Federal Case Summaries

7th Circuit Court of Appeals

Windridge of Naperville Condo. Ass’n v. Phila. Indem. Ins. Co., 932 F. 3d 1035 (7th Cir. 2019) Decided Aug. 7, 2019

Opinion Summary:
An insured condominium association brought action against an insurer, seeking declaratory judgment that the insurer had to pay to replace siding on all four sides of buildings following hail damage. The United States District Court for the Northern District of Illinois granted summary judgment in favor of the association. The Insurer appealed. Holding: The Court of Appeals, Hamilton, circuit judge, held that the policy required the insurer to replace or pay to replace siding on all four sides of the condominium buildings, as matching siding was no longer available, rather than only on physically damaged sides. Affirmed.

8th Circuit Court of Appeals

Noonan v. American Family Mutual Insurance Co., No. 18-1393 (8th Cir. 2019)

Opinion Summary:
The 8th Circuit agreed with American Family that the district court erred in holding that the matching exclusion did not apply to the insureds’ policy. Reviewing the district court’s interpretation of the insurance policy de novo and applying Minnesota law, the court held that even if it were to discount the matching exclusion’s explicit statement that it modifies the form, as the district court did, other circumstances unambiguously showed that the Minnesota Endorsement, and thus the matching exclusion, applied to the insureds’ policy. Therefore, the district court erred in reading the matching exclusion in the policy and, after applying the explicit and unambiguous exclusion, American Family was not obligated to pay for damages attributable to matching difficulties.

Todd Borchardt; Michele Borchardt; Danielle Shaver, Dillon Borchardt v. State Farm Fire and Casualty Company No. 18-2610 (8th Cir. 2019)

Opinion Summary:
For a concealment or misrepresentation to be “material,” it must be sufficiently substantial to matter to a reasonable insurer. A concealment or misrepresentation that impacts the investigation of an insurer into the cause of the fire is material. Likewise, a concealment or misrepresentation about items of personal property that were allegedly destroyed by a fire is material unless the amount of money involved in the concealment or misrepresentation is so small that a reasonable insurer is not likely to care about it.

To act with “intent to defraud” means to act with the purpose or intent of deceiving or cheating someone else. In considering whether any of the Borchardts acted with intent to defraud, you may consider whether they acted with a desire or purpose to bring about some gain or benefit to themselves at the expense of State Farm.

We assume the jury followed the court’s instructions, weighed the evidence and credibility of the witnesses and carefully reached the verdict that it did. Viewing the evidence in a light favorable to the verdict, we conclude that this record contains sufficient evidence to sustain the jury’s determination that Todd, Michele and Danielle made material misrepresentations relating to their insurance claims.

Florida

District Court of Appeal of the State of Florida Fourth District, State Farm Florida Insurance Company v. Joseph Valenti, Jr. No. 4d19-205 (Dec. 11, 2019)

Opinion Summary:
An insurer appeals a final judgment entered against it in favor of its insured. The sole issue on appeal relates to the meaning of “disinterested appraiser” in the insurance policy’s appraisal clause. Can an insured’s public adjuster later be appointed the insured’s disinterested appraiser? The circuit court found that the public adjuster could. On the facts here, we disagree and reverse the circuit court’s judgment.

Here is a brief history of the claim. A leak in the insured’s home caused water damage. Two weeks later, the insured signed an agreement with a public adjuster. As part of the
agreement, the insured assigned 20% of any recovery from the insurance company to the public adjuster.

After the insured retained the public adjuster, the public adjuster contacted the insurer about the claim, attended the property inspection, and sent follow-up correspondence about the inspection to the insurer. Ultimately, the insurer sent payment for its valuation of the loss and demanded appraisal to resolve any remaining dispute about the valuation.

After the demand for appraisal, the public adjuster sent a letter to the insurer naming himself the insured’s appraiser. The insurer objected to the public adjuster’s appointment of himself, arguing that the appointment of the public adjuster violated the policy’s requirement that the parties select a “qualified, disinterested appraiser.” The insured disagreed and filed an action for declaratory relief in the circuit court.

The court stated “I would hold that a person with a direct financial interest in the amount recovered from an insurance claim cannot be disinterested. But, because the panel’s opinion reaches the same result, and on grounds that I also agree with, I join the panel’s opinion reversing the circuit court’s judgment.”

CONNER, J., concurring specially.

I agree with much of the analysis presented by Judge Kuntz’s special concurrence. But I am not so sure the question of whether a contingency fee makes an appraiser “interested,” instead of “disinterested,” is as simple as Judge Kuntz suggests.

For me, there are two factors which establish the insured’s public adjuster in this case was not “disinterested.” First, the partial assignment of the claim puts the public adjuster to some extent in the shoes of the insured, and for me there is no doubt that a party to the claim is not “disinterested.” Thus, it is significant that the public adjuster picked himself to be one of the appraisers to resolve the claim. Second, the fact that the compensation paid to the public adjuster for his work is keyed to a percentage of the recovery by the insured leads me to conclude the public adjuster is not “disinterested,” because his fee arrangement arguably gives him a financial incentive to be less objective.

But the interplay between financial interest in the claim and the status of being “disinterested” is a bit complicated. One of the problems in this case is that on appeal, the insured raised policy arguments about the contingency fee arrangement that were not addressed in the summary judgment. More specifically, the insured argued, particularly at oral argument, that if this Court takes a categorical position and declares that a contingency fee arrangement with an appraiser disqualifies the appraiser for not being “disinterested,” insureds will have a difficult time hiring appraisers. In addition to the trial court not addressing the argument, there was no summary judgment evidence to support the argument. For that reason, I am hesitant to take a categorical position on the issue of a contingency fee being a disqualifier. To me, it is better to wait for another case to decide that issue where the record is better developed.

Additionally, I struggle with the notion that a contingency fee arrangement categorically makes one more financially interested in the outcome of the case than a flat fee arrangement. Just as it is frequently the case in personal injury cases that experts are hired more often by one side or the other, I suspect the same is true with appraisers for property insurance claims. Is an appraiser
that seeks to be hired regularly by one side more objective than the appraiser who is hired on a contingency fee arrangement?

In addition to the two factors discussed above which persuade me to conclude that the public adjuster in this case was not “disinterested,” there is an additional reason for my conclusion. The insurance policy provides that the appraisal process can be invoked only after there is a disagreement between the parties on the amount to be paid for the loss. That would typically mean that
someone on each side has evaluated and determined an estimated value for the loss, after reviewing the premises and determining what needs to be replaced or repaired. Under the appraisal process, the timing of the sequence of events leads me to conclude that the intent of the parties, in agreeing that “disinterested” appraisers are to be selected, was for the selected appraisers to provide a fresh set of eyes or new perspective to evaluate the value of the claim. Aside from the fact that the public adjuster in this case picked himself to be an appraiser, it is clear from the
record that the public adjuster would not have provided a fresh set of eyes or new perspective to the valuation process.

For the reasons expressed above, I agree the public appraiser in this case could not properly serve as a “disinterested” appraiser

MINNESOTA

Selective Insurance Company of South Carolina v. Amit Sela. Case No. 16-Cv-4077 (Pjs/Ser) United States District Court District of Minnesota (Aug. 16, 2019)

Opinion Summary:
Minnesota has decided to address the issue of unreasonable claims handling through § 604.18, and not by importing broad reasonableness obligations into insurance contracts via the implied covenant of good faith and fair dealing. Sela’s claim under § 604.18 for bad-faith denial of insurance benefits will be tried by the Court. ECF No. 185.
If Sela can prove that Selective did not have a “reasonable basis” for denying his claim and that the person or persons at Selective who denied the claim “knew of the lack of a reasonable basis,” then he can recover significant damages and attorney’s fees under § 604.18. If he cannot prove these things, then he can recover only the benefits due under the insurance contract.

Pleasure Creek Townhomes Homeowners’ Association v. American Family Insurance Company. A19-0662 State Of Minnesota in Court of Appeals (2019)

Opinion Summary:(unpublished opinion):
In this insurance-coverage dispute, appellant Pleasure Creek Townhomes Homeowner’s Association (the Association) appeals the district court’s grant of summary judgment
to respondent American Family Insurance Company. The Association, the insured, argues that the district court erred by deciding that its all-risk businessowners policy does not cover the cost to replace undamaged, faded siding to match siding replaced due to hail damage. The Association argues that (1) the policy’s matching exclusion is void as a matter of law because it violates the minimum coverage required by the Minnesota Standard Fire Insurance Policy, Minn. Stat. §
65A.01 (2018); (2) the matching exclusion does not apply to the facts of this case; (3) in the alternative, the matching exclusion is ambiguous and unenforceable; and (4) American Family’s construction of its policy violates the reasonable expectations of the policyholder. We affirm.

OKLAHOMA

Loven v. Church Mutual Insurance Co. 2019 Ok 68 Case Number: 116808; Comp w/116954 Decided: Oct. 22, 2019 the Supreme Court Of the State of Oklahoma

Opinion Summary:
The plaintiff/appellant, Lisa Loven, is a general contractor who applied for a public adjuster license with the Oklahoma Department of Insurance. After she disclosed that a former client sued her for acting as an unlicensed adjuster, the Department opened an investigation regarding her application. Subsequently, the Department denied her application, and Loven appealed. During

the appeal hearing Church Mutual Insurance and its adjuster Jeffrey Hanes provided information regarding their dealings with Loven as a general contractor when she contracted for storm repair work for two churches they insured. The appellate hearing officer affirmed the denial of her application as a public adjuster because she had illegally acted as an unlicensed public adjuster. Loven sued Church Mutual and Hanes for intentional interference with a prospective economic business advantage. The trial court granted summary judgment to Church Mutual and Hanes because 36 O.S. Supp. 2012

  • 363 provides civil tort immunity to insurers who provide any information of fraudulent conduct to the Department. Loven appealed and the Court of Civil Appeals affirmed. We granted certiorari to address the statutory immunity provisions and to determine the first impression question of whether the tort of intentional interference with a prospective economic business advantage requires an element of bad faith. We hold that: 1) 36 O.S. Supp. 2012
  • 363 provides immunity for those who report or provide information regarding suspected insurance fraud as long as they, themselves, do not act fraudulently, in bad faith, in reckless disregard for the truth, or with actual malice in providing the information; and 2) the alleged tort of intentional interference with a prospective economic business advantage requires a showing of bad faith.

However, because no proffered evidence in this cause tends to show bad faith, the immunity provisions of 36

O.S. Supp. 2012 §363 apply, and summary judgment was proper.

TEXAS

The Texas Supreme Court issued Barbara Technologies Corporation v. State Farm Lloyds, No. 17-0640 Argued Feb. 20, 2019

Opinion Summary:
In this case, we consider competing motions for summary judgment that present the issue of whether an insured party can prevail on its claim for damages for delayed payment pursuant to the Texas Prompt Payment of Claims Act (TPPCA), see TEX. INS. CODE ch. 542, when it is undisputed that the insurer investigated the claim, rejected it, invoked the policy’s provision for an appraisal process, and ultimately paid the insured in full in accordance with the appraisal. We hold that the

insurer’s payment based on the appraisal was neither an acknowledgment of liability under the policy nor an award of actual damages. Because the insured has not established that it is entitled to TPPCA prompt pay

damages as a matter of law and the insurer likewise has not established that it can owe no TPPCA damages as a matter of law, we reverse the court of appeals’ judgment and remand the case to the trial court for further proceedings.

CALIFORNIA

California Insurance Code Section §2051.5 (b)(1) Time Limit to Collect Full Replacement Cost

No time limit of less than 12 months from the date that the first payment toward the actual cash value is made shall be placed upon an insured in order to collect the full replacement cost of the loss, subject to the policy limit.

Additional extensions of six months shall be provided to policyholders for good cause. In the event of a loss relating to a “state of emergency,” as defined in Section 8558 of the Government Code, no time limit of less than 36 months from the date that the first payment toward the actual cash value is made shall be placed upon the insured in order

to collect the full replacement cost of the loss, subject to the policy limit. Nothing in this section shall prohibit the insurer from allowing the insured additional time to collect the full replacement cost.

Note: AB 1772, which extended the time to rebuild and collect full replacement cost from 24 to 36 months after a declared disaster, has an urgency clause and is currently in effect for the new fires.

California Insurance Code Section §2051.5 (b)(2) — Time Limit to Collect Additional Living Expenses (ALE)

In the event of a covered loss relating to a state of emergency, as defined in Section 8558 of the Government Code, coverage for additional living expenses shall be for a period of 36 months, but shall be subject to other policy

provisions, provided that any extension of time required by

this paragraph beyond the period provided in the policy shall not act to increase the additional living expense policy limit in force at the time of the loss.

California Insurance Code Section §2051.5 (c) Rebuilding in Current Location or Rebuilding or Replacing in a New Location

Homeowners may use their replacement cost insurance coverage to (1) rebuild at the current location, (2) rebuild on a new location, or (3) purchase an already built home at a new location. In the event of a total loss of the insured structure, a policy issued or delivered in this state shall not contain a provision that limits or denies, on the basis that the insured has decided to rebuild at a new location or to

purchase an already built home at a new location, payment of the building code upgrade cost or the replacement cost, including any extended replacement cost coverage, to

the extent those costs are otherwise covered by the terms of the policy or any policy endorsement. However, the measure of indemnity shall not exceed the replacement cost, including the building code upgrade cost and any extended replacement cost coverage, if applicable, to repair, rebuild, or replace the insured structure at its original location.

Homeowners are entitled to the “extended” or “guaranteed” portion of their replacement cost policies and any building code upgrade costs (if applicable) even if they rebuild or replace in a new location.

Note: AB 1800 clarified an insured’s right to collect the full replacement cost of their home in the event of a total loss, whether they decide to rebuild, replace at another location or purchase an already built home at a new location. This bill has an urgency clause and is currently in effect for the new fires.

California Insurance Code Section §2071

Changing Claims Adjusters

If, within a six-month period, the company assigns a third or subsequent adjuster to be primarily responsible for a claim, the insurer shall provide the insured with a written status report. The written status report must include a summary of any decisions or actions that are substantially related to the disposition of a claim, including, but not limited to, the amount of losses to structures or contents, the retention or consultation of design or construction professionals, the amount of coverage for losses to structures or contents and all items of dispute.

Appraisal

In the event of a government-declared disaster, as defined in the Government Code, appraisal may be requested by either the insured or the insurance company but shall not be compelled.

Suits

No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within 12 months next after inception of the loss. If the loss is related to a state of emergency, as defined in subdivision (b) of Section 8558 of the Government Code, the time limit to bring suit is extended to 24 months after inception of the loss.

Note: AB 2594, which extended a consumer’s right to sue from 12 to 24 months, has an urgency clause and is currently in effect for the new fires.

California Insurance Code Section §2084 Copy of Complete Policy After a Loss

After a covered loss under a policy covered by Section 2071, an insurer shall provide to the insured, free of charge, a complete, current copy of his or her policy within 30 calendar days of receipt of a request from the insured.

California Insurance Code Section §675.1(b) Cancellation after Total Loss to Primary Structure

The insurer shall not cancel coverage while the primary insured structure is being rebuilt, except for the reasons specified in subdivisions (a) to (e), inclusive, of Section 676. The insurer shall not use the fact that the primary insured structure is in damaged condition as a result of the total loss as the sole basis for a decision to cancel the policy pursuant to subdivision (e) of that section.

California Insurance Code Section §675.1(a) Adjustment of Policy Limits on Renewal

If reconstruction of the primary insured structure has not been completed by the time of policy renewal, the insurer, prior to or at the time of renewal, and after consultation by the insurer or its representative with the insured as to what limits and coverages might or might not be needed, shall adjust the limits and coverages, write an additional policy or attach an endorsement to the policy that reflects the change, if any, in the insured’s exposure to loss. The

insurer shall adjust the premium charged to reflect any change in coverage.

California Insurance Code Section §675.1(c) Non-Renewal After a Declared Disaster

Except for the reasons specified in subdivisions (a) to (e), inclusive, of Section 676, the insurer shall offer to, at least once, renew the policy in accordance with the

provisions of subdivision (a) if the total loss to the primary insured structure was caused by a disaster, as defined in subdivision (b) of Section 1689.14 of the Civil Code,

and the loss was not also due to the negligence of the insured

Skipton and Associates, Inc.