Superstorm Sandy May Help Change New Jersey Court View on Recovery of Attorneys’ Fees

Larry Bache – May 17, 2014

Florida law allows first-party claimants to recover attorneys’ fees in the event litigation is required for an insured to be made whole.1 New Jersey has a similar rule with a dramatic difference. New Jersey Rule 4:42-9(a)(6) provides:

(a) Actions in Which Fee Is Allowable. No fee for legal services shall be allowed in the taxed costs or otherwise, except:

* * * *

(6) In an action upon a liability or indemnity policy of insurance, in favor of a successful claimant.

At first glance, it appears that any policyholder may seek attorneys’ fees when an insurer fails to fulfill its obligations requiring litigation. The reasoning is simple to understand: When a policyholder suffers property damage, it is difficult to restore their property if attorneys’ fees are deducted from the recovery. Hence, a fee statute provides a policyholder with the opportunity to recover those fees against the insurance carrier that underpaid or wrongly denied their claim.

Unfortunately, New Jersey courts have refused to apply Rule 4:42-9(a)(6) to first-party actions. Instead, New Jersey currently only allows recovery for attorneys’ fees to third-party claimants.2

It is well documented that Superstorm Sandy caused catastrophic damages to the Garden State, and recently carriers are getting more attention for mistreating their policyholders as thousands of lawsuits have been filed. As a result of these lawsuits, policyholders’ advocates are getting the opportunity to show the judges that first-party claimants are deserving of the same remedies under Rule 4:42-9(a)(6) as third-party claimants.

1 See Florida Statute 627.428.

2 Giri v. Med. Inter-Ins. Exch. of New Jersey, 251 N.J. Super. 148, 151-52, 597 A.2d 561, 562-63 (N.J. Super. Ct. App. Div. 1991).

via Superstorm Sandy May Help Change New Jersey Court View on Recovery of Attorneys’ Fees : Property Insurance Coverage Law Blog.

PSE&G Files Suit Against Insurers for Hurricane Sandy Losses

Robert Trautmann – July 28, 2013

If you are facing litigation with your insurance carrier over Hurricane Sandy damage, you are not alone. Public Service Enterprise Group, the parent company of PSE&G – the largest utility company in the state, filed suit recently against eleven insurers in Essex County, New Jersey. In the complaint, PSE&G alleges it had $1 billion worth of coverage and they are being shortchanged on an estimated $426 million worth of Sandy damages. The lawsuit is only in its beginning stages and, given the backlog and judge shortage in Essex County, this case is a long way from any resolution.

I have had many homeowners ask me why their insurance carrier has singled them out for mistreatment. This filing should demonstrate to homeowners they have not been singled out at all. Rather, this just further demonstrates the insurance industry’s abysmal response to Hurricane Sandy. I would expect more high profile cases to be filed in the coming months as we approach the one year anniversary of the storm. I hope this filing and the others that come will bolster the spirit of underpaid insureds and remind them they are not alone in the fight.

Finally, this is not the only litigation PSE&G will be involved in as a result of Hurricane Sandy – although the rest may not be as a party. I have been contacted by numerous business owners concerning losses they suffered from utility interruption. Many policies that cover such losses have strict exclusions. Many carriers are improperly shifting the burden of proof on exclusions to the insured, which means there will be litigation. PSE&G will then be called upon to prove how and when certain business owners lost their utilities. It will be interesting to see if the evidence brought forth in the suit PSE&G filed against their insurers will be helpful to the insured seeking coverage for utilities interruption.

via PSE&G Files Suit Against Insurers for Hurricane Sandy Losses : Property Insurance Coverage Law Blog.

Proof of Loss Issues in New Jersey

Robert Trautman – February 21, 2013

Thanks to Hurricane Sandy, many property owners in New Jersey are making their first ever claims on their homeowners’ or flood insurance policies. They are faced for the first time with preparing and submitting a Proof of Loss. In this post, I address the requirement for a Proof of Loss. In later posts, I will discuss other issues relating to this topic.

A Standard Flood Insurance Policy (SFIP) is governed by federal law and is generally administered by a Write Your Own (WYO) insurance carrier. “A SFIP requires an insured to submit a proof of loss to its WYO within sixty days of the alleged date of loss. 44 C.F.R. Pt. 61, App. A(1), Art. VIII(J))”1 Further, “[a] proof of loss statement must be signed and sworn by the insured and must contain various pieces of information such as a short explanation of how the loss occurred, specifications of buildings damaged, detailed estimates of repairs required, and an inventory of damaged property.”2

The U.S. District Court in New Jersey has held failure to strictly adhere to the Proof of Loss requirement under a flood policy bars payment.

Plaintiffs’ failure to submit a proof of loss statement, late or otherwise, for an amount in excess of that already paid by Omaha, represents a complete failure to comply with the federal regulations and the terms of their SFIP and therefore the case law from this Circuit cited by Defendant controls and bars Plaintiffs’ present claim for additional payment.3

When dealing with a NFIP flood claim, the timely filing of a Proof of Loss is imperative and failing to timely file will forfeit your rights under your policy.

In non-flood policies, Proofs of Loss may still be required, however the policy and not any particular law that dictates time requirements. Much like in the flood arena, courts have held a failure to abide by the Proof of Loss requirement will bar a claim, however, enforcement may not strictly applied as in the flood context. “Where the giving of notice of loss or the furnishing of proofs of loss is a condition precedent of liability under an insurance contract… non-compliance is fatal to recovery in the absence of a showing of waiver or at least of substantial compliance.”4

If a policyholder can prove the carrier waived the Proof of Loss requirement or that they substantially complied, the failure to file may not be an absolute bar to recovery. However, if your policy contains a requirement for a Proof of Loss, it is in your best interest to timely comply with the provision in order to avoid the time and expense incurred litigating the issue.

1 Miller v. Selective Ins. Co. of America, No. 08-2296, 2009 WL 5033952 (D. N.J. Dec. 15, 2009) (Note for Hurricane Sandy victims FEMA has extended this period to one year from the date of loss).

2 Id.

3 Messa v. Omaha Property & Cas. Ins. Co., 122 F.Supp.2d 523, 530 (D. N.J. 2000).

4 See Also Resolution Trust Corp. v. Moskowitz, 868 F.Supp. 634 (D. N.J. 1994).

via Proof of Loss Issues in New Jersey : Property Insurance Coverage Law Blog.

Appraisal in Flood Claims

Robert Trautmann – February 19, 2013

A topic of much debate after Hurricane Sandy is the appropriateness of appraisal when property owners and their carrier do not agree. Can appraisal address scope (coverage) as well as price? While this area of the law is still developing, courts are unfortunately leaning to a restricted interpretation of the Standard Flood Insurance Policy (SFIP) appraisal clause, ruling that only price is appropriate for appraisal and scope is a question of coverage under the purview of the courts.

The U.S. District Court for the Northern District of Florida held “the SFIP provides that appraisal is an option only when and if the parties fail to agree on the “actual cash value” or “replacement cost” of the damaged property — not when the parties disagree on the threshold issues of coverage and causation.”1 The U.S. District Court for the Southern District of Florida likewise stated:

This language cannot be stretched to mean that appraisal can be invoked whenever the parties dispute which items of property were damaged or whether those items were in fact damaged by flood waters. That type of dispute is a dispute over coverage, and under the terms of the SFIP such a dispute can only be resolved by a federal district court.2

The U.S. District Courts in New Jersey has not yet weighed in on this subject, but it appears likely that they will follow the trend.

While this is the current state of the law, I suggest the counterargument is the correct reading of the policy and provides a more efficient process. The appraisal clause of the SFIP reads, in pertinent part:

If you and we fail to agree on the actual cash value or, if applicable, replacement cost of your damaged property to settle upon the amount of loss, then either may demand an appraisal of the loss…. The appraisers will separately state the actual cash value, the replacement cost, and the amount of loss to each item…

Nowhere in the policy does it state appraisal will be limited to the scope agreed to by the carrier. Rather, the plain language states “The appraisers will separately state the actual cash value, the replacement cost, and the amount of loss to each item.” It seems clear the appraisers should be permitted to evaluate all claimed items of the loss, regardless of the carrier’s position on scope and coverage. The carrier should then be directed to pay the appraised value of the non-disputed portions of the claim. The sole question left to litigate would be coverage, as the price for the disputed items would be set. The carrier will argue, as they did in Museum Plaza Condominium Association, Inc. v. Fidelity National Indemnity Insurance Company, that appraisal is only appropriate where the parties are in full agreement as to scope.3 This argument, however, finds no support in the SFIP. While there will continue to be ligation over the appropriateness of appraisal, a process as I have outlined here would create a much simpler process and allow litigation to be handled in an expeditious, if not summary, fashion.

1 Flaharty v. Allstate Ins. Co., 2010 WL 148226 (N.D. Fla. Jan. 11, 2010).

2 De la Cruz v. Bankers Ins. Co., 237 F.Supp.2d 1370 (S.D.Fla.2002).

3 Fidelity National Indemnity Insurance Company’s Opposition to Motion to Compel Appraisal, 2012 WL 3812755 (S.D. Fla. July 17, 2012).

via Appraisal in Flood Claims : 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.