Insurance Dispute Lawyer Blog

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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 previously discussed in Part I, the case of Charles Ebinger, et ux. v. Venus Construction Corporation, et al. focuses on the time period in which a claim for damages can be brought against a contractor and the time period in which a contractor may bring an indemnifying action against a subcontractor. This Part, however, focuses on the Louisiana Supreme Court's reasoning as to how it interpreted the applicable statute of limitations.

The Ebingers moved into their newly built home in April of 1997. On October 9, 2003, the Ebingers filed suit against Venus Construction alleging defects in the home's foundation had caused cracks in the drywall, tile, brick walls, and floor. Venus Construction filed its indemnity claim on September 22, 2006 against the engineer and subcontractor that supplied the foundation.

First the Court determined when the cause of action arose. The Court determined that "regardless of the length of the peremptive period, it [the peremptive period] began when the owners took possession of the house or filed an acceptance of the work." In this case, a certificate of occupancy issued on April 22, 1997, and therefore, that is when the peremptive period began. At the time the Ebingers moved into their home, the original statute was in place and thus the Ebingers would have ten (10) years to file a claim.

Second, the Louisiana Supreme Court looked at the language of the statutes to determine whether the superseding statutes were written to act retroactively or have prospective application. Though the peremptive period was ten years at the time the statute of limitations began to run, the legislature amended the governing statute in 1999, substituting 'seven' for 'ten' years as the peremptive period. Further, this Act stated "the provisions of this Act shall have prospective application only and shall apply to contracts entered into on or after the effective date of this Act." Thus, at this time, the Ebingers would still have a valid claim through the original ten year peremptive period because the amended statute had only prospective applicability, not retroactive applicability, as specifically written in the Act by the legislature. Next, the Court looked at the second revision of the Act in 2003 which substitute 'five' for 'seven' years and did not maintain the 'prospective application' language. The Court states that the legislature's actions in drafting a law are knowing and intentional, and thus, if the legislature meant for the 'prospective application' language to continue, then the legislature would have included it in the Act. However, because the legislature did not, the Court's interpretation is that the 2003 Amendment supersedes the original statute and makes the peremptive period five years, even for those causes of action that arose back when the ten and seven year periods were applicable.

Third, the Court examines Constitutional rights to Due Process and determines that the statute of limitations is a procedural law and as long as it does not disturb a vested legal right, a right that at the moment may be expressed, then the statute of limitations (peremptive period) may be applied retroactively. In the end, the Ebingers' claim is not perempted even though it was filed two months after the 2003 Amendment because the Ebingers' right to sue had vested the moment they attained the certificate of occupancy. However, as for Venus Construction, "the mere expectancy of a future benefit," for Venus Construction in this case the right to file a claim for indemnification, "does not constitute a vested right." Therefore, Venus Construction's right to file a claim for indemnification did not vest until a judgment was entered against Venus Construction, and thus the peremptive period has run for Venus Construction to file a claim for indemnification against the subcontractor.

Continue reading "Keeping Up with Your Louisiana Home's Construction Defects (Part II) - Understanding Statutes " »

Being able to be involved in the design and building of a new home can be an exciting experience. But there is nothing more special than seeing the home's construction completed and fully furnished. After all of this, there can be nothing more upsetting than the discovery that the new home has building defects. Imagine settling in and noticing some part of the home's structure misshapen or cracking at the seams of walls or floors, or perhaps even a foundation or structural supports that have improperly settled or misplaced. The focus of Charles Ebinger, et ux. v. Venus Construction Corporation, et al. focuses on the time period in which a claim for these damages can be brought against a contractor and the time period in which a contractor may bring an indemnifying action against a subcontractor.

The crux of this follows what happens from the time that the building has completed through when litigation is brought against the contractor, and in the event the contractor is found liable, then the indemnification proceeding the contractor would most likely bring against any subcontractor who may be at fault for the imperfect work. However, this is complicated by taking into account the statute of limitations that exists to bring about such a suit. And this is further complicated when taking into account the revisions of the statute of limitations by the legislature.

In short, and to be clear, 'to indemnify' means to compensate for damages or losses sustained and to pay for expenses incurred through the litigation. Thus, in the event that a contractor, one who oversees and employs the various subcontractors for a specific job, is found to be liable for damage that exists in a specific construction unit, then, if it is through no fault of the contractor, but is the fault of one of the subcontractors and his or her oversight of his or her unit and specific job, then the contractor may seek to have his or her losses, in this case through litigation and a damages award against the contractor, paid by, or reimbursed by, the subcontractor.

A statute of limitations is a specific statute enacted by the legislature that basically states when it is too far away in the future of when an event originally happened to seek legal recourse. Usually, the statute of limitations begins to run when the complainant knew or should have known of the event or damages, as is often seen in torts cases. In this case, as will be later discussed in more detail, the statute of limitations until peremption began at ten (10) years and over the course of two revisions, became five (5) years.

Peremption, which is a large focus of this case, is the extinguishment of the right to bring a cause of action against another. Peremption is synonymous with a statute of limitations in that both, in this case, would prevent either the homeowner from bringing an action for damages against a contractor, or the contractor from bringing an action for indemnification against a subcontractor. Reading this, one may ask, why wouldn't the homeowner just bring a suit for damages against the subcontractor. There are two answers to this question, neither requiring an in depth discussion:

A. The contractor is the one hired to perform the job. In this case, that job is to build a house. In turn, however, because the contractor is usually unable to perform all the necessary duties, the contractor hires subcontractors to perform the separate duties (foundation, carpentry, electrical, plumbing, etc.). Thus, it is the contractor who has a contract with the homeowner while the subcontractor has a contract with the contractor.

B. Because the homeowner has a contract with the contractor and not the subcontractor, the party who may in fact be the cause of the damage, a party may bring an action against the contractor for any construction defects because the Law allows the contractor to, in turn, bring a suit for indemnification against the subcontractor who may in fact be at fault for the defect or damage.

Now that the background information has been laid down and described, it is time to turn to the legal issue of when is a cause of action perempted when the statute of limitations has been revised twice. For this discussion, please continue on to Part II. If, however, instead more information or legal services are required at this moment please contact the Berniard Law Firm for further information or legal services.

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.

While catching up on some hurricane news for the Gulf Coast region from June, we came across this story about relief fraud in the wake of Hurricane Katrina

A federal grand jury in Atlanta has accused four people of fraudulently obtaining tens of thousands of dollars in government assistance for victims of Hurricane Katrina.

Federal prosecutors said Wednesday that 37-year-old Kristine Clark and 24-year-old Michael Rouzan, both of Decatur, Ga., were charged in one indictment, and 26-year-old Markisha Burks of Dallas and 43-year-old Lucien Danthon of Atlanta were named in separate indictments accusing them of falsely claiming they resided in New Orleans at the time of the 2005 storm.

Charges include wire fraud, mail fraud and theft of government funds.

Prosecutors say Clark and Rouzan obtained $32,000 for housing assistance and purported property damage, and a trailer in Hammond, La., where they lived from May 2006 to March 2008.

It's extremely frustrating to hear of how people took advantage of the tragedy suffered by the city of New Orleans but even moreso to see how their claims may justify stricter action by the government that can injure those with real needs after the next tragedy. Punishment for such fraud should be handled swiftly and aggressively to send a message so that if such an event occurs, anywhere in the country, opportunists avoid taking assistance from the people who truly need it. In the event there is any debate over eligibility for such assistance, contact an attorney or government official immediately before assuming and opening yourself up for jail time and fines.

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.

Insurers seek dismissal of state's Road Home suit

NEW ORLEANS -- Lawyers for some of the nation's largest insurance companies asked a federal judge on Friday to dismiss a lawsuit filed by a former Louisiana attorney general, calling it "a bald attempt" to force insurers to increase payouts for hurricanes Katrina and Rita.

U.S. District Judge Stanwood Duval Jr. heard arguments from lawyers on both sides of the case, but didn't immediately rule on the companies' request for him to dismiss the class action suit filed in 2007 by former Attorney General Charles Foti.

Lawyers for Allstate Insurance Co., State Farm Fire and Casualty Co. and other insurers claim the attorney general's office is trying to take over the rights to more than 155,000 policyholder claims, to recover money the state paid out through the federally funded Road Home homeowner grant program after the 2005 hurricanes.

But the companies say the state already had deducted insurance payments in calculating grant awards.

More can be read at the KATC website, the article being available here

The insurance companies will fight tooth and claw to keep from paying out on claims and often make the process unbearable for policy holders looking to make a claim, going so far as to fight the state when it tries to step in for citizens. It is important to remain on top of your claim at every step and retain adequate legal council if necessary.

Continue reading "Recent Article About Road Home Plan and Insurance Providers" »