ACC is the causation of Nationwide’s litigation – and policyholder claim of emotional distress

Katrina insurance litigation – selected Nationwide and State Farm cases posted the end of February and introduced a handful of interesting cases including Politz v Nationwide, a slab case.

Politz caught my eye again last night when my sweep of active cases turned up this Order from Judge Senter:

That the defendant’s motion [158] for summary judgment is GRANTED IN PART and DENIED IN PART. The motion is GRANTED as to the coverage for “other structures.” In all other respects the motion is DENIED.

That the defendant’s motion [110] to strike the plaintiffs’ claims for emotional distress will be GRANTED IN PART and DENIED IN PART. The motion is GRANTED as to any evidence that Mrs. Politz’s heart condition or “depression” was caused by Nationwide’s actions in adjusting the Politzs’ claim and as to any evidence that Nationwide’s actions caused Mr. Politz’s hypertension, diabetes, anxiety, claustrophobia, depression, or his death from osteomyelitis. In all other respects, this motion is DENIED.

In the related Memorandum Opinion Judge Senter provides a summary of the background on the case:

Plaintiffs John and Helen Politz (the Politzes) resided at 116 Winters Lane, Long Beach, Mississippi, at the time of Hurricane Katrina. John Politz is now deceased, and claims for damages on his behalf are no longer viable. See docket entry [193]. Their residence was insured under a Nationwide homeowners policy (policy number 6323 HO 164506) providing limits of coverage of $106,800 (dwelling), $10,600 (other structures), $74,760 (personal property), and $21,360 (loss of use). This Nationwide policy excludes damage caused by flooding, including storm surge flooding.

Plaintiffs’ home was reduced to a slab by the storm forces. Plaintiffs applied for and received a grant from the Mississippi Development Authority (MDA). Plaintiffs’ grant application acknowledges that their residence was damaged by flooding. In its initial evaluation of the plaintiffs’ claim, Nationwide reached the conclusion that all of the damage to the insured property was caused by storm surge flooding or concurrently caused by storm surge flooding and other windstorm damage.

On or about September 29, 2005, Nationwide’s adjuster inspected the storm damage. Nationwide ordered an engineering report for the insured property, and Conestoga/HAS Engineers reported the results of its inspection on or about November 29, 2005. Based on this report, on January 10, 2006, Nationwide denied any liability for the plaintiffs’ loss. Nationwide did not deny that a part of the plaintiffs’ loss was from a covered cause, i.e. windstorm, but Nationwide denied any liability in light of the concurrent cause language in the policy.

Armed with the Fifth Circuit’s Opinion in Leonard v Nationwide – and ignoring all other decisions –  Nationwide continues to press the causation cause language in cases where wind damage is documented and would otherwise be covered.   Is Nationwide  a “slow learner” or what? Since I’ve begun regular docket “sweeps” of currently active cases, every Nationwide case I’ve looked at has the same argument.

Since Nationwide is relying on an exclusion from coverage, i.e. the flood exclusion, Nationwide has the burden of proving the merits of this policy defense. There is testimony in the record that indicates how difficult an undertaking this is in the circumstances of this type of claim, i.e. a claim where only a slab remains after a storm with extremely strong winds and storm surge flood waters. My review of the deposition testimony now in the record, particularly the testimony of Nationwide’s representatives, indicates that there is a genuine issue of material fact on the question of what property was damaged by the storm winds versus the damage caused by storm surge flooding. I will therefore deny Nationwide’s motion for summary judgment on this point.

Nationwide’s motion states, “[R]egarding Cover C, all of Plaintiff’s contents would have been destroyed by storm surge even if some of them were first damaged by wind or wind-driven rain. Moreover, despite Nationwide’s request for her to do so, Mrs. Politz has failed to provide any itemized list of contents for items which she claims were damaged solely by wind. Nationwide is therefore entitled to summary judgment with respect to Coverage C”…

Katrina destroyed everything in her path without regard to the income, age, or health status of her victims.  Mrs. Politz’s case is one of the several I’ve read lately continued by a surviving spouse and/or the estate of the plaintiff.    The associated stress of losing both the family home and a family member is all but beyond comprehension.

Consider, for example, the number of times Mr. and Mrs. Politz relocated after the storm.

In her deposition, Mrs. Politz testified that she made a list of the personal property lost in the storm and estimated its replacement cost to be approximately $99,000…The list she prepared in making this estimate has now been lost. Mrs. Politz also testified that about ten days after the storm she and her husband rented an apartment. Nationwide sent the plaintiffs a check for $3,000 at or near the time the apartment was rented…and a second check for $3,000 several weeks later… The plaintiffs lived in this apartment until January 2006, when they moved into a FEMA trailerSix months later the plaintiffs purchased a new home and moved in.

Judge Senter’s Order requires Mrs. Politz to replace the missing documentation and allows 30 days for her to do so saying, I do not believe Nationwide will be prejudiced by the delay in receiving the itemization of damaged personal property. I guess they won’t – now.  Without the strong hint that Judge Senter will be looking closely at Nationwide’s response, I’m inclined to believe the company would do most anything other than pay this claim.   Read on and you may share my opinion.

Three moves in a year’s time would tax most anyone’s physical and emotional health.  At this point, Mrs. Politz  has now survived Katrina, three moves, and Mr. Politz”s death.

Nationwide asserts that there is no medical evidence sufficient to support a cause of action for mental or emotional distress experienced by either of the plaintiffs, and Nationwide seeks summary judgment on those claims. Nationwide also seeks, by
its motion to strike, the exclusion of any testimony concerning Plaintiff Helen Politz’s heart condition and her treatment for depression. During the discovery period, Mrs. Politz did not timely disclose her medical records concerning her treatment for
depression or for her heart condition.

Dr. Mark Babo, one of Mr. Politz’s treating physicians, did not have the opinion that Nationwide’s partial denial of Mr. Politz’s insurance claim caused Mr. Politz’s hypertension…diabetes…or his death from osteomyelitis…Dr. Babo recorded symptoms of
anxiety, but did not give Mr. Politz a diagnosis of anxiety…Dr. Babo confirmed that Mr. Politz suffered from claustrophobia and that he (Mr. Politz) felt claustrophobic in the FEMA trailer the Plaintiffs lived in after the storm…but Dr. Babo expressed no opinion concerning the cause of Mr. Politz’s claustrophobia which existed before Hurricane Katrina….Dr. Babo prescribed Xanax to relieve symptoms of anxiety that may have been related to Mr. Politz’s claustrophobia. Dr. Babo saw nothing in Mr. Politz’s medical records to indicate that he was ever diagnosed with depression…In light of this testimony, I will not permit Mrs. Politz to venture an opinion that Nationwide’s actions were the cause of her late husband’s hypertension, diabetes, anxiety,claustrophobia, depression, or his death from osteomyelitis.

My previous poor opinion of  Dr. Babo’s opinion has been deleted in light of information in Nationwide’s Motion to Strike that documents his deposition was given without medical records for reference.

While Mrs. Politz may, in good faith, have the subjective belief that Nationwide’s refusal of her claim for storm damage contributed to her heart condition and to her“depression,” I will not permit her to express that belief in the absence of corroborating
medical testimony…Because this action encompasses both claims for negligence and for bad faith, I will decline Nationwide’s invitation to grant summary judgment on this issue at this time. Any discussion of mental or emotional distress will
be excluded from evidence during the first phase of this trial when the issue of contract damages alone will be decided.

Finally, Nationwide asserts that its actions in adjusting this claim were reasonable in light of all the facts surrounding the loss and in light of the then existing jurisprudence on the concurrent cause language in the policy. Nationwide therefore seeks summary judgment on the plaintiffs’ claims for negligence and for punitive damages.

While Nationwide has submitted a great deal of evidence to support its contention that the adjustment of Plaintiffs’ claim met the standard of reasonable care and good faith, there is sufficient countervailing evidence to make this a genuine issueof material fact at this juncture.

Again, this is not an issue that will be addressed in the first phase of the trial, and I am cognizant that Nationwide altered its opinion and its actions when it became apparent that Nationwide’s interpretation of the concurrent cause language might be undermined by legal opinions issued after the plaintiffs’ claim was denied.

I do not believe an insurer can be found to be negligent or to be acting in bad faith when it is following a reasonable interpretation of its policy language, even if its interpretation is not adopted by the courts.

Judge Senter’s last comment does not address the “bad faith” that went into developing policy language that would preclude courts from  “reasonable interpretation” in a policyholder’s favor; but, perhaps that will come.  Let’s take a quick look at the two motions subject to Judge Senter’s Order – starting with theMotion for Summary Judgment as it provides the context for considering Senter’s comment about an insurer “following a reasonable interpretation of its policy language“.

Nationwide listed seven reasons for granting the motion.  Six are listed below; the seventh was an itemized reference to supporting documentation in the Exhibits.  Judge Senter only granted summary judgment on the undisputed claim there were no “other structures” (second item on the list below).

  • First, Plaintiff admitted under penalty of prosecution for fraud that her dwelling “received flood damage as a result of Hurricane Katrina,” and received the $139,500 in flood grant proceeds that they sought by making this representation. This admission, and the record evidence, eviscerates any claim that Plaintiff’s property was not destroyed solely by wind – to the contrary, it proves that their “property damage was caused by the concurrent or sequential action of water [for which] the policy clearly disallows recovery.” Leonard v. Nationwide Mut. Ins. Co., 499 F.3d 419, 430-31 (5th Cir. 2007) cert. denied, 128 S. Ct. 1893 (2008). Because the damage to Plaintiff’s dwelling was not covered under her policy, Nationwide properly denied the uncompensated portion of their claim by relying on the evidence of flood damage and the flood exclusion and anti-concurrent causation language in Plaintiff’s policy.
  • Second, Plaintiff had no other structures on her property, and therefore Nationwide is entitled to summary judgment with respect to any claim for payment owed under Coverage B.
  • Third, regarding Coverage C, all of Plaintiff’s contents would have been destroyed by storm surge even if some of them were first damaged by wind or wind-driven rain. Moreover, despite Nationwide’s request for her to do so, Mrs. Politz has failed to provide any itemized list of contents for items which she claims were damaged solely by wind. Nationwide is therefore entitled to summary judgment with respect to Coverage C.
  • Fourth, with respect to Coverage D, because wind damage to Plaintiff’s home did not render it uninhabitable, Plaintiff was not entitled to additional living expenses under her policy. Finally, Plaintiff has offered no evidence that there are any additional living expenses for which she has not already been compensated. Here too, Nationwide is entitled to summary judgment.
  • Fifth, Plaintiff has proffered no evidence to show that she or her late husband suffered emotional distress that was caused by Nationwide’s partial denial of her claim… Moreover, she cannot show that Nationwide had no arguable basis for partially denying her claim.
  • Sixth, Plaintiff has no basis to claim that Nationwide was negligent, grossly negligent, careless or reckless with respect to Plaintiff’s rights, or acted in bad faith in adjusting their claim or that she is entitled to punitive damages. The record reflects no genuine dispute that Nationwide had a “legitimate or arguable reason” – from both a factual and legal perspective – for reserving its rights and denying a portion of Plaintiff’s claim for insurance coverage…

Ohdeargod, reading about Nationwide’s claim handling causes “emotional distress” – and this is the company that advertises it’s “on your side”.  What a depressing thought!  Which brings us to Nationwide’s Motion to Strike Plaintiff’s Claim for Emotional Distress and this one statement that says it all.

Moreover, although Mrs. Politz disclosed that she had heart surgery, she did not identify or disclose the names of any treating physicians. Mrs. Politz personally verified and swore to the accuracy of these interrogatory responses.

You’ll have to pull the Motion to see all that Nationwide subjected this heart patient to while claiming “good faith” claims handling.  However, I do see the implications of Judge Senter’s point.  This is far worse than “negligence” or “bad faith” and nothing about Nationwide’s “interpretation of policy language” is remotely “reasonable”.

6 thoughts on “ACC is the causation of Nationwide’s litigation – and policyholder claim of emotional distress”

  1. Lexington acts the same exact way regarding its ACC despite Dickerson and Griletta.

    Remember, in the LA cases tried to date, the issue of the ACC and how it applies has never reared its ugly head. One reason is that the levee breaches occurred well after the wind and rain ended. Accordingly, in cases where the insurance company used the water line and only paid for losses above the water line, the absurd reading of the ACC endorsed by insurance companies comes like Nationwide to light and my experience is that those insurance companies generally run away from the argument like cockroaches exposed to light. For example, the one case we had where an adjuster went on the reecord as saying “as long as flood entered the structure, everything was excluded pursuant to the ACC” settled for a ton of money right after we filed a MSJ asking the court to declare thst the ACC did not apply in that fashion.

    I don’t say the following with a 100% confidence in the LA Supreme Court, but say it knowing I am right. At its heart, ACC clauses are really burden shifting mechanisms designed to relieve all risks insurers of proving their exclusions. LA has a state law that states any burden shifting provision is null and void, I suspect its only matter of time before the LA Supreme Court declares ACC clauses unenforceable as vague or ambiguous if not vague or ambiguous, unenforceable as contrary to La. R.S. 22:658.2, now 22:1893.

  2. The clause as Rossmiller described/defined and the courts have ruled since Leonard is nothing like what Nationwide is saying, NRB.

  3. Rossmiller admits that the wind and flood losses are separate, but then he refuses to acknowledge that ACC’s primary purpose is to shift the burden of proof to take all the benefit of the doubt in the company’s favor. The courts’ better rulings are still not good enough if the homeowner has to prove what portion of the loss was caused by wind alone before the flooding.

  4. The problem I have found is that not enough plaintiffs’ lawyers have taken the cases with good facts, i.e. gaping holes in the roof , ceilings dropped and only a couple of feet flood water, but the insured received a new roof and nothing else.

    Under those facts, which I have had numerous times, the adjuster cannot possibly put forth a rational explanation as to why the insured was not paid for the walls, floors etc… knowing full well the wind and rain came first and the flood did nothing but “mask” the damage that already occurred. After the adjuster’s deposition, I usually file a msj and request oral argument with the idea of showing the judge the absurdity of the insurance company’s position and the absurd results that flow the insurance company’s self-serving interpretation of its unilaterally drafted ACC. Remember, under Louisiana law and likely Mississippi law, exclusions must be interpreted narrowly and in a way that does not lead to “absurd” results. Interpreting ante-concurrent cause clauses in the manner advanced by Nationwide is broad, overly expansive and leads to absurd results.

    The Leonard decision is completely wrong and I suspect the MS Supreme Court will take the 5th Circuit task if given the opposrtunity. Remember, in Landry vs. Citizens Property Ins. Co., the La. 3rd Circuit Court of Appeal politely and indirectly took the 5th Circuit to task for its legally incorrect ruling in Chauvin vs. State Farm, the valued policy law case.

    The key to neutering the 5th Circuit and federal courts in general is to push the legal issues in state court cases.

  5. My previous post should read that not enough plaintiffs’ lawyers have used the cases with good facts to push the legal issues such as the ACC. Many times good facts expose bad legal arguments and crystalize issues for judges.

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