print what's up fall2005 - united policyholders · homeland security. private insurers...

Insurance News You Can Use

fall 2005

what’s

UPEducation Pays

The Fall, 2004 issue of “What’s UP”featured the photo of 2003 San DiegoCedar Fire survivors Karen and Bill

Reimus in front of their destroyed ScrippsRanch area home. The Reimus’ were amongmany who suffered the second disaster oflearning they were seriously underinsured —with far less than the “replacement” insur-ance coverage they’d been sold.

Karen and Bill educated themselves andused UP’s claim tips to negotiate with their

insurer and get the full coverage that hadbeen promised to them when they boughttheir policy. We are very pleased to reportthat they and their two young childrenmoved back into a rebuilt home this summer.

Karen’s insurance claim strugglesinspired her to devote many hours of preciousrecovery time over the past two years to helpenact legislative reforms to protect futuresurvivors against what she and her commu-nity had to go through. She educated law-makers on issues, made many trips toSacramento, testified at hearings and workedtirelessly to overcome the reform roadblocksput up by the powerful insurance industrylobby. Karen has worked closely with UP andis now a member of our Advisory Board.

in this issue

Before and After : The recently completed rebuilt home of 2003 Cedar firestorm survivors .

www.uphelp.orgIf your fingers are aching from typingin our full name, now you can get allthe on-line insurance scoop you’veever wanted and more by simplygoing to www.uphelp.org. Not onlyhave we added a second, shorter webaddress, we’ve added new features toour site, including:

• Tips for buying the right coverages• Tips for getting fair claim settlements

under different types of policies• Claim tips and regionally-oriented

disaster recovery advice• Comprehensive info on Long Term

Care insurance• More detailed info on Amicus Project

cases• Archived newsletters and feature articles• Links to public and professional

help resources

The California Supreme Court issuedtwo landmark rulings in June, 2005that should have a nationwide impact

on whether courts uphold or reduce futurepunitive damage verdicts in unfair insurancepractice cases. Applying the argument offered inan amicus brief filed by Pillsbury & Levinson,LLP on behalf of United Policyholders, theCalifornia Court determined that previousrulings across the country severely limitingpunitive damages were misinterpretations ofa 2003 U.S. Supreme Court ruling in State

…continued on p3

UP Amicus BriefContributes To LandmarkRulings That ShouldDeter Unfair Practices —California Supreme Court OverturnsRulings Limiting Punitive Damages

Post-Katrina Claim Aid Efforts Underway Please visit www.uphelp.org for details.

“One of the most valuable thingswe learned was — your adjustermay be friendly, but they're notyour friend” — Karen Reimus

2 Bach Talk2 Insuring a Rental Car3 Shernoff re-joins UP Board4 Should you buy EQ insurance?5 Coverage for landslide damage 5 Grant funds new info on Long

Term Care Insurance 6 Flex your buying power

6 Grant from CJF aids UP work7 Underinsurance UPdate7 AZ recovery UPdate8 Networking fundraiser a success10 New info re: UnumProvident 10 Book Reviews12 Amicus Project Update

How insurers handle claims fromHurricane Katrina will be a huge fac-tor in the recovery effort. The pro-

jected loss figures and rebuilding costs may bestaggering and unprecedented, but insurers canand must meet their obligations. Insurers whodon’t will make the recovery more expensivefor everyone — including themselves.

Public officials and policyholder advo-cates will have to be vigilant in monitoringthe situation and keeping the pressure oninsurers to adjust claims fairly and pay prompt-ly. We’re already hearing reports of adjustersgiving out wrong information and denyingclaims that should be covered. We’re workingovertime to get practical insurance facts andtips out to the survivors and aid workers.

Confusion/misinformation over who’sgot what kind of insurance, what’s coveredand for how much is obstacle number one.There are many different types of policies inplay. Homeowners' policies contain exclu-sions for “flooding” damage but cover waterdamage caused by other forces — such as

“wind-driven rain.” Many people did notknow about or could not afford supplemen-tal policies. The National Flood InsuranceProgram sells separate flood coverage and isrun by FEMA under the jurisdiction ofHomeland Security. Private insurers partici-pate in the NFIP and get a fee for adjustingNFIP claims. Coverage for mold damage hasbeen a controversial item with insurers formany years. On top of all of this, insurersfacing large payouts naturally seek ways tominimize their losses. Not a good scenariofor those relying on insurance to recover.

Survivors of every disaster face insuranceproblems that are unique to the event as wellas “garden variety” problems (delays, under-insurance, lowballing). The unique problemsKatrina survivors will face relate to the extentand causes of the flooding. Survivors won'tbe the only ones confused. Most of theadjusters in the trenches were just hired andwill be handling claims for the first time.Public officials, policyholder attorneys, andeven insurers themselves are getting up tospeed on the coverage issues and the lawsand regulations that will govern.

United Policyholders was founded in1991 to provide a unique and necessary serv-ice to the public. The working group that ledto the incorporation of UP recognized a fun-damental fact:

Insurance is integral to the fabric of oureconomy and our lives, yet there is a naturaleconomic clash between the interests ofinsurers and insureds that gets obscured viaadvertising and slogans. Adjusters may be“friendly” but they are not paid to be theinsured’s friend. Insurers are in the businessof making money — not being goodSamaritans. Insureds who get educated arethe ones who get fair claim settlements.Insureds that passively trust in the insurancesystem are very often ripped off. We make ahuge difference in people’s lives when we teachthem how to enforce their insurance rightsand when we work to protect those rights.

UP’s website offers practical tips, articlesand materials on a wide range of issues relatingto virtually every major type of personal andcommercial insurance product. www.unitedpolicyholders.org or www.uphelp.org

Please help us continue our impor-tant work by joining UP or making acontribution today.

Respectfully yours,

Amy BachCo-founder and Executive Director

Amy Bach, Executive Director,United Policyholders

2 what’s UP fall 2005

Bach Talk

UP staff is hard at work gatheringreports directly from disaster sur-vivors and adjusters, letting peopleknow about the help we offer, andcoordinating our efforts with volun-teers from prior disasters, other non-profits, policyholder advocates…allof whom know what lies ahead forthe survivors.

When you rent a vehicle, should youopt for the rental company’s“insurance’ (collision damage

waiver, etc.)? The costs could more thandouble your daily rental fee. Will othersources of insurance adequately cover you?How about your credit cards? Yes. No.Maybe. The real answer is:

Do your homework before you get tothe rental office.You don’t want to waste money or duplicatethe coverage you already have through your

personal car insurance, credit cards, home-owners or renters insurance, health or lifeinsurance. But you want to be protected.

Before renting a car, check your autoinsurance policy or ask your insurance agenthow your coverage will work if you’re in anaccident in the rental car. If you have an autopolicy in effect, find out:1. Does your auto policy contain collision

and comprehensive coverage a well as per-sonal liability?

2. Does your auto policy cover rental cars?

3. What are the restrictions on coverage forrental cars in your auto policy? (E.G.many policies will not cover SUVs, luxurycars, etc., or certain countries/locations).

4. Will your auto policy cover the full cost ofreplacement or repair of the rental car orjust up to the value of your insured car. (Ifyour car is insured for $5,000 and you renta car valued at $15,000, you could beresponsible for the difference.)

5. Are all the people who’ll be driving the…continued on p11

Insuring a Rental Car—Buy Only What You Need

what’s UP fall 2005 3

Farm v. Campbell, (see prior issues of“What’s UP” for discussion of Campbell).

The June rulings effectively lift the ceil-ing that courts have been applying to reducepunitive damage findings by juries sinceCampbell was decided. Insurance industrylobbyists and attorneys had been celebratingthe ceiling because it has substantiallyreduced bad faith penalties. Policyholderadvocates have been deeply concerned overthe reductions courts have been making inpunitive damage verdicts since the 2003 rul-ing because we believe that the threat of sub-stantial punitive damage awards serves as themost effective deterrent against unfair salesand claim practices by insurers.

But since Campbell and up to the recentCA rulings, courts across the country haveignored that principle and almost uniformlyapplied a “single-digit” test to determine theratio between punitive damages and compen-satory damages, such that punitive damagescould not exceed a ratio of 9 to 1 regardless

of how egregious the conduct or wealthy theperpetrator. But the California SupremeCourt ruled in the case of Johnson v. FordMotor Company and Simon v. San PaoloU.S. Holding Company, Inc. that this is amisinterpretation of the guidelines for award-ing punitive damages under the principleslaid out by the U.S. Supreme Court in StateFarm Mutual Auto Insurance Co. v.Campbell in 2003, The California SupremeCourt, however explained that Campbell didnot support a uniformly applied single-digittest, noting that while punitive damages areexpected to exceed single-digit ratios in manycases, they should not exceed them “to a sig-nificant degree.” This language was left forinterpretation in future cases, but clearly permits

much larger punitive damage awards, which could be 5 or 10 times as large as they wereunder the previous interpretations of Campbell.

“These rulings will reverberate across thecountry. They blow the doors off of the ideadearly held by insurance companies and largecorporations that punitive damages must be

confined to a small multiplier of compensa-tory damages,” said Arnold Levinson, partnerat Pillsbury & Levinson. “They rebalancethe scales to properly assess punitive damagesand mark a major victory for those seekingjustice against fraudulent corporate behavior.Before this ruling many corporations believedthat they could justify reprehensible businesspractices because they thought that the penaltyfor fraudulent conduct was so small that itcould simply be absorbed as a cost of doingbusiness. These two cases will be a shock totheir systems.”

Pillsbury & Levinson, LLP is a SanFrancisco Bay Area law firm that representsindividuals with health, disability and lifeinsurance claims, and businesses and individ-uals with liability and property insuranceclaims. Co-founding partner Arnie Levinsonhas been a longtime advisor and volunteerwith United Policyholders. www.pillsburylevinson.com.

UP Amicus Brief…continued from p1

Insurance industry lobbyists and attorneys had been celebrating the ceiling because it has substantiallyreduced bad faith penalties.

We are very proud to announce thatWilliam M. Shernoff has re-joinedthe Board of Directors of United

Policyholders. Since 1971, Mr. Shernoff, afounding partner of the law firm, Shernoff,Bidart & Darras, has devoted his career tofighting insurance company abuses. In 1974Shernoff set the legal precedent that estab-lished bad faith law.

His many landmark cases include secur-ing unpaid health, disability and Holocaust-era life insurance benefits, and helping thou-sands of California disaster survivors get fairproperty claim settlements. He has been list-ed in The Best Lawyers in America everyyear since 1983 and was named a SuperLawyer of 2000 by Law and Politics

Magazine and Los Angeles Magazine. Mr.Shernoff has authored three books and hasdonated copies of his most recent book:Payment Refused: How to Make InsuranceCompanies Pay Your Claims as one of thethank-you gifts for UP’s new membershipprogram.

Shernoff served on UP’s first Board ofDirectors and has always been a valued advi-sor and contributor. His partner, JeffreyEhrlich, is among UP’s most dedicated probono amicus brief writers and Amicus Projectadvisors. His partners Mike Bidart andFrank Darras are also among the top-ratedand most accomplished policyholder attor-neys in the U.S.

William M. Shernoff served on UP's firstBoard of Directors and recently re-joined.

Leading Consumer RightsAttorney re-joins UP Board

Help Us Help YouWe’re working hard to make sure thatinsurance companies live up to the salespromises they make to the public. Pleasesupport our unique and important work.Make a tax deductible contribution todayvia credit card at www.uphelp.org or bysending a check in the enclosed envelope.


We moved into the Bay Area in2002. My wife had grown up inearthquake country (Seattle, WA),

and we were nervous about the risk. Thegeological survey came back with good news— no known faults in the immediate area.We investigated earthquake insuranceoptions — and balked at the almost $70,000deductible, not to mention the premiums,which were higher than the premiums forour homeowner’s policy and our personalumbrella policies combined.

Two months later, we were talking tothe insurance folks again. A series of “cluster”earthquakes started shaking our neighbor-hood soon after we moved in. It turns outthat there was a previously undiscoveredfault — right under our neighborhood. Mywife was even shown on a local TV news

program, enlisting neighborhood children tohelp her pack away our china and crystal,which had been displayed on shelves.

Like 7 out of 8 Californians, we decidedto not buy the earthquake insurance. We justcouldn’t justify the cost vs. the perceived lowlevel of benefits. The house was built in1987, and included all the recommendedretrofits. As my wife said, if an earthquakedid more than $70,000 of damage, she wasmoving to “tornado alley” anyway.

It turns out, as we’ve recently learned;we had not explored all our options. TheCalifornia earthquake insurance situation isunique, and it pays to do your homework.Now that we’ve done our research, Ichanged my mind and I’m buying thecoverage. The bottom line of my conclusion is:

Making The Right Financial Decision re: Earthquake InsuranceBy Jonathan Buckley and UP Staff

…continued on p14

Tips on Buying EQ Insurance1. If you live in a quake-prone region

and you can afford it, the best wayto protect your investment in yourhome are to retrofit and buy earth-quake insurance.

2. The decision whether or not tobuy EQ insurance is an individual,financial decision. Key factors toresearch and consider are:

a) the financial strength of thecompanies that will sell it to you

b) the features and pricing of theirpolicies

c) the amount of equity you have inyour home

d) your proximity to a fault zone, ande) the age and style of construction

of your home and foundation.

3. If you decide to buy EQ insurance,shop for limits that are adequate tofully replace your property, engineer-ing costs, required improvements tocomply with building codes, tempo-rary living expenses, outbuildings,etc. Read and follow our “Do's andDon'ts When Insuring Your Home”atwww.unitedpolicyholders.org/claimtips/tip_do_donot.html

4. Policies with 10% as opposed to thestandard 15% deductible are nowavailable but of course they're moreexpensive. The price and highdeductibles for EQ policies have ledmany people to avoid buying theproduct, but remember;

If you live in a quake-prone region,going “bare” with no insurancemeans you have a 100% deductible…you'll bear the entire risk yourself.

5. Don't assume that FEMA, the SBAand/or private charities will bailyou out with funds to rebuild aftera major disaster. FEMA has verylimited funds and strict eligibilitycriteria. SBA loans are modest andmust be repaid.Private charities arebeing severely stretched by an ever-increasing demand for their services.

For more detailed information onearthquake policies and claims,please search our site, articles inback issues of our “What's UP”newsletters, and follow the links we offer at www.uphelp.org.

Tips on Buying Flood Insurance1. Make an informed decision on the risk of a flood damaging your property.

Check locally available flood zone maps (real estate brokers have them) to see if your property is located in a National Flood Insurance Program, (NFIP)participating area. Consider your region's flooding history and your property'sproximity to levees and waterways.

2. Even if you're not in a designated flood zone you can generally buy floodinsurance if you are willing and able to pay for it. The price of the coveragegoes down in lower risk areas.

3. Call a reputable insurance agent or broker and get a quote for adding floodcoverage to the risks your property is insured against. Don't assume your homeis not at risk for flood damage just because you are not legally required to buyflood insurance. If an agent/broker tells you they don't sell it or you can't buy it,call elsewhere. Some agents won't sell flood coverage because they're notfamiliar with the policies and may be reluctant to learn the rules of the NFIP.

4. If you decide to buy flood insurance, make sure you buy adequate coveragelimits. Flood policies generally have fixed dollar amounts for dwelling and contents coverage that don't adjust upward if replacement costs prove higherthan expected. Flood policies generally don't cover temporary living expenseswhile your home is uninhabitable or landscaping, trees, etc. If you buy a floodpolicy, you want it to cover the full replacement of or repairs to your struc-tures, personal or business property, debris removal, business interruption,recreation of valuable papers, damage to property of others, etc.

5. Verify with your agent that you have “replacement cost” coverage and “codeupgrade” coverage — especially if the insured structure is older than fiveyears. Code upgrade coverage covers the cost of rebuilding in compliancewith current building codes, even if means making improvements.


Slide Victims Should Hire Own Engineers — Not Rely Solely on Insurers’ Experts UP Amicus Brief Quoted in Julian by CA Supreme Court re: Coverage For Slide Damage

Earlier this year, UP helped argue beforethe California Supreme Court in coor-dination with the California Dept. of

Insurance on behalf of a family whose homewas severely damaged by a tree. In Julian v.Hartford, the tree had slid down and crashedinto the home’s roof as a result of heavy rainsthat had undermined its supporting soil.Hartford rejected the claim and the disputewound its way up to the state’s highest court.United Policyholders, represented by WalnutCreek, CA attorney Chipman Miles, sidedwith the homeowners and along with the CADept. of Insurance, filed an amicus brief sup-porting coverage. UP also participated in oralargument, for the first time, before the state’shighest Court issued its long-awaited decision.

Unfortunately, insurance companieswere the winners, but this article will high-light the positive aspects of the decision.The negative impact will be felt by the victims of a June disaster in Laguna Beachthat destroyed many cliffside homes.

Hartford had sold the family a compre-hensive policy that excluded weather conditionsonly when they “contribute in any with” anexcluded cause to produce loss. ChipmanMiles of Miles Miles & Westbrook, arguingon behalf of amicus curiae United Policyholdersand Julian, argued that this would improperlydeprive coverage where 99% of the loss wasattributable to rain (covered) and 1% to earthmovement (excluded). He argued that such aprovision, read literally, would directly con-flict with Insurance Code § 530, which haslong required coverage whenever the “proxi-mate” cause was covered, even though a“remote” cause was excluded.

Justice Carlos Moreno, writing for a 5-2majority, explained:

“We agree with United Policyholders thatapplication of the policy language insituations like the one described above(99% rain; 1% earth movement) wouldraise troubling questions with the effi-cient proximate cause doctrine. Denial

of coverage would suggest the provision ofillusory insurance against weather conditions… Indeed; the phrase ‘contribute in any way with’ that linksweather conditions with earth movementseems particularly designed to circumventthe efficient proximate cause doctrine.”

This language should prove invaluable tohomeowners in similar disputes with theircarriers. It suggests that insurers must comply

Chip Miles represents and advises property owners and is a UP volunteer.

CA HealthCare Foundation Funds Creation of New UP Resource on Long Term Care Insurance

Thanks to a $10,000 DesignatedProjects Fund grant from theCalifornia HealthCare Foundation,

United Policyholders’ website now offerscomprehensive information and resources forconsumers on buying and filing claims underLong Term Care Insurance policies. (Seewww.uphelp.org, claim tips @Long TermCare). The site now features LTC basics,LTC claim tips, and a survey that identifiesand evaluates non-commercial and commer-cial internet sites and highlights those thatoffer reliable and practical information.

Long Term Care policies are relativelynew insurance products with widely varying

and complex features that are being aggres-sively marketed. Consumers who are fearfulabout their health declining in the future arevulnerable to high-pressure sales tactics.Those who claim benefits under LTC poli-cies are by definition in an impaired condi-tion and generally ill-equipped to challengecoverage denials by insurers. These factorspose unique challenges to buyers, claimantsand regulators.

To address a growing need for LTCbuyer info and aid, UP sought and foundsupport to create a new educational resourcespecifically on LTC products. We are deeplygrateful to the Honorable Harry W. Low,

(former Ct. of Appeals Justice and CAInsurance Commissioner, now a mediatorwith JAMS and Board member of the CAHealthCare Fdn), and to the CaliforniaHealthCare Foundation for the funds weneeded to accomplish this important work.For more info on the Foundation visitwww.chcf.org.

UP will be continuing to gather infor-mation and augmenting our on-line resourcesection on an ongoing basis. Special thanksare due UP contract staffer Amy Wollmanfor her work on this project.

…continued on p11


The phrase “use it and lose it” describesa bad, relatively recent trend in theinsurance world. It means if you use

your insurance you will lose your insurance,or… file even one claim and your rates willincrease or your policy will be non-renewed.Insurer reps deny that it’s a reality, but stateregulators and consumers are painfully awarethat it is. UP has received many complaintsfrom affected consumers.

There are many aspects to the “use itand lose it” phenomenon. Factors include:

1) Shared claims databases (e.g.“CLUE”) that all insurers can access;

2) An increase in vendors selling servic-es and tools to insurance companiessuch as “Risk Meter” that purport to help insurers weed out undesirable risks;

3) The fact that fewer claims translateinto higher profits for insurers;

4) Consumers are naturally averse topaying higher premiums and/orbeing uninsured;

5) The increasing use by insurers of“surcharges” as a way of avoiding regulatory scrutiny of rate increases.

The causes of “use it and lose it” havebeen discussed in the Spring 2003 and Fall2004 issues of What's UP, www.unitedpoli-

cyholders.org/newsletters/fall04.html#7, andwww.unitedpolicyholders.org/newsletters/spring_03.html#hiUpdate. Policyholder advo-cates take this issue very seriously because ittruly undermines the concept of insurance asa worthwhile product to buy. What’s thepoint of paying for it if you’ll be unfairlypenalized for using it?

The problem has been serious enoughto require action by some state regulatorsand legislators. California passed a law

requiring insurers who non-renew policy-holders to disclose their reasons and invite aresponse. CA Insurance Commissioner JohnGaramendi issued emergency regulationsbarring insurers from using improper criteriato nonrenew customers. Insurers sued theCommissioner to keep the regulations fromtaking effect and won, so the Commissionerrevised and reissued them and they're cur-rently pending.

Buyers Must Resist “Use it and Lose it”

How to resist use it and lose it:1) Use your buying power by asking the right questions before you suffer a loss.

Call your agent or company, ask them point blank what will happen to yourpremiums and your coverage if you file a claim. Compare their rules withcompeting insurers. Switch if you find a more reasonable company.

2) If your insurer tries to non-renew you after you file a claim, work to get them to reverse their decision. Your agent and your state regulator should help.

3) If your insurer tries to surcharge you after you file a claim, shop around withcompetitors before agreeing to pay the higher rate. Once you’ve secured coverage elsewhere — tell them why you left.

4) Check your CLUE or A+ report and correct any errors.(See www.unitedpolicyholders.org/newsletters/spring_03.html#clue )

5) Pay small claims out of pocket and read our “To claim or not to claim” series on smart claim decision making.

6) File a complaint with your elected officials and state regulator if you’re thevictim of an unfair rate increase or arbitrary non-renewal.

UP Honored to Receive Civil JusticeFoundation GrantEarlier this year, UP was presented with a $5,000 grant from the CivilJustice Foundation at a ceremony in Palm Springs, CA.The Foundation iscommitted to preventing consumer injury and defending a consumer'saccess to justice, through grants to progressive grassroots organizationsseeking systemic change.The Foundation is especially interested inorganizations or projects that find it difficult to obtain funding from moretraditional sources because they address a controversial problem. UPused the funds to support our work educating and aiding disaster sur-vivors and individual claimants. For more information about theFoundation, visit their website atwww.atla.org/foundations/civiljus/cjmenu.aspx.

Complete Your Survey

Our Reader’s Surveys are

how we stay connected

with you and your needs.

Please complete the enclosed

Reader’s Survey and return

it with or without a donation

in the envelope provided.


ARIZONA UPdate

UP is still involved in educating andsupporting Arizona property ownersworking to recover from a June,

2003 wildfire that devastated their MountLemmon community outside Tucson. Manywho were unintentionally underinsured wereforced to hire counsel and file lawsuitsbefore the two-year anniversary after insurersrefused to upgrade their policies.

UP continues to stay in touch with survivors and:

• help “trouble-shoot” claim problems• offer local tips and resource info

(“Road Map to Recovery- Arizona”)• pressure AZ Insurance Commissioner

to facilitate claim settlements

Two years after the disaster,problems include:

• Inadequate insurance funds• Large dollar gaps between repair esti-

mates generated by local builders ver-sus insurance company estimatorsand/or computer programs.

• Rebuilding challenges posed by ordi-nances/laws regulating construction.

• Property owners forced to file lawsuitsto get fair insurance claim settlementsnow that two years have elapsed sincetheir homes were destroyed.

UP enjoyed getting a note earlier thisyear from a Mt. Lemmon survivor who wasable to solve her underinsurance problemwith help from UP: “… I want to thank youfor the wonderful gifts of information andguidance you and your organization provideto so many people.” Public adjuster PeteRomero and CA attorney Brian Kabateckare representing many of those still strug-gling to recover.

Please Note: United Policyholders

neither sells nor profits from the sale

of insurance.The information provid-

ed in this newsletter is a public serv-

ice to our readers.We do not warrant

the quality of any product or vendor

identified in this newsletter.

While some industry reps try topublicly dismiss the post-disasterunderinsurance plague as overblown

and exaggerated, most acknowledge theproblem. Earlier this spring UP took part ina panel discussion during “All Industry Day”,an annual event sponsored by the GoldenGate chapter of the national CPCU Society(Chartered Property Casualty Underwriter,www.cpcusociety.org ) titled: Holding HandsWhile Pointing Fingers. The programexamined the recurring problem of underin-surance and potential solutions from the dif-ferent perspectives of the insurance industry,the insurance regulator, and the consumer.

The program description explained;“The wildfires that swept across southernCalifornia in 2003 destroyed thousands ofhomes and commercial structures. Hundredsof homeowners discovered that they wereunderinsured. Is the solution to be found inproviding better information to the con-sumer, placing the burden of insurance tovalue and replacement be placed on thecompany or the agent, or is there any fairand reliable solution when costs are inflatedwithout bounds following a catastrophe?

The importance of this issue was evi-denced by the number of bills dealing withthis problem that were sponsored byCommissioner Garamendi during the lastsession of the California legislature. Thenumber of public hearings and debate thathave continued to address this issue after theclose of the legislative session last August sug-gests that a final solution remains to be found.This is an important and timely topic… It isimportant that people in the insurance industryunderstand the role, concerns, and perspec-tive of all parties to this issue if this problemis to find some resolution in the future.

Agents, brokers, service representatives,underwriters, and insurance claims staff willbenefit from this presentation and discussionand will learn how they might better serveand inform the California consumer to helpavoid problems of underinsurance in the future.”

Panelists included representatives from:• The California Department of

Insurance • A property valuation company• An agents and brokers association• An insurance company• United Policyholders

UP’s presentation was well-received andincluded the three-pronged solution we havebeen advocating for the past two years: 1. Clarify the law:

a) Insurance companies and salesagents must have a clear legalduty to recommend coveragelimits in homeowners policiesthat are adequate to cover fulland reasonable replacementcosts, including compliance withall building codes applicable toreplacement. (Existing CA lawalready requires insurers to chargefair and adequate rates)

b) Insurers must clearly and con-spicuously notify consumerswho decline full replacementcoverage that they are not fullyinsured.

2. Focus on quality, not just the lowestprice. Insurers, agents, brokers and con-sumers must recognize their contributionto the underinsurance problem andchange their behavior by paying attentionto the quality not just the price of policies.

3. Only trained insurance professionalsshould set coverage limits. Strengthenexisting regulations to mandate propertraining for all industry professionals inusing replacement cost estimating soft-ware and setting adequate coverage limits.

Former UP intern Dean Seiji was presentat the program and we congratulate him onearning his designation as a member of theCPCU Society. The society is a membershipof more than 26,000 credentialed insuranceprofessionals who promote excellence

Underinsurance — Causes and Solutions

…continued on p10


This past January UP hosted aNetworking Cocktail Reception in LaQuinta, California to raise funds to

support our work and bring policyholderadvocates together in a fun setting. The partywas held at legendary golfer Arnold Palmer’sRestaurant. Thanks to the amazing planningefforts of Deborah Dudley and DarleneGaloday, the party was a great success withdelicious food and good spirits. Long-timeand newly introduced colleagues had theopportunity to catch up, share info on recentdevelopments and challenges in the world ofpolicyholder representation. UP’s ExecutiveDirector gave a brief overview of the organi-zation’s current projects and goals.

We thank and acknowledge our gener-ous supporters, and our Board of Directors.We honor policyholder advocates around thecountry for their dedication in waging verydifficult battles against well-financed insurersto collect on insurance promises for individ-uals and businesses. Together we will contin-ue to work to preserve and strengthen thecivil justice system that is so important topolicyholders and to our nation’s health.

UP thanks the following friends formaking the event a success and helping uscontinue our important work.

Co-HostsBourhis & Wolfson

www.bourhis-wolfson.comConsumer Attorneys of California

www.caoc.orgLerach, Coughlin, Stoia, Geller, Rudman

& Robbins, LLP www.lerachlaw.com

Lieff, Cabraser, Heimann & Bernsteinwww.lchb.com

Shernoff, Bidart & Darras www.sbd-law.com

SponsorsAnderson, Kill & Olick, P.C.

www.andersonkill.comLaw Offices of Bernie Bernheim Kabateck, Brown & Kellner LLP

www.kbklawyers.comLaw Offices of Michael J. Kinane

PatronsChavez & Gertler

www.chavezgertler.comFriedman, Rubin & White

www.frwlaw.usGoldstein, Gellman, Melbostad,

Gibson & Harris www.g3mh.comDouglas Grose, P.A.Mannion & Lowe

www.mannion-lowe.comMerlin Law Group, P.A.

www.insurance-law.com

Pillsbury & Levinson, LLP www.pillsburylevinson.com

The Greenspan Co./Adjusters Int’l.www.greenspanai.com

BenefactorsSharon Arkin, Esq.Associated Planners Investment

Advisory, Inc./Larry P. GinsburgStephen BasserConsolidated Adjusting, Inc.California Association of Public

Insurance Adjusters (CAPIA)Doug DeVries, Esq.Daley, DeBofsky & Bryant, P.A.Howard Finkelstein John J. Spiegel, P.A.The Sturdevant Law Firm

SupportersDawson & RosenthalBruce BrusavichCEMA FinancialRichard DillenburgDaniel E. HanleyRobert HammelMarvin KayGuy Kornblum & AssociatesCaryn Montague & AssociatesLaw Office of Daniel U. SmithStanzler, Funderburk & CastellonWinkles Law Group, P.A.

Networking Fundraiser a Success

Amy Bach, with reception Co-Host Ray Bourhis, Patron Arnie Levinson and Boardmember Alice Wolfson.

Miami, Florida policyholder attorneyDouglas Grose with Oakland, CA attorney Charles Miller


San Francisco attorney Guy Kornblumand Jilda Shernoff.

Photos by Eric Wolfson.

California colleagues Ray Bourhis and reception Patron Lee Harris

Board member, reception Co-Host William Shernoff ofClaremont, CA with Steve Basser. Shernoff authored anew book, Payment Refused this year (see related articlein this issue).

San Francisco consumer attorney Heather Foster, a partnerwith Lieff, Cabraser, Heimann & Bernstein. The firm has provided important financial support for many UP projectsover the years

Birmingham, Alabama attorney Jeffrey S. Daniels 2004-05Chair of the ATLA Insurance Law Section, chats with a colleague


Three new books published this yearreveal aspects of the insurance worldthat may surprise and intrigue you and

will surely educate you.Insult to Injury, Insurance,Fraud and the Big Businessof Bad Faith, By Ray Bourhis.Berrett-Kohler Publishers, Inc.,Available at bookstores andonline. Endorsements on the

book jacket by Senator Ted Kennedy, CAInsurance Commissioner John Garamendi,and UP co-founder Amy Bach. AnAmazon.com reader posted this review:

“If, like the average American citizenprobably does, you view the insurance indus-try as a benevolent protector that exists toserve its' customers, you are in for one rudeawakening. Ray Bourhis, who served asplaintiffs counsel in the case detailed in thebook he later wrote, confronts the awesomeduplicity of his adversary, one of the largestinsurance underwriters in existence, a com-pany that seemed determined not to honorits obligations at any cost. Bourhis describesthe unending legal gamemanship, the obdu-rate refusal to settle, the psychological brutal-ity of a company that appeared to prefer todestroy a policyholder than pay a claim onthe agreed terms. The jury was not deceivedand awarded Bouris' client a $7.7 millionjudgment as compensation for the egregiousbad faith demonstrated by the insurer. Thisis an absolutely revolting story of an “endsjustify any and all means” philosophy runamok at the senior management level andthe terrible human cost exacted from thetrusting and powerless who had believedtheir policies would protect them in times of dire need, when illness or injury renderedthem unable to work. If you ever plan on

purchasing a long term disability insurancepolicy from any insurer, you MUST readthis book first; you have no idea what youmay be setting yourself up for”. www.ama-zon.com/gp/product/customer-reviews/1576753492/ref=cm_cr_dp_pt/10393070962561406?%5Fencoding=UTF8&n=283155&s=books

Payment Refused, By WilliamM. Shernoff. Available via mem-bership in UP, www.unitedpoli-cyholders.org/membership.html,or by contacting www.sbd-law.com. In this revised edition

of Payment Refused, consumer rights attor-ney William Shernoff alerts us to the fact thatinsurance companies are rallying for tortreform only to safeguard their excessive prof-its — which are the real cause of the highcost of insurance. The book contains buyingtips, claim info and a comprehensive glossaryof insurance terms you need to know to be anempowered policyholder.

Your Credit Score: How toFix, Improve and Protectthe 3-digit Number thatShapes Your FinancialFuture By Liz Pulliam Weston,Pearson/Prentice Hall

Publishers, www.ft-ph.com, available atbookstores and online. The author is a writerwith the Los Angeles Times who’s been coveringpersonal finance issues for many years. Insimple, easy to understand language, sheexplains how your credit rating impacts howmuch you get charged for your insurancepolicies, and offers up-to-the-minute infor-mation on today’s radically new credit scoringsystem. The information in this book cansave you thousands on credit and insurance.

Read ‘em and Learn:New Info Available re: UnumProvident/Paul Revere

UP’s Info Sharing Project is aresource for policyholders andadvocates struggling to resolvedisability claim disputes againstpowerful insurance companies.Leading policyholder attorneysdonate documents to UP that shedlight on unfair claim practices. UPmakes them available to policy-holders and other advocates. Formore information about availabledocuments and ordering proce-dures, email [email protected].

Thanks to the generosity andhard work of the attorneys at thelaw firm of Friedman, Rubin &White, policyholders and advocatescan obtain through UP the entiretranscript of the recent trial victoryin Merrick v. Paul Revere andUnumProvident on a CDRom foronly $250.The case was tried inU.S. District Court, Las Vegas, NV,12/13/2004. A Federal court juryfound that the insurer had acted inbad faith in denying the disabilityclaim of a venture capitalist andawarded him $1,147,355 in backbenefits, $500,000 for emotionaldistress.The jury also assessed apunitive damage verdict of $10million based on evidence of theinsurer’s financial condition.

through ethical behavior and continuingeducation. The Society's members hold theChartered Property Casualty Underwriterdesignation, which requires passing eight rigorous undergraduate- and graduate-levelexaminations, meeting experience require-ments, and agreeing to be bound by a strictcode of professional ethics. The CPCU designation is conferred by the AmericanInstitute for CPCU.

Underinsurance…continued from p7

Tuition break for UP Members on Insurance Law ProgramThe American Conference Institute offers courses for attorneys who practice

insurance-related law.The programs cover current law on coverage and claimissues and are taught by top trial attorneys from both sides, experts, and judges,many of whom have done volunteer work for United Policyholders.The next ACIprogram will focus on Bad Faith and Punitive Damages and will take place in MiamiBeach, Florida on November 15th & 16th, 2005.

UP members get a 15% discount on tuition. Be sure to mention your member-ship when you register to take advantage of this excellent offer.To register, pleasecall (888) ACI-2480.


rental car named in or covered under yourauto policy?

6. How much is your current deductible?

Many credit cards come with limitedcoverage for rental carsIf you don’t own a car and have no home-owners’ insurance, you’ll want to check withyour credit card companies to find out whatthey cover, but most likely you’ll want to buyat least some of the items the rental companysells to cover the gaps.

Contact your credit card company andfind out what coverage you’ve got throughthem. If you’re going to rely on their coverageand not buy through the rental company,confirm your understanding of your coveragethrough the credit card company in a writingthat you mail or fax to them (keep a copy foryourself). Check to see if coverage is “primary”or “secondary.” Many credit cards offer “sec-ondary” coverage, i.e. they will pay after otherinsurance antes up. If you are relying on yourpersonal auto policy, this could mean that yourcredit card would cover your deductible. Otherrestrictions could include type of vehicles, loca-tion, and specific drivers. Damage to any vehicleother than the rental car is usually not covered.

Neither your personal auto policy norcoverage offered by credit card companies will

cover “loss of use” fees which, in most states,the rental company can charge for the timethat the rental vehicle is not in servicebecause of repair or replacement.

Your homeowners or renters policy maycover loss of personal items from the car butwould it cover the loss of a laptop?Your healthand life insurance policies should also offerbenefits in case of injury or death.

There are several types of insuranceoffered by rental companies but you need totalk with the agent and read the fine printbecause the scope and limitations vary.

LDW (Loss Damage Waiver)/CDW(Collision Damage Waiver)This is not insurance per se, it is a waiver thatreleases you from liability for damage to thevehicle from collision, fire, theft, and vandal-ism as long as you adhere to the contractrules regarding drivers, use of vehicle, etc.This does not cover damage to someone else’scar but it does pay for “loss of use”. Your per-sonal policy usually covers rentals if itincludes collision and comprehensive.

Personal Liability LIS (LiabilityInsurance Supplement) This covers damage to someone else. If youdo not have personal liability coverage, youshould buy the rental agency’s coverage. Creditcards usually do not offer liability insurance

when you use them to pay for the rental.

PAI personal accident insuranceThis is a onetime payment for you or a pas-senger in case of death or maiming from a caraccident and is generally covered under yourpersonal auto or health policies.

PEC personal effects coverageCovers you for something lost or stolen fromyour car and is often already covered throughauto insurance, credit cards or homeownersinsurance. Check your limits before declining.

Other considerations: Some people optfor car rental insurance because they fear theirpersonal auto rates will go up if they file aclaim. If you are responsible for an accident,your insurance rates may increase no matterwho pays for the damage. Rental companieslike to have their money up front for therepairs or replacement, so they may chargeyour credit card and let you wait for theinsurance reimbursement.

The bottom line:You need to know what you already havethru insurance policies or via your credit cardand then decide if you need additional cover-age from the car rental company. Then youcan pick and choose what’s best for you andavoid wasting money or taking undue risks.

Rental Car Tips…continued from p2

with California law, and the network ofstatutes and judicial decisions making up theefficient proximate cause doctrine, to have anenforceable insurance policy.

Despite this language, however, theCourt went on to rule for Hartford. The onlyjustification for doing so was this:

“Rain inducing a landslide is a commonlyunderstood risk of loss and the frequentand direct causal relationship betweenrain and landslide is widely and easily understood.”

There was no authority provided for thisstatement. This was not an argument whichhad been advanced by Hartford lawyers ortheir amici curiae. In fact, a strong argumentcan be made that landslide analysis requireswell trained geotechnical engineers and is not

widely and easily understood. In any case, theCourt based its conclusion on its belief thatthere was no violation of the efficient proxi-mate cause doctrine by the “specific peril” ofrain-induced landslide in this case.

We believe that, despite the outcome,the Julian case offers real hope to homeowners.An engineer can opine whether or not weath-er conditions caused the loss. Where applica-ble, homeowners should argue that policylanguage excluding coverage is ambiguous. In

footnote 4 of the Julian opinion, the Courtdeclined to address the ambiguity issuebecause it had not been raised early enough,but suggested that it may have been sympa-thetic to such an argument. It is importantfor policyholders and their lawyers to recog-nize what the Court did not do. It did notreverse the Palub decision. It did not addressthe ambiguity issue. It did not reverse Garveyor try to rewrite § 530. It left open the possi-bility for coverage in a variety of similar situa-tions. The insurers’ attempt to circumventproximate cause was rejected.

People buy insurance to protect againstcatastrophes beyond their control. Insurancecompanies should not be able to avoid pay-ing due to tricky or confusing policy language.

United Policyholders’ amicus brief can beread in its entirety at: www.unitedpolicyhold-ers.org/amicus_filed_2.html

Landslide Damage…continued from p5

UP urges all homeowners sufferinga catastrophe involving weatherconditions to promptly hire a skilledengineer who will evaluate the lossfairly and not just try and please theinsurance company to secure futurebusiness from them.


UP’s Amicus Project continues to gainrecognition and influence. Our briefsare increasingly quoted in important

opinions that impact the lives and health ofindividuals and businesses.

Since the Project's inception we havefiled more than 140 briefs on behalf of poli-cyholders on a wide range of insurance issuesin State and Federal appellate courts and theU.S. Supreme Court. Our roster of promi-nent brief writers from all over the UnitedStates continues to grow. The number ofbrief requests we receive has grown with ourreputation, and we are working hard toexpand our resources to increase our capacity.

Judicial decisions define insurance con-sumers' rights and insurance companies'obligations, so they are critically importantand have long-lasting impact. Insurers andtheir trade associations deluge courts withbriefs arguing their views. In the majority ofcases, judges get no briefs at all that advancethe perspective of insurance consumers(“insureds”). Predictably, the results oftenfavor the insurance industry. UP is strivingto change this through our Amicus Project.Our briefs provide judges with a balancedperspective when they review cases involvinginsurance questions.

We thank our extraordinary AmicusProject Chair Eugene Anderson, his firm,Anderson, Kill & Olick, and our dedicatedcorps of pro bono brief writers, includingstalwarts Arnie Levinson, Jeff Ehrlich,Chip Merlin, Chip Miles, Brian Miles andScott Turner. We welcome volunteersBernie Bernheim, G. David Brumfield,Ronald Dean, Robert Gerstein, RichardGiller, Mary Kestenbaum, SteveMurray, William Scott Patterson, andHarold Trippman to our team.

Visit our website to see a listing of manyof the cases in which we've appeared andread our most recent briefs. Briefs we filed sofar in 2005 include:

ARIZONASafeway Ins. Co. v. Guererro, In the SupremeCourt of the State of Arizona, No. CV-04-0146-PR , Auto insurance/bad faith fail-ure to settle. UP brief prepared and filedby James J. D’Antonio, Esq., Tucson, Arizonain coordination with the Arizona TrialAttorneys Association and John Tully, Esq.

CALIFORNIAAmerican Insurance Association v.Garamendi, California Supreme Ct. CaseNo. C045 000 (127 Cal. App.4th 228) IScope of regulator’s authority to prom-ulgate regulations to restrict insurer’sability to use arbitrary underwritingcriteria to non-renew and surchargeinsureds. After weighing in on the meritsearlier in the proceedings, UP weighed inthis year to request depublication of an opin-ion that undermines the Comm’rs authorityto do his job. UP letter brief drafted bySteven Murray Esq. of Encino, CA.

Ins. Comm'r of the State of CA v. GoldenEagle Ins. Co., a CA Corp. In the Court ofAppeal of the State of California, First A.D.,Division 3 A104076 Scope of pollutionexclusion/commercial policy. UP briefdrafted by Jordan Stanzler, Esq. of the S.F.firm of Stanzler, Funderburk & Castellon.

Greene v. Century National Ins. Co. Courtof Appeal, Second Appellate District, CaseNo.: B144789. Property policies/publicadjuster fees/coverage for asbestosabatement/admissibility of insurerreserve evidence. UP’s letter brief request-ing publication of the case was drafted byAmy Bach.

Johnson, Greg and Jo Ann vs. Ford MotorCompany, CA. (See related article on page 1in this issue re: outcome) Supreme CourtCase No. S121723, on appeal from a deci-sion by the Court of Appeal, 5th A.D. Case

No. F040188 and F040529., (Companioncase: Lionel Simon dba Liberty PaperCompany v. San Paolo U.S. HoldingCompany, Inc., CA Supreme Court CaseNo. S121933, (Court of Appeal Case No.B121917) Permissible ratios of punitivedamage awards in relation to compen-satory damages, post-State Farm v.Campbell. UP briefs were submitted inboth cases, prepared by Pillsbury &Levinson, Arnold R. Levinson; Esner &Chang, Stuart B. Esner, Andrew N.Chang, and Amy Bach.

Julian v. Hartford Scope of landslideexclusion in a homeowners policy/effi-cient proximate cause analysis. UP briefprepared by Chipman Miles of WalnutCreek, CA. (See related article in this issue)

Penn-America Ins. v. Mike’s Tailoring, S131639, Scope of water damage exclu-sion/property policies. UP’s letter briefwas prepared by David Parisi and SuzanneHavens Beckman of Sherman Oaks, CA.

Permanent General Assurance Corp. v.Superior Court (2004) 122 Cal.App.4th1493, 19 Cal.Rptr.3d 597, Court of Appeal,Fourth Appellate District, Case No.G033269, Discovery and admissibilityof evidence of patterns of unfair claimpractices. UP letter brief requesting depub-lication drafted by Bernie Bernheim, Esq.of Los Angeles, CA.

Audrey Timmis et al v. Kaiser Permanente etal, CA Appellate Court No. 1D Civil No.A102962, Insurer’s requirement thatpills be “split” to be covered. UP’s letterbrief supporting review drafted by Amy Bach.

FLORIDATaurus Holdings, Inc. and Taurus Int'lManufacturing, Inc. v. U.S. Fidelity andGuaranty Co., et al In the Supreme Court ofFlorida, Case No SC04-771 UP brief draftedby William Scott Peterson, Esq.

Nationwide Mutual Insurance v. Frank andSteve Chillura, Ct. of Appeal, 2nd Dist.,Case No. 2D04-4906 Coverage for foun-dation systems and costs of evaluating

Amicus Project Update

Please support UP's Amicus Projectwith a financial contribution todayvia the enclosed envelope or onlineat: https://secure.entango.com/donate/Vfrq4aTcsqw. We need money tocontinue this important work andcontinue our very efficient balanceof donated labor and funded expenses.


damage/homeowners UP brief writtenpro bono by Miami attorney Harold B.Klite Truppman, P.A.

ILLINOISCountry Mutual Insurance Company v.Livorsi Marine, Inc., pending before IllinoisSupreme Court, Case No. 99807.Notice/Prejudice re: late claim Theunderlying case against Livorsi Marine wasfor trademark infringement and unfair com-petition. The insurance company did notreceive actual notice of the lawsuit until 21months after it was filed. The insurancecompany admitted that it had not sufferedany prejudice from the timing of the notice.The reason there was no prejudice wasbecause Country Mutual was conflicted outof defending Livorsi Marine because itinsured both Livorsi Marine and the plaintiffin the underlying case. The insured admittedthat notice was late. The insurance companydenied coverage and filed a declaratory judg-ment action solely on the grounds of latenotice. The trial court and the appellatecourt entered judgment in favor of the insur-ance company on this issue. Before theIllinois Supreme Court, the only issue iswhether an insurance company must provethat it was prejudiced before it can deny cov-erage on the grounds of late notice. UP’sbrief was prepared pro bono by PaulWalker-Bright in the Chicago office ofAnderson, Kill & Olick PC.

NEW HAMPSHIREFrancie E. Harrison v. Unum Life Ins. Co. ofAmerica, US Court of Appeals, First Circuit,Docket No. 05-1577 Auto insurance/interpretation of policy exclusion usedto deny coverage. UP’s amicus brief wasprepared pro bono by Eugene Andersonwith assistance from Amy Francisco,Anderson, Kill & Olick, P.C.

NEW YORKDuane Reade, Inc. v. St. Paul Fire andMarine United States Court of Appeals forthe Second Circuit, Case No. 03-9064. July,2005 Business interruption coverage,9/11 losses This case presents a number ofcoverage issues arising out of the destruction

of a WTC tenant’s business operations fromthe “9/11” terrorist attacks. The issuesinclude how long the insured’s businessinterruption losses should be covered, (St.Paul is arguing the limit is 21 months,regardless of whether or not Duane Reade,Inc. will be able to move back in to thedestroyed location in 21 months), andwhether the insured is entitled to interrup-tion (lost earnings) coverage for as long as ittakes for the premises to be fully rebuilt as acommerce center as opposed to simply ahabitable space. UP’s amicus brief was pre-pared by attorneys in the New York office ofthe law firm of Anderson, Kill & Olick, P.C.

U.S. Underwriters Ins. Co. v. City ClubHotel, LLC, Shelby Realty et al U.S. D.C.for the Southern Dist. Index No. 02-cv-07379-NRB NY, Dec. 16, 2004 PH mayrecover attorneys fees incurred toresolve coverage dispute UP filed anamicus curiae brief before New York’s highestcourt on the issue of payment for a policy-holder’s legal fees in a dispute with an insur-ance company. Reaffirming an importantrule for policyholders, the Court found thatthe insurance company must pay the policy-holder’s attorneys’ fees in the coverage dis-pute. The Court noted that the fees wereincurred as a consequence of the insurer’sunsuccessful attempt to “free itself of its poli-cy obligations.” UP’s amicus brief was pre-pared by William Passannante, Esq. ofAnderson, Kill & Olick, P.C.

OHIOThe Glidden Company v. LumbermansMut. Cas. Co., et al No. 81782 (Ct. App. Coverage for pre-acquisition activi-ties/commercial This case addresses theavailability of insurance coverage to corpo-rate policyholders after corporate transac-tions. The insurance companies had arguedthat certain corporate transactions eliminateinsurance coverage. The Ohio Court ofAppeals disagreed in a significant opinion.They held that the insured was entitled tobenefits under the policies at issue for pre-acquisition activities of a paint business,including the right to indemnification andthe right to a defense. UP’s amicus brief wasprepared pro bono by William Passannante,

Esq. of Anderson, Kill & Olick, P.C.

Pilkington North America, Inc. v. TravelersCasualty & Surety Co., et al. In the SupremeCourt of Ohio, Case No. 2005-0378.Sucessor coverage for pre-acquisitionactivities The Ohio Supreme Court hasaccepted certification on the issue of whethera corporation that succeeds to another enti-ty's liabilities acquires rights to that entity'sinsurance coverage for pre-acquisition opera-tions. Relying on the majority rule, Plaintiff-Petitioner Pilkington North America, Inc.(“Pilkington”) argues that a corporate policy-holder is entitled to a defense and indemnityfor pre-acquisition liabilities because liabilityinsurance coverage follows the alleged liabili-ty by operation of law. In contrast, the insur-ance companies dispute that insurance bene-fits may transfer by operation of law. Theyalso argue that they forever retain the right toblock the transfer of any chose in actionbased on the “anti-assignment” clauses intheir policies. The majority of courts, howev-er, have held that anti-assignment clauses donot apply to the transfer of coverage rights orchoses in action after a loss has taken place.This position also is consistent with the cus-tom and practice of insurance companiesand corporate policyholders alike. UP’s briefwas drafted by William Passannante andCathleen Tilas of Anderson, Kill & Olick,P.C. (NY office), and Drew Carson andSarah H. Kostura of Goodman, Weiss &Miller in Cleveland, Ohio.

PENNSYLVANIAMotiva Enterprises, LLC v. St. Paul Fire andMarine Ins. Co. and Nat'l Union Fire Ins.Co. of Pittsburgh, Pennsylvania In theUnited States Court of Appeals for the FifthCircuit, Case No. 05-20139. This issue UPbriefed in this case is whether a policyholderforfeits coverage by settling a claim withoutthe insurance company's authority, after theinsurance company intentionally placed itsinterests adverse to those of its policyholderby issuing a reservation of rights and withoutany showing that the insurance company wasprejudiced by the settlement. A “reservationof rights”, while not an outright denial of aclaim, is legal notice of an insurance company's

…continued on p14


Our renewed research started with thepast issues of newsletters published byUnited Policyholders (www.unitedpolicy-holders.org/newsletters) The newslettersidentify companies that are selling earth-quake insurance and they offer lots of goodinformation on retrofitting your house.

If you can afford it, the best way toprotect your investment in your homeagainst the risk of quake damage is toretrofit and buy earthquake insurance.

One of the most important things to dois to ensure that your house is built to or isretrofitted to basic seismic safety standards.This is known as “mitigation”, and it willsubstantially reduce the risk of severe earth-quake damage to your home. The more stepsyou take to retrofit and improve your home’sability to resist the impact of an earthquake,the less likely you are to face expensive repairs.

Three relatively simple and cost effectivemethods of retrofitting include bracing yourwater heater, installing “sheer” panels andbolting your foundation. You can look atillustrations of these basic retrofits at:

www.earthquakeauthority.com/prepared-ness/preparedness_home.html#top

A licensed, experienced contractor canperform these tasks for a reasonable cost;they don’t have to be someone who advertis-es themselves as a retrofitting or seismic spe-cialist. If you have concerns about a propos-al, pricing or quality of work already done,the Contractors State Licensing Board canhelp. In California, find them online atwww.cslb.ca.gov/consumers, or call themtoll-free at 1-800 321-CSLB (2752)

Don’t overlook the importance of miti-gating damage to the contents of yourhome. You can do most contents mitigationyourself without spending a lot of money,with the exception perhaps of bracing largefurniture items to the wall. There are a num-ber of good products available at hardwareand home improvement stores, includingputty and gels that protect breakables, andstraps and braces for electronic equipment,furniture and art work.

Three basic choices1. Buy EQ coverage through the company

that insurers your home; or2. Buy EQ coverage through a “stand-alone”

private company; or3. Buy EQ coverage through the California

Earthquake Authority.

That discouraging deductibleEveryone I know who has evaluated

earthquake insurance complains about thehigh deductibles. In order to receive any ben-efits under your insurance policy, your claim

must exceed a set “deductible.” Most non-commercial policies, (auto, homeowners)have a fixed dollar amount deductible, (e.g.$500). Earthquake policies are different.Their deductible is a percentage figure.Earthquake policies will not pay a claimuntil the deductible is met; so on a homewith $400,000 of coverage and a 15%deductible, the homeowner will be coveringthe first $60,000 of damage. The damage toyour structure must exceed your deductibleto trigger a payment, and the payment willonly be the amount of repair costs aboveyour deductible.

According to CEA staffer Rolf Erikson,there is a key difference between CEA andother policies re: what triggers a paymentabove the deductible. Most companiesrequire an insured to actually spend the fullamount of their deductible amount beforethey’ll pay benefits. The CEA uses thedeductible as a trigger — once you establishthat your damage exceeds it — Erikson saysyou are entitled to get paid the full differencebetween your deductible amount and thecost of repairs — regardless of whetheror not you spent the amount of yourdeductible. This gives the property ownerthe options of being creative, economizing ormaking modifications to make the best use

EQ Decision-making…continued from p4

intention to contest an aspect of coverage. Areservation of rights letter in essence tells theinsured they should not rely on their insurerfor protection — they may be “on theirown.” A prudent insured will take steps toprotect themselves in the event their insurerdenies coverage for a suit against them. Thisoften means settling a suit with the insurer'sconsent, if possible, but without that con-sent, if necessary to achieve a prudent settle-ment. UP argues in its brief that the Courtshould apply the rule that when an insur-ance company reserves its rights, one conse-

quence is that it loses the ability to raise a“consent to settle” clause as a coverage defense. UP's brief was prepared pro bono byWilliam Passannante and DavidKochman of Anderson, Kill & Olick 's NYoffices, and Charles Stern, Jr. of the SteegLaw Firm, in New Orleans, Louisiana.

401 Fourth Street Inc. vs. InvestorsInsurance Group, In the Supreme Court ofPennsylvania, Middle District, Case No. 270MAP 2003. Coverage for imminent col-lapse under a property policy. ChiefJustice Ralph J. Cappy sided with plaintiff'sargument that the term “collapse” is

ambiguous and connotes only a substantialimpairment of a building's structuralintegrity. Tim Law of Anderson Kill &Olick P.C., which represented UnitedPolicyholders in an amicus brief in supportof 401 Fourth Street, said “the decision is animportant first step to bring Pennsylvania inline with the majority of states that construecollapse coverage broadly to protect the healthand welfare of homeowners and the public.”

TEXASFairfield Ins. Co. v. Stephens Martin Paving,LP and Carrie Bennett In the SupremeCourt of Texas, Austin, Texas No 04-0728

Amicus Project…continued from p13

…continued at uphelp.org/newsletters.html

If you live in EQ country, have equi-ty in your home and couldn’t affordto rebuild it on your own, buyingearthquake insurance makes finan-cial sense. It really is that simple.And whether you buy it ornot…make sure to mitigate/retrofit.

This article was written at UP’s request by,Jonathan Buckley, Buckley Financial Planning, SanRamon, CA www.buckelyfinancialplanning.com,with editing assistance and additions by UnitedPolicyholders staff.


Fall 2005 Reader SurveyPlease take a few minutes to complete and return this survey in the enclosed envelope with or without a contribution to support United Policyholders. United Policyholders is a non-profit corporation organized under section 501 (C)(3) of theInternal Revenue Code. All Contributions are tax-deductible.

Name

Mailing Address (if you’ve recently moved) or Corrections

City State Zip

Please circle all of the following that describe you:

Homeowner/Renter Diaster Survivor Legal Professional Insurance Professional Commercial Insured Other

Are you a member of a professional or trade association that might have an interest in insurance issues? (Please identify

name of organization and contact phone number)

Are you interested in volunteering with UP? Yes No

THANK YOUFor taking the time to complete and return this survey. Please support our work by enclosing a donation.

___$60–99 ___$100–249 ___$250–499 ___$500–999 ___$1000 & up ___Other _________

It's fast. It's easy. To join please selectfrom the following categories:

Valued $60-99Includes a subscription of What's UP,United Policyholders' quarterly newsletterand a UP baseball cap.

Premium $100-249Includes a subscription of What's UP,United Policyholders' quarterly newsletterand a UP umbrella.

Comprehensive $250-499Includes a subscription of What's UP,United Policyholders' quarterly newsletterand a copy of Payment Refused byWilliam M. Shernoff.

Deluxe $500-999Includes a subscription of What's UP,United Policyholders' quarterly newsletter,a copy of Payment Refused by William M.Shernoff and a UP baseball cap .

Umbrella $1000 & upIncludes a subscription of What's UP,United Policyholders' quarterly newsletter,a UP umbrella and a copy of PaymentRefused by William M. Shernoff.

Join UP Today!

visit www.uphelp.org to read more about these items.

Your annual membership will help us continue our unique and important workempowering policyholders. All members receive a useful gift and our newslet-ters which contain up-to-date insurance information. Help us grow and plan forthe future. If you prefer to make a one-time donation, we welcome and appre-ciate your support.

Your support is tax-deductible! UP is a non-profit, tax-exempt charitableorganization that has been protecting policyholders' rights and helpingclaimants get fair settlements since 1991.

Nonprofit Org.U.S. Postage

PAIDOakland, CA

Permit No. 1778

110 Pacific Avenue, #262

San Francisco, CA 94111

www.unitedpolicyholders.org

Dear Friend,Insurance companies have armies of lobbyists and lawyers advancing theirinterests. Insurance consumers (policyholders) have United Policyholders. Weare the only consumer organization that is 100% dedicated to educating thepublic, courts, and elected officials on insurance issues and consumer rights.Weare working hard so you can truly have the peace of mind you think you’rebuying when you write that premium check to your insurance company. Don’tlet them sell you short — support us so we can support you. Please returnthe enclosed envelope with your tax-deductible contribution today.

THANK YOU FOR YOUR SUPPORTHOW TO REACH UNITED POLICYHOLDERSwww.unitedpolicyholders.orgCORRESPONDENCE: 110 Pacific Avenue, #262, San Francisco, CA 94111 MESSAGES: (510) 763-9740

HAS YOUR ADDRESS CHANGED?Please make corrections below or on the enclosed survey and send them to usin the enclosed envelope, or send us an e-mail: [email protected]

Donations to supportUP’s important work can be made simply and securely online by credit card:www.uphelp.org

or via check to:United PolicyholdersPMB 262, 110 Pacific Ave.San Francisco, CA 94111

United Policyholders is a non-profit501(c) (3) charitable, educationalorganization. All donations are taxdeductible.

print what's up fall2005 - united policyholders · homeland security. private insurers...

Documents