Insurance Dispute Lawyer Blog

The Berniard Law Firm would like to wish everyone a Happy Holiday.

Regular posting will resume in 2012! Have a happy, and SAFE, holiday season!

In insurance, an assignment is the transfer of legal rights under an insurance policy to another party. The legality of assignments became a major issue in the aftermath of hurricanes Katrina and Rita. During this period, the federal government, in an effort to aid rebuilding efforts, issued money through the Road Home program to homeowners who held underinsured properties. In exchange, these homeowners were required to assign their rights to insurance claims under their policies to the the state of Louisiana. The purpose of this assignment was to prevent homeowners from fraudulently receiving duplicate payments. However, the program incentivized insurance companies to estimate damages too low, which in turn forced homeowners to take the higher amount offered through the Road Home program.

The shortfall created within the Road Home program forced the state of Louisiana to bring suit against insurance companies through the policy rights assigned to the state by homeowners. In essence, the state sought to recoup actual insurance claim damages that the homeowners were rightfully owed had they not opted into the Road Home program. Though most, if not all, of the homeowner insurance policy contracts contained an anti-assignment clause, the state maintained that it had the right to post-loss assignment. Therefore, it is critical to distinguish between a pre-loss assignment and a post-loss assignment.

A pre-loss assignment occurs when one transfers a legal right under an insurance policy to another before the injury or loss occurs. An example of a type of pre-loss assignment is found in cases when life insurance is assigned to a bank as collateral for a loan. Here, the assignment has occurred before the loss, in this case the death of the original policy holder, and any benefits that accrue at the time of death are used to repay the bank first. These types of assignments typically require consent from the insurer, but are usually barred by anti-assignment clauses.

A post-loss assignment, on the other hand, is the transfer of a legal right under an insurance policy to another party after the injury or loss occurs. Post-loss assignments frequently give the third party transferee the ability to file a claim against the insurance company for any loss accrued by the original policy holder. Many insurance companies try to block such assignments through broad anti-assignment clauses found in policy contracts. Such clauses were found in most Katrina and Rita policies, and insurance companies pointed to these sections in an attempt to avoid paying actual damage costs homeowners thought they rightfully assigned to the state.

While national jurisprudence holds that pre-loss anti-assignment clauses are valid in favor of contract law and public policy, anti-assignment clauses related to post-loss assignments are held to be invalid. The reasoning behind this difference primarily lies with public policy considerations. A pre-loss assignment, for example, may increase the risk beyond the point that the insurance company had originally contracted for and with a party the insurance company had not originally contracted with. A post-loss assignment, on the other hand, simply assigns an accrued right to payment after a loss has already occurred. There is no change in risk as the loss has already occurred, and since payment is to be made it matters none to whom the payment is made.
The Supreme Court of Louisiana holds that such public policy concerns are better suited for the legislature. However, the Court does state that clauses prohibiting post-loss assignment must be written in clear and unambiguous language. If the language in the policy contract is unclear, then, in accordance with laws regarding contracts of adhesion, the language will be construed against the insurance company and in favor of the insured. If you have entered into a contract with an insurance company and are looking to assign your rights under the policy to a third party, turn to the language in the contract itself. Though there is not specific set of words or test used to determine "clear and unambiguous," your own judgment is a good starting point in determining whether or not you have the right to assignment.

Though your own judgment is an excellent place to start, insurance law is very complicated and is best suited for a practicing attorney.

Continue reading "Supreme Court of Louisiana Rules on Hurricane Katrina Insurance Policies' Anti-Assignment Clauses" »

Insurance policies routinely include provisions that are intended to limit the scope of the insurer's coverage in the event of a claim by the policyholder. For instance, most homeowner's insurance policies exclude coverage for fire damage that results from the policyholder's deliberate arson. Commercial premises insurance policies, which commonly also include coverage for loss of business income, can carry similar limitations. The recent case of Berk-Cohen Associates, L.L.C. v. Landmark American Insurance Company in the U.S. Court of Appeals for the Fifth Circuit provides an instructive example of how insurance policies are "construed using the general rules of interpretation of contracts" by the courts.

Berk-Cohen Associates, L.L.C., as the owner of the Forest Isle Apartments in New Orleans, maintained an insurance policy to cover the complex with the Landmark American Insurance Company. The policy covered property damage but specifically did not cover losses at Forest Isle "caused directly or indirectly by Flood.” In the case of a covered cause of loss, such as wind damage or fire, the policy insured Berk-Cohen against both the property damage and the resulting lost business income. However, the scope of the income protection excluded any income that would have been earned directly as a consequence of any "favorable business conditions caused by the impact of the Covered Cause of Loss on customers or on other businesses." In other words, Berk-Cohen could not profit by a widespread calamity that was also the source of a property damage claims. Forest Isle suffered a series of misfortunes, including a tornado, a vehicle strike, and--most significant--damage from Hurricane Katrina. Following the hurricane, Landmark compensated Berk-Cohen for damages caused by wind but not flood. Concerning Berk-Cohen's claim for lost business income, Landmark argued that it was not responsible for the increased rents that resulted from the extensive flooding around the city because flood damage was excluded from the policy. Accordingly, Landmark "declined to increase its calculation of lost business income to the extent that any foregone income arose from flooding." Berk-Cohen initiated litigation and, following a bench trial, the district court held that, notwithstanding the flood damage exclusion in the policy, Landmark should have considered the business conditions attributable to flooding in other buildings when computing the business income that Berk-Cohen lost as a result of the wind damage to Forest Isle. On appeal, the Fifth Circuit upheld the district court's opinion. It noted that the “Covered Cause of Loss” that gave rise to Berk-Choen's property damage claim was wind. Consequently, the policy language prohibited Berk-Cohen from recovering for lost business income as a result of wind damage suffered by customers or other competing businesses. But, "any increase in customers’ demand or reduction in competitors’ supply due to flooding at other properties is a permissible factor in calculating lost business income." (Emphasis supplied.) The court refused to permit Landmark to exclude coverage for flood damage by the policy language while at the same time invoking the same source of damage to reduce Berk-Cohen's business income recovery. To do so would "extend[] the flood exclusion beyond its function," since the policy specifically permits the income calculation to consider "favorable business conditions." Accordingly, the court "decline[d] to use a limitation on coverage"--that is, flooding--"to alter the calculation of damages for a covered loss"--the lost income. The Fifth Circuit concluded that the "policy ... excludes coverage for flood damages at the Forest Isle property. The flood exclusion does not, however, prevent Berk-Cohen from recovering lost business income due to the favorable business conditions arising from flood damage to other buildings."

This case demonstrates that applying the "normal cannons of contract interpretation" can work to the benefit of the insured. As with any contract, the insurance company is bound by the plain meaning of the policy language, even if it means that excluding coverage for one claim will open the door to liability for another. The lesson here is that a knowledgeable and experienced attorney is invaluable to anyone who is involved in a dispute over insurance coverage.

Continue reading "Hurricane Damage at New Orleans Apartment Leads to Dispute Over Insurance Coverage Calculation" »

As many Gulf Coast residents unfortunately know, standard homeowner's insurance policies do not include coverage for flooding. In order to assist property owners in Louisiana and other states in protecting themselves against floods from hurricanes, tropical storms, and other severe weather, Congress created the National Flood Insurance Program (NFIP) in 1968. NFIP offers flood insurance to homeowners, renters, and commercial property owners in communities that participate in the NFIP. In order for a community to be eligible to participate, it must agree to adopt and enforce certain building standards that are designed to reduce the risk of flood damage. According to the NFIP, flood damage is reduced by nearly $1 billion each year as a result of the floodplain management standards implemented by these communities. Also, structures that are built to NFIP standards experience approximately 80 percent less damage annually than those not built to the standards. The Federal Emergency Management Agency (FEMA) manages the administrative functions of the NFIP, including the claims process. As one Katrina victim recently learned, homeowners who file claims under the NFIP must closely follow the rules contained in their policies.

Violet Collins, a resident of New Orleans, maintained a flood insurance policy through the NFIP to cover her house and its contents. The structure was insured for $225,000 and the contents for $12,500. When the home sustained flood damage during Hurricane Katrina, Collins contacted FEMA to provide notification of the damage. FEMA sent an adjuster to her house to inspect the damage and arrange for payment from FEMA. Collins later submitted additional documentation for damage that the adjuster had overlooked, and FEMA issued her two more checks. Some time later, Collins filed a suit against the NFIP which alleged that the payments on her flood claims were insufficient. The NFIP filed a motion for summary judgment on the basis that Collins failed to file a proof of loss as required by the insurance policy and was therefore barred from seeking additional money. The district court granted NFIP's motion, and Collins appealed.

After reaffirming that it must "strictly construe and enforce" the flood policy's requirements, the Fifth Circuit Court of Appeals asserted that "an insured's failure to provide a complete, sworn proof of loss statement, as required by the flood insurance policy, relieves the federal insurer's obligation to pay what otherwise might be a valid claim." Gowland v. Aetna, 143 F.3d 951, 954 (5th Cir. 1998). The court noted that, ordinarily, the proof must be submitted within 60 days of the loss, but that FEMA extended the window for Hurricane Katrina claims to one year. Nevertheless, Collins never submitted any proof of loss; the court examined Collins's arguments for why she was not required to file one. Her first argument was that FEMA had waived the requirement altogether, a contention that the court quickly dispensed with by citing well-settled case law on the same question. Second, Collins asserted that the NFIP waived the filing requirement in a letter she received from an insurance adjuster. However, the court concluded this was not possible because "federal regulations provide that no provision of the policy may be altered, varied, or waived without the express written consent of the Federal Insurance Administrator," which was not given. Finally, Collins argued that because she suffers from a debilitating eye disease, she was excused from observing the filing requirement. In response, the unsympathetic court stated that "Collins, however, fails to explain why Louisiana tort law would apply to her claim for flood insurance proceeds or why, if applicable, this would exempt her from our precedent requiring strict compliance with the ... proof-of-loss requirements." Accordingly, the court affirmed the district court's dismissal of Collins's suit.

This case serves as a reminder that, even in the aftermath of such massive natural disasters as Hurricane Katrina, flood victims are still expected to follow the specific requirements of their NFIP insurance policies when seeking payment for flood-related losses. Although it may seem cruel to reject a flood victim's appeal for a fair pay-out, the courts have put policyholders on notice that they will not entertain requests to alter the terms of the policies. For this reason, victims of any flood should seek the help of a qualified attorney who can help them navigate the steps required to fully collect on their flood insurance policies.

Continue reading "Court to Katrina Flood Victim: Follow the Rules When Making an Insurance Claim" »

For those Louisiana residents, whether you live in Lake Charles, Shreveport, Baton Rouge, New Orleans, Kentwood or any other of the great cities across this state, looking for more information on their possible personal injury claim, check out our blog dedicated to these legal matters:

Louisiana Personal Injury Blog

This blog discusses the legal issues relating to Admiralty/Maritime law, Animal/Dog Bites, Car Accidents, Chemical/Industrial Spills, the intricacies of Expert Testimony, Insurance Disputes, employee rights under the Jones Act, Legal Duty, Civil Lawsuits, Criminal prosecution, Medical Malpractice, Mesothelioma/Asbestos, Motorcycle Injury, Negligence, Offshore Accidents, Product Defects, Chinese Drywall, Strict Liability, Workers' Compensation and Wrongful Death. All of these issues are crucial to citizens rights and residents of Louisiana.

To better understand the complexity of the law, contacting an attorney is crucial. However, to get a better understanding of the general issues, we hope this resource is invaluable. Feel free to browse this legal resource dealing with a variety of harms or damages you may have suffered in order to understand how your issue matches up with the law.

If you would like to speak with an attorney, check out our contact information. We represent Louisiana residents across the state and would be happy to discuss with you how to move forward with your unfortunate circumstances.

Per The Times-Picayune, FEMA has delayed the deadline to 2012 for collecting insurance money designated for the elevation and protection of homes in Louisiana:

Because of the slow flow of other federal money, such as Road Home grants, FEMA had already pushed back the deadline for home-raising work under the National Flood Insurance Program's Increased Cost of Compliance provision.

Typically, to collect up to $30,000 in so-called ICC money to cover the costs of protecting their property from future storms, rebuilding homeowners have two years from the date that their property is declared "substantially damaged" to complete the relevant work. FEMA had already extended that to four years.

For most people affected by Hurricane Katrina, that gave them until September 2009. But earlier this month, state officials argued that homeowners needed more time because of various impediments to rebuilding, such as a shortage of contractors, new damage from last year's Hurricanes Gustav and Ike and the late arrival of state-run storm-proofing incentive programs, namely the Road Home elevation grants from the FEMA-financed Hazard Mitigation Grant Program.

This is a good sign as it indicates the federal government is aware that there are extensive delays people in the Gulf Coast area are dealing with, be it federal funding such as this or insurance companies delaying payouts. More time gives a break for residents who are feeling the economic crunch or are simply unable to meet the deadlines as they are set. Either way everyone wins in this scenario as it gives the government time to make sure the process goes correctly and is not rush and allows residents the opportunity to breathe easier about the new federal requirements.

As highlighted in recent articles regarding insurance companies going out of business and leaving policy owners "out in the cold", it is important to know what to do in the event your policy provider goes out of business.

While making whatever repairs necessary to keep your home in shape, and documenting closely the expenses, it is important to immediately contact the Texas Department of Insurance and find out what is going on with your insurance company. Should your insurance company fail, the Texas Property and Casualty Insurance Guaranty Association is in place to help those policy holders. The Texas Property and Casualty Insurance Guaranty Association can be reached at (512) 345-9335.

It is important in such instances to also receive legal assistance or advice in the event your insurance company will have to be sued to get the claim you deserve.

Continue reading "Texas Insurance Companies Going Under: What to do?" »

Texas Governor Rick Perry has requested that FEMA waive or extend the deadline for FEMA aid to those whose lives have been disrupted by Hurricane Ike. KFDM reports:

Gov. Rick Perry has requested the Federal Emergency Management Agency (FEMA) waive, or extend for 180 days, the deadline to file proof of loss requirements for flood insurance policyholders whose homes were damaged by Hurricane Ike.

Due to the severity and magnitude of the disaster, FEMA granted an extension of the 60-day proof of loss deadline for flood insurance policyholders. Currently, policyholders are required to file proof of loss by March 12, 2009. An extension would allow Texans the same amount of time to file their claims as was allowed following Hurricane Rita.

"With so many Texas homes suffering flood damage related to Hurricane Ike and so many families who have not yet been able to rebuild, a deadline of March 12 is unrealistic," Gov. Perry said. "I urge FEMA to waive or extend the deadline so that Texans with flood insurance have adequate time to file their claims."

This extension would allow for more preparation and recovery for those harmed by the storm and extends the government's assistance for some time. Insurance companies also have deadlines for their response to homeowner's claims. It is essential that you make sure your insurance company reaches their deadlines on your Hurricane Ike or other property damage claims.

Continue reading "Governor Perry Urges FEMA Extend Aid Deadline" »

The Federal Emergency Management Agency's fourth extension of time for individuals in Texas affected by Hurricane Ike created a new deadline of February 20th for claims to be made. This, in light of the fact 90% of applicants who have submitted applications as of late were considered ineligible by FEMA. Texas Governor Rick Perry requested the extension in order to give applicants more time to get their affairs in order and ask the state for assistance.

To apply, go to www.fema.gov or pick up a phone and call 1-800-621-3362.