Proving and Winning a First Party Bad Faith Case, Part 4 – The Nuts and Bolts of Discovery : Property Insurance Coverage Law Blog

David Furtado – March 23, 2014

In part 3 my series on Proving and Winning a First Party Bad Faith Case, I posted a Request for Production of Documents I recently served upon the insurer’s attorney on a case I am handling in federal court in the Western District of Missouri. In that case the insurer’s attorney requested information from my client in the insurer’s Requests for Production of Documents that would be needed to support my client’s allegations that the insured did not act reasonably and in good faith when adjusting my client’s claim. My client hired a public adjuster in that case who documented all of his communication with the insurer’s representatives as well as shared information with the insurer’s representatives in writing regarding the communications the policyholder and he had with contractors who evaluated the damage at policyholder’s property as well as building code representatives regarding building codes that must be complied with when replacing or repairing the damages incurred at the policyholder’s property.

The fact that the policyholder hired a public adjuster to assist in the adjustment of the claim has made presenting the policyholder’s case from a legal prospective much easier as the public adjuster documented every step he took in the adjustment process as well as documented every response the insurer made to his requests in the adjustment process showing the insured delayed payment of the claim and tried not to pay the claim fairly.

I served the following Requests for Admissions upon opposing counsel where United Fire and Casualty Company is the Defendant.


1. Admit that on August 31, 2007, UNITED issued property insurance policy No. xxxxxxxx to Plaintiff.

2. Admit that at all times material thereto all policy premiums were paid in full.

3. Admit that on February 29, 2012, the insured building sustained damages caused by a wind/tornado occurrence.

4. Admit that on February 29, 2012, the policy No. xxxxxxxxx was in full force and effect and all premiums were fully satisfied.

5. Admit that a wind/tornado occurrence is a covered peril under the Policy.

6. Admit that UNITED confirmed coverage for the tornado loss and issued payments for the claim.

7. Admit that UNITED retained Torgeson Design Partners to perform a structural damage assessment of the property.

8. Admit that UNITED retained TC3 to perform a repair cost estimate.

9. Admit that Torgerson Design Partners reported that repairs to the building would not be reasonable, safe or cost effective.

10. Admit that TC3 reported that structural repairs would cost over $6,000,000.00.

11. Admit that the building formerly located at xxxxxxxxxx, Branson, MO, could not have been repaired to its pre-loss condition.

12. Admit that it was necessary to demolish the building formerly located at xxxxxxxxx, Branson, MO.

13. Admit that on May 16, 2012, the insured submitted an executed Sworn Statement in Proof of Loss estimating the building’s repair or replacement cost at $7,282,859.99.

14. Admit that the Actual Cash Value of the building at the time of the loss was $5,947,452.96.

15. Admit that the amount of the loss to the building exceeded the $4,400,000.00 policy limit of the building coverage.

16. Admit that the amount owed to the insured for the building loss was $4,400,000.00.

17. Admit that the City of Branson is not a loss payee under policy No. xxxxxxx.

18. Admit that the City of Branson is not a mortgagee under policy No. xxxxxxx.

19. Admit that under policy No. xxxxxxx, UNITED has an obligation to protect a mortgage holder or loss payee, as their interest appear on the Declarations Page.

20. Admit that under policy No. xxxxxxx, Business Income is defined as the net income that would have been earned or incurred if no physical loss or damage had occurred, minus continuing, normal and operating expenses incurred, including payroll.

21. Admit that mortgage payments are considered normal operating expenses.

The above listed requests were the first twenty-one I sent. The reason many of these admissions were sent was to establish facts necessary to prove the client’s case, to obtain responses to facts that we know are true, and prepare for depositions of the insurer’s representatives who worked on the adjustment of this case, as well as their managers who supervised the adjustment process.

Proving and Winning a First Party Bad Faith Case, Part 4 – The Nuts and Bolts of Discovery : Property Insurance Coverage Law Blog.

Washington Supreme Court Permits $1.5m Damages Claim to Proceed Against Engineering Firm Under “Independent Duty Doctrine”

Clayton Graham – March 13, 2014

In a recent decision decided on a narrow 5-to-4 vote, the Washington Supreme Court declined to bar a couple’s negligence claims against an engineering firm based on a contractual limitation of liability, permitting the couple to continue pursuing their damages claims in King County Superior Court.

The parties to the case, Donatelli v. D.R. Strong Consulting Engineers, Inc., entered into a contract for Strong to assist with a short plat approval for the Donatellis’ King County property.  The contract limited Strong’s liability to the greater of $2,500 or its professional fees charged to the Donatellis.  Strong secured preliminary approval for the Donatellis’ short plat, but final plat approval did not issue prior to the County’s 60-month deadline, so the preliminary plat approval lapsed.  The Donatellis lost the property through a foreclosure before a new plat application could be processed.  The Donatellis then sued Strong on a number of legal theories, including breach of contract, professional negligence, and negligent misrepresentation, seeking an award exceeding 1.5 million dollars for lost profits and other damages.

Strong sought dismissal of the negligence claims based on Washington’s “economic loss rule,” which the Court has more recently restyled the “independent duty doctrine.”  While there is a great deal of case law applying this rather nebulous doctrine, it generally bars a plaintiff from bringing a tort claim for economic damages where there is a contract between the parties that allocates risk for the claims asserted.  Prior Court decisions have characterized the rule as an “attempt[] to describe the dividing line between the law of torts and the law of contracts.”  One policy advanced by this doctrine is preventing parties from “sidestepping” the terms of their contract by suing in tort for a matter that was already covered by a written agreement.  But in prior decisions, Washington courts have made it clear that contractual limitations of liability cannot limit claims arising from duties that arise independently of the parties’ written contract.

The Court found that the independent duty doctrine did not bar the Donatellis’ negligence claims against Strong, based on an analysis of the Court’s precedents and the contours of the independent duty doctrine.  Notably, in reaching this conclusion, the Court focused on a number of factors outside the Donatellis’ written contract with Strong.  For example, the Court acknowledged that it was not clear, based on the record before the Court, whether Strong’s contractual duties were limited to the tasks listed in the written contract, or whether Strong’s contractual duties were expanded through oral agreements or its affirmative conduct in handling additional tasks for the Donatellis.  In permitting the Donatellis’ negligence claim to proceed, the Court stated that “[b]ecause we do not know the scope of D.R. Strong’s contractual obligations, we cannot determine if any of D.R. Strong’s duties to the Donatellis arose independently of the contract.”  The Court also allowed the Donatellis’ negligent misrepresentation claim to proceed, finding that “Strong’s duty to avoid misrepresentations that induced the Donatellis to enter into a contract arose independent of the contract.”  In reaching this conclusion, the Court acknowledged that parties can limit their representations to one another in a written contract, but in this case the Donatellis claimed that their decision to enter into the contract in the first instance was based on Strong’s representations about the total cost and timeline for the project.

It is important to note that the Court did not address the merits of the Donatellis’ negligence claims, nor did it find any liability on Strong’s part.  It simply found that the independent duty doctrine did not bar these claims, and the decision will allow the Donatellis’ negligence claims to be decided by the King County Superior Court.  Lawyers drafting contracts for engineers, architects, and other professionals in the building and development industry should keep the lessons of the independent duty doctrine—and Donatelli v. D.R. Strong—in mind.  While the Court’s decisions make it clear that contractual limitations of liability cannot extend to all tort claims, there are a number ways that more of the parties’ agreement can be brought within the four corners of the contract—for example, including express, limited representations and warranties, “merger” clauses, and execution of written contract amendments or change orders whenever a professional’s scope of work is expanded to tasks not covered by the initial contract.

via Washington Supreme Court permits $1.5m damages claim to proceed against engineering firm under “independent duty doctrine” – Lexology.

Hail HAAG and Travelers Insurance Claims : Property Insurance Coverage Law Blog

Chip Merlin – March 21, 2014

Hail damage claim disputes and lawsuits are the rage in Texas, Colorado, Oklahoma, Arizona, and Missouri. Many insurance companies have developed operational claims responses for the purpose of controlling their severity of loss. For many insurers, HAAG is the “go to” preferred expert vendor providing various services.

I have previously noted that Insurance Company Experts Are Often Biased And Outcome Oriented. In a post, When Insurers Hide Behind their Experts in Texas, we noted a Texas case where HAAG was alleged to have been a biased vendor for the insurance industry. Large forensic engineering companies have business salespeople selling testimony and services to insurers. They cannot afford to get blacklisted by their insurer clients who have claims goals and programs designed to pay less.

The result is policyholders suffering from a hailstorm are often getting the frustration of fighting adjusters and insurance company lawyers as they get caught up in the claims industry’s goal to reduce hail damage payments. My recent post, Are Insurers Roofing Allowances for Roof Vents Injuring and Killing People? noted the dangers some of these practices are causing.

In the past, I have had few cases against The Travelers. When I went to the data banks of the Bad Faith Litigation Group’s index regarding Travelers, I noticed a dearth of information. So, we have started working on collecting information regarding the claims practices of The Travelers because I have an active hail damage case against them. You would think any company with completely ethical claims practices would simply share that information with their customers, because an honest and ethical company could withstand such scrutiny and would want to advertise it. You can guess why I have to seek a little help from my friends.

Any policyholder, roofer, public adjuster, or policyholder having trouble with a property insurance claim involving HAAG or The Travelers is invited and encouraged to contact yours truly or Shane Smith. We all need and can benefit from sharing and helping one another.

via Hail HAAG and Travelers Insurance Claims : Property Insurance Coverage Law Blog.

Xactware’s 2013 Property Report Reveals Impact of Oklahoma Tornadoes on Estimate Trends

MarketWatch – March 19, 2014

Xactware’s annual property report for the United States reveals that the Oklahoma tornadoes in May had the largest effect on property repair estimate trends of all U.S. catastrophes that occurred in 2013. Xactware is a member of the Verisk Insurance Solutions group at Verisk Analytics.

Xactware’s 2013 Property Report for the United States shows that the monthly value of property repair estimates submitted by contractors and insurance professionals peaked in May ($3.33 billion) and June ($3.32 billion). That trend follows the tornadoes that wreaked havoc throughout Oklahoma in May. In August, the monthly value of repair estimates began to decline and continued to do so for the rest of the year. The property report bases its findings on about 3.65 million repair estimates processed throughout 2013 by Xactware’s claims management and analytical network, XactAnalysis(R).

Although the Oklahoma tornadoes were the most prominent catastrophe of the year, a few other events occurred as well, including hailstorms in Texas, wildfires and flooding in Colorado, and tornadoes in the Midwest. However, those catastrophes had little effect on overall reconstruction costs. That distinction goes to Superstorm Sandy, which made landfall October 29, 2012.

“Even though Superstorm Sandy struck in 2012, it had the largest net impact on construction costs last year at an estimated 7 percent in New York and New Jersey,” said Mike Fulton, Xactware’s vice president of Pricing Data Services. “The specific effects of the various fires, tornadoes, and flooding were less pronounced because they were diluted by the overall market resurgence that took place last year.”

Xactware’s annual property report provides a wealth of information about important trends in the property insurance industry. In addition to an in-depth overview on the value of repair estimates, Xactware’s 2013 Property Report for the United States includes findings on these key areas.

– the average value of property repair estimates by month and type of loss (such as wind, water, and hail)

– the total number and value of personal property estimates by category (including electronics, jewelry, and clothing)

– reconstruction cost trends for each state and the District of Columbia

– trends for commonly used building materials (such as lumber, drywall, carpet, and roof shingles)

“Last year was an incredibly unpredictable year for the property industry,” said Jim Loveland, Xactware’s president and CEO. “Studying the information contained in Xactware’s property report for 2013 is the best way to quickly gain an understanding of last year’s trends as well as prepare for the year to come.”

via Xactware’s 2013 Property Report Reveals Impact of Oklahoma Tornadoes on Estimate Trends – MarketWatch.

Florida Construction Liens: Qualifying As A “Materialman” Under Florida’s Construction Lien Law

W. Mason – March 17, 2014

Under Florida’s Construction Lien Law, a “materialman” is a person who furnishes materials under contract to the owner, contractor, subcontractor, or sub-subcontractor on the site of the improvement or for direct delivery to the site of the improvement. A materialman may deliver specially fabricated materials off the site of the improvement. By definition, a materialman performs no labor in the installation of the materials. Fla. Stat. § 713.01(20).

Florida Construction Lien Law provides that a materialman who is in privity of contract with the owner, and who complies with the provisions of the Construction Lien Law statutes has a lien on improved real property for money that is owed to him or her for the materials. A materialman in privity with the owner shall also have a lien on the owner’s real property for any money that is owed to him or her for labor, services, or materials furnished to improve public property, if the improvements to the public property are a condition of the permit to improve the owner’s real property. Fla. Stat. § 713.05.

A materialman who is not in privity has a lien on improved real property for money that is owed to him or her for the materials and any finance charges due under his contract. Fla. Stat. § 713.06(1).  A materialman who is not in privity with the owner also has a lien on the owner’s real property for labor, services, or materials furnished to improve public property, if the improvement of the public property is furnished in accordance with his or her contract and with the direct contract. Fla. Stat. § 713.06(1)

In Associated Distributor, Inc. v. Mix, a supplier of appliances brought a lawsuit to foreclose a construction lien on property owned by Mary Mix.  440 So. 2d 516, 517 (Fla. 4th DCA 1983). The Fourth District Court of Appeals held that there was competent evidence to support a finding that Associated merely supplied the contractor with bulk order materials such as appliances which were in turn used by the contractor at its discretion in various construction projects. Because the appliances supplied to the contractor were not necessarily intended for delivery to the Mix property, Appliances was not considered a “materialman” entitled to enforce a construction lien pursuant to Florida law. As a result, Appliance’s construction lien was deemed fraudulent and Mix was awarded attorneys’ fees.

While the Contraction Lien Law specifically states that one who performs installation labor cannot be a materialman, a materialman is permitted to repair or replace defective materials provided to an improvement. See Robert C. Malt & Company, Inc. v. Chambers Truss, Inc., 522 So. 2d 430 (Fla. 4th DCA 1988).

The provisions of the Construction Lien Law applicable to materialmen are somewhat more relaxed than for contractors or subcontractors. For instance, materialmen are not required to furnish owner’s with a Contractor’s Final Affidavit. Qualifying as a materialman under the Florida Construction Lien Law forbids the supplier from providing installation labor and requires the supplier to provide the materials to a specific property. If the supplier fails to qualify as a materialman under the law and fails to take the necessary steps to perfect the lien as a contractor, the lien may be unenforceable.

via Florida Construction Liens: Qualifying As A “Materialman” Under Florida’s Construction Lien Law – Real Estate and Construction – United States.