Blogger:  Lee M. Epstein

Beyond the personal toll extracted by Hurricanes Harvey and Irma, the property and business losses are projected to be among the greatest caused by a natural disaster. As the recovery efforts continue in earnest, the following Checklist is offered to assist those who have suffered a loss and are planning to submit an insurance claim for any property loss and business interruption suffered.

□    Restore service to any property protection systems that have been damaged, such as
     sprinklers and alarms

       □    If property protection cannot be restored, post a watch

□    Notify all insurance companies whose policies may be implicated

       □   Consider whether notice should be given to excess insurance companies or to
           insurance companies whose policies have expired

□    Prepare a preliminary report describing:

      □    The type of loss

      □    The date and time of the loss

      □    The location of the loss

      □    A contact person at the company

      □    The property involved, including: buildings, equipment and stock

□    Determine if:

      □    The property is protected from further damage

      □    Any buildings require temporary enclosures

      □    Any utility lines have been damaged and require repairs

□    Identify and separate damaged and undamaged property

□    Commence salvage operations

□    Determine whether:

      □    Production can be restored at the damaged facilities

      □    Damaged equipment can be repaired

      □    Substitute facilities and equipment are available and necessary

      □    Lost production can be made up through inventory, overtime, or other

□    Formulate a plan with the insurance company’s input for making repairs, 
     securing substitute facilities and equipment and undertaking other loss
     mitigation efforts

□    Set up accounting procedures to track:

      □    Property Damage

            □    Create separate accounts for all loss-related expenses

            □    Implement procedures for collecting and maintaining all loss-related
                 documentation  in accordance with insurance policy terms, including
                 invoices, contracts and manpower hours

            □    Inventory damaged and undamaged goods

      □    Business Interruption

            □    Determine the “period of interruption”

            □    Determine the quantity of lost production as reflected in inventory 
                 records, production records and sales records. Compute what the business
                 would have normally produced, had there been no loss, then see how many                    
                 units were actually produced.  The difference is the gross lost production.
            □    Deduct any sales or production that can be continued or made up through
                 the use of existing inventory, the utilization of other plants, the utilization
                 of overtime hours or other loss mitigation efforts.  The difference is the
                 net lost production.

            □    Multiply the net lost production by the marginal value of a single
                 production unit.

            □    Add back the extra costs associated with replenishing inventory and loss
                 mitigation efforts.

□    Prepare and submit claim

      □    Summarize

            □    Date, location and type of loss

            □    Amount claimed

      □    Break down the amount claimed

            □    Property damage

                  □    Real property

                  □    Equipment

                  □    Stock and supplies

                  □    Demolition and debris removal

      □    Business Interruption

            □    Interruption Period

            □    Sales value of lost production

            □    Expenses incurred to reduce the loss

□    Attach supporting documentation for each element of the property damage and
     business interruption

□    Press for written extensions of time to submit claim and to file suit if necessary

□    Seek prompt payment of claim by insurance company

□    If a dispute over a claim arises, determine

      □    Whether appraisal is appropriate or beneficial

      □    Whether litigation will expedite payment of claim

For more information, please contact Lee Epstein, Chair of the Insurance Counseling and Recovery Department at Flaster Greenberg PC. 

Horrible Insurers: PA Judge Sends Message To Bad Faith Insurer

Cropped shot of a businessman crossing his fingers behind his back

In a scathing opinion, a Pennsylvania trial court judge urged an appellate court to uphold an award of $18 million in punitive damages and $3 million in attorneys fees against Nationwide Mutual Insurance Company. See Berg v. Nationwide Insurance Company, Civ. Action No. 98-813 (Pa. Common Pleas, Berks, Cty.). The award stemmed from Nationwide’s “scorched earth” litigation policy and bad faith conduct directed towards one of its policyholders.

The case involved a claim under an automobile insurance policy. After the insured’s car was damaged, a claim for coverage was made. Although Nationwide’s independent appraiser determined that the car was totaled, Nationwide overrode that decision and sought to repair the car. Nationwide then spent in excess of $3 million on lawyers to fight the claim.

The words of Judge Jeffrey K. Sprecher of the Berks County Court of Common Pleas cannot be improved upon and I will not try. Instead, I will simply let Judge Sprecher’s words speak for themselves.

Year after year, [the insureds] trustingly paid the premiums for insurance coverage for defendant’s provision of representation and payment of any liability if ever needed. Premiums are paid, regardless of whether or not Nationwide ever has to incur any claims and regardless of whether its expense is one hundred dollars or one hundred thousand dollars. [The insureds], as with other policyholders, pay for this peace of mind.

*           *           *           *

Was there a failure to make a timely offer of settlement? There most certainly was. [Nationwide] tries to divert the blame for this unprecedented endless and protracted litigation to plaintiffs. Of course, the only one who could settle this case was Nationwide if it had made a legitimate offer. Instead it sent a scorched earth message to litigants and the plaintiffs bar that they cannot fight Goliath, especially in small claims cases because their lives will be made miserable. Nationwide will dig in its heels and fight all the way to the end.

*          *          *          *

[Nationwide] clearly followed a litigation strategy designed to “starve out” and wear down plaintiffs and their counsel. Nationwide’s message: the wealthy and powerful corporation could wait 20 years or until the end of time, while plaintiffs’ counsel tires of waiting for compensation from his clients to pay his legal fees and expenses or if plaintiffs are able to pay their legal fees, Nationwide could wait until the end of time for plaintiffs to grow weary of spending hundreds of thousands of dollars to compete with defendant’s billions.

*          *          *          *

[Nationwide] has done everything it possibly could to stonewall the claims processing disposition for its insured. It failed, dismally, to treat the [the insureds] fairly to properly remediate the claim. It looked to its own economic considerations and has sought to limit its potential liability and operated in a fashion designed to send a message.

To the extent Nationwide “operated in a fashion designed to send a message,” Judge Sprecher reciprocated. Insurers who act in bad faith in Pennsylvania will pay a heavy price.

It’s Your Funeral: Failure to Produce Insurance Policies in Funeral Scam Case Results in Court Imposed Sanctions

its your funeral
PNC Bank was recently sanctioned by a federal court for failing to produce insurance policies in a case involving an alleged “Ponzi” scheme.  See Jo Ann Howard and Associates PC et al. v. J. Douglas Cassity et al., Case No. 4:09-cv-01252 (E.D. Mo., July 22, 2015). The “Ponzi” scheme was run by executives of National Prearranged Services (“NPS”) who pocketed proceeds from funeral services contracts rather than safeguarding them with a trust or an insurance policy. PNC was linked to scheme as the successor in interest to NPS trustee, Allegiant Bank and Trust Co., and found liable for $390 million in compensatory and punitive damages.

In resisting disclosure of its insurance policies, PNC argued that its insurers had not acknowledged coverage and, even if they had, any available insurance had already been exhausted by prior claims. In rejecting those contentions, the court relied on Federal Rule of Civil Procedure 26(a(1)(A)(iv), which requires disclosure of any insurance policy which “may” cover the claims at issue.

In addition to ordering the immediate disclosure of any applicable insurance policies, the court also agreed that an award of sanctions was warranted. To that end, the court allowed the plaintiffs to submit for the court’s consideration a specific amount of attorneys fees to be awarded as sanction.

Finally, and perhaps most problematic for PNC, the court also agreed to review any communications that PNC had with its insurers for possible disclosure to the plaintiffs. The plaintiffs argue that those communications could reveal inconsistent positions taken by PNC.

This case underscores two equally important points. First, insurance policies that may cover a claim at issue are often subject to disclosure and discovery, but are frequently overlooked. Second, failure to timely disclose and produce such insurance polices may lead to the imposition of sanctions.

Questions? Let me know.