.  This case has kept pounding in my head like several incessant jackhammers on concrete.  No wait, that would be the actual incessant jackhammers that construction crews are using outside my office building as they rip up the street, again and again, to put in yet another light-rail line.  Nevertheless, this case has troubled me, so I read it again.  And this further reading, I regret to report, has raised more questions than answers.  Here's a pdf of the case if you care to follow along.

• As I mentioned, for some reason the briefing in this case on the court's CM/ECF electronic system is not accessible, which is contrary to the dictates of Congress.  So I am unable to review the arguments the parties made, I have only the judge's decision. Therefore, there may be a simple explanation why, it appears, Factory Mutual did not assert the anti-concurrent cause language in its excess policy's flood exclusion, but I don't know what it is. You may say as follows: California was the choice of law for contract interpretation, and California doesn't enforce contractual anti-concurrent language -- a state statute has been interpreted as mandating the efficient proximate cause analysis instead in property insurance cases. To which I respond by quoting from the opinion: "Factory Mutual does not perceive that a conflict of laws exists between the states of California and Mississippi on the issues presented. . . . Accordingly, the Court will apply the California rules of contract interpretation to these motions."  I, on the other hand, perceive a big difference between the two states: the Mississippi Court of Appeals has upheld anti-concurrent language in insurance contracts, while California courts do not.  So why give in on the choice of law? 
• The decision says that Phase I of the litigation -- which was all that was covered by the decision -- is limited "to issues regarding contract interpretation, including any purported admissions of the parties." So issues regarding damages and the amount are not present in this phase.  But contract interpretation is more than looking at the words of the contract -- in first-party property insurance contracts, loss causation is what you are interpreting and the causation methodology selected determines the interpretation of the words.  Yet in this decision causation is the dog that didn't bark, as in the famous Sherlock Holmes story, The Adventure of Silver Blaze:

Gregory (Scotland Yard detective): "Is there any other point to which you would wish to draw my attention?"

Holmes: "To the curious incident of the dog in the night-time."

Gregory: "The dog did nothing in the night-time."

Holmes: "That was the curious incident."

• Remember that Judge Pregerson found that storm surge was not unambiguously excluded by the excess policy's flood exclusion because storm surge is a force that is acted upon by wind, and wind is not expressly excluded, because the phrase "whether driven by wind or not," which was contained in the primary policy, was not present in the excess policy. When one says this, one is making an argument regarding the cause of the property damage.  The judge, in fact, said this: "Given that a storm surge is a particular type of 'inundation of water' -- an inundation caused, in part, by wind -- this omission creates ambiguity in the Excess Policy's Flood exclusion." (p. 16).  This, in effect, must mean one of four things:

1.  There is only one cause of the damage -- wind: storm surge is merely a manifestation of wind that does not involve a second force of water/flood.  This would be absurd, so it cannot be what the judge intended.

2.  There are two causes of the damage -- wind and water, acting in concert to create the same damage.  Does this sound familiar to you? It might, it is the very definition of concurrent forces.  However, anti-concurrent language in a contract nullifies that causation analysis.

3.  There is one cause of the damage -- wind that acts upon water to create a phenomenon called storm surge, which no matter what its cause, is not excluded.  I have called this a reductionist argument, because property coverage for direct physical loss is inherently causal -- some causes are covered and some are not.  If this was the judge's reasoning, it is incomplete.

4.  Some other darn thing about which I have no clue what the judge is talking about. 

• Even if Pregerson had rejected anti-concurrent language as unenforceable under California law, one would think that he would have analyzed the policy's coverage under California's efficient proximate cause methodology.  He could have stated the methodology was not needed because there was only one cause, and therefore no need to choose among multiple causes as to which is the proximate or dominant cause.  Or he could have said that there were in fact two causes, and selected wind as the dominant cause.  None of this was mentioned.  Yet again, the causation dog didn't bark.  More questions than answers, which I don't like, because it means I won't be able to rest until I find the answers.  And I assure you, I will. 

Posted By David Rossmiller In First Party Insurance
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A correspondent sent me the pdf of August 16 decision in Northrop Grumman v. Factory Mutual Ins. Co., a $1.2 billion lawsuit by Northrop alleging breach of contract for Factory Mutual's failure to pay for Katrina losses at Northrop's various shipbuilding facilities in Louisiana and Mississippi.  Northrop is based in Los Angeles, and this lawsuit was filed in California state court and removed by the insurer to federal district court.  For some strange reason, almost none of the entries shown on the district court's electronic docket are available, so I'm hindered in reviewing the pleadings.  But from what I can determine from press reports, Northrop press releases and other sources, including debate in Congress over whether the federal government should advance money to Northrop to cover property damage and business interruption losses insurers haven't paid for, it appears the amount being sought from Factory Mutual is actually about $350 million.  Those who have followed this case more closely may be able to enlighten me.    

Northrop purchased a $100 million primary policy that basically covered everything -- no flood exclusion, no earthquake exclusion.  Factory Mutual had 15 percent of the coverage of the primary layer, and paid it.  Let's keep in mind the layers of coverage here.  The primary layer of coverage was shared by some 30 insurers including Factory Mutual.  A second layer of Factory Mutual coverage began at $500 million in losses and continued up to $19 billion.

The key issue, as explained by federal judge Dean Pregerson, was whether the Factory Mutual excess policy clearly excluded Katrina storm surge under its flood exclusion. Pregerson said it didn't, and because the exclusion was ambiguous, granted summary judgment to Northrop, a decision that is sure to be appealed to the Ninth Circuit.  Here is the language of the excess policy's flood exclusion:

 Flood; surface waters; rising waters; waves; tide or tidal water; the release of water, the rising, overflowing or breaking of boundaries of natural on man-made bodies of water; of the spray therefrom; or sewer back-up resulting from any of the foregoing; regardless of any other cause or event contributing concurrently or in any other sequence of loss.

Now, you may remember that in other Katrina litigation, flood exclusions in homeowners policies have been upheld, and judges have said that storm surge -- ocean water pushed ashore by hurricane winds -- is a flood.  Those policies, however, have included the phrase "whether driven by wind or not," a phrase that was in the definition of flood in the Northrop primary policy but is not in the excess policy's definition. (Remember, the flood definition didn't apply to the level of damage under the primary policy because Northrop purchased coverage with no primary flood exclusion).  Judge Pregerson therefore saw the difference between the two policies as highly significant, and he also placed great importance on past policies Factory Mutual had sold Northrop that defined flood to include storm surge, and that Factory Mutual has sold other policies including "whether driven by wind or not." While both constructions of the policy -- Northrop's and Factory Mutual's -- he said, where there are two reasonable constructions the policy is construed against the insurer, black letter coverage law. 

His decision came down to the reasonable expectations of Northrop at the time it purchased the policy, and evidence was presented that went both ways.  Read the decision and you will see.  The case presents two curiosities for me, however: why Factory Mutual gave in to the choice of law as California, rather than Mississippi, which has case law stating that storm surge is flood, and why the decision makes no mention of the anti-concurrent cause language in the excess policy's flood exclusion. 

Based on the limited record I'm able to review, these are my guesses. First, if the issue is one of reasonable expectations of the parties -- what they believed the coverage was based on their negotiations before the policy was issued -- Mississippi case law does not form a part of that calculus.  Second, if the issue is whether storm surge is defined as flood and whether it is flood, there is not a concurrent cause issue, because a loss involving analysis of concurrent or sequential losses requires, of course, more than one cause, one of which is not covered.  If all possible causes of the loss are covered, anti-concurrent, anti-sequential language is inoperable.  That's my first, quick take on the case.  Your views, as always, may differ, and they may persuade me if you let me know of them.  Policy language controls, as always, and if a policy is interpreted to include wind-driven storm surge as flood, someone can interpret it as wind (it appears that 1998 damage to Northrop facilities by Hurricane Georges was in fact adjusted by Factory Mutual as wind damage). Is it in fact wind damage? I think no, merely because a catastrophe involves wind does not mean wind itself was the physical force that caused the loss.  However, because direct loss from wind does not appear to have been an issue with the excess layer of coverage, the door is open to a reductionist analysis that wind and water are not separate forces and are defined by implication as one force by the policy, in the context of the reasonable expectations of the parties.

One final point: many have made the observation that the rule of contra proferentem is justified by the disparity in bargaining power between insureds and insurers, a justification that does not hold true when the insured is a sophisticated corporation like Northrop, one of the biggest companies in the nation with gross revenues far in excess of Factory Mutual, and one that has extremely good friends like Sens. Thad Cochrane and Trent Lott, who pushed for Congressional earmarks benefitting Northrop to the tune of many millions of dollars. What do you think, should contra proferentem apply in a case like this? If not, how does a court draw the line and tell where an actual disparity in bargaining power exists and where it does not?  Should there be a per se rule that any coverage involving actual bargaining does not warrant the application of contra proferentem?

Posted By David Rossmiller In First Party Insurance
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This story was pretty amazing to me -- AIG sent a firetruck to protect from Idaho wildfires some expensive homes that it insures. I hate to be the one to mention this, but does a proactive measure like this create the possibility of extra-contractual insurer liability if any of the following occur?

• a home that is both insured by AIG and is within the area protected by the firetruck burns down;
• a home that is insured by AIG but outside the area protected by the firetruck burns down;
• a home that is not insured by AIG but is inside the area protected by the firetruck burns down;
• AIG-insured homes burn down in some future wildfire where a firetruck is not dispatched.

I know what some will say -- spoken like a lawyer!  Remember, however, I grew up in a small town and have also been a journalist, two other ways you learn about the dark side of human conduct. 

Posted By David Rossmiller In First Party Insurance
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As some of you might remember, I spent a good chunk of my non-billable time earlier this year working on an article about anti-concurrent cause language in Katrina and other insurance litigation.  My part is done, and I'm waiting on the publisher to give me a pdf of the finished article, which will appear in October in New Appleman's™ on Insurance: Critical Issues.  Because so many people have been asking me about this article, and because it is topical, I have requested and have received permission to publish an advance copy of the article here on this blog.  When I get the pdf, which will probably be later this month, I'll put it as a link to a post.

Appleman's is also holding a teleconference October 16 where I will talk about Katrina issues, anti-concurrent cause language and the like.  James Davis of Anderson Kill & Olick will also be presenting.  His topic: Global Warming Litigation -- Implications for Insurance Coverage.  The name of the conference is New Appleman's™ Insurance Coverage Teleconference: The Impact of Mass Catastrophes on Insurance Coverage.  If you want to attend from the comfort of your office, here's a link that tells you how to do it. 

Posted By David Rossmiller In First Party Insurance
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A couple items of interest:

• State Farm's agreement to voluntarily re-evaluate Katrina claims in Mississippi has resulted in additional payments to policyholders of $29.8 million, according to this story in the Sun Herald.  
• Here's a kind of run-of-the-mill story about some people from Congress visiting the Gulf Coast to check up on Hurricane Katrina recovery, but these two paragraphs really jumped out at me:

The delegation later told a crowd of about 500 in Bay St. Louis that a vote could come in September on a bill aimed at improving the insurance problems that Gulf Coast homeowners have experienced since Katrina.

Rep. Gene Taylor, a Mississippi Democrat, has proposed adding wind coverage to the National Flood Insurance Program, which was created in 1968 to help homeowners living in flood-prone areas get flood insurance to complement private policies. Taylor said he did not know the cost of providing wind coverage.

"He did not know the cost of providing wind coverage." That's the kind of federal program I'm sure we all like to see, one with open-ended or unknown costs -- hey, why not, the country's swimming in money, let's just toss some of it around and see what happens.

Posted By David Rossmiller In First Party Insurance , Industry Developments
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You remember in January, when the Florida Legislature was debating that big package of insurance reforms? At the time, many said the state's "insurance crisis" -- rapidly rising homeowners rates -- was actually a reinsurance crisis.  In other words, the high price reinsurers were charging in the wake of Hurricane Katrina was supposed to be the biggest factor.  So the state went into the reinsurance business and promised rate reductions of 24 percent or more.  Not only have rates not declined much, insurers are now asking for rate increases.  And the state's reinsurance isn't selling with some insurance companies, in part because companies don't actually believe the money will be there in the fund. I thought it worth passing along this excerpt from a recent editorial in a Florida newspaper:       

The solution hinged on the state nearly doubling the Catastrophe Fund from $16 billion to $28 billion. That was supposed to allow insurers to buy reinsurance (or extra coverage for insurance companies) at a cheaper rate from the state than that charged by private firms and pass along the savings to policyholders.

Instead, state regulators maintain that the companies, which did buy from the state, are using the savings to buy backup coverage beyond what they need from private providers they also happen to own. Thus, if the state avoids a major catastrophe or multiple storms, they can pocket all the cash.

You see what happens when people get confused? This is what happens when people get confused.  Florida doesn't face a reinsurance crisis, it faces a risk crisis where it's got a very highly regulated market, lots of risky coastal development that has long been subsidized and a complete unwillingness to recognize that there are limits to how well governors and legislators can predict the future or make economic actors do their bidding.  The complaint evidenced in the excerpt above makes absolutely no sense.  First, if you create a product and people don't like it, are they to blame or are you to blame? Second, by the argument's own internal logic, no one should have a complaint against insurers who buy reinsurance from their own companies -- if the state avoids a major catastrophe, "they can pocket all the cash," but of course, if the state doesn't avoid a major catastrophe, they pay out all of the cash.  Third, this is all happening because Florida officials don't want to pay the price for removal of coastal subsidies, and they want insurers to play along with their game so they themselves don't feel the heat.  That's where all the table-pounding by Gov. Crist comes from -- frustration that, for some reason, companies insist on acting in their self-interest instead of in his interest. 

Posted By David Rossmiller In First Party Insurance
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You might have seen that, besides the decision in the big In Re Katrina Canal Breaches Litigation last week, the Fifth Circuit decided a couple other Katrina cases on Monday.

This one, Arias-Benn v. State Farm, is pretty dull fare, but contains an interesting point on loss causation analysis.  The issue -- whether a homeowners policy covers damage to refrigerators when their contents rotted during extended power outages due to Hurricane Katrina.  The important distinction for this case is that the policy covers the spoiled food itself, but not the refrigerator, unless the power outage was caused by some condition unique to the residence premises, such as a falling tree, while power lines remained energized elsewhere.  Because the power outage was general, damage to the refrigerators themselves was not covered. That seems to me a pretty simple way to state the issue, I was disappointed this opinion by the Fifth Circuit was so opaque on such a straightforward matter.  The decision is written as if no one but the two litigants is going to read it, and after all, they already know what is going on. To make sure I understood the court's point, I had to go back to the briefing in the underlying case.  To me, the really interesting part of this case was the plaintiff's attempt to use the efficient proximate cause doctrine to say the damage should be covered.  The Fifth Circuit's ruling on that issue was again kind of fuzzy and dense, but what it was trying to say was this: proximate cause inquiry is merely the default rule of causal inquiry, and a contract can alter the causal analysis that must be used, and did alter the analysis in this case.

The other case was Chauvin v. State Farm, which affirmed the district court's ruling that  Louisiana's Valued Policy Law did not apply to a total loss by flooding, an excluded peril. Two points from this case are worth remembering: the Valued Policy Law is meant to provide disincentive for insurers to underwrite insurance for property for more than it is worth and charging higher resulting premiums, and it is also meant to discourage policyholders from intentionally destroying overinsured property and reaping a windfall (in theory, someone is less likely to torch their property if they will merely break even, rather than profit, by the act).  Again, this opinion could be written more clearly and explain how the law works more clearly. I wrote this post last year about Louisiana's Valued Policy Law in a different case, it might be of assistance in further exploring this issue if you are interested. As I understand the law -- and obviously there is some disagreement over how this works or the Chauvin case wouldn't have been necessary -- it says that the face value of the policy must be paid only if the total destruction is caused by a covered loss.  If 50 percent of a loss is caused by a covered loss, 50 percent is covered, as you would expect, but not the entire loss.  

Posted By David Rossmiller In First Party Insurance
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Oral argument for the Leonard v. Nationwide was held Monday.  Here's an  Associated Press story about it.  The Leonards, represented by Dickie Scruggs, on July 23 dropped their appeal of Judge Senter's decision, which held that the Leonards were not entitled to reform the policy based on alleged misrepresentations about hurricane coverage by the insurer and the Leonards' insurance agent.  But Nationwide continued to press its appeal of another portion of Judge Senter's ruling -- that the anti-concurrent cause language in the Nationwide policy was ambiguous.  Here's how the story reported Nationwide's argument:

On Monday, Nationwide attorney Chris Landau asked a three-judge panel of the 5th Circuit to overturn that portion of Senter's ruling [regarding the anti-concurrent cause language], which he said gives "enormous leverage" to policyholders in other cases.

"This has a huge practical effect on so many of these cases," Landau said. "In so many of the cases, you just can't tell if it's wind or water" responsible for damage.

The Leonard case resulted in a bench trial before Judge Senter.  In his August 15 Memorandum Opinion, he analyzed the anti-concurrent language that precedes the flood exclusion.  The language reads as follows (I've omitted the section headings and paragraph number from the policy):

We do not cover loss to any property resulting directly or indirectly from any of the following. Such a loss is excluded even if another peril or event contributed concurrently or in any sequence to cause the loss.

This anti-concurrent language is the standard ISO language used by a number of insurers.  Here's what Judge Senter wrote about it:

The "loss," "such a loss" and "the loss" referred to in this paragraph, is, in this instance, damage caused by rising water during Hurricane Katrina.  These three terms refer to this particular excluded loss, i.e. damage caused by rising water, but this paragraph does not affect the coverage for other loses (covered losses), i.e. damage caused by wind, that occur at or near the same time.  Thus, this language does not exclude coverage for different damage, the damage caused by wind, a covered peril, even if the wind damage occurred concurrently or in sequence with the excluded water damage.  The wind damage is covered; the water damage is not. 

What Judge Senter is saying here is mostly right and it is a clearer statement about the effect of anti-concurrent language than was contained in the later Tuepker v. State Farm decision by the judge.   The key words in this anti-concurrent clause are "resulting directly or indirectly from" and "if another peril or event contributed . . . to cause the loss."  Remember that the coverage grant of the policy insures against "accidental direct physical loss to property."  Merely because damage occurs at or about the same time does not make it either concurrent or in sequence in this context.  To qualify as either of those, a single type of accidental direct physical loss to property must be caused by multiple forces. If wind damage occurs, for example, that is a different cause and a different loss than flood damage. Two separate losses, two separate causes.   That is why I would disagree with Judge Senter's use of the terms "concurrently" and "in sequence" in the second-to-last sentence above.  He seems to have said that these are two separate forces and two separate losses, which I agree with.  But to that degree, the anti-concurrent, anti-sequential language is not even implicated, much less ambiguous. That's where I would differ with his analysis, with all due respect.  The issue is then one of allocation between the covered wind and the uncovered water.  If, however, there actually is evidence that some particular damage to the Leonard home occurred only because the wind and water acted together or in sequence, then the anti-concurrent language would be relevant.  But in reading through the findings of fact and conclusions of law in the opinion, I have trouble seeing what damage would fall into that category. 

Of course, it's always good to have Dickie Scruggs involved in one of these scrums, because there is sure to be drama -- I'm just waiting to see if he ever makes a guest appearance on Boston Legal alongside Denny Crane.  Here's an account from the story of his exchange with the Court during arguments.  

The Leonards dropped their appeal of Senter's ruling on July 23. Their attorneys, led by high-profile litigator Richard "Dickie" Scruggs, said the 5th Circuit shouldn't hear the case now that the couple has abandoned their appeal.

"This family is tired of dealing with this matter, and they want to move on with their lives," Scruggs said.

Scruggs said Nationwide's bid to overturn Senter's verdict is based on "collateral issues" that are irrelevant to the outcome of the trial.

Chief Judge Edith Jones told Scruggs that his move to drop the appeal a week before Monday's hearing was the latest in an "odd course of events" in this case.

"It does raise an inference in my mind that there's something else going on here," she said.

"This is not some sort of a dodge or gamesmanship," Scruggs responded.

No doubt it has crossed the Court's mind that Scruggs dropped his appeal in an attempt to leave in place the part of the ruling about the anti-concurrent language being ambiguous, and that this in fact might amount to "gamesmanship."  Really, judges can have such suspicious minds.

Posted By David Rossmiller In First Party Insurance
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One more quick thought about In Re Katrina Canal Breaches Litigation as we head into the weekend.  As I've indicated in previous posts and as is borne out by the Fifth Circuit's decision, the methodology selected for analysis of causal connections in property insurance in a great many instances determines the outcome. This is the reason insurers came up with anti-concurrent, anti-sequential cause language in the first place: it is altogether too easy for judges to circumvent contractual drafting intent by selecting a causal analysis that will ordain a different outcome, endowing a result that is in fact the product of human bias with the aura of scientific inevitability.  (I do not necessarily impute malice or even conscious intent to this process, I merely recognize that this is a human tendency and will remain one as long as human beings are the way they are). 

For example, even though the "efficient proximate cause" methodology is purportedly bias neutral and selects between multiple causes of single damage as to which is the dominant cause of loss, it doesn't require a lot of imagination to see that the act of selection is one that can, in certain hands, be manipulated to gain a desired result.  Even the act of selecting which "causes" are to be included in the analysis is subject to the same human tendencies of selection bias. If you look to the case law, you will see that I am right.  Insurers -- there are exceptions -- therefore sought to overturn efficient proximate cause as well as other doctrinal methodologies, such as concurrent causation analysis, with anti-concurrent, anti-sequential cause language: the first, of course, contractually overcomes concurrent cause analysis, the second efficient proximate cause.  If anyone wants to talk further about these points, I am glad to do so: just drop me an e-mail at dpr@dunn-carney.com or call me at 503-306-5311.

Posted By David Rossmiller In First Party Insurance
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I read the opinion over again, and I have a few things to add after what I wrote yesterday.  So I'll refer you to that post and my post at Point of Law, which has a link to a Randy Maniloff article you should read about the underlying case, and I'll also make these observations: (Here, again, is a pdf of the Fifth Circuit's decision)

-- Want more news? Here's an Associated Press story on the case, where I'm quoted as saying the Fifth Circuit got it right and that it was an easy call. I think that is correct.  There have been attempts for at least the last 40 to 50 years for courts to expand property insurance causation to include human negligence as well as physical forces themselves.  One of the first and certainly the most noted case in this line is Sabella v. Wisler, 59 Cal.2d 21 (1963).  Human negligence, it can be argued, is qualitatively different in a causal analysis than a physical force, because the word "negligence" is merely a conclusion borrowed from the field of torts about the legal responsibility for setting forces in motion. It is not in itself a physical force.  In any event, the Fifth Circuit was not going down that road, and said human negligence was not a "cause" of the New Orleans Katrina flooding -- it may have been a contributing factor in the cause, which was flooding, but it was not a cause.  Without getting into the observation that many policies now carry contractual language that directly overturns negligence as the cause of a property loss, I will say the Fifth Circuit's analysis is the traditional first-party property analysis, and the one insurers have worked to get for the past 30 years in revising their policy language.  For the most part, and in the most important particulars, the Fifth Circuit's causation analysis was right on the money: it was single force causation, the most uncomplicated analysis in property insurance.  Once the court decided on that route, upholding the flood exclusions was a given and an easy call. 

-- I thought I noticed the court taking a subtle dig at the 85-page length of Judge Duval's underlying opinion.  See page 6 of the Fifth Circuit's opinion.

-- Let's remember that the policies in question here don't merely exclude "flood," they state they exclude "water damage," and flood is one definition of water damage.  Other definitions include surface water and overflow of a body of water. Judge Duval attempted to say that flood included only "natural" events, and that no "overtopping" of the canals occurred -- they broke open. However, it was the overflow of a body of water that created the forces that breached the levee walls, as the appellate court pointed out, and additionally, the policies speak of "overflow," not "overtopping," which is a word Duval plucked out of thin air.

-- In perhaps a foreshadowing of the way the Fifth Circuit may go on the appeal in Tuepker v. State Farm, now before the court, the Fifth Circuit stomped on Judge Duval's reasoning that the policies' Hurricane Deductible didn't affect the reasonable expectations of policyholders or the interpretation of the flood exclusion. Remember, Judge Senter in Tuepker said the following:

Because this policy carries a specific "Hurricane Deductible Endorsement," it is apparent to me that it was intended to cover damages sustained in a hurricane because of the effects of rain, hurricane winds, and objects that might be carried by those winds, whether or not there was also damage caused by the high water.  Thus, to the extent that State Farm contends that the hurricane itself, i.e. the hurricane winds and rain, would constitute a weather condition that would completely relieve State Farm of liability for damage to insured property . . . I find that the policy is ambiguous and its weather exclusion therefore unenforceable in the context of losses attributable to wind and rain that occur during a hurricane. Tuepker opinion, p. 7.

He said the same thing about the State Farm flood exclusion and its anti-concurrent, anti-sequential cause lead-in language:

I find that these two exclusions [the weather conditions exclusion and the flood exclusion] are ambiguous in light of the other policy provisions granting coverage for wind and rain damage and in light of the inclusion of the "hurricane deductible" as part of the policy. Tuepker opinion, pp. 8-9.

Here's a pdf of Judge Senter's opinion in Tuepker so you can read and judge for yourself.  About the Hurricane Deductible Endorsements in the In Re Katrina policies, the Fifth Circuit said this: 

[T]hey do nothing more than alter the deductible for damage caused by a hurricane.  Nothing in the language of the endorsements purports to extend coverage for floods or to restrict flood exclusions; indeed they do not even include flood or water (other than rain) in the definition of "hurricane." Further, the endorsement state that all other provisions of the policies apply, indicating that the flood exclusions remain in effect. The hurricane-deductible endorsements therefore would not give a reasonable policyholder the impression that flood resulted from a breached levee would be covered.

A hint, perhaps just a hint, perhaps more than a hint, of the thinking of the Fifth Circuit as it will apply to Tuepker. (Remember also that the State Farm "weather conditions" exclusion contains an exception that specifically states the exclusion does not apply to covered damage, so in the context of wind damage, which is covered, it can't be ambiguous).

The court said the efficient proximate cause doctrine and the policies' anti-concurrent cause language are not relevant in this case.  This is correct reasoning, because the flooding was only single causation.  Both efficient proximate cause and anti-concurrent language are appropriate only where multiple causes combine to create the same damage. For more on this, read my post of yesterday.  If this is the thinking of the Fifth Circuit, they will accept my conclusion that the damage in Tuepker is also not mutiple causation of one loss, but rather two independent single causes that resulted in separate losses (assuming there is evidence of wind damage to the Tuepker home beyond mere speculation).  Therefore, neither the efficient proximate cause doctrine, which it seems Judge Senter was driving at in his Tuepker opinion, nor State Farm's anti-concurrent cause language, were implicated and there can be no ambiguity regarding either the flood exclusion or the anti-concurrent language. Contrary to the belief of many, State Farm has not asserted the anti-concurrent cause language as a reason to deny wind payment to the Tuepkers.  As they have stated it in briefing, State Farm's position is that wind damage is due to one cause and flood damage to another, making the first covered and the second uncovered.  The problem is one of proving wind damage and allocation of the damage between the two losses, which is a far different analysis than a causal analysis.

I have been saying this now for many months: this type of damage at issue in Tuepker is two independent single forces that did not combine or operate in sequence to cause the same loss, but rather operated separately to cause two separate losses.  Single causation only.  (I am not ruling out that there could be instances where wind and water operate concurrently or in sequence to produce the same damage, but that is not the case in Tuepker or the vast majority of Katrina cases). Think of it like this: a homeowners policy does not insure against destruction of a house, it insures against "accidential direct physical loss to the property," or some such phrase. To the degree two separate forces cause separate damage, it is an instance of two single causes. Each single cause of separate loss must be evaluated for coverage in its own right. I have stayed awake into the wee hours on many, many nights researching and analyzing this issue, wrestling with Tuepker and Sabella and cases without number, hearing the voice of David Hume and the words of the 1985 anti-concurrent article by Michael E. Bragg in the footsteps of the night janitors and security guards as they peer into my office to see who could possibly be working at 2:30 a.m. I have been to hell and back in search of the answer. I know I'm right on this one.

Posted By David Rossmiller In First Party Insurance
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The Fifth Circuit got it right.  Here's a pdf of the decision.

District Court Judge Stanwood Duval's underlying decision had said that flood exclusions in many of the policies involved in this litigation were ambiguous because they didn't specifically define floods to include water spilling out from a canal breach, due to defective construction and human error. Judge Duval, in an 85-page opinion that stretches the bounds of patience and the human attention span, implied that "overtopping" of the canals would be excluded, but that a breach in a levee -- under the language of the standard ISO and most other insurance policies -- is not specifically excluded.  As most reading this will know, when a term or provision of an insurance policy is ambiguous, the interpretation is decided in favor of the insured. Along the way,  Judge Duval spent a lot of time talking about cases involving water main breaks, rather than cases involving flooding due to dam breaks or levee construction.

The Fifth Circuit cut right through all this sophistry and said that merely because a levee breach is involved, it does not make the flood definition in the policy ambiguous:

[L]evees are flood-control structures, which by definition means that they interact with floodwaters.  Because levees are man-made, one could point to man's influence nearly any time a levee fails.  If a levee fails despite not being overtopped by floodwaters, it is because the levee was not adequately designed, constructed, or maintained.  If a levee fails due to the floodwaters overtopping it or loosening its footings, it is because the levee was not built high enough or the footings were not established strongly or deeply enough.  Even where a levee does not fail, one could find a non-natural flood; where a properly designed and constructed levee causes floodwaters to be diverted downstream to another area of land, the resulting flood downstream occurs because the levee performs as designed.  Any time a flooded watercourse encounters a man-made levee, a non-natural component is injected into the flood, but that does not cause the floodwaters to cease being floodwaters. 

See p. 36 of the Fifth Circuit's decision.

 I was also impressed that the Fifth Circuit got the causation analysis right.  The flooding here was not an issue of multiple causation of one loss, it was an issue of single causation of one loss. Doctrines like the efficient proximate cause analysis used by most courts in deciphering causation among multiple causes are not needed where a single cause is at work.  Nor are the anti-concurrent, anti-sequential clauses of ISO policies and the policies of other insurers like State Farm at issue.  As the Fifth Circuit said:

But here, on these pleadings, there are not two independent causes of the plaintiffs' damages at play; the only force that damaged the plaintiffs' properties was flood.  To the extent that negligent design, construction, or maintenance of the levees contributed to the plaintiffs' losses, it was only one factor in bringing about the flood; the peril of negligence did not act, apart from flood, to bring about damage to the insureds' properties . . . . Moreover, to the extent that the plaintiffs do attempt to recharacterize the cause of their losses by focusing on negligence as the cause rather than water damage, their argument fails . . . . If every possible characterization of an action or event were counted an additional peril, the exclusion so in all-risk insurance contracts would be largely meaningless.

See opinion, p. 44.

Basically, the causal analysis is right.  However, the court referred to negligence and the flooding as potentially "independent" causes of damage.  That is not correct: if they had been viewed as multiple causes, the flooding was a dependent cause that followed in sequence from the human negligence -- one caused the other, like a rainstorm causing a mudslide. An independent force is like the wind and storm surge that hit the homes in Mississippi.  The wind was one independent cause of loss that caused its own damage (where this damage could be proven),  and the water was also an independent cause that caused its own seperate and discernable loss. In the case of sequential, dependent causation, no one really disputes that the efficient proximate cause doctrine applies to find the real cause.

Where so-called concurrent forces operate, however, there is some disagreement: some define concurrent forces fairly strictly, as those that operate independently of each other and combine to create a single loss.  The most famous example of this is the 1973 California case of Partridge v. State Farm.  Even though this was a third-party liability case, not a first-party property case like those we are talking about here, the case contains a good causation example: the plaintiff's injury came as a result of two causes that operated independently but combined to create the injury, which would not have occurred "but for" the existence of each cause (the defendant filed his gun mechanism to produce a hair trigger, then drove negligently over rough terrain, setting off the gun and shooting the plaintiff passenger).  This is a concurrent cause.  Not every court sticks to these labels, and many broadly label causes that are either dependent or independent as "concurrent" when they combine to produce the same damage. No matter what they call it, the overwhelming majority of courts use the efficient proximate cause doctrine to pick from among multiple causes of the same loss in first-party property insurance analysis. 

Where anti-concurrent cause language comes in is that it contractually overturns the efficient proximate cause analysis and says that where multiple causes of the same loss exist, if any of them are excluded and the damage would not have happened but for that cause, the loss is excluded.  As I point out in an article I just finished for the New Appleman's Critical Issues publication, these clauses are not implicated in single causation, which the Fifth Circuit correctly pointed out.  (Despite broad popular perception to the contrary, these anti-concurrent clauses by and large have not been asserted in most Katrina damage litigation, as insurers have recognized that wind and water, although separate forces, are not concurrent when they created separate, discernable and provable losses). 

OK, that's it for this post.  I may have more to say later.  A well-written opinion, on the money for the most part, and half as long as Judge Duval's opinion.  

Posted By David Rossmiller In First Party Insurance
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The lede on this press release is in the "No Kidding" category -- but the study it talks about gives some useful specifics about the cost of wind insurance along the Gulf Coast. Here's the opening paragraph:

Many businesses along the Gulf of Mexico coast have had a difficult time obtaining wind insurance coverage since Hurricanes Katrina, Rita, and Wilma hit in 2005 and have often ended up paying more than twice as much for the insurance as they did previously, according to a RAND Corporation study issued today.

Actually, most of the press release after that point is pretty good.  The reasons for higher property insurance In Florida, Mississippi, Louisiana and elsewhere won't come as much of a surprise to the kind of folks who read this blog, but it's interesting to look at the list as RAND sees it:

The study identified several reasons behind the large premium increases:

• Insurers and the modeling firms on which they rely increased estimates of the number of hurricanes expected to hit the region and the damage caused by hurricanes when they do occur.  
• Financial rating agencies tightened capital adequacy requirements for insurers.  
• Litigation and government actions following the 2005 hurricane season led to uncertainty about how insurance contracts will be enforced by courts in the region.  
• The threat of large assessments on insurers after future hurricanes that caused deficits in residual markets.

That third reason is one you can't underestimate. By the way, here's a link to the study itself. 

Posted By David Rossmiller In First Party Insurance
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This is a good story by Anita Lee of the Sun Herald about state grants given by Katrina victims to compensate for wind and water damage to their homes.  Some people, after getting their insurance money, are going to have to repay Mississippi for the grants.  Others, however, who received confidential settlements of insurance lawsuits, will get to keep the state money.  This does not sit well with everyone.

 As the story says:

A federal grant modification that created the situation has gone unnoticed by many, but others are angry about the Mississippi Development Authority policy.

"It doesn't seem right that they don't ask for repayment," said Gulfport resident Nancy Fish, who had flood and homeowner insurance coverage for the loss of two homes and cars.

Why doesn't the state ask for the money back? Here's how Dickie Scruggs and policyholder attorney Jack Denton explained it:

Denton said in many cases, clients needed both the legal settlement and grant money to be made whole, a sentiment Scruggs echoed.

Scruggs added: "The difference between settling a lawsuit and just getting some more money from your insurance company unsolicited - there's a big difference. You're suing for all kinds of claims. When a settlement is reached, it's not broken down as to how much was for structure, breach of contract, bad faith, emotional distress, breach of the duty of good faith and fair dealing, fraud, negligent adjustment of the claim. Every lawsuit we've settled has had at least 10 or 11 legal claims.

"Nobody can slice and dice the settlement of a lawsuit in such a way to figure out what is owed. It's a situation that they didn't envision when the payment provisions were written."

MDA's disaster recovery director, Donna Sanford, said the agency is not tracking the lawsuit settlements because they are confidential.

"That was the whole purpose of this modification," she said. "We can't tell from these closed settlements what structural-damage payments, if any, they're getting."

A couple points.  First, some folks may indeed need more dough than others to be made whole, especially when they must pay 40 percent of the proceeds of a lawsuit settlement to Scruggs or Denton. Second, just because you throw some RICO claims, or some other claim outside of breach of contract, into a lawsuit does not make the fundamental principle of compensation for the structure different.  That's lawyer talk, not common sense.  Third, what is with this passive attitude on the part of state officials? They don't know about the amounts because they are confidential? That's what I'm going to tell the IRS about money I received this year, you think they will buy it?  

Posted By David Rossmiller In First Party Insurance
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You know that article I said I was researching and writing on anti-concurrent cause language, which has been such a big part of the Katrina public debate and litigation? Well, it is finally done and I have sent it off to the editor.  If I've made any mistakes in causation analysis, it certainly won't be because of lack of effort. 

As I sit here in my office writing this post at 3 a.m., I have stacks of paper roughly three feet high, if you put them all together.  Most of this I read, in an effort to trace causation theory from Aristotle to Hume to English fire and maritime policies to wacky California cases to Katrina and beyond.  I think I got it, but only time will tell. I made a great effort to write it in as entertaining and simple a way as you can when you are dealing with a subject like causation that either flees as you approach or fights back.  I have suffered much over this article.  When writing these hard, long-term projects, your will gets weak, and your thoughts seem to scatter like marbles on the floor at the slightest excuse. I'm sure you've been there yourself. 

So I've had this letter written by the Consumer Federation of America sitting on my computer for a week, and have been wanting to write about it, but I felt if I said anything about causation or anti-concurrent cause language outside of what I was writing in the article, I would lose my focus.  So now that it's done, I can say what I have to say.  The letter requests that state insurance commissioners act to overturn anti-concurrent cause language and strip it from new policies issued in the states.  But as I point out in my article, the wind damage and the water damage caused by Katrina were, in the great bulk of the cases, not concurrent causes, they were separate, independent causes of loss, and therefore do not present an issue of concurrent or multiple causation of a single loss.  That anti-concurrent cause language is at the center of Katrina debate is one of the great ironies of the entire Katrina mess. I've made that point on this blog before, but of course not in the depth I do in the article. 

Here's an excerpt from the letter:

What is lurking to unexpectedly deny coverage to consumers in your state?  Would a later flood override a claim for tornado damage?  Would an earthquake that occurred at the same time as or after a fire destroyed a home negate coverage for fire losses?  Would the discovery of mold or termite damage exclude wind or fire damage that occurred? 

Surely it is terrible public policy to allow this sort of policy provision to exist, ticking like a time bomb, waiting to go off in the face of unsuspecting customers.

For reasons that I explore in exhaustive detail in my article, the scenarios listed above are -- I'm sorry to be so blunt, but it's true -- just pure, uninformed bunk, and show a complete lack of understanding both of the real coverage issues in Katrina litigation and of how anti-concurrent cause language works.  You know, when I was a kid growing up in NoDak, one of my brother's friends so habitually spewed bunk -- his every thought, word and deed was saturated with it -- that people disregarded his real name and he was universally referred to and called simply Bunk.  Make of that story what you will. 

Let that be the last word from my keyboard on anti-concurrent cause language this week.  I am going to go home, grab a few winks, get back in the office for a mid-morning conference call, help out some clients and then take a vacation. How I will blog during this vacation, which will be in a place without Wi-Fi or even (shudder) dial-up, I have not yet figured out, but I blogged from the middle of Yellowstone, and I will find a way.  So long for this week. 

Posted By David Rossmiller In First Party Insurance
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This is a good interview by the Miami Herald of Florida Chief Financial Officer Alex Sink, who sounds as if she is about ready to start hunting down the people who said Florida's legislative insurance reforms would bring down property insurance premiums 20 percent or more -- they haven't.  Here's an excerpt:

Q: What happened to those rate cuts that homeowners had been promised?

A: Who told us that we were going to see 20 percent rate reductions? It was the OIR [Office of Insurance Regulation], which hired Robert Hunter [insurance director for the Consumer Federation of America and former Texas Insurance Commissioner] for pretty big money to do an analysis of what we could anticipate.

My question is -- and I'm going to bring this up to the [Florida] Cabinet -- we heard 20 percent and we got 10 percent. What happened?

We took on an enormous amount of extra risk (in the CAT Fund) because we all agreed our policyholders were hurting, our economy was hurting and we needed rate relief.

We should always go back and find out whether it was a miscalculation, bad information or whether in fact the insurance companies aren't doing what they were supposed to be doing.

But think about this: State Farm was out there from the get-go, saying ``our rates could come down between 8 percent and 10 percent.''

Citizens wasn't [directly] impacted by the CAT Fund changes, but it was out there saying ``our rates might come down about 10 percent.''

So, between State Farm and Citizens, that's 50 percent of the market.

How do you get 20 percent if 50 percent of the market is saying they are only going to [drop] rates about 10 percent?

There is more good stuff in the interview about her worries that the state-run property insurer, Citizens Property, is taking on way too much risk and, at the same time, is being prevented by lawmakers from charging actuarially sound rates. 

Here's another story from the Southwest Florida News-Press where Gov. Charlie Crist is optimistic and says, "We have turned the ship."  That's probably what the captain of the Titanic said after they saw the iceberg.  

Posted By David Rossmiller In First Party Insurance
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I thought the writing in this L.A. Times story on Jack Denton was pretty decent, although it's written in a breathless heroic tone that makes it sound like a piece in a continuing series that includes the tales of Hercules and the adventures of Horatio Hornblower.  What's the word I'm looking for? Sycophantic? Perhaps. But that doesn't mean it's not a fun story to read.  Denton, you may recall, along with William Walker, was the attorney for the Broussards in Broussard v. State Farm, a case I have discussed at great length on this blog.  Still, all in all, a fascinating look at a key lawyer in the Katrina cases and the son of a Mississippi legal legend.  Anyway, it's about time some plaintiff's lawyer got some press besides Dickie Scruggs. 

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Yesterday I said it wouldn't take long to find out what Judge Beer was going to do about the show cause order protested by the U.S. Attorney's Office, and it didn't.  Later that day, the judge withdrew his show cause order. Here is a story on developments from Mike Kunzelman of the Associated Press.  Here's an excerpt:

On Monday, however, Beer reconsidered and agreed to withdraw his earlier ruling. In a one-page order, Beer said he now believes [U.S. Attorney David] Dugas' office has "shown cause for its current position in this litigation."

In an interview, the judge said he would prefer that the U.S. Attorney's office participates in the case so that he isn't "stuck with being the watchdog" for taxpayers' interests.

"But I can understand their position," Beer added.

Here is a pdf of the judge's order. 

The AP story says Judge Beer gave an interview about the case.  Dang, I was a reporter on a metro daily for eight years and I interviewed Henry Kissinger, Gerald Ford and the Maharishi Mahesh Yogi of Beatles fame once each, but I never got a federal judge to comment on a current case.  (All three, I must admit, were long past their hey day at the time I caught them, although on second thought, every day of Kissinger's adult life has probably been his hey day).  Incidentally, I talked with the Maharishi by phone from the Netherlands after he placed an unusual ad in the paper offering to come to Phoenix with a bunch of followers -- for a generous sum of course -- and set up a kind of force field with chants and meditation to help the city with its crime and street gang problems: I think the story I wrote referred to the idea as Om-boys vs. Homeboys.   Strangely, the offer didn't catch any traction with the City Council.

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You remember the Branch Consultants v. Allstate et al. whistleblower case?  The one where the plaintiffs make allegations of insurer fraud in transferring wind damage onto federally backed flood insurance policies? If you don't, here's a post I did not long ago that has all the refresher information you will need. 

In the lawsuit, today was the day set by federal Judge Peter Beer requesting the United States Attorney's Office to intervene in the lawsuit, or face a July 11 show cause hearing explaining why not.   You may remember I questioned whether a federal judge has any authority to order employees of the Attorney General to prosecute specific cases.  Apparently the U.S. Justice Department is of the same opinion: in this brief filed July 5, the Justice Department says it is still investigating the allegations in the lawsuit but has insufficient verification of the claims to intervene.  More significantly, the filing requests that Judge Beer vacate his prior order, on the ground that he has no authority to issue it in the first place.  Here's a snippet from the Government's brief:

The Government also respectfully submits that its decision not to intervene in this case at this time was an exercise of prosecutorial discretion that is not reviewable by this Court.  The Government has not been able to locate any case law precisely on point, apparently because no court has ever previously entered an order requiring the United States to intervene in a qui tam suit.  However, controlling law in analogous contexts is quite clear.

Here's a pdf of the Government's brief.  Read it, it's only eight pages.  The good stuff is in the last three starting with subheading III.  Also take a look at this preliminary report by the Department of Homeland Security regarding allegations insurers ripped off the treasury by classifying wind damage as flood damage.  This report was attached as an exhibit to the Justice Department's memo, and basically says DHS so far has found no evidence of this rip-off, although investigations continue. I've mentioned this preliminary report before, so I won't go into great detail in this post, and I intend to return to the subject of this report later this week.  I thought the report was pretty well-written and easily understandable, salutations to whoever put it together.

I got a chuckle out of this Chicago Tribune story, which tried to spin the Justice Department's filing as a hopeful sign the government is highly interested in intervening in the case.  If your read of the brief is like mine, the Justice Department is saying it doesn't have anything to go on at this time and isn't going to accept the plaintiffs' allegations at face value, plus a federal judge has no authority under the False Claims Act to direct specific prosecutions of civil claims.  Translation: get up off my back, Judge Beer.  All that talk in the brief about remaining interested in the case? Sure, what else are they going to say, we intend to blow off the whole thing and ignore it no matter what the facts? 

The next day, July 6, the plaintiffs filed a brief in response to the government's brief.  It didn't argue the law about whether Judge Beer has authority to force the government to intervene, but instead said the Justice Department's brief did not specifically address the properties named in the lawsuit through which fraud occurred. 

What will Judge Beer do? Let's wait and see, I suspect it may not take long to find out.  However, if you look carefully, the judge's original motion is not self-styled as an order at all, and is phrased as a mere request and a motion by the judge (although the court's docket classifies the document as an order).  So perhaps the judge does not have to vacate anything, which would provide an escape hatch to this mess. 

Posted By David Rossmiller In First Party Insurance
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I hate using the word "roundup" because I'm never sure if there is supposed to be a hyphen in it or not.  At some time in the past when I was a journalist, the rules on such things as hyphenation were entirely clear to me, but at some point this knowledge became lost to me, like a former basketball player who picks up a ball and rises up to dunk, only to find he can barely touch the net.  As a casual observer, it appears to me that the world has lost faith in the hyphen and it is on its way out entirely.  Shamefully, I couldn't really tell you when to use a hyphen or not, and I just fake it as best I can by feeling my way along.   

• Here is a story by Anita Lee of the Sun Herald about a new Katrina lawsuit filed against State Farm by Judy Dutruch, a woman who is in something called the Slingshot Gang.  Last year, NPR did a story on the Slingshot Group, so-called because of the David-and-Goliath implications of taking on insurance companies. I'm not sure if the Slingshot Group and the Slingshot Gang are the same thing, if one is a splinter group of the other, or if there is a Sharks vs. Jets type of situation going on here.  Dutruch, who advocated in vain for Judge Senter to certify a class action against State Farm earlier this year, says she has given up trying to resolve issues with State Farm outside the courtroom.  Here is a pdf of the complaint.  Incidentally, the policyholders' attorneys are the Merlin Law Group, which has a fine blog on Katrina and other insurance issues.
• Here is another Anita Lee item on numbers from Insurance Commissioner Dale's review of Nationwide's claims handling practices.  Next up for Dale is State Farm. 
• Here is a good story by John O'Brien of Legal Newsline about Mississippi Attorney General Hood's use of outside counsel, in matters including Katrina-related work, who are campaign contributors. 

Posted By David Rossmiller In First Party Insurance
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This Associated Press story in the Clarion-Ledger is a reminder that the Leonard v. Nationwide case goes on at the appeals level, and that oral argument is scheduled for Aug. 6.  I haven't read the appellate briefs in the case yet, but sometime in the next month I will, and I will report back to you on what I think.  If you need a reprise of the Leonard case from last year, I have written many posts on the case, and this link is your huckleberry, as is this one, and this one, and this one, and this one.   If you are looking for a pdf of the decision, the second-to-last link is your huckleberry.  And to the person who asked me recently if I have declared a moratorium on the use of the phrase "this is your huckleberry" because it hasn't been used lately on this blog, I'd say you have your answer. 

UPDATE: I of course should have anticipated that casual and some regular readers have no idea what this huckleberry talk means: here's an explanation, coincidentally from a prior post on the Leonard case. 

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Looks like Mississippi Insurance Commissioner George Dale is not taking the pig-and-lipstick insult lying down.  Dale has upped the ante on the Scruggs Katrina Group, announcing the settlement of a bunch of Katrina claims by Nationwide.  Here is an additional story from the Clarion-Ledger with information about further State Farm settlements in Mississippi.

Lord knows I am no fan of coasting, taking it easy or giving anything less than maximum effort, but between blogging, projects for Appleman's on Insurance and . . . seems like there was something else . . . oh yes, a full time law practice, there's not a lot of juice left in the tank at present.  I saw some other items in my Bloglines feedreader that I want to address, but that will have to wait until tomorrow.  So today, only this post, unless something major breaks on the order of Dickie Scruggs challenging George Dale to a duel.

Posted By David Rossmiller In First Party Insurance
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Last week when the Scruggs Katrina Group put out an announcement announcing it would have an announcement the next day, this is probably along the lines of what I expected: Scruggs and Allstate have entered into a settlement of Katrina claims, although the terms are so secret we don't even know how many cases it involved, or really, whether they were cases or just inchoate claims.  Read about it here in this story by Anita Lee of the SunHerald.

Of course, that isn't what last week's announcement was about, it was about the fact that the Scruggs Katrina Group has filed a lawsuit alleging that at any moment we can expect an attack from Mars, that State Farm officials are advance agents of our future Martian overlords and blend in by wearing latex people suits, and that the "Like A Good Neighbor" TV commercials will soon feature a reptilian spokesthing that will demand obedience to the new Martian order.  Wait a minute. . . . It seems the complaint actually alleged that State Farm has been engaging in racketeering, fraud and federal crimes. Well, that's somewhat different.  Still on the fringe, but different. 

Posted By David Rossmiller In First Party Insurance
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Some of you may recall this post from last month about the Palmer v. State Farm case in federal court in Mississippi, in which I expressed some confusion as to the apparent differences between State Farm's position in that case on the effect of its anti-concurrent policy language, and its stated position in other cases.

So what is the right position? The one in the other cases. Here is a pdf of a State Farm motion to alter or amend Judge Senter's memorandum opinion denying State Farm's earlier motion to dismiss in Palmer.  The new motion, in essence, clarifies that the earlier assertions of State Farm's position in the Palmer motion to dismiss were not consistent with the company's real position and were in error.   Even though the new motion does not seek to change the result of Senter's ruling, but only amend it to reflect what the insurer says is its true position on the anti-concurrent language, the Palmers are having none of it and oppose the motion, calling it "blatantly disingenuous."  Here is a pdf of their response brief.

Again, as you may recall, I wrote a short piece about the anti-concurrent language including a mention of the Palmer case for RiskVue, and you can see what I wrote at a link at this post.  I also have mentioned that I am working on a much longer piece about anti-concurrent language in insurance policies, with a focus on Katrina litigation, that will appear in another venue not too far in the future. 

I consider few things in insurance coverage more stupifyingly complex than issues involving causation, and that is saying something in a field with more than its fair share of issues that can twist your brain into a pretzel.  I have spent an enormous amount of time researching and working on this future article, and one of the amazing things about so-called concurrent causation is that hardly anyone can agree on what it is, much less on the right way to analyze it in the context of insurance contract interpretation, and still less on what the proper result should be.  This takes me back to my law school days when Prosser and Keeton's famous chapter on Proximate Causation was assigned reading in Torts class, and I read it something like 11 or 12 times trying to figure it out, leading my friends to conclude I had lost my mind.  I got an A in the class, so I think I understood it at least in part.  As a work of legal philosophy, the chapter has few parallels, and it even has a certain degree of humor about it.  Far from being unapproachable, it attempts to bring abstraction down to concrete reality and practicality as best it can.  The authors probably have done a better job of explaining the concepts of causation in the law than anyone else ever has, and yet the chapter seems written with the melancholy understanding that if you asked 100 people who had just read it what the chapter said, you would get 50 different answers, and the other 50 people would either laugh in your face or just look at you and walk away.       

Posted By David Rossmiller In First Party Insurance
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This is an impressive move, exactly the kind of bold strategy