Insurance Coverage & Liability

It’s just a few days away! The papal visit is expected to bring more than 2 million visitors to the Philadelphia area. Our last two articles (here and here) dealt with the positive economic impacts for the region and managing the masses during this event. Here are five (5) tips that should be at the top of the list for landlords and owners of commercial, retail and multi-family properties.

Review your Leases. With an event of this magnitude, it is a good time to take a last minute look at your leases to ensure all items are appropriately addressed. For instance, does your lease have certain notice requirements for limiting access to parking areas designated for tenants and their customers? If you plan on sectioning off certain parking areas, did you send notice out in time? Sometimes leases will have a provision that allows you to circumvent certain notice requirements, if actions are done for health and safety reasons.

Continue Reading Pontiff’s Visit to Philadelphia (Part III) – Top Five (5) Last Minute Tips for Landlords/Owners

The insurance industry is reacting to the recent realities that the Ebola virus has the potential to have an impact on U.S. based businesses. NAS Insurance Services recently announced that it will offer Ebola Business Interruption Coverage in conjunction with Prospect Insurance Brokers Ltd and the Ark Syndicate at Lloyd’s of London. This coverage is intended to fill a gap that exists in current Commercial Business Owner policies. Continue Reading New Insurance Offering: Ebola Business Interruption Coverage

Most homeowner’s policies issued in New Jersey contain statutes of limitation for filing a lawsuit against an insurance carrier where the homeowner (insured), disagrees with the insurance carrier’s claim payment amount, or refusal to make any payment on a claim.

In a recent unpublished United States District Court opinion, Turkmany v. Excelsior Insurance, the court reaffirmed the New Jersey Supreme Court’s holding in other cases, by ruling that the limitations period to bring suit against an insurance carrier begins to run once the insurer “flatly states that the insured will not be paid any additional funds on a claim.”

The court sought to clarify when the insured is entitled to “tolling” of the statute of limitations, the time during which the insured is granted additional time to file a lawsuit. For example, if a policy has a 1 year statute of limitations and a loss occurs on January 1 of given year, and the homeowner files a claim with the carrier on February 1, but the carrier takes until December 1, (10 months later), to issue a formal written denial of the claim, the homeowner is given the benefit of that additional 10 months to file a lawsuit. In other words, the Plaintiff will have 1 year and 10 months to file a lawsuit (in this example, November 1 of the following year).

This concept arises out of the court’s recognition that the homeowner should not be penalized for time spent by the insurance company in deciding whether to pay the claim, and should be given the benefit of the full amount of time set forth in the policy. This is most typically one or two years, although in the absence of a statement in the policy, a six-year statute would apply in New Jersey. However, given that almost all homeowner’s policies have a one or two-year limitation period stated in the form policy language, it is extremely rare that a homeowner would get the benefit of six years.

This opinion breaks no new ground, but, rather, reaffirms in slightly stronger and more clear terms, how a court might view computing the time allowed for the homeowner to sue the carrier. There has been discussion, in prior decisions, regarding an insured’s reasonable expectations, when the insurance carrier either doesn’t respond to the insured within the limitation period or provides an equivocal response – without specifically addressing whether additional monies will be paid out under the policy.

This opinion provides some guidance in that regard. The bottom line is that insureds should be diligent about putting the carrier on notice of a claim, in timely presenting proofs, and by filing suit promptly against the carrier, if necessary, to avoid statute of limitation bars. Similarly, insurance carriers must be prompt in their responses and definitive, regarding payment of claims, so that everyone knows what to expect in terms of time limitations.

Insureds filing a fire loss claim against their homeowner’s insurance carrier for property damage and loss of personal property must not conceal or misrepresent any material fact or circumstance in presenting the claim.

In a recent unreported Appellate Division case in New Jersey, Masaitis v. Allstate, plaintiffs (the homeowners) sued Allstate for significant fire loss damages to property and contents. Allstate counterclaimed, alleging that the plaintiffs misrepresented their losses in making the claim. Although Allstate also alleged arson, that issue was considered and rejected by the jury, who concluded Allstate had not proven the plaintiffs committed arson. Regardless, the jury was very skeptical about the proofs presented by the plaintiffs, and held that the plaintiffs fraudulently claimed loss of items they could not prove they had ever owned, let alone had lost in the fire.

Although the fire marshal concluded the cause of origin could not be determined, there were apparently substantial proofs submitted to the jury, challenging the plaintiffs’ credibility regarding motive – based, in part, on their pets, vehicles, and expensive items of personal property, having been removed from the property prior to the fire and having presented conflicting testimony regarding at least one of the plaintiff’s whereabouts at the time of the fire.

Ultimately, the homeowners were found to have violated a New Jersey statute, which allows an action by an insurance carrier, against someone who knowingly files a statement of claim containing any false or misleading information. If the insurance company can prove a claim under the statute, they are entitled to reasonable investigation expenses, costs of suit and attorneys fees. Here the jury awarded over $800,000 to the insurance company.

The take away is that insureds must be honest in presenting claims to the insurance carrier following a property casualty loss. Often insureds are traumatized; the fire loss scene is chaotic; and proofs are hard to come by, depending upon the seriousness of the damage to property and the ability to reconstruct damaged items after the fact.

Notwithstanding, insureds must be straightforward in presenting claims and must not use a serious property loss to serve as a smokescreen for trying to inappropriately gain. Insurance companies are adept at investigating and approach losses with a skeptical, if not jaundiced, view of their insureds, as they sift through the evidence and form opinions regarding not only the cause of loss, but the quality of the proofs. This case is a sobering reminder that this process is a two-way street, requiring scrupulous honesty by all involved.

A recent unpublished decision by a N.J. federal district judge addressed whether an insurance company can be forced to pay out $300,000 on a life insurance policy purchased by a senior who stopped paying premiums before his death.  Smith v. Conseco.

The New Jersey legislature enacted a statute, effective in 2000, requiring insurers to remind senior citizen policyholders of their right to designate a third-party to receive notice from the insurance company of an attempt to cancel the policy, as a means of protecting seniors whose diligent record keeping may have fallen off with age.

Unfortunately, the legislature provided only that the Department of Banking and Insurance may fine an insurance company $1,000 to $2,000 for failing to honor this legal obligation. The Smith case addressed whether the beneficiary of a life policy has a private right of action against the insurance company for failure to provide the required notice, forcing them to pay out the full life insurance policy benefit.

The law provides that every insurer shall permit its senior citizen insureds to “designate a third party to whom the insurer shall transmit a copy of notices of cancellation, lapse, nonrenewal and conditional renewal with respect to a policy of personal lines insurance.”  The senior citizen must notify the insurer that a third-party has been so designated, and the insurance carrier must then notify both the insured and the third-party designee of changes in coverage status.

The judge recognized that although there are a few reported cases in New Jersey, where the courts have found a private right of action, in somewhat analogous circumstances, absent specific intent expressed by the legislature, the court was reluctant to read a private right of action into the statute or code.

This is an area where adequate safeguards and protections to an insured would seem to require modification of the statute to expressly provide for a private right of action.  Perhaps an enterprising legislator would take up this cause.  As this case points out, having the insurance carrier exposed to a $2,000 fine ultimately does nothing for a beneficiary who is denied the intended benefit of a $300,000 life insurance policy, presumably as a result of inadvertent inattention by a senior citizen insured.  Here, the decedent had faithfully paid premiums for almost 20 years, before discontinuing payments.

The take away is that seniors are wise to designate a third-party to receive notifications, so that if things fall through the cracks, there is a second pair of eyes looking out for inadvertent lapses in coverage, not intended by the insured.  This also serves as a cautionary tale for those of us who are trying to keep an eye out for seniors in our lives, whose attention to the increasingly complex “paperwork” of daily life, is not as keen as once it was.

A recent New Jersey Appellate Division decision in Kohler v. Life Insurance Company of North America and Best Med Consultants, Inc., addressed a disability insurance carrier’s right to have a disability claimant examined through a so-called "independent medical examination (“IME”)." The plaintiff was a nurse who suffered injuries, including shoulder damage, requiring surgery. Her treating physician imposed various restrictions on her ability to perform the duties of her former occupation. She was awarded Social Security and long-term disability benefits through her employer.

As a result of an IME, plaintiff’s benefits were terminated, based upon the medical examiner’s conclusion that she had the ability to function in a sedentary or medium duty capacity and that medical information in the file did not support a functional impairment that would prevent her from working in “any occupation,” as defined by the policy. Her suit alleged tortious interference against the outside contractor retained by the insurance carrier to perform the IME.

The court found the carrier had the right under the policy to conduct an IME "as often as it may reasonably require,” and that the elements of tortious interference had not been satisfied. Similarly, the court concluded that the outside vendor had not engaged in insurance fraud by conducting this examination.

The court recognized that reasonable medical professionals can differ as to their opinion concerning functionality, and disability. The court was persuaded in part by plaintiff’s failure to avail herself of the opportunity to provide additional information in support of her claim, after the IME findings had been rendered. This would have included office notes from her treating physician, objective medical findings, hospital records, therapy notes, and other information. It is unclear from the opinion why this information was not provided.

The take away is that courts construing disability policy language will likely affirm the insurance carrier’s right to conduct one or more IMEs. In my experience many carriers seek out legitimate third-party opinions when sending disability claimants for IMEs. There is always a concern however that physicians conducting IMEs on a regular basis for insurance carriers, may not approach the task with full objectivity, given the temptation to form their opinions with one eye on the flow of additional work. Although that would violate ethical and legal standards, the suspicion lingers, nonetheless, there certainly are instances where the notion of the examination as "independent" is a misnomer.

The bottom line is that claimants and their attorneys must be vigilant in providing to the insurance carrier any and all information the carrier needs to consider regarding the patient’s medications, treatment, objective medical findings, day in the life explanations of their limitations and all other information to support a claim. The claimant must also insist that the IME practitioner have available to him or her before the examination, all information necessary to conduct a legitimate examination and form an opinion based upon a full understanding of the claimant’s condition.

If it cannot be confirmed that the disability carrier has provided this information, the claimant or counsel should arrange to have the information provided prior to the examination and document that it has been received by the examiner. Once the IME report is rendered, it can be reviewed to verify what information was actually considered in arriving at the conclusions stated.

We also recommend having a nurse practitioner or other qualified individual attend all IMEs to guard against the examiner mis-portraying in the report anything that transpires during the session, and to document the length of the visit, what questions are posed, how the physical examination is conducted, the claimant’s reactions in real time, and other important features.

Intuitively, we believe this militates against a temptation by the practitioner to cut corners during the examination. The hope is that in the face of a legitimate IME, a deserving plaintiff’s claim will prevail, or at the very least, claimant will be best positioned in the event of an appeal of the carrier’s determination. This case also points out the difficulty in establishing tortious interference which has an intentional component to it – making it a difficult claim to prove in this or other contexts.

We note that this opinion is unreported and obviously other case law may have relevance in construing this issue. This is just a snapshot based upon a recent unreported case. Claimants are advised to consult with counsel at all stages of a disability application for benefits, since there are nuances to the production of information to the insurance carrier and, in order to put the claimant’s best foot forward, the process demands a thoughtful presentation of relevant evidence to the insurance carrier.

“There is no use trying,” said Alice; “one can’t believe impossible things.” “I dare say you haven’t had much practice,” said the Queen.  “When I was your age, I always did it for half an hour a day.  Why, sometimes I’ve believed as many as six impossible things before breakfast.”  Lewis Carroll

I was thinking recently about my favorite quotation, as pertains to mediating legal disputes.  I came across this some years ago and remain amused at how this quotation from Alice’s Adventures in Wonderland aptly captures one of the most critical elements to a successful mediation.  As a seasoned mediator, I begin each session by affirming my absolute confidence that a settlement of the dispute can be arrived at during the session we are about to commence.

Parties come to the process often unfamiliar and apprehensive, yet warily open to the prospect, especially if reinforced by the suggestion that anything is possible. Of critical importance is affirming their hope, often lingering below the surface, that a compromise may be reached and a settlement achieved.  Parties to litigation yearn for clarity and certainty in an otherwise intimidating, unpredictable process.  The mere suggestion that a resolution is achievable and within reach, can be quite powerful — especially when conveyed with genuine confidence by the mediator.  It can create the requisite freeing climate for creative thinking and exploration of viable solutions to an otherwise vexing and seemingly unsolvable dispute.

In the last few months I have successfully assisted in settling three complex and challenging matters; two business dissolutions and a sexual-harassment claim, each in one full day session.  I like to believe that setting the stage properly at the outset was of critical importance in allowing the process to unfold, with parties and attorneys both actively participating, and coming from a place of confident optimism.

Sometimes all the participants need is permission to open their minds to all possibilities, and to let go of preconceived notions that resolution of a thorny controversy is outside their attainable reach.  I thought it of benefit to share this small morsel of mediator’s wisdom this morning…

In response to concerns raised by the public, legislators, the Community Associations Institute and others, Congress recently passed the Homeowner Flood Insurance Affordability Act of 2014.  Signed by President Obama into law, the legislation forestalls significant increases in flood insurance premiums that were set to have taken effect.

The Act implements measures, including the following: an 18% annual cap on flood insurance premium rate increases under the National Flood Insurance Program; reinstatement of subsidies on existing properties at the time of sale, thus preventing properties complying with prior flood maps from being hit with significant increases under new maps showing a greater potential for flooding risk; reinstatement of certain grandfathering provisions for properties now located in high risk areas under new FEMA maps; premium refunds to certain homeowners who overpaid premiums; measures to minimize annual premium increases; and completion of a study on implementing additional affordability measures.

Under the Act, there will be efforts to better coordinate flood map updates with local community concerns and to assist local communities in necessary flood mitigation measures in light of the new flood map zones.

This legislation, at least temporarily, provides a reprieve and mitigates against harsh, unaffordable increases, which would have driven even more individual homeowners from their properties, and would have imposed draconian cost increases upon common interest properties in New Jersey and elsewhere. 

It remains to be seen whether the gains felt through the enacted measure will be eroded over time, or whether overall program compromises in this area will allow earlier proposed increases to creep back into the NFIP, as administered by the government.  The NFIP was originally put in place due to the lack of affordability of market rate insurance in flood prone areas.  An additional concern is whether the program itself is sustainable, in the long run, given the significant costs associated with Sandy and with prior storms generally occurring in other parts of the country.

With the anniversary of Superstorm Sandy fast approaching, policyholders who sustained damage during the storm who have not yet settled their insurance claims, may be running up against some contractually imposed deadlines.  Most insurance policies limit the time period within which an insured is permitted to file suit against an insurer for the insurer’s failure to provide benefits under the policy. Insurance policies are considered contracts, and normally in New Jersey an aggrieved party has up to six years to sue for an alleged breach of contract. However, parties are free to enter into contracts that contain terms which restrict rights that would otherwise be available to one party or the other. In the insurance context, policy provisions which limit the time period within which an insured is permitted to sue are found in virtually all policies.

 

Insurance policies often mandate that lawsuits must be filed within one or two years from the date of the loss. For individuals with unresolved Sandy claims, the consequences of not filing suit within the appropriate time frame could prove devastating. However, determining the appropriate date on which claims will be barred may not be as simple as it appears on the face of the insurance policy, and often times, this works in the insured’s benefit.

 

Although insurers may argue that the insurance policy and its terms regarding bringing suit should be strictly interpreted as written, New Jersey Courts have generally held that insureds should be credited for any time the insurance company spends investigating the claim. Accordingly, from the time the insurance company is put on notice of the loss to the time the insurance company issues its determination, the contractually imposed time period is “tolled.”  This acts to provide the insured with the benefit of the full time allotted by the insurance policy without regard to any delay the insurance company itself may cause during its investigation. However, insureds should be aware that any gap in time between when the loss occurs and when the insurance company is placed on notice still counts against the insured.

 

Policy holders are urged to review their policies carefully and to contact experienced counsel to review the claim history and take steps to ensure that they do not lose valuable rights. This is especially true for insureds with Sandy damage that have policies calling for a one year suit limitation. The facts of each specific case may be different and although tolling can be a valuable tool for insureds, it is always best to have counsel open a dialogue with the insurer beforehand to confirm that everyone is on the same page in terms of lawsuit filing obligations.  This will act to avoid unnecessary confusion and will give insureds a reliable sense of what the carrier’s position is, so that informed decisions can be made.  

As many New Jersey residents decide whether to modify their existing homes in coastal areas, damaged by Sandy, identifying and retaining qualified, licensed contractors to “raise” existing structures is a major concern.  Owners in Little Egg Harbor recently suffered a catastrophic collapse of their home, just following the home having been raised approximately 10 feet by a contractor they retained to raise the home damaged by flooding during Sandy.

I have been retained as counsel by the owners to assist in determining the cause of this loss and to obtain recovery of monies needed to rebuild the home, from all available sources.  In this process, the means and methods of raising the home will be a central focus.  Given the number of homes needing to be raised, either by choice, or as a consequence of revised FEMA flood map and insurance implications, the available New Jersey contractors with experience in raising homes, pre-Sandy, is far outstripped by the current demand. 

We have seen an influx of out-of-state contractors offering to perform these services.  While some of these firms are quite skilled and competent, that may not be true of all contractors soliciting this work, and homeowners are cautioned to address the following concerns before signing a contract with a contractor to raise their home:

The need to obtain copies of valid NJ licenses for these contractors; full copies of in force  insurance policies, including general liability and workers compensation coverage; comprehensive specifications compiled by a structural engineer to inform the contractor’s work; references from other successfully completed jobs in New Jersey or elsewhere, through online sources, direct contact, or records available through state or local building departments or Departments of Community Affairs; tightly worded contracts which accurately reflect the contract price, scope of work, and other requirements set forth in the statute and regulations issued under the New Jersey Consumer Fraud Act; soil borings, or other pre-construction testing of the site conditions, if necessary; and other safeguards to insure against potentially disastrous consequences.

The New Jersey Department of Community Affairs has a list of 19 “elevation” contractors who have been recognized as licensed to operate in New Jersey.  Additional contractors are expected to be added to this list.

Any time a structure is raised, the potential exists for significant property damage or danger to persons and this work should not be undertaken lightly, or without adequate safeguards and protections in place.  The homeowner should have a full measure of comfort and confidence in whomever is chosen.  Required building permits must be obtained and all site conditions must be taken into consideration so that the site is fully prepared, before any actual work takes place.

Although the cause of the failure claim we are currently examining is still under active investigation, the resulting damage speaks volumes as to the seriousness with which this type of work must be viewed.  Homeowners are strongly encouraged to seek legal advice, which may also include assistance from a structural engineer or trusted contractor, to advise the homeowner, and ensure that all adequate measures are taken.  You want to do everything possible to make sure that you are confident the process will go smoothly, so your home can be safely and successfully repositioned, as needed, and can be enjoyed for many years to come.