If you been reading the comments to the post about the Louisiana Legislature chances are you won’t be suprised the story Business Insurance News linked as Cat bond activity levels off. (Large H/T to Editilla at the Ladder)
It seems the cats scratched the subprime market a lot deeper that earlier reports suggested and now the cat bond market is suffering from cat scratch fever.
Activity in the markets for industry loss warranties and catastrophe bonds has lessened in 2008, after several years of rapid growth.
Cat-bond activity, in particular has taken a knock, as competition from a softening reinsurance market and waning interest from investors have taken their toll.
After a record year for industry losses in 2005, there were three record years in terms of catastrophe-bond issuance…
Corporate-bond markets now offer more opportunity and so demand for insurance-linked securities has fallen…Cat-bond issuers—namely insurance and reinsurance companies that seek coverage from capital market investors— are in competition with other issuers of bonds, in particular issuers of corporate debt—where credit spreads have widened…This means that the cost of insurance-linked securities has risen as investors now require higher interest payments than in the past to entice them into buying cat bonds…
A number of cat bonds have been devalued…because the investment-banking counterparties were thought to be exposed to subprime exposures. (emphasis added)
State Farm has been in a different kind of cat fight since Hurricane Katrina and this report suggests its running a pretty high fever – otherwise the delusional views cited in the story are just more of the examples of State Farm spinning allegations as fact.
Even for an accomplished attorney like Sheila Birnbaum, Hurricane Katrina litigation in Mississippi offers a learning experience…Skadden Arps is representing State Farm in cases against it, brought by policyholders whose homes and businesses were lost or damaged…
One lesson, she said, was that sometimes a good offense can be best for the defense.
She learned that from her opponent.
“You cannot, sometimes, be cautious. You need to be proactive in your responses when in this type of legal environment,” Birnbaum said. “Otherwise, you’re always playing catch-up and you never define what is happening to you.”
As noted during the seminar, it didn’t take long after Katrina for the court papers to start piling up.
They were still piling up on the August 29 SOL. Pacer shows 68 new Katrina cases filed against State Farm in August – far more than filed against any other provider, if not equal to or greater than the total of all other Katrina cases filed during the month, in Federal Court, Southern District, Mississippi.
Ms. Birbaum, who is indeed accomplished as the article claims, identified “the opponent” as Attorney General Jim Hood – and not the policyholders and taxpayers the Farm shortchanged.
Hood sued State Farm and four other insurance companies weeks after Katrina, claiming that they intentionally misrepresented to policyholders the amount of damage done by wind (covered by their policies) and water (covered by a federal program).
A proposed settlement with State Farm had the potential to affect more than 35,000 policyholders, but a federal judge did not approve of it for procedural reasons. A separate successful settlement of 640 claims was coupled with a $5 million payment to Hood with the agreement his criminal investigation would cease, the company says.
Hood eventually sued State Farm again for not making the rejected settlement work. State Farm claims he threatened it with the prospect of another criminal investigation and sued him.
“In revealing that (last) subpoena, it seemed remarkably like if not identical to the previous subpoenas,” Coleman said.
“State Farm, looking at this, decided it had to be proactive in this arena and sued Attorney General Hood in federal court, claiming the renewed prosecution violated its Constitutional rights and the letter and spirit of the agreement.”
Birnbaum cited the strategy as a successful offensive, as the suit was settled after a judge found that a previous agreement forbidding Hood from criminally prosecuting State Farm was enforceable.
What the judge found was there was no ambiguity in the agreement. The suit was settled, the settlement agreement sealed, and both State Farm and Hood claimed victory.
At the same time, State Farm battled with famed (and now jailed) plaintiffs attorney Richard “Dickie” Scruggs, who grouped together a handful of firms for the purpose of filing Katrina claims. The 640-case settlement provided $26 million for the Scruggs Katrina Group.
Scruggs admitted that he tried to manipulate the political and legal aspects of the cases, as well as public opinion, to force settlements.
“He coordinated with state and federal officials to try to vilify the insurance industry, and State Farm in particular,” Birnbaum said, noting he and some of his associates were campaign contributors of Hood’s.
“In our opinion, there was some quid pro quo for the activities going on.”
It certainly was their opinion and they definitely made it known as if their allegation was fact and a springboard for bigger leaps.
An FBI report released this year says Scruggs offered $500,000 to two of his alleged co-conspirators in a judicial bribery scheme to attempt to convince Hood not to indict State Farm on criminal charges regarding Hurricane Katrina claims because Scruggs feared it would put an end to a possible settlement with his Scruggs Katrina Group.
Hood said he is too hard-headed to be influenced by outside forces.
The “report” was an accounting of an the grand jury testimony of indicted informant Tim Balducci compiled by an FBI agent who included Balducci’s similarly worded but otherwise unverified allegation.
Federal prosecutors also said Scruggs and Hood worked closely to preserve confidential documents stolen from State Farm by a pair of sisters who worked at a company that teamed with State Farm after Katrina.
Scruggs was charged with contempt for allegedly violating a Dec. 2006 order from a federal judge that told Scruggs to return the insurance documents.
Instead, Scruggs gave them to Hood, claiming he was permitted to hand them over to law enforcement officials. Though Scruggs beat the criminal contempt charge, a federal judge found him and the sisters in civil contempt.
It’s not clear what “federal prosecutors” she’s referring to but I suppose it was those the 11th Circuit dismissed when it handed the case to Judge Vinson – the same Circuit now considering Scruggs appeal of the civil contempt charges and Judge Acker’s handling of the case.
Scruggs had promoted the sisters to the media as whistleblowers who would reveal the insurance industry’s treacherous practices and gave them $150,000 salaries as litigation consultants.
The Rigsby sisters are whistleblowers – and neither Scruggs promoting or State Farm discrediting their status changes the law that establishes their role as fact.
Embracing the roles of the media and the growing number of blogs that followed the stories was important Birnbaum said.
“In today’s world, you have to be able to respond to the media in a quick manner to tell your story,” she said. “This is especially so when the plaintiff is trying to use them to affect the jury pool or pressure settlements.
“The era of ‘no comment” in litigation just doesn’t work anymore.”
I agree the era of “no comment” is over; however, but the public rightfully expects comment to be more than self-serving allegations represented as fact and out-of-context statements of others with implications added that distort the intended meaning.
Scruggs is serving a five-year prison sentence, and the case attracted heavy media attention for months.
His former associates changed their name to the Katrina Litigation Group, but Coleman was one of the attorneys who crafted a gameplan to have them disqualified from all Katrina cases, which they were.It was Birnbaum’s final lesson — sometimes nothing is as important as luck.
“The bribery indictments helped change the playing field,” she said. “People began to listen to State Farm’s side of the story as to how all this was being manipulated and how no fraud had taken place, and State Farm had done what they should’ve done as a good insurer trying to handle claims under very, very difficult circumstances.”
Ultimately, State Farm reached a claims-revisiting policy with the state’s Insurance Department, while Scruggs, son Zach and law partner Sidney Backstrom pleaded guilty in March to attempting to bribe a state judge in a dispute with a former partner over the $26 million in Katrina fees.
Although some even dispute it was “luck”, State Farm definitely used the indictments to change the playing field; and people did listen, but, listening and believing are two different matters and truth a third – and in that regard, State Farm’s luck may be running out. Plenty of fluids should take care of the fever.
The remark that struck me as the biggest piece of propaganda was her dismissal of the large jury verdicts down here against the Farm as “emotoinal”.
Someone must have never told Birnbaum about Aiken v USAA or Wegener v Lafayette.
I think what she meant to say is when State Farm wins the jury got it right, but when they lose it is always due to an emotional jury.
Her remark is an insult to anyone who was called to serve and took the oath. In fact she sounds like she’d fit in good with Jess Dickinson and his bought and paid for Chamber of Commerce buddies on the Mississippi Supreme Court.
sop
Sop, it was so insulting to their policyholders – the people who paid for coverage and got lawyers in return. They need to explain exactly what they did that they’re trying to pass of as “mistakes” and show the documentation that proves mistakes and not bad faith or fraud. Until they put up, they really need to shut up. JMHO
Never heard of her.
Rest assured Rick she has heard of us.
Birnbaum and Skadden run the litigation from afar. The Farm’s lawyers in Mississippi are her “do bitches”.
sop
This is all b.s. The record is very clear that she pressured Scruggs to get Hood to back off as a condition of the SF-SKG settlement. Her own story contradicts itself. If Hood was pressuring SF to settle with Scruggs, then why would Scruggs need to bribe or pressure Hood to sign off on the deal? She must be a settlement lawyer because her bullshit could not stand up in court.
Umm Brian, Bellesouth was run off two other blogs for saying just what you did. The record didn’t matter in the rush to hang Dickie Scruggs and it still doesn’t to the SF PR machine and those who bought in to the BS hook, line and sinker like Freeland and Lotus @ Folo, one of the two blogs that banned Belle.
Rick for additonal color think of Birnbaum as the queen bitch in the movie Aliens – the one who was laying all the eggs back at the hive. If you check the link to LNL you’ll find her picture, compare it to this one. The resemblance is eerily similar.
sop
Trahant:
Read some US Supreme Court opinions. You will see Ms. Birnbaum’s name in there as counsel from time to time. Or maybe you will bump into her the next time you go there to argue a case.
As for impugning the integrity of Gulf Coast juries, Dickie did that himself when he (inadvertantly) blew the whistle on “magic jurisdictions”. Or did you all think he was describing a praiseworthy process?
Mr CG good to see you out.
No Dickie Scruggs didn’t impungn Gulf Coast juries, he was stating a simple fact and one that was true once upon a time. For the record those jurisdictions were relatively few in number and the problem was taken care of in tort reform several years ago.
On the surface it would be easy to forever tar the entire state that way Mr CG but it doesn’t hold up against the reality on the ground.
Birnbaum fostering that false perception is a great disservice to the State of Mississippi and it’s citizens. I wouldn’t expect the corporate whores at Legal News Line to get the record straight but we’ll fix it here.
sop
I guess sarcasm is lost on Claimsguy. But now that he mentions it, I do not argue before the U.S. Supreme Court . . . rarely ever before the La. Supreme Court. But I’ll bet you this Claimsguy: I’ve tried more Katrina cases than she has.
I like arguing to juries more than I like arguing to judges who are way smarter than I am anyway.
Quote:
“I like arguing to juries more than I like arguing to judges who are way smarter than I am anyway.”
I guess if you are from there you can say such things without it being disparaging.
True Dat! I said “way smarter,” whereas juries are only smarter.