2018 pamic property potpourri summit/2018... · bob horst timoney knox, llp 2018 pamic property...
TRANSCRIPT
Bob Horst
Timoney Knox, LLP
2018 PAMIC
Property Potpourri
April 10, 2018
FIND US ON
FIRST, THE YEAR* IN REVIEW
What cases & developments really meant something?
* When I say “year” I mean since the last PAMIC Annual…
2017 CASES THAT MADE A DIFFERENCE
Brown v. Everett Cash Mut. Ins. Co. - Pa. Superior
Morrow v. Allstate Indem. Co. - M.D. Ga.
2017 CASES THAT MADE A DIFFERENCE
Kurach v. Truck Ins. Exch. – Philadelphia CCP (Djerassi, J.)
Windows v. Erie Ins. Exch. – Pa. Superior
2017 CASES THAT MADE A DIFFERENCE
Bond v. Liberty Ins. Corp. – W.D. Missouri
2017 CASES THAT MADE A DIFFERENCE
In re State Farm (“Labrier”) - 8th Cir. – Missouri law
Rancosky v. Washington Nat’l Ins. Co. – Pa. Supreme
Hall v. South River Restoration, Inc. – D.C.
Oak Hill Inv. IV LLC v. State Farm Fire & Cas. Co. – N.D. Ohio
2017 CASES THAT MADE A DIFFERENCE
Smith v. United States Liab. Ins. Co. - Philadelphia
2018
Diminished Value (“DV”) - CALIFORNIA
In Doyle v. Fireman’s Fund Ins. Co., a wine collector realized his “multi-million dollar” wine collection was counterfeit and submitted a claim for the difference between what he paid for the wine (millions of dollars) and what it was actually worth (virtually nothing). His insurer denied the claim. The wine was in the exact same condition as when it was purchased; there was no loss. The critical take-away from this case is that diminished value is not a covered property loss. Instead, it’s simply a measure of damages and those aren’t damages covered in a first -party property claim.
Depreciation of Labor - MISSISSIPPI
Can labor be depreciated? A federal district court in Mississippi weighed-in on the subject this month and said “no.”
In Titans Exteriors, Inc. v. Certain Underwriters at Lloyd’s, London , because the relevant policy did not define depreciation or actual cash value, the court declared an ambiguity and held that Underwriters may not depreciate labor when calculating actual cash value in Mississippi. Had there been a definition in the policy, the result may have been different. This continues to be a hot topic.
Intentional Loss Exclusion and the “Abuse” Exception - PENNSYLVANIA
A federal district court in Pennsylvania recently addressed Pennsylvania’s abuse exception to the intentional loss exclusion. In Sterner v. Liberty Ins. Co., the plaintiff’s wife, an insured under the policy, intentionally set fire to the marital home. The arsonist wife left a note accusing the plaintiff/husband of adultery with references to “punishing” him. Using the Sterner court’s rationale, the act of setting the fire was the abuse itself.
ASSIGNMENT OF BENEFITS ISSUES
Are they legal in Pennsylvania?
ASSIGNMENT OF BENEFITS
INS. ADJUSTMENT BUREAU, INC. V.
ALLSTATE INS. CO., (PA. 2006)
• Public Adjuster files suit against Allstate
for breach of contract and assignment
• Public Adjuster argues 10% assignment of
insurance proceeds is not revocable
• Post-loss Assignee of right to the payment
of insurance proceeds may collect directly
from the insurance carrier
INS. ADJUSTMENT BUREAU, INC. V.
ALLSTATE INS. CO., (PA. 2006)
• Assignment may be for purposes of
security and irrevocable on partial
performance
• Assignee may also collect pre-judgment
interest
INS. ADJUSTMENT BUREAU, INC. V.
ALLSTATE INS. CO., (PA. 2006)
WHY NOW?
THE EXPANDING FLORIDA PROBLEM
• Examination(s) Under Oath
• Document and Financial Record
Requests
• Proofs of Loss
ARE POLICY CONDITIONS ENFORCEABLE
AGAINST ASSIGNEE CONTRACTORS?
One Call Prop. Servs. v. Sec. First Ins. Co.,
Fla. Dist. Ct. App. 2015: Maybe
Sable Cove Condo. Ass'n v. Owners Ins. Co.,
10th Cir. Sept. 2016: Yes
ARE POLICY CONDITIONS ENFORCEABLE
AGAINST ASSIGNEE CONTRACTORS?
• Use of Debt Collection
Agencies
• Effect of Fair Debt
Collection Practices Act
• Implications of
Pennsylvania Public
Adjuster License Law
• Potential Unauthorized
Practice of Law Issues
NEW TACTICS & POSSIBLE SOLUTIONS
DIMINUTION OF VALUE IN
PROPERTY CLAIMS
“DV”
WHAT IS IT?
• Policyholders argue they need to be “made whole”
• “Stigma damage”
IS IT RECOGNIZED?
• Thompson v. State Farm (M.D. Ga.)
• Class certification granted and SJ for Plaintiff
• Royal Capital Development v. Maryland Cas. (Ga.)
• Doyle – California (as we discussed)
WHY SHOULD I CARE?
• Consequential damages
• Do policies address this?
• Use of DV in support of other arguments/issues
DEPRECIATING LABOR:
YES OR NO?
WHY IS THIS A BIG DEAL?
IT’S A BIG DEAL BECAUSE…
• Several states have held that the depreciation of labor – when paying actual
cash value – is illegal;
• This topic is on the radar screen of plaintiff’s attorneys and public adjusters
across the nation;
• The class action exposure can be significant; and,
• Forcing labor to be excluded from a depreciation calculation may impact an
insurer’s current business practices, if the law were to be altered in your
jurisdiction.
WHAT IS THE DIFFERENCE?
THE DIFFERENCE IS…
• The type of labor (did it “add value” to finished product)
• The trade involved
• Paint, plumbing, electrical, roofing, fencing, carpentry…
• The scope & length of the job
• The total number of trades altogether (overhead & profit analysis)
• The size of the work crew
• is there really oversight/clerking necessary
• The “permanence” of the work
• The labor cost
• How does your estimating software work?
WHAT’S THE “LEGAL” DIFFERENCE?
• Which jurisdiction are we in?
• How does the policy language read?
• Personal lines or commercial lines?
• All of the factors from the previous slide . . .
• Are you using an independent? If so, how are you contractually-bound?
• Is it a class action . . . or not?
• How smart is your Judge?
HOW DO THE STATES DIFFER AT THIS POINT?
The question: “is it legal to depreciate labor?”
“YES” states: Florida, Indiana, Oklahoma, Pennsylvania
“NO” states: Arkansas, Montana, Vermont, CA (?), Mississippi
Does the case law provide
legitimate guidance?
DISCUSSING SOME OF THE CASES
• Redcorn & Branch (OK), then Adams (AK)
• The class actions that followed…
• Wilcox (Minnesota)
• Brown, Bailey (Kentucky)
• Labrier, Boss (Missouri)
• Graves (Kansas)
• Papurello (PA)
`
Are there related topics that may
give us guidance?
LOOKING TO RELATED TOPICS FOR GUIDANCE
• Overhead & profit cases
• Defining ACV
• Cases interpreting similar principles (automobile policies, tax
law)
• Diminished value cases (auto & property)
• Depreciation of sales tax
• OSHA standards; product guidelines/installation instructions
WHAT LABOR ADDED TO THE VALUE…
PUBLIC ADJUSTERS
THE “NEW” ADS & PRESS
“Like”
1. Inconsistency between
adjusters and claim
offices
2. Confrontation
3. Scant investigation
4. Advances
“Dislike”
1. The Active Adjuster
2. Qualified experts
3. ROR letters
4. Records requests
5. Statements
6. EUO’s!
PUBLIC ADJUSTERS
PROHIBITING USE OF A PUBLIC ADJUSTER?
In Pennsylvania You Can Be Liable For Interfering With Public Adjuster Contract
Johnson v. Pilgrim Mut. Ins. Co. (Pa.Super. 1981)
PROHIBITING USE OF A PUBLIC ADJUSTER?
SOCIAL DUTY ISSUES
THE ADVENT OF
“SOCIAL DUTY”
Negligent Performance
of Undertaking to
Render Services
RESTATEMENT (SECOND) § 323
BRUNO V. ERIE INS. CO. (PA. 2014)
Restatement (Second) § 323 adopted under
rationale that negligence allegations
“facially concern Erie’s alleged breach of a
general social duty, not a breach of any duty
created by the insurance policy itself.”
SCAMPONE V. GRANE HEALTHCARE CO.,
(PA.SUPER. 2017)
Nursing home death – corporate negligence, and
punitive damages…
“A defendant acts recklessly when ‘his conduct creates an unreasonable risk of physical harm to
another and such risk is substantially greater than that which is necessary to make his conduct
negligent.’ “ Phillips, supra at 445 (quoting in part Hutchison, supra at 771).
• Contractor referral procedures
• Health and safety recommendations
• Experts!
• ALE
• Warnings – even if you’re not an
expert
• In Writing
PREVENTATIVE MEASURES
“An ounce of prevention is worth a pound
of cure.”
The Potential Measures/Actions
RECOVERABLE DEPRECIATION –
IS FULL REPLACEMENT
NECESSARY?
LOSS PAYMENT
• “We will pay cost to repair or replace . . . But
not more than the least of the following:
• “The necessary amount actually spent to
repair or replace the damaged building”
• “We will pay no more than the actual cash
value of the damage until actual repair or
replacement is complete”
LOSS PAYMENT
• When is actual repair/replacement complete?
• E.g. – Wind damage to roof with interior water
damage
• Entire loss is covered
• RCV - $30,000 / ACV - $23,000
• ACV paid
AGREED ESTIMATE
• Roof RCV - $20,000 / ACV - $15,000
• Ceiling RCV - $5,000 / ACV - $4,000
• Walls RCV - $2,000 / ACV - $1,500
• Floors RCV - $3,000 / ACV - $2,500
PARTIAL CLAIM FOR HOLDBACK
• “I repaired the ceiling for $5,000 ($4,000 ACV pd). Here’s my receipt. Please pay me the $1,000 recoverable depreciation.”
• “I repaired the ceiling, walls and floors for $10,000 ($8,000 ACV pd). Here are the receipts. Please pay me the $2,000 recoverable depreciation.”
• “I repaired the roof for $20,000 ($15,000 ACV Pd). Here is the receipt. Please pay me the $5,000 recoverable depreciation.”
HALL V. CUMBERLAND (N.J. SUPER.)
• Policyholder – Standard within industry to release
depreciation attributable to component part of project
once it is repaired/replaced.
• Court
• All repair or replacement in building must be
completed before any depreciation can be released.
• Insurer not compelled to make periodic payments.
APPRAISAL
APPRAISAL – THE NEW ISSUES
APPRAISAL – THE NEW ISSUES
The “Coverage” Question
“When properly executed,
appraisal is binding on the
parties as to the amount of
loss only. Appraisal does not
determine coverage.”
• Challenging Appraisal Awards
• The Standard: Limited to fraud, misconduct,
corruption or other irregularity causing an unjust
result.
• Level of Proof: Clear & Convincing Evidence
APPRAISAL – THE NEW ISSUES
RESIDENCE PREMISES
SAMPLE POLICY DEFINITION
a. The one or two family dwelling where “you” reside; or
b. That part of any other building where “you” reside;
Including other structures and grounds at that location, and which is shown as the “residence premises” in the Declarations.
POTENTIAL AMBIGUITIES
Ionata v. Allstate Ins. Co. (E.D. Pa. 2016)
• Eastern District explains the term “reside”
may be ambiguous when a homeowners’
policy allows for varying periods of
vacancy in other policy portions
POTENTIAL AMBIGUITIES
Miller v. Poole (Pa.Super. 2012)
• Pennsylvania Superior Court explains that
the term “residence” can have more than
one meaning, but he term “household”
may be ambiguous
DEPRECIATING OVERHEAD AND PROFIT:
YES OR NO?
Office of Program Policy Analysis and Government
Accountability
“the research arm of the Florida Legislature. OPPAGA
supports the Florida Legislature by providing data,
evaluative research, and objective analyses that assist
legislative budget and policy deliberations….”
WHAT IS THE REAL ANALYSIS
FOR THE 10 & 10?
WHAT IS THE ANALYSIS
FOR THE 10 & 10?
• Public adjuster fees
WHAT IS THE ANALYSIS
FOR THE 10 & 10?
WHEN IS 10 & 10 PAYABLE?
It’s simple algebra! RC less depreciation = ACV
WHEN IS 10 & 10 PAYABLE?
• Do you just count the number of trades?
• What is “reasonably likely”?
• Defining ACV is the key
• Is it a “broad evidence” rule state?
• Pennsylvania is not a “broad evidence”
rule state
WHAT IS THE ANALYSIS
FOR THE 10 & 10?
LET’S TALK…
Any questions, comments, etc.?
Thank you!