Proof Of Loss Requirements In New York State

Shaun Marker – February 19, 2013

Those who handle first-party property insurance claims everyday understand the importance of the proof of loss. Imagine attempting to handle your own first-party property insurance claim and not realizing what potential pitfalls there can be in the claims process. One of these potential pitfalls is timely submitting a proof of loss according to the policy and state law. A proof of loss is a standardized form on which the insured gives information about a claim and the property insured. The general purpose of proof requirements is “to afford the insurer an adequate opportunity for investigation, to prevent fraud and imposition upon it, and to enable it to form an intelligent estimate of its rights and liabilities before it is obligated to pay.”1

New York has a statute, Insurance Law §3407, which addresses proofs of loss. The statute requires a policyholder to “furnish” the proof of loss to the insurer within sixty (60) days after the insurer requests it and provides the form. It is critical for a policyholder in New York to submit the proof of loss timely once it is requested and the form is supplied. In New York, a policyholder’s failure to file the proof of loss within the time period gives the insurer an absolute defense to the claim. New York is a strict compliance state with the proof of loss requirement.

The reason I placed quotation marks around the word ”furnish” in the last section of this article is because it is one of those legal buzz words. That means that a court has specifically discussed the meaning of that term in a case.

In Ball v. Allstate Insurance Company,2 a policyholder mailed the filled out proof of loss form on the sixtieth day after it was requested by the insurer. The insurer rejected it, argued the policyholder failed to comply with the proof of loss requirement, and sought to treat it as an absolute coverage defense to the claim. The insurer received the proof on the sixty-fourth day after its request. New York’s highest appellate court held the word “furnished” in the statute refers to the date the proof of loss is mailed by the policyholder to the insurer. So if the proof of loss is mailed on the sixtieth day following the insurer’s request, it is furnished timely according to the statute, even though it may not be received by the insurer until beyond the sixtieth day. The Court held:

[W]e conclude that the Legislature contemplated that proofs of loss would be “furnish[ed]” to the insurer when they were mailed. Allstate’s contrary interpretation of the statute would result in forfeiture even in those instances where the insured placed the proofs in the mail with the reasonable expectation that they would arrive at their destination before expiration of the 60–day period but were not received because of the inefficiency or mistake of the post office. The statute contains no explicit language requiring receipt within 60 days. For us to add that requirement would create a trap for unwary insureds who timely mail proofs of loss but forfeit their claims, nonetheless, because, for reasons beyond their control, the proofs were not received by the insurer until after expiration of the 60–day period. That result is not compatible with the modern commercial environment where the mails are extensively relied upon for communication between parties.

The proof of loss is a very important document in the property insurance claim process. It is very important to submit the proof of loss timely to the insurer to avoid jeopardizing the ability to recover benefits. While the New York statute and case law regarding proofs of loss allow policyholders to furnish proofs by mailing them on the sixtieth day following the insurer’s request, it is obviously better to submit it much earlier, if possible.

1 14 Couch on Insurance 2d (Rev. ed. 1982) § 49:390.

2 Ball v. Allstate Ins. Co., 595 N.Y.S.2d 711 (1993).

via Proof Of Loss Requirements In New York State : Property Insurance Coverage Law Blog.

Insurance Policy Conditions (a/k/a/ Land Mines): Part 16 – Specificity of Fraud-Based Claim Denial

Jeffrey Greyber – February 15, 2013

Most policies contain a “Concealment or Fraud” condition that reads along these lines:

With respect to all persons insured under this policy, we provide no coverage for loss if, whether before or after a loss, one or more persons insured under this policy have: a. Intentionally concealed or misrepresented any material fact or circumstance; b. Engaged in fraudulent conduct; or c. Made false statements; relating to this insurance.

Just about every fraud-based claim denial that I have come across (at the claim and/or litigation stage) lacks specificity, i.e., fails to explain how the insured defrauded the insurer. Do not let the insurer get away with that at either the claim stage or the litigation stage.

Regarding the claim stage, Section 626.9541(1)(i)(3)(f) of the Florida Statutes requires an insurer to give the insured “a reasonable explanation in writing … of the basis in the insurance policy, in relation to the facts or applicable law, for denial of a claim or for the offer of a compromise settlement.”1

Regarding the litigation stage, Rule 1.120(b) of the Florida Rules of Civil Procedure reads as follows:

In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with such particularity as the circumstances may permit. Malice, intent, knowledge, mental attitude, and other condition of mind of a person may be averred generally.

And Rule 9(b) of the Federal Rules of Civil Procedure reads almost identically to Rule 1.120(b).

It is important to demand specificity from the insurer for several reasons. Here are some of those reasons:

Holding the insurer’s feet to the specificity fire in the claim stage may allow you to avoid litigation by unraveling or clearing up whatever the insurer believes to be fraud or concealment.2

Holding the insurer’s feet to the specificity fire in the claim stage (i.e., locking in the insurer’s bases for claim denial in the claim stage) could possibly bar the insurer from conjuring up new bases for its claim denial in the litigation stage.

Holding the insurer’s feet to the specificity fire in the litigation stage could very well lead to dismissal (if the insurer commenced a fraud-based declaratory action) or to the striking of an insurer’s fraud-based affirmative defense (if the policyholder commenced litigation).3

Ferreting out the specifics behind an insurer’s fraud-based declaratory action or affirmative defense could help you narrow the scope of an insurer’s discovery fishing expedition.

To read previous posts in my series on insurance policy conditions, click here.

1 Though the focus of this article is fraud-based claim denial, you should exercise your statutory “reasonable explanation in writing” right with respect to any kind of claim denial.

2 Key word = “believes.” An insurer’s fraud sound and fury is often immersed in subjectivity.

3 See Van Meter v. Bank of Clearwater, 276 So. 2d 241, 245 (Fla. 2d DCA 1973) (dismissing the case because the complaint did not satisfy “the necessity of pleading the specific acts and conduct constituting the fraud”).

via Insurance Policy Conditions (a/k/a/ Land Mines): Part 16 – Specificity of Fraud-Based Claim Denial : Property Insurance Coverage Law Blog.

New Jersey Bad Faith Claims

Robert Trautmann – February 17, 2013

In a previous post, I discussed whether Hurricane Sandy victims were also the victims of bad faith claims handling by their insurance carriers. This post will discuss what constitutes bad faith here in New Jersey.

Many Hurricane Sandy victims are still waiting on their insurance carrier to processes and pay their claims. While delay can feel like bad faith on the part of the carrier, delay is only a component of what New Jersey Court’s consider when ruling on a bad faith claim. “[B]ad faith is established by showing that no valid reasons existed to delay processing the claim and the insurance company knew or recklessly disregarded the fact that no valid reasons supported the delay.”1 The Supreme Court held in Picket that, in order to avoid a bad faith claim, the insurance carrier’s actions must be “fairly debatable”2 The Picket court also found that unless the policyholder could succeed on a motion for summary judgment, a bad faith claim cannot succeed. Thus, New Jersey has reserved bad faith claims for the most clear cut cases of egregious conduct by insurance carriers.

Bad Faith is a common law remedy. New Jersey currently provides no private right of action under New Jersey’s Unfair Claims Settlement Practices Act.3 However, Senate Bill S-460, which creates a private right of action and would permit policyholders to recover damages, is currently pending in the New Jersey Senate. If passed, the new law would allow policyholders to recover:

a. the full amount of damages as set forth in the final judgment, regardless of the coverage limits of the policy;

b. prejudgment interest, reasonable attorney’s fees, and all reasonable litigation expenses from the date of the institution of the action filed pursuant to this act. The prejudgment interest shall be calculated at the rate provided for tort actions, or for non-acceptance of a formal offer for judgment, whichever is higher, as prescribed in the Rules of Court; and

c. punitive damages, when the insurer’s acts or omissions demonstrate, by clear and convincing evidence, actual malice or wanton and willful disregard of any person who foreseeably might be harmed by the insurer’s acts or omissions.

The acts and omissions of many carriers in the wake of Hurricane Sandy show this is a much needed law here in New Jersey. I will monitor this bill’s progress through the Senate and Assembly and post updates when available.

1 Picket v. Lloyd’s, 131 N.J. 457, 481 (1993).

2 Id. at 473.

3 N.J.S.A. 17:29B-1 et seq., Pickets at 467.

via New Jersey Bad Faith Claims : Property Insurance Coverage Law Blog.

Analysis of “Occurrence” in Defect Coverage Actions

Aaron Mandel and Stevi Raab – February 8, 2013

Through its recent opinion in Westfield Ins. Co. v. Custom Agri Systems, Inc., 2012 WL 4944305 (Ohio Oct. 16, 2012) (“Westfield”), the Ohio Supreme Court joined the majority of states in holding that faulty construction work does not qualify as an “occurrence” within the meaning of a general liability policy.

In Westfield, Younglove Construction (“Younglove”) contracted with PSD Development (“PSD”) to construct a feed manufacturing plant.  After PSD withheld payment, Younglove sued PSD for breach of contract in Ohio federal court.  In its answer, PSD alleged that one of Younglove’s subcontractors, Custom Agri Systems, Inc. (“Custom”), defectively constructed a steel grain bin, but did not allege that Custom’s defective construction work damaged PSD’s other property.  Younglove then sued Custom for contribution and indemnity, and Custom sought a defense and indemnity from its general liability insurer, Westfield Insurance Company (“Westfield”).  Westfield intervened in the action, seeking a declaration it was not obligated to provide coverage to Custom because Younglove’s claim against Custom did not seek damages arising out of “property damage” caused by an “occurrence.”  Westfield and Custom cross-moved for summary judgment on the issue.

In deciding the motions, the court acknowledged that Ohio law did not address whether defective construction work qualifies as an “occurrence” within the meaning of a liability policy.  Rather than decide the issue, however, the court found that a contractual liability exclusion in Westfield’s policy precluded coverage and granted summary judgment to Westfield.  Custom appealed to the Sixth Circuit, and Westfield filed an unopposed motion to certify two questions of state law to the Ohio Supreme Court:  whether a property owner’s claims of defective construction allege “property damage” caused by an “occurrence” under a commercial general liability policy, and, if so, whether contractual liability exclusions nevertheless preclude coverage for such claims.  The Sixth Circuit granted Westfield’s motion, and the Ohio Supreme Court accepted certification.

Addressing only the first question because the court believed it was dispositive, the Ohio Supreme Court held that defective construction does not constitute an occurrence.  The court reasoned that general liability policies are “not intended to protect business owners against every risk of operating a business,” nor are they “intended to insure the risks of an insured causing damage to the insured’s own work.”  The court also looked at court decisions in other jurisdiction, and found the majority view is that claims of defective construction are not claims for “property damage” caused by an “occurrence” within the meaning of general liability policies.  The court then analyzed whether Custom’s defective construction of the grain bin was an “occurrence,” noting the policy defined “occurrence” as an “accident including continuous or repeated exposure to substantially the same general harmful conditions.”  Although the policy did not define “accident,” the court noted that the term has an inherent “fortuity principle” under which losses must be “unexpected, as well as unintended,” and concluded that Custom’s defective work on the steel grain bin was not an “occurrence.”

via Introducing Construction Defect Coverage Quarterly, and an Analysis of “Occurrence” in Defect Coverage Actions | Sedgwick LLP – JDSupra.