Insurance – Page 16 – Seattle Insurance and ERISA Blog

How Do I Make An Insurance Claim After Wildfires, Floods, Hurricanes or Other Natural Disasters?

Disasters have been in the news a lot in the last 12 months, between west coast wildfires, Texas floods and Florida hurricanes. Disasters raise a number of insurance issues for policyholders, especially when they’re busy digging out of the wreck already. Disasters also strain overworked insurance company personnel, who might make hasty guesses about your loss that wind up being inaccurate. Here are some steps you might consider taking if that happens (after making sure everyone is safe of course):

Promptly Notify Your Insurer – Your first step if you think you might have a claim is to tell your insurer. Delayed claim notice is a basis to deny an otherwise valid claim. It’s also wise to make sure the insurer has your updated contact information.
Read Your Policy – Your insurance policy is an important starting point. It spells out your rights and the company’s obligations. It contains important time limits and similar rules you need to follow in order to make a valid insurance claim. It also specifies your coverage in detail; don’t assume the overworked adjuster processing thousands of similar claims will identify all coverage that might benefit you. It may require you consult with the company before undertaking any repairs, or have similar rules you need to follow.
Protect Yourself From Further Loss – Protecting yourself and your property from further damage is common sense. It’s also explicitly required by many insurance policies. If you sustain further loss because you failed to take reasonable preventative measures, your insurer may have a valid basis to refuse to cover the additional loss you could have avoided. But keep in mind that your policy may provide that non-emergency repairs require you to consult with the company before undertaking the work.
Make a Paper Trail – Take notes when you speak to the adjuster or contractors, and save your receipts for all disaster-related expenses such as repairs or hotel bills. Make sure you get important statements from the insurer, like requests for information or coverage statements, in writing. Keep an inventory detailing the full scope of the loss.
Get Repair Quotes – Get an estimate from the contractor or another appropriate person of the cost to repair the damage. This will give you a reasonable basis to double-check your insurer’s estimate.
Be Present During the Inspection – Your adjuster will likely inspect your property to ascertain the scope of the damage. It’s often wise to attend the inspection in person. That way, you can point out the full extent of the damage and make sure the adjuster doesn’t miss anything.

Ninth Circuit Decision Shows Life Insurance Pitfalls for Policyholders; Clarifies Jurisdiction in Insurance Disputes

The Ninth Circuit’s recent ruling in Elhouty v. Lincoln Benefit Life, Case No. 15-16740 (March 27, 2018) is notable for two reasons. It illustrates the pitfalls of certain life insurance policies that supposedly pay for themselves, and it clarifies the jurisdictional standard governing when insurance disputes can be litigated in federal as opposed to state courts.

Elhouty purchased a flexible premium adjustable life insurance policy from Lincoln Benefit Life Company with a $2 million face value. Adjustable life policies are often marketed as giving the policyholder all the advantages of death benefit protection, an interest-bearing account for investment purposes, and flexibility as to how premiums are paid. The policies often come with a sales pitch that the policy’s investment component will effectively pay off the future premiums, without mentioning that the investment returns are often inadequate to cover future premium increases.

Elhouty’s case illustrates this pitfall: for years, Elhouty arranged for his premiums to be paid directly out of the policy’s net surrender value, but failed to notice when the net surrender value was exhausted and he was sent a bill for $55,061.49 to keep the policy in force. Since Elhouty never paid the additional premium, Lincoln Benefit claimed the policy lapsed. Elhouty disputed Lincoln Benefit properly notified him of the additional premium he owed, and filed a lawsuit seeking a court declaration that the policy remained in force.

Elhouty sued in state court, and Lincoln Benefit removed the action to federal court (conventional wisdom holds federal courts are more insurer-friendly than state courts). To properly remove the action, Lincoln Benefit was required to establish that the amount of money at issue in the lawsuit exceeded $75,000.00. Lincoln Benefit argued the amount at issue was the full $2 million policy face value; Elhouty claimed it was only the $55,880.08 in premiums he allegedly owed Lincoln Benefit.

On the jurisdictional issue, the Ninth Circuit agreed with Lincoln Benefit. The court determined the unpaid premiums were not in dispute because Lincoln Benefit did not seek to recover them from Elhouty. Elhouty had had the option to pay $55,880.08 to keep the policy in force, but the real dispute in the lawsuit was the policy’s validity. The court clarified that, in cases where the “controversy relates to the validity of the policy and not merely to liability for benefits accrued,” the policy’s face value is the amount in controversy for jurisdictional purposes. Thus, the court ruled the amount in controversy was $2 million and federal courts had jurisdiction.

The court also agreed with Lincoln Benefit on the merits of the dispute. Elhouty argued Lincoln Benefit’s policy termination notice for unpaid premiums was defective because Elhouty never received notice. But the court ruled that the language of the policy and applicable state law required only that the notice be mailed, not that the policyholder actually receive it.

For insurance lawyers, Elhouty is useful for its clarification of the jurisdictional standard. For policyholders, Elhouty is a reminder of the importance of keeping your premium payments up to date and not taking the insurer’s promotional materials at face value.

Can The Insurer Change Your Policy Without Notice?

A recent Washington Court of Appeals decision emphasizes that insurers can change policy terms upon renewal with only minimal notice to the insured, even if the notice consists only of a terse email with a hyperlink to “terms and conditions.”

The insurer’s renewal notice is a common pitfall for policyholders, who often set their policy premiums to pay automatically and set the policy to renew automatically. Having set the policy on “autopilot,” the policyholder receives the automatic renewal notice and thinks they do not need to closely read it, on the assumption that renewing the old policy means they are getting the same coverage. But insurers often add material changes to their policies in renewal notices, which policyholders may not realize until years later when a loss they thought was covered turns out to be excluded under the modified policy.

This was the issue in the Washington Court of Appeals’ recently-published decision in Jackson v. Esurance Insurance Company, Case No. 75506-4-L. The court’s decision parses coverage under Mr. Jackson’s Esurance auto insurance policy and the policy’s exclusion for racing. Whether a car was involved in racing at the time of an accident would seem straightforward, but that was not the case for Mr. Jackson, whose policy included an expanded racing exclusion Esurance added in the fine print of his renewal policy. This decision reminds policyholders to always check the fine print of the insurance policy renewal notice because it may not be consistent with their expectations.

In February 2006, Mr. Jackson purchased a personal auto insurance policy from Esurance. Esurance delivered the policy to Mr. Jackson electronically pursuant to Esurance’s business model as an internet-based insurance company. Mr. Jackson’s original policy excluded: “Loss to ‘your covered auto’ or any ‘non-owned auto’, located inside a facility designed for racing, for the purpose of: a. Competing in; or b. Practicing or preparing for any prearranged or organized racing or speed contest.” In January 2010, Mr. Jackson renewed his Esurance policy. The renewal policy contained a broader racing exclusion, also excluding: “Participating in any racing school, driving school, driver training, skills training, race driving experience, or race adventure program.”

In June 2014, Mr. Jackson attended an Audi driving-skills training program at the Pacific Raceways racecourse. Mr. Jackson wanted to make sure his insurance covered him for any damages that might occur during the event, so he checked the copy of his policy available on Esurance’s website. Esurance’s website only contained the original policy with the narrow racing exclusion that did not exclude “driving school” participation.

Mr. Jackson crashed his vehicle during the driving skills program. He made a claim with Esurance. Esurance denied his claim under the expanded racing exclusion’s exclusion for racing school participation, quoting the current policy language.

Melting snow from higher up the mountain created this impromptu waterfall on Kachess Ridge, near Cle Elum.

Mr. Jackson sued Esurance under Washington’s Insurance Fair Conduct Act (“IFCA”) and Consumer Protection Act (“CPA”), as well as bringing claims for breach of the policy contract and common law bad faith. He claimed that Esurance failed to properly notifyhim of the 2010 policy amendment expanding the racing exclusion, and that Esurance’s conduct was deceptive and unlawful in violation of the Consumer Protection Act. The trial court dismissed Mr. Jackson’s lawsuit. Mr. Jackson appealed to the Court of Appeals, who affirmed the dismissal.

First, the Court of Appeals held Esurance’s 2010 broadening of the racing exclusion was enforceable. The Court of Appeals agreed with Mr. Jackson that Washington law required Esurance to notify him before amending or modifying the policy. But the court noted Washington law does not require notice be given in a specific manner, and permitted Esurance to deliver notices of policy changes electronically. Mr. Jackson consented to receive policy notices electronically when purchasing his original policy from Esurance. Even though Esurance’s renewal consisted of a terse email with a hyperlink to renewal “terms and conditions” not contained in the email itself, the court ruled this was sufficient to give Mr. Jackson notice of the expanded racing exclusion.

Second, the Court of Appeals determined Esurance’s electronic notice of the expanded racing exclusion was not deceptive or unlawful under the Consumer Protection Act. Mr. Jackson argued his difficulty in locating the actual policy on Esurance’s website rendered Esurance’s notice procedures deceptive. The court rejected that argument because Esurance provided Mr. Jackson instructions to access his policy when he first purchased it in February 2006. The court attributed Mr. Jackson’s difficulty solely to his decision not to carefully read the renewal notices Esurance sent him.

Appeals Court Ruling Clears the Way for Bad Faith Suits Against Individual Insurance Adjusters

The Washington Court of Appeals just decided an important issue in insurance disputes: confirming the policyholder can sue the individual insurance adjuster as well as the insurance company itself. In Keodalah v. Allstate Insurance Company and Smith, No. 75731-8-I, the court ruled: “we hold that an individual insurance adjuster may be liable for bad faith and CPA violations.” This significant ruling has several implications for future insurance bad faith litigation.

The underlying insurance claim arose when Mr. Keodalah was in a car wreck and made an uninsured motorist (“UIM”) claim with his insurer Allstate. Allstate’s internal investigation and the police report uniformly established the motorcyclist was solely at fault for the collision. Allstate’s adjuster, Ms. Smith, nevertheless insisted Keodalah was 70 percent at fault, made up facts about the collision she later admitted were false, and refused to pay the full claim.

Keodalah sued Allstate as well as Smith individually, asserting claims for bad faith, violations of the Consumer Protection Act (“CPA”), and violations of the Insurance Fair Conduct Act (“IFCA”). The trial court dismissed Keodalah’s claims against Smith without a trial, ruling that insureds can’t sue individual adjusters for insurance bad faith.

On appeal, the Court of Appeals decided the trial court was wrong and that policyholders like Keodalah can sue individual insurance adjusters as well as the insurance company. The court relied on Washington insurance law which imposes a duty of good faith on “all persons” engaged in the business of insurance, including specifically “the insurer…and their representatives.” (emphasis added). Because Ms. Smith, as an insurance adjuster, “was engaged in the business of insurance and was acting as an Allstate representative,” the appeals court had no difficulty concluding Smith owed Keodalah a duty of good faith and could be sued for breaching that duty. The court also distinguished several other Washington and federal court decisions the adjuster relied on.

Keodalah has several potential implications for future insurance disputes. Obviously, the adjuster’s personal exposure adds a significant dimension to the dispute. And foreign insurers employing Washington adjusters could likely be sued in state court without removal to federal court (which is typically more favorable to the insurer), because federal courts typically only have diversity in insurance disputes where all the parties are citizens of different states.

What to Expect When You’re Expecting To Make An Insurance Claim – A Cheat Sheet

So you’ve had a loss – perhaps a tree fell on your house, your car was wrecked or you became injured or disabled – and it’s time to dust off that insurance policy to see if you’re covered. Maybe you already made a claim but your insurer denied it for reasons that don’t make sense – or, perhaps even more frustrating, the insurer refuses even tell you whether they’re going to pay your claim or not. Or maybe you’ve just recently purchased a policy and want to know your rights.

This cheat sheet is a list of some issues you may want to consider. It tells you (1) the basic information you need; (2) some of your basic rights under Washington law; and (3) some helpful tips and “best practices.”

This is only a summary – your rights and obligations depend on the specific circumstances. If you think you might have a claim or dispute involving insurance, it’s wise to consult a lawyer. Insurance is complex and it is easy to accidentally put yourself in a disadvantage or even lose your rights entirely.

Basic Information You Need

Do I Have The Policy Documents? The insurance policy is absolutely critical. It states your coverage, your rights, and the insurer’s rights. It likely includes provisions requiring you to take certain action – like notifying your insurer of a claim within a certain period of time – in order to preserve your rights.

Many people are surprised to learn that their declarations page, summary plan description, or brochure explaining their coverage isn’t the policy. An insurance policy virtually always consists of a collection of multiple separate documents. For instance, a life insurance policy might consist of an application, a policy contract, and several addenda, riders or attachments. There are often additional documents such as annual statements that are also critical to understanding your rights under the policy.

Did I Get The Policy Through My Employer? Insurance policies you acquired through or in connection with your employer are different from regular policies. Employer-related policies are subject to a federal law called the Employee Retirement Income Security Act (ERISA for short). ERISA can apply even if the policy was issued by an insurance company that’s not your employer, and even if your employer doesn’t pay your premium. ERISA is very different from the law governing normal insurance policies; it’s complex and imposes special rules and deadlines. If you think your policy might be subject to ERISA, it’s important to pay extra close attention and consult a qualified attorney.

Do I Have All The Facts? If you have a claim or think you might want to make a claim, it’s crucial you know the facts. Make sure you obtain all the documents that are potentially relevant. If it’s a health or disability claim, have all the relevant medical records. If it’s a car crash, have the police report.

Know Your Rights

Here are some of the basic rights you have as a Washington policyholder:

You Have The Right To Be Treated Fairly. Washington law imposes a duty on insurers to act in “good faith.” Good faith generally means the insurer must treat you honestly, made decisions on your claim based on adequate information, and never put their interests over yours. (Remember that policyholders also have to act in good faith, so be sure you’re always honest when dealing with your insurer).

You Have The Right To Have The Insurer Follow The Policy. The policy is a contract between you and the insurer. The insurer has to follow it. The insurer can’t try to re-write the policy after you make a claim.

You Have The Right To Prompt Claim Responses. Washington law requires your insurer to respond to your claim within a specific time – often ten days – and acknowledge that they received your claim. Beyond the initial claim, insurers generally have to respond to your communications about the claim in a reasonable time. The insurer must also tell you whether or not they will pay the claim within a reasonable time after you provide the documentation they need to made a decision.

You Have The Right To A Full Investigation. Insurers have to decide whether to pay claims based on a reasonable investigation. That means your insurer has to make a reasonable effort to look for evidence that’s relevant to your claim. They can’t just consider the evidence that supports denying the claim.

Best Practices

Below are some helpful best practices to keep in mind when dealing with a possible insurance claim.

Keep A Paper Trail. Make sure you document everything that’s relevant to the policy or your claim. It’s especially critical to document all your communications with the insurer or with third parties (doctors, mechanics, potential witnesses, etc.). Communicate via email or hard copy mail when practical. If you have a phone call or in-person meeting with an adjuster, take notes, then send them an email summarizing your understanding of the discussion and inviting them to correct you if they think you got it wrong. If you lose money or have other harm because your insurer isn’t doing what they’re supposed to, document it. If it’s not on paper, it never happened.

Cooperate With Reasonable Requests. If your insurer makes a reasonable request for information or similar assistance with your claim, comply promptly. Remember you have a duty to act in good faith, and your policy may affirmatively require you to cooperate in making a claim. That doesn’t mean bending over backwards, but you should comply with reasonable requests. If you wind up in court, you want to be sure that it’s your insurer and not you who the judge sees as being unreasonable.

Be Proactive. Procrastination will never improve your position and it can make you lose your rights entirely if you miss a deadline. Promptly notify your insurer if you think you have a claim. Include as much information about the claim as possible. Follow up with the adjuster if they are slow in getting back to you. Reach out to third parties who might have relevant information. Generally, delay in processing your claim benefits your insurer – not you.