On the other side – policyholders v Nationwide

One justice asked Nationwide whether ACC would exclude coverage in a case where a home was 95% destroyed by wind before any flooding…According to…[Nationwide]…it does not matter what actually caused the damage.  If the subsequent flooding would have caused it, the damage is covered by NFIP and not Nationwide.

Nationwide’s unabashed admission of claims dumping, linked here, could not have been a surprise to policyholders on the Coast who found the Company was not on their side after Hurricane Katrina.

A review of five policyholder cases currently in litigation is telling of the other side of Nationwide.  Corban, Gunn, & Van Cleave represents plaintiffs O’Bannon, Hartman, and Drake; Chuck McRea, former Presiding Judge of the Mississippi Supreme Court is counsel for Watson; and Nilson plaintiffs are represented by the Bay St. Louis firm Hawkins, Stracener & Gibson.

SLABBED first reviews the O’Bannon v Nationwide Complaint as it provides the most detailed description of the events behind the Company’s admitted billing of wind damage to the NFIP – a description that supports a larger conspiracy of fraud than either Nationwide or State Farm alone as claimed in the first Rigsby qui tam complaint. (Nationwide was among the three insurer defendants dismissed without prejudice by the Rigsbys with consent to same from  the Department of Justice on behalf of the United States)

Denial of Plaintiffs’ Claim Was Part of a Top-Down Scheme of Institutional Fraud

After assessing the magnitude of the Nationwide-insured Katrina losses, the Nationwide Defendants, and each of them, intentionally and deliberately set forth on a course of action, concealed from the Plaintiffs and other homeowners, designed to reduce the companies’ exposure for losses by abandoning Nationwide’s duty to fully investigate individual Katrina “total destruction claims”, and to shift the financial burden of responding to the Hurricane to the Federal Government.

Unbeknownst to the Plaintiffs, and concealed from the Plaintiffs and other Nationwide insureds, Nationwide Fire and Nationwide Mutual embarked during the period of August 29, 2005 and thereafter, on a calculated course of corporate conduct designed to deny Plaintiffs’ claim, and the claims of all Mississippi Gulf Coast homeowners like them whose Nationwide-insured homes had been destroyed down to the slab or foundation.

Manipulation of NFIP Claims Handling Guidelines

The insurance industry drafted “amended”, “streamlined” claims handling procedures for handling Hurricane Katrina NFIP claims, and urged the Federal Government to accept and implement these guidelines. Upon information and belief, these amended guidelines were written and proposed by State Farm Fire and Casualty Company and/or State Farm Mutual Automobile Insurance Company, with the advice and assistance of other insurance companies doing business in Mississippi, including but not limited to Nationwide

Upon information and belief, the insurance industry’s goals associated with the proposal of amended NFIP Guidelines were two-fold. As WYO insurance company, participating companies receive a percentage of every dollar paid out on an NFIP claim serviced by those companies as compensation for alleged “administration” fees…

As a result of the adoption of the amended guidelines, Nationwide and other participating companies were able to obtain substantial compensation from the Federal Government for doing considerably less work than was contemplated in setting the percentage of payouts that would be paid to WYO companies in the form of administrative fees…

The standard NFIP policy, as written, only provides coverage for damage caused by flood, and contains an exclusion for damage caused by wind…

The second prong of the insurance industry’s, including Nationwide’s strategy with regard to utilization of amended NFIP Guidelines has played itself out through litigation of Hurricane Katrina cases in Mississippi Courts.

When insureds, such as the Plaintiffs, pursue litigation against their insurance carrier for bad faith failure to pay proceeds due under the homeowner’s insurance policies, the insurance company alleges the insureds are not entitled to proceeds or some percentage there of under their homeowners’ insurance policy, because, the insurance company alleges, the insureds admitted “flood damage” by virtue of accepting benefits under their NFIP policies…

This last paragraph makes a particularly interesting point given Nationwide’s admission of paying wind damage from NFIP funds – a point with implications for McIntosh v State Farm – but save that thought and read on:

Nationwide Devised and Employed Fraudulent Claims Handling Guidelines

Upon information and belief, Nationwide Mutual drafted; and Nationwide Fire…  adopted; new claims handling procedures after the hurricane to be “used for determination of coverage” in Mississippi Katrina claims where insured property was substantially damaged, and was contacted by hurricane driven storm surge…

Nationwide created a claims handling protocol for substantial damage claims, including the Plaintiffs’, which was unique to Hurricane Katrina. Nationwide created a “Claims Coverage Committee”, which committee was originally represented to consist of numerous levels of claims employees, so that the coverage decision on substantial damage claims would not be made by anyone individual on anyone claim.

Nationwide ultimately abandoned this process, however, and relegated the coverage decision on substantial damage claims, including the Plaintiffs, to one individual – an in house lawyer from Nationwide’s legal department…

Upon information and belief, representative(s) of the “claims committee” that made the decision to deny the Plaintiffs’ claims were sent a memo from in house lawyer Roger Woods, dated September 3, 2005; and were sent numerous edited revisions of document(s) titled “Hurricane Katrina Personal Lines Questions & Answers for Claims Associates and Independent Adjusters for Alabama and Mississippi”; and/or “Katrina Q&A”; which documents set forth fraudulent and improper interpretations and applications of the subject policy of insurance, which were used to wrongfully deny the claims of the Plaintiffs…

The procedures were intentionally designed to result, and did result, in denials of legitimate claims, including the Plaintiffs’, and to save Nationwide from the magnitude of payments that were rightfully due Plaintiffs and others under the form of policy issued to the Plaintiffs, and hundreds of other Mississippi insureds…

In accordance with a top-down policy, adopted by Nationwide post-Katrina, after deliberation and calculation; and fraudulently concealed from the Plaintiffs and other insured homeowners, Nationwide: changed its claims handling procedures for losses contacted by storm surge; failed to timely obtain engineer reports; ignored engineer reports and other evidence, including eyewitness testimony, that proved homes in the community were destroyed by hurricane force winds before the storm surge arrived; ignored findings in engineer reports that demonstrated coverage; adopted requirements for finding coverage that had not been utilized on
pre-Katrina claims, and that were not contained within, nor supported by the subject policy of insurance; and issued across the board denials of coverage to policyholders whose homes were substantially and/or completely destroyed by the hurricane, including the Plaintiffs…

Defendants’ actions resulted in an intentional and deliberate abandonment of the duty to fully, timely and competently investigate the claims of the Plaintiffs, and other Nationwide insured Katrina “slab cases” and/or “substantial damage” cases; and an intentional and deliberate abandonment of the duty to interpret and apply coverage in line with the terms and conditions of the subject policy of insurance, and Mississippi law…

Based on the above conspired actions, and contrary to the express and implicit representations of Nationwide and its agents that the Plaintiffs were purchasing coverage for losses and damages caused by hurricanes, and contrary to the express and implicit policy provisions, Nationwide refused to pay for all the losses and damages the Plaintiffs suffered at their home, which losses were all caused by Hurricane Katrina – a windstorm.

The acts and omissions of the Defendants with regard to “investigation” of the cause of the loss incurred by the Plaintiffs, and Defendant’s outright denial of coverage, constitute intentional, deliberate conduct accompanied by fraud or deceit as alleged specifically herein.

The complaints of plaintiffs Hartman and Drake contain similar allegations – and a similarity in Nationwide’s conduct evidencing the alleged calculated course of corporate conduct designed to deny [O’Brannon] Plaintiffs’ claim, and the claims of all Mississippi Gulf Coast homeowners like them

I always loved being a lawyer…

Reflections, Chuck McRea

In Watson v Nationwide, Plaintiffs claim, The actions of Nationwide and the defendants in denying the Plaintiffs’ claims were part of a fraudulent and deceptive scheme, deliberately devised, and intentionally implemented by Nationwide after Hurricane Katrina at the expense of the Plaintiffs and similarly situated insureds. Said actions constitute an intentional, wrongful, and tortuous act.

Said actions by Nationwide constitute fraud, fraudulent concealment, and fraudulent inducement, as well as bad faith claims handling on an institutional basis in the handling by Nationwide of Katrina claims. The actions by Nationwide were intended to, and did, result in the intentional and fraudulent denial of the claims of the Plaintiffs and others whose homes were completely destroyed by Hurricane Katrina…

Nationwide’s acts and omissions, as set forth in all the preceding paragraphs, were contrary to the representations on which the Plaintiffs relied in purchasing the policy, and inured to the benefit and financial gain of Nationwide, which still has not paid the Plaintiffs’ legitimate claim, and to the detriment of the Plaintiffs…

Said delay, intended by Nationwide, has exacerbated the extra-contractual damages suffered and incurred by the Plaintiffs, for all of which damages should be awarded in this action.

One distinction between Watson and O’Bannon/ Hartman/Drake is the Watson includes the local Nationwide agents and agency as named defendants in the Complaint.  Accordingly, the case was filed in the Circuit Court of Jackson County.

Nationwide has claimed the Watson Plaintiffs fraudulently enjoined these defendants to keep the case out of federal court.

Watson responds to this allegation with a Motion to Remand and For Sanctions –  its content narrowed  with precision; yet, demonstrating the range and depth of knowledge one would expect from a former Supreme Court judge.

There is an abundance of case law in support of this motion to remand with a large amount of those cases involving Nationwide’s wrongful removal of Katrina state court cases for the purposes of delay to this Court. Nationwide will later take the position that pre-judgment interest should not be allowed, thus saving thousands of dollars. One of the latest remand cases is West v Nationwide, 543F Supp. 2nd 587 (Feb.22, 2009) in which this Court granted the remand on the very same issues presented in this case. (See Exhibit “1” attached hereto).

Some other examples where Nationwide has wrongfully removed cases to this Court are Tuepker v. Nationwide Fire and Casualty, Civ. Action No. 1:05-cv-559 (S.D. Miss., May 24, 2006); Dastugue v. Nationwide Fire and Cas. Co. and Felecia Craft-Robinson, Civ. Action No. 1:05-cv-687(S.D.Miss. July 26, 2006); Gurrisi v. Nationwide Fire & Cas. Co. 440 F.Supp.2d 534, 536 (S.D.Miss.,2006); and Mangano v. Nationwide Fire & Cas. Co., Civ. Action No. 1:06-cv-724 (S.D.Miss. Nov. 30, 2006).

To this end, it is clear that the Defendants have removed this action for the sole purpose of delay. The Defendants are well aware of the rule of law on removal, but more specifically the rule of law as it applies to them under these exact circumstances…

No attempt to summarize this motion with selected text could possibly be successful without  quoting the motion in its entirety.  Consequently, the following selection addresses a point of personal interest.

Mississippi law has held that, “an individual may be held jointly liable with a corporation for a tort he commits as an agent of the corporation.” American Fire Protection, Inc. v. Lewis, 653 So.2d 1387, 1391 (Miss.,1995). Applying these principles, the federal courts have long held that:

Under Mississippi law, the negligence of an employee is imputed to the employer if such acts occur within the scope of employment, but the fact that a judgment may be entered against an employer does not absolve the employee of liability for his acts; but rather, the doctrine of respondent superior operates to establish a joint and several liability between both employer and employee. Wheeler v. Frito-Lay, Inc., 743 F.Supp. 483,486 S.D.Miss.,1990).

The federal courts in Mississippi, in applying Mississippi law have held that, “The officer or agent may be held personally liable when he directly participates in or authorizes the commission of a tort.” Christmon v. Allstate Ins. Co., 57 F.Supp.2d 380, 382 (S.D.Miss.,1999)(citing Mississippi Printing Co., Inc. v. Maris, West & Baker, Inc., 492 So.2d 977, 978 (Miss.1986))…

Nevertheless, the Defendants insist on seeking removal despite having actual knowledge of the law. Therefore, to the extent that the Defendants seek removal based on federal questions, the Plaintiff seeks cost associated with this Motion to Remand under 28 U.S.C. ‘ 1447. The defendants have established a pattern of Katrina cases where they intentionally charge wrongful joinder, remove it to this Court and after much delay this Court has to remand it back to the state court.

The defendant has a duty to reevaluate its position and where the circumstances require it to change it position, it must do so in a timely fashion. This Court has time and again ruled for remand in cases similar to this one. Yet the defendants continue to refuse remand the case voluntary. It has been over sixteen months since the West decision, and still they have not re-assessed their position or chosen to have this case remanded. Sanctions should be imposed for the wrongful removal and their failure to re-assess their position under Rule 37 FRCP and Statute…

Nilson v Nationwide , the final case selected for this review, settled today after what the docket entry described as a lengthy settlement conference.

Like Watson, Nilson included a local Nationwide agent/agency as a named defendant.  However, Nilson plaintiffs also claimed emotional distress; and, once again Nationwide, well aware of the rule of law, subjected a plaintiff to the risk of increased emotional distress just as it has done Mrs. Politz.

In the Watson complaint, former Justice McRae identified the emotional distress resulting from Nationwide’s conduct by what proved to be a legal term and not a personal perspective:

Tort of Outrage

An outrage it was, is, and always will be, tort or not.

5 thoughts on “On the other side – policyholders v Nationwide”

  1. I don’t know anything about Mississippi susbtantive law, specifically the interpretation of exclusions in insurance policies. However, under La. Law exclusions are to be narrowly construed and not in a manner that leads to ansurd consequences. Also, policies are to be interpreted in a manner to effect, not deny coverage.

    Nationwide’s argument runs directly contrary to those principles. I suspect the MS Supreme Ct. took all of about 10 minutes to reject Nationwide’s non-sense and the opinion will not be kind to Nationwide.

  2. Somewhat typical of corporate actions in this type of event. The reason however is “here we go again”. The laws read a lot better in Mississippi than they are applied. Really, all the problems given to violations and the associated corruption on a daily base I’m giving to lyrical stress release by 3 days grace and their song riot.

    In comparing any worthy reason for rioting, the folks on the coast have sure shown restraint. Me thinks the anger is a tool of some Defendants who use it arrogantly.

  3. It was clear that the majority of the MS Supreme Court believes that the loss attaches when the damage occurs.

    Nationwide’s position is that the part of the ACC that excludes losses caused by flooding “in any sequence” means that neither the cause nor the loss are attached until the hurricane is over. Then any damage that would have been caused by the flooding is an excluded loss with no consideration of whether wind may have caused some damage before the flooding. The Nationwide attorney believes that the whole purpose of ACC is to avoid arguing over whether each window, door, wall, roof, etc. might have been damaged by wind before the flooding.

    USAA may seem more reasonable, but it should be pointed out that their original engineering report on the Corban property was one of the Haag reports that said that the storm surge preceded the peak winds so that all flood damage happened first. They are not arguing that timing now, but that was the basis for the original adjustment decisions.

    USAA’s position is based now on the premise that they can divide the wind damage from the flood damage. They say they will pay for wind damage that happened before flood damage, but not for any wind damage in which flooding was a contributing cause.

    This is setting up a system where policyholders have two choices: (1) expect to have to sue and spend years in litigation with competing experts arguing over what damage was caused by wind and what was caused by flooding or (2) do not evacuate, risk your life in order to document the damage caused by wind.

  4. Good points. I think this was interesting – #49 in Watson complaint.

    Nationwide denied coverage for damage alleged caused by
    “storm surge” when the subject policy of insurance did not include the separate and distinct peril of “storm surge” as a peril it intended to attempt to exclude, even though the industry, and other companies doing business in Mississippi, recognized that “storm surge” is an independent peril which must be specifically named to be excluded. (Complaint #49)

    I’m starting to see more mention of surge in complaints – so much that I checked the filing date on a couple of them thinking it would be 2006 but found August 2008 instead – meaning cases filed right before 3yr SOL.

    References to surge as part of hurricane were big deal after Ike.

    The difference I’m seeing now is quotes from authorities that distinguish surge from flood.

  5. Here’s some thoughts on disaster preparedness/recovery having to do will authority within the insurance contract:

    Are You Disaster Ready?

    What do you expect in case of loss? Who cares? Who has disaster preparedness/recovery money for that?
    I don’t have all the answers, but I do have this one:
    A letter pertaining to disaster (hurricane, earthquake, tornado, flood, fire, etc.) has been sent to President Obama on behalf of all insurance policyholders. As a matter of transparency on the record of insurance consumer protection, any response by President Obama will be posted on the following Website for review: http://www.disasterprepared.net/president.html

    Qui potest et debet vetare, jubet: (Law Maxim)

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