Monthly Archives: September 2007

Is anti-concurrent cause language ‘unethical’?

I saw this question discussed at a recent post on Sam Friedman’s blog at National Underwriter.  Plenty of comment by readers, both pro and con.  You might be able to predict what I think.  The question itself arises from a misconception of what anti-concurrent cause language is and what it addresses — in other words, I don’t believe the question makes sense.  Is the notion of exclusions in insurance policies unethical?  Is the notion of covering collapse but defining collapse extremely narrowly, and excluding many causes of collapse, unethical?  Is it unethical to define a policy’s coverage as excess to any other available insurance? Is it unethical to define ongoing property damage as uncovered if any part of it began before the policy period commenced?  Is it unethical to define an intentional act as one that is expected and intended by any insured, meaning one who did not intend the harm is excluded from coverage along with the one who did?  Answer all these questions, and then we can have a debate about the ethics of anti-concurrent cause language.  

As the above questions make plain, insurance policies contain all kinds of provisions that normal people don’t expect or think about.  So do other contracts.  You ever gone on a cruise?  Chances are your ticket contract contained a forum selection clause stating you have to sue in Florida if you have a beef with the cruise line.  Does the average person have a clue about choice-of-law provisions in contracts or their significance?  How many investors anticipate that they will have to engage in NASD arbitration instead of going to court? 

The issue is not one of ethics, but public policy.  If a contractual provision is not against public policy, there is nothing wrong with including it in the contract.  Anti-concurrent cause language merely defines the causation analysis that must be used by the court.   Other potential choices for causation analysis, such as efficient proximate cause or concurrent cause analysis, were neither carved into stone tablets by God, nor have courts found the specific type of causation methodology used in property insurance causation to be a mandatory contract rule, or in other words, a matter of public policy. 

To all who would say anti-concurrent cause language is unethical, answer these questions. Why is the efficient proximate cause methodology of defining the cause of a property loss superior analytically to the methodology contained in anti-concurrent cause clauses?   What endows efficient proximate cause with greater moral stature than anti-concurrent cause methodology? For property insurance contracts with no defined method of analyzing property loss causation, is it ethical not to reveal to the consumer that the default method will be efficient proximate cause?  Come on, I don’t really need to go on, do I?  You can see the whole ethics argument can be shredded like cheesecloth without even breaking a sweat.  Who can answer these questions, and having answered them, will anyone then argue to me that anti-concurrent cause language is unethical?  



Filed under Miscellaneous

Taylor’s federal multi-peril insurance bill passes House

It passed the House easily, but no similar bill has even been introduced in the Senate, and the Bush administration has said the president will veto it if it gets through the Senate. 

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Filed under First Party Insurance

Sheriff’s deputy run over by own stolen car entitled to UM benefits from personal auto policy

This is a coverage scenario you don’t run into every day, from Pease v. State Farm, a decision from Maine a couple days ago (click here to read the decision):

  • Jason Pease, an off-duty sheriff’s deputy in Portland, Maine, gets a call to go check out a domestic disturbance;
  • He drove his unmarked patrol car to the scene, got out and left the engine running;
  • He found the man who had been causing the disturbance — the man said he had been drugged and people were out to get him;
  • The man ran away from Pease, got into his patrol car, and while Pease tried to pull him out, drove away;
  • The car knocked Pease down and ran over his leg, causing severe injuries;
  •  The auto insurance policy of the drugged man provided no coverage because he was in unlawful possession of Pease’s patrol car; 
  • The sheriff’s office had decided to carry no uninsured/underinsured motorist coverage for officers on the job;
  • So Pease looked to his own UM insurance on his personal auto policy from State Farm; 
  • The insurer argued UM benefits were not implicated because the policy did not cover motor vehicles "furnished for the regular use of you, your spouse or any relative;" 
  • The Supreme Judicial Court of Maine found coverage existed — and this is the part that is really interesting — because the patrol car stopped being furnished for his regular use at the moment the suspect stole it. 

I thought this was some pretty creative thinking, but it apparently was not the argument the insured’s attorney made.  The insured argued the "regular use" provision did not apply, but what argument was actually made is not revealed.  The court said only that it came up with its own reasoning, which the justices didn’t quite explain, exactly.  Nevertheless, this impressed me and I’m going to remember it and use a variation of it in some case involving causation.  Here is a newspaper story I found about the case from the Sun Journal of Lewiston, Maine. If you read the reader comments to the story, the David in there is not me. Not that there’s anything particularly crazy about what he wrote, I’m just sayin’.


Filed under UIM/UM Coverage

Hood spokesman says challenger needs to cowboy up

Look for Mississippi AG Jim Hood to strap on a gun belt, wear a 10-gallon hat, and ride into his next press conference on a steer while saying "that ain’t no bull,"  after his campaign spokesman called out Hood’s challenger this way:

"There’s an old saying that applies to make-believe cowboys who dress and talk the part, pretending to be what they aren’t. Alben Hopkins is ‘all hat, no cattle.’"

Read this great story by John O’Brien of Legal Newsline for more details.  Just as a point of future reference for the spokesman, however, I would like to point out that the correct phrasing is "pretending to be what they ain’t."  I like how the candidates in the Mississippi AG race aren’t fooling around, pretending to respect each other, and how they realize that negative campaigning is what we all really want to see, no matter what we say.  The campaign isn’t quite up to Citizen Kane levels yet ("Gettys! I’m going to send you to Sing Sing! Sing Sing, Gettys! Sing Sing!"; "Candidate Kane found in love nest with quote, singer, unquote") but give it some time. 

For his part, Hopkins has been pointing out Hood’s fondness for campaign contributions from folks who, as luck would have it, happen to get state contracts.  In a hilarious satire of a dumb explanation of this phenomenon, Hood said as follows, according to the story:

Hood has said state contracts are given on a "first-come-first-serve basis."

"It’s kind of like intellectual property. They’re bringing you an idea," Hood said. "And we give it to whomever it is, and if they’ve got the ability to handle it and the wherewithal to handle it and the money to back it, they’ve got the case."

That’s pretty funny, he got us real good with that one.  That’s the key to a good joke — why, just imagine if he had been serious!  I’ve said it before, Hood has real comedic talent — he’s the best straight man since maybe Bud Abbott, or at least Bob Newhart. 


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A Tuesday Fisking

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.

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Filed under First Party Insurance

No post today

I think this will be the third time in a year and a half of blogging that I haven’t had a real post during a non-holiday weekday — posts saying I’m not going to post don’t count.  One of those times, I was too sick to get out of bed.  This time, due to a confluence of work, deadlines, lack of sleep and internet access problems, I can see it’s not in the cards.  Thanks for stopping by, see you tomorrow.


Filed under Miscellaneous

Final version of Appleman’s anti-concurrent cause/Katrina litigation article

Here is the final version of the article appearing next month called Interpretation and Enforcement of Anti-Concurrent Policy Language in Hurricane Katrina Cases and Beyond.

Because this is an exception to the Lexis policy of not allowing stuff to be seen until it actually is published by them, I agreed to post the following copyright notice.  Below is also some information on how you can sign up for an Appleman’s teleconference where I am going to talk about this article, as well as some of the later developments that aren’t covered as extensively in the article,  like the Fifth Circuit’s recent Katrina decisions.  

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.

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.  Click here for information on how to attend.


Filed under Miscellaneous

Florida Supreme Court: Valued Policy Law requires payment only for covered portion of total loss

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."

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Filed under First Party Insurance

Jeb Bush rips Florida Gov. Crist over insurance war

It makes very little sense to me what Charlie Crist is doing in Florida — putting taxpayers at risk while throwing tantrums — and I’m glad to see Jeb Bush speak out publicly against Crist’s insurance policies, which will only make things worse.  Here’s a recent story from the St. Petersburg Times on Bush’s remarks, and here’s an excerpt from the story:   

Like other critics — mostly in the insurance industry — of the reforms of early 2007, Bush argued that expanding Florida’s role in the property insurance market will put the state at considerable financial risk if Florida is hit by one or more major hurricanes.

Such solutions "are as bad as the natural disasters themselves," Bush said, adding that "My beloved state of Florida has taken steps along that path."

Without mentioning Gov. Charlie Crist by name, Bush still took aim at the current Republican governor, who inherited the property insurance problem and has all but declared war on State Farm, Allstate, Nationwide and other large insurance companies operating in the state.

The special session legislation championed by Crist will produce "unintended consequences and greater problems in the longer term," Bush said. "The more risk that is concentrated within the public domain, the greater the burden to taxpayers to pay for the cost of rebuilding after a devastating hurricane." Highlights of Bush’s remarks were published on Bestwire, an insurance industry wire service run by A.M. Best.

I disagree with one thing in the story — "has all but declared war."  Heck, he signed a declaration of war a long time ago.  It wouldn’t surprise me any to see ol’ Charlie Crist come out to a press conference wearing green fatigues, sporting shades and a pistol in his belt and chomping a cigar, talking all about liberation and the running dogs of the capitalist masters, and announce he is seizing the assets of the insurance companies in the name of the people. 

UPDATE: Here is the first story that came out on Bush’s remarks, by Ray Lehmann of A.M. Best.

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Filed under Industry Developments

Thanks to readers

One of the highlights of my day is receiving e-mails from readers — although I’ve been lucky in that a fair number of people post public comments, a lot more send me private e-mails, and that is one of the great joys of blogging: meeting new, interesting people, with fascinating takes on the issues we discuss here.  Doesn’t matter whether they agree or disagree with me, I enjoy hearing from people, and I keep their identities to myself, and the information too, unless they say it’s OK to use it. 

Thanks especially to those who read my anti-concurrent cause article and commented to me on it, including correcting a few errors I had in it.  I took these comments to heart and made a few changes for the final draft that will appear in Appleman’s.   That is one of the new paradigms of the internet, to put out a product and invite public comment before it’s set in stone, and that is something I hope to do again.  I will be writing a follow-up article on the implications of Katrina appellate decisions for the April edition of Appleman’s Critical Issues, and I’m still forming my opinions on those decisions, so input is always welcome — writing this blog is a continuing education for me.

This blog and the reader response I’ve received is just another reason why I say I must be the luckiest man on Earth to have had the life I’ve had — growing up in NoDak with the finest folks in the world, then getting paid to be a journalist and then a lawyer, not to mention the great family I have and living in Portland, Oregon, the friendliest city I’ve ever seen.  Life is a great adventure, with the oddest twists and turns — never did I imagine in my younger years I would be writing about insurance and having a ball doing it.  Always feel free to e-mail me at with questions, comments, ideas for posts, news or criticism.  I read every e-mail, and I try to respond to each one, with the exception of those that ask me to send money to bribe Nigerian customs officials for the purpose of extracating a large fortune from the country.  I currently have all my money tied up helping some folks get a large fortune out of Malaysia, for which — I think it’s OK to reveal this — I have been assured I will shortly receive some rather handsome compensation!


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