N.Y. Court: Insureds Can Sue For Consequential Damages

February 20, 2008

  • February 20, 2008 at 8:32 am
    Anonymous says:
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    eat into their profits! give me a brake Besides the prospect of higher premiums. Bull breach of contract is way thay are paying thew the backside crying wolf its the greed of the insurance playing with people lifes ask all of the soul that have paid .

  • February 20, 2008 at 10:17 am
    Anonymous says:
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    Wednesday, February 20, 2008

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    Hurricane Katrina

    5/2/2007
    Hood suing State Farm… again
    by John O’Brien

    Hood
    JACKSON, Miss. – For failing to work around a federal judge’s rejection of a proposed settlement, Mississippi Attorney General Jim Hood has decided to sue State Farm Fire and Casualty Co.

    A report by The Associated Press claims Hood said Tuesday that he has nearly drafted a new complaint that alleges a breach of contract.

    State Farm was one of five insurance companies Hood filed suit against alleging a lack of coverage following 2005’s Hurricane Katrina. Just two weeks ago, another one of the proposed classes in the settlement was dismissed, effectively ending the saga of the proposed settlement between Hood and State Farm.

    Trial lawyer Richard Scruggs, who helped negotiate the proposed settlement with State Farm, had already withdrawn his request for the Woullard class, led by Dennis and Imani Woullard, to be certified.

    Hood made a last-ditch effort to force acceptance of the settlement, which U.S. District Judge L.T. Senter originally denied doing because of fairness problems he perceived in it. He denied Hood’s motion.

    The Guice class, about 900 homeowners whose homes were nearly or totally destroyed, last month was also turned down by Senter, whose final opinion on Woullard can be found here.

    Hood’s proposed settlement established a procedure to revisit claims from policyholders who had not sued but still could. State Farm’s minimum offer would have been 50 percent of the structural value, and if the policyholder declined it, the case would go before an arbitrator. It was estimated the settlement, which would have affected about 35,000 policyholders, would be worth around $500 million.

    Senter had problems with this procedure and denied the proposed settlement. In Hood’s last motion, he blamed State Farm for the problems not being corrected.

    “The state court settlement agreement requires State Farm to establish an orderly, fair, and prompt administrative procedure to reevaluate Hurricane Katrina claims in Harrison, Hancock and Jackson counties based upon criteria and guidelines approved by this Court, and enforceable by legal action in this Court,” Hood wrote.

    “As a result of State Farm’s failure to establish an acceptable procedure for the reevaluation and settlement of claims which could be approved by this Court, State Farm is in breach of its settlement agreement with the Attorney General.”

    State Farm has set up a similar claims revisiting procedure with Insurance Commissioner George Dale, though Hood and Scruggs are irked at its lack of judicial oversight.

    David Rossmiller, an insurance attorney and partner at Dunn Carney in Portland, Ore., who has been analyzing the Gulf Coast’s insurance situation for LegalNewsline, said he can’t see how Hood could win his breach of contract suit.

    “This sounds an awful lot like a question on a Contract Law 101 final exam, with the correct answer being that you can’t sue someone for breach when their performance of the agreement is prevented by a federal judge,” Rossmiller said.

    “Maybe in the course of drafting this complaint Hood will pull out those old law school finals and contemplate how to get around State Farm’s impossibility defense.

    “I wonder if by the time this thing gets drafted — if it does — Hood will get around to seeing Judge Senter’s refusal to approve the class action and State Farm’s lack of performance more as a failure of a condition precedent to Hood’s own performance — a justification for reinstituting the lawsuit he previously dropped. Maybe that’s what he’s driving at.”

  • February 20, 2008 at 1:42 am
    Frank Stowell says:
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    In reality, which of the two parties held up the claim, the carrier by not paying in a timely fashion, or the client by not providing documentation to justify loss of income payment.

    These two cases would be an interesting read.

  • February 20, 2008 at 1:57 am
    ernie says:
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    How does the court hold the carrier liable for loss due to faulty repairs?

  • February 20, 2008 at 2:04 am
    Dave says:
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    Leave it to NY Courts to render another bonehead decision to allow their jesters another means of collecting fees. A company is under no obligation to advance 100% of damages. It is not responsible for the insured’s cashflow issues. The requirements to pay are outline in the proof-of-loss language. NY judges can’t make decent decisions on policy language much less liberalizing it.

  • February 20, 2008 at 3:05 am
    Marc says:
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    Contra Proferentem run amok. Another fine example of the judiciary messing with the interpretation of an insurance”contract”.

  • February 20, 2008 at 3:21 am
    Rich says:
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    Good points, Marc.
    If allowed to stand, I agree that all New York businesses will be forced to pay higher rates.

  • February 20, 2008 at 5:09 am
    Russell Vollmer says:
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    I agree with the comments of others and with the two dissenting judges. Besides the prospect of higher premiums (just what we need to attract or keep business in NY), if our courts, in their efforts to use insurance industry coffers to solve social and financial problems, keep whittling away at insurers’ reserves and eat into their profits, that will ultimately cause some to pull away from New York and put their capital elsewhere where they have a better chance of profit. How good is that for New York?

  • February 21, 2008 at 9:48 am
    Jim says:
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    Higher rates seems absurd to the policy holder. We do all we have to do to fight higher rates, especially in matters of insurance. We are glad to pay a lower rate because we don’t see a need….in the present. The need becomes a reality only if something goes wrong. When a family business is claimed and your life is turned upside down. When you are forced to start over, and rebuild everything you have worked for. You will definatly change your opinion.

  • February 21, 2008 at 10:04 am
    Fair says:
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    There are 2 sides to every story. This may be a way to boost companies to help their insureds get back on their feet and back in business sooner. Sometimes it is the contractors rebuilding the property and not the companies who are the hold up.

    Or, this could just be a case of good lawyers taking advantage of loss to allow the client and themselves to make a profit from it. Insurance is to put you back to pre-loss condition, not to make a profit.



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