Do Medical Records Support Removal And Do Unripe Claims Get Dismissed

By Edward Sylvester

In Alilin v. State Farm Mut. Auto. Ins. Co., No. 6:14-cv-1183-Orl-41DAB (D. for M.D. Fla., Jan. 30, 2015), Judge Carlos Mendoza denied Alilin's challenge to the amount in controversy prong of State Farm's removal to federal court and found that Alilin's medical bills, which were previously submitted to State Farm with a settlement offer, were persuasive evidence that the amount in controversy exceeded $75,000. The Court also denied application of Alilin's argument that future set-offs would reduce the medical expenses to significantly less than the jurisdictional amount, because the amount in controversy is determined at the time of removal; thus, "post-judgment 'set-offs' or collateral source payments are irrelevant."

Additionally, the Court addressed State Farm's motion to dismiss Alilin's claim for bad faith, which was based on the premature nature of the claim. Alilin argued that the bad faith claim should be abated and not dismissed. Although the Court acknowledged that Florida courts hold such claims in abatement, the Court stated that Alilin "bears the burden of establishing the Article III prerequisites to jurisdiction" and found that Alilin's inability to establish the bad faith claim was ripe warranted dismissal "for want of subject matter jurisdiction."

For more information on removing actions to federal court, or any other litigation-related questions, please contact Edward Sylvester directly.

Edward Sylvester is a partner in the Miami office and is licensed to practice in all state and federal courts in both Florida and Ohio.

Sizing Up Cyber Risks after the Sony Breach

Sony’s most recent data breach underscores the difficulties in underwriting and insuring cyber risk. Sony incurred losses that were surprising in both their scope and type. The company already is a defendant in at least four new lawsuits concerning the disclosure of employees’ confidential information. In addition to potential liability, Sony suffered substantial first-party losses that may be difficult to quantify, including forensic costs, reputational injury, and business interruption losses.

According to published reports, Sony may have $60 million in cyber insurance to mitigate these losses.  Even if this figure were true and the cyber policies applied to the breach, Sony’s insurance probably would cover only a fraction of its actual damages.

The unprecedented nature of this breach may cause some insurers to reexamine their exposure to cyber risks. Although companies can purchase cybersecurity insurance, these policies are not always affordable. The problem is most acute on the first-party side. 

In a November 2012 Cybersecurity Insurance Workshop Readout Report, the Department of Homeland Security noted that, although a sizeable third-party market exists to cover loss of customer or employee data, first-party policies "remain expensive, rare, and largely unattractive." The report identified several factors for this problem including: the lack of actuarial data to model cybersecurity risks and fears that a “cyber hurricane” would overwhelm insurers with large and unpredictable losses. The Sony breach may spur more talk of “cyber hurricanes.”

Insurers have limited their exposure on the third-party side as well. Most cyber liability policies have burning limits, meaning that defense costs erode coverage. This feature allows insurers to cap their exposure at pre-determined levels. At the same time, insurers are expanding cyber-related exclusions in commercial general liability policies and other conventional insurance products, forcing companies to seek coverage for cyber risks in specialty policies.

As insurers obtain actuarial data, they will develop more affordable products for addressing third-party and first-party cyber risks. But the onus for developing this market is not only on insurers. Companies must improve their data security. Increased security should reduce the risk of breach, allow cyber losses to be more easy to predict in size and type, and in the end make cyber risks more insurable.

Travis Wall recently authored the chapter on Cyber-Security Insurance for the LexisNexis California Insurance Law & Practice treatise. For more information, please contact Travis directly (email).

 

Latest Updates to Media Liability Insurance in California

Hinshaw & Culbertson LLP partner James Castle recently enhanced and updated the chapter on Media Liability Insurance for LexisNexis' California Insurance Law & Practice. Cases discussed include:

For more information on Media Liability Insurance, please contact James Castle (email).

Latest Updates to the California Inurance Holding Company Act

Hinshaw & Culbertson LLP attorney Suh Choi has updated and enhanced Chapter 5, The California Insurance Holding Company Act, for the LexisNexis California Insurance Law & Practice treatise:

The latest update features a new section on "Divestiture of Control," that discusses the notice of proposed divestiture that any controlling insurer seeking to divest its controlling interest in that insurer must file with the Commissioner. The section describes how the Commissioner will deal with confidentiality concerns surrounding the notice. The new section also notes the possibility that the Commissioner may require parties seeking to divest control to file for formal approval of the transaction.

The revised chapter also features a new practice note as to the California Department of Insurance's requirements as to exhibits that must accompany the filing of Form A Information Statement when there are various acts that will, directly or indirectly, lead to a change in control of a domestic insurer or person controlling a domestic insurer.

Section 5.06[1] newly points out an exception to the exemption from registration granted an admitted foreign insurer whose domiciliary jurisdiction has disclosure requirements and standards that are substantially similar to California's requirements.

Section 5.06[8] newly discusses the annual enterprise risk report that must accompany registration statement.

A new practice note in the section discusses various online filing requirements through the California Department of Insurance's Online Assistance System for Insurers Submittals ("OASIS").

A new practice note discusses the Department's "safeguard" provisions with regard to agreements between a California insurer and an affiliate."

For more information on The California Insurance Holding Company Act, please contact Suh Choi (email).

New Chapter on Cyber-Security Insurance Authored by Hinshaw & Culbertson Partner

Hinshaw & Culbertson LLP partner Travis Wall recently authored the chapter on Cyber-Security Insurance for the LexisNexis' California Insurance Law & Practice treatise.

The chapter provides an introduction to common cyber incidents, such as data breaches, and addresses the different kinds of losses and liabilities that arise from these events.

This analysis includes a discussion of the legal and statuatory framework governing data breaches. The bulk of the chapter addresses potential coverage for cyber incidents under commercial general liability policies.

Despite recent trends, most case law in cyber context has involved traditional third-party liability insurance. Even though insurers and policy holders are shifting coverage for cyber risks away from traditional insurance into specialty policies, the prior case law is still instructive. These decisions influenced how insurers drafted cyber insurance policies. The case law also may inform how courts interpret particular provisions in specialty policies or endorsements. Thus, this chapter analyzes these pertinent court decisions. It assesses coverage provisions and exclusions under CGL Coverage A and B as applied to cyber incidents.

The chapter ends with a discussion of key characteristics of specialized cyber policies and emerging trends of coverage disputes in this area.

For more information on Cyber-Security Insurance, please contact Travis Wall (email).

California Court Upholds In-House Counsel Privilege

By Terrence P. McAvoy and Michael G. Ruff

Brief Summary

In Palmer v. Superior Court California's Second District Court of Appeal upheld the in-house counsel privilege for communications concerning a dispute with a current client and, in doing so, declined to adopt the "fiduciary duty" and the "current client" exceptions to the attorney-client privilege.

Complete Summary

Plaintiff brought a malpractice claim against an attorney and her firm as a result of their short-lived representation of him in an invasion of privacy claim. Two months into the representation, plaintiff began sending emails expressing dissatisfaction with the firm's billings and representation. Nevertheless, plaintiff stated that he continued to rely on defendants for legal advice about his matter. Shortly thereafter, plaintiff filed a malpractice action against defendants and substituted new counsel in the underlying litigation.

During the time of representation, the attorney consulted with other attorneys in her firm — the firm's general counsel, claims counsel, and another "deputized" attorney. The firm did not bill plaintiff for any of the other attorneys' time. In response to deposition questions and discovery requests, the attorney invoked the attorney client privilege for internal communications between the attorney and other firm lawyers acting in their capacity as counsel for the firm and/or documents prepared in anticipation of litigation. Plaintiff filed a motion to compel, which the trial court granted. Defendant filed a petition for writ of mandate or prohibition, requesting the trial court to set aside its order and enter a new order denying the motion to compel.

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Insurance Regulator Too 'Aggressive,' Insurers Say

Four insurance companies sued the California Department of Insurance, claiming the agency has become "increasingly aggressive" in its efforts to enforce the state's Unfair Insurance Practices Act.

The companies say the department is trying to enforce the UPA beyond the scope of the original statute, by wanting to impose "millions of dollars in monetary penalties" against insurance companies.

In statute form, the UPA outlines 16 unfair claims settlement practices that companies must avoid in order to be compliant with the law. Prohibited practices include misrepresenting pertinent facts or policy revisions to clients, compelling insured clients to pursue litigation to recover amounts due, and attempting to settle a claim for less than a "reasonable" amount.

But the four plaintiffs known as the Torchmark group of companies said the department has been adding to the original 16 practices, creating 25 "categories of acts" that outline specific conduct to be followed or prohibited in the settlement of claims.

The Torchmark group includes Globe Life and Accident Insurance Company, American Income Life Insurance Company, United American Insurance Company and United Investors Life Insurance Company and is represented in the suit by Robert Hogeboom of the Los Angeles firm Hinshaw & Culbertson.

READ MORE at Courthouse News Service

 

California Insurance-Related Bills Signed into Law

September 30, 2014, was the deadline for Governor Jerry Brown to take action on bills passed by the California Legislature during the 2014 regular legislative session. Here are summaries of noteworthy insurance-related bills that were signed into law. Unless noted otherwise, these new laws will go into effect on January 1, 2015.  

Assembly Bills

AB 1234 - provides in statute that information reported in the registration statement required by the Insurance Holding Company System Regulatory Act and information and documents disclosed in the course of an examination or investigation made pursuant to the Act is not subject to discovery from the commissioner and is not admissible into evidence in any private civil action if obtained from the commissioner in any manner.

AB 1395 - increases from $0.25 to $0.26 the annual per vehicle fee assessment on automobile insurance policies which funds consumer service functions at the Department of Insurance related to automobile insurance; the assessment will remain at $0.26 until January 1, 2016, thereafter the amount of the assessment will be determined by the insurance commissioner but may not exceed $0.26. AB 1395 also clarifies that an insurer, after it remits the $0.15 Seismic Safety Commission assessment on property insurance policies to the Department of Insurance, does not owe a duty to the policyholder to return a portion of the assessment in the event the policy is terminated early.   

AB 1804 - requires private passenger auto insurers, residential property insurers, and insurers providing individual disability income insurance to maintain a verifiable process or to adopt a procedure that allows an applicant or policyholder to designate one additional person to receive notice of lapse, termination, expiration, nonrenewal, or cancellation of a policy for nonpayment of premium. AB 1804 does not apply to policies of private passenger auto insurance that provide coverage for less than six months. AB 1804 will become operative on January 1, 2016.

AB 1897 - adds a section to the Labor Code which provides that when a client employer obtains or is provided workers from a labor contractor to perform labor within the employer’s usual course of business, the client employer and the labor contractor share all civil legal responsibility and civil liability for all workers supplied by the labor contractor for both the payment of wages and the failure to obtain workers’ compensation insurance.

AB 2056 - requires pet insurance policies to include specified disclosures, including policy exclusions, any waiting period or deductible, and whether the insurer reduces coverage or increases premium based on claim history. AB 2056 also sets forth definitions of certain terms, including “chronic condition,” “hereditary disorder,” and “veterinary expenses,” which a pet insurer must include in its policies if the insurer uses any of the terms in its policies. AB 2056 applies to any policy of pet insurance which is marketed, issued, amended, renewed, or delivered to a California resident on or after July 1, 2015.  

AB 2064 - revises the disclosure language which must be included in a residential property insurer’s mandatory offer of earthquake insurance. The disclosure revisions enacted in AB 2064 will become operative on January 1, 2016. AB 2064 also increases the statutory cap on the California Earthquake Authority’s operating expenses from 3% of its premium income to not more than 6% of its premium income.

AB 2128 - extends the sunset date on the statutory provisions relating to the Department of Insurance’s California Organized Investment Network (COIN) from January 1, 2015 to January 1, 2020. Existing law requires all admitted insurers to file data on their community development investments in California. AB 2128 limits the requirement to report on community development investments to each admitted insurer with annual premiums written in California equal to or in excess of $100 million for any reporting year. AB 2128 further provides that an insurer meeting the $100 million threshold also must report on its community development infrastructure investments and its green investments in California. The information required by AB 2128 must be submitted by July, 1, 2016, on investments made or held during calendar years 2013, 2014, and 2015. AB 2128 also revises the information regarding insurer community development investments which the Department of Insurance is required to post on its website.       

AB 2220 - requires private patrol operators to carry a minimum of $1 million in liability insurance coverage.

AB 2293 - establishes insurance requirements for a transportation network company which the bill defines as an entity “operating in California that provides prearranged transportation services for compensation using an online-enabled application or platform to connect passengers with drivers using a personal vehicle.” AB 2293 requires a transportation network company to maintain $1 million in primary liability coverage from the moment a participating driver accepts a ride request until the driver completes the transaction on the online-enabled application or platform or until the ride is complete, whichever is later. In the timeframe from when a participating driver logs on to the transportation network company’s online-enabled application or platform until the driver accepts a request to transport a passenger, the transportation network company insurance must maintain primary liability insurance coverage in the amount of at least $50,000/$100,000/$30,000; the company also must  maintain excess coverage of at least $200,000. The statutory section on insurance coverage enacted by AB 2293 states that nothing in the section “shall be construed to require a private passenger automobile insurance policy to provide primary or excess coverage during the period of time from the moment a participating driver in a transportation network company logs on to the transportation network company’s online-enabled application or platform until the driver logs off the online-enabled application or platform or the passenger exists the vehicle, whichever is later.”   These provisions of AB 2293 become operative on July 1, 2015.      

AB 2494 - authorizes a trial court to order a party, the party’s attorney, or both to pay reasonable expenses, including attorney’s fees, incurred by another party as a result of bad-faith actions or tactics that are frivolous or solely intended to cause unnecessary delay.

AB 2734 - makes changes to the Insurance Code which the Assembly Insurance Committee characterizes as “noncontroversial.” Among other changes, AB 2734 1) increases from $5,000 to $20,000 the annual tax threshold which triggers the obligation on a surplus lines broker to make tax payments in monthly installments, 2) increases from $5,000 to $20,000 the annual tax threshold which triggers an obligation on an insurer to prepay taxes, 3) clarifies what constitutes “California business” for the purposes of insurers’ duty to file information with the insurance commissioner concerning procurement contracts with minority, women and disabled veteran-owned businesses, 4) changes the annual data call on private passenger auto insurance information to an every-other-year data call, 5) clarifies that the $5 million financial responsibility requirement for testing of autonomous vehicles may be satisfied with an insurance policy, and 6) authorizes the insurance commissioner to act on an application seeking status as a certified reinsurer 30 days after the application is published, rather than the 90 days required by existing law.

AB 2735 - sets forth in statute that a homeowner who has purchased an earthquake insurance policy that does not satisfy the standard coverage requirements must be reminded by the insurer at renewal that the homeowner has the right to purchase a policy that meets the standard coverage requirements. The reminder notice must be filed with the insurance commissioner 30 days before its first use and is subject to the commissioner’s disapproval.   

Senate Bills

SB 1011 - authorizes certain 501(c)(3) nonprofit organizations to insure themselves against damage to property and the losses related to the loss of use of property though a risk pool arrangement.

SB 1205 - requires the Department of Insurance’s curriculum board to develop or recommend courses of study for agents and brokers on commercial earthquake risk management.  

SB 1273 - extends the sunset date on the California Low-Cost Automobile Insurance Program from January 1, 2016 to January 1, 2020. SB 1273 also amends several statutory provisions relating to the program. Among other changes to the program, SB 1273 1) increases the cap on the value of an automobile that may be insured under the program from $20,000 to $25,000 and authorizes the California Automobile Assigned Risk Plan Advisory Committee to adopt a method to determine the value of an automobile, subject to the insurance commissioner’s approval, 2) allows a person who has fewer than three years of driving history to qualify for coverage under the program, and 3) entitles certified producers to a commission of 12% or $50, whichever is greater.

SB 1446 - allows a small employer health plan or a small employer health insurance policy that was in effect on December 31, 2013, that is still in effect on the effective date of SB 1446, and that does not qualify as a grandfathered health plan under the federal Affordable Care Act, to be renewed until January 1, 2015, and to continue to be in force until December 31, 2015. SB 1446 went into effect on July 7, 2014.

 

Deepwater Horizon Ruling Places $18b Bull's-Eye on BP

Barger & Wolen partner David McMahon was quoted in a Law360 article, Deepwater Horizon Ruling Places $18b Bull's-Eye on BP subscription required), on September 4, 2014, about U.S. District Judge Carl J. Barbier’s ruling which found BP’s actions in the Deepwater Horizon disaster grossly negligent. The ruling holds BP responsible for up to $18 billion in Clean Water Act penalties and leaves open the possibility of billions more in punitive damages.

The 153-page ruling issued September 4th thoroughly laid out why the negative pressure test botched by BP prior to the Macondo well blowout constituted gross negligence and even if it didn't, a series of negligent actions by BP added up to gross negligence.

While negligent acts were committed by individual BP employees, the court seemed to adopt a broader definition of a person under the CWA to include the company as well, said David McMahon, a Barger & Wolen LLP partner who worked on the early phases of the BP litigation.

Essentially, the [judge] suggested that corporate ratification was not required to have the enhanced level of penalties stick,” McMahon said. “That was an interesting analysis.”

While Judge Barbier found that BP and drilling partners Transocean Ltd. and Halliburton Co. were each liable under general maritime law for the blowout, explosion and oil spill, he also said Transocean and Halliburton’s indemnity and release clauses in their respective contracts with BP are valid and enforceable.

Barger & Wolen and Hinshaw & Culbertson Announce Merger

Combined Firms Create Powerhouse Insurance Practice with 120 Attorneys Dedicated to Serving the Insurance Industry

  

Chicago and Los Angeles — September 2, 2014 — Barger & Wolen and Hinshaw & Culberston, a national law firm with 460 lawyers in 22 offices around the country, announced today they will combine forces. The merger creates one of the largest insurance law practices in the United States with 120 full-time attorneys dedicated to providing legal counsel to insurance companies and financial services firms that shape the insurance industry.

The partner votes took place on August 28, 2014, and the merger will become effective on October 1, 2014. The combined firm will keep the name Hinshaw & Culbertson and have over 500 attorneys in 11 states as well as London.

Click here for the full press release. For more information, contact Heather Morse.