keeping score – one settlement, one compromise, and one heel-digging response

Hasbrouck v Nationwide, a case recently introduced on SLABBED as one of the sequence of events in no particular order, has reached settlement according to a note on the docket.

Magistrate Judge Anderson stuck a compromise issued an Order in O’Keefe v State Farm – agreeing with O’Keefe on the overly broad nature of State Farm motion for protective order but granting the motion with O’Keefe’s more restrictive version.

Order pursuant to hearing conducted on 6/30/09: denying Plaintiffs’ 89 Motion to Quash the subpoena duces tecum [#89] served on USF&G; granting Defendant State Farm’s 100 Motion for Protective Order only to the extent that the proposed Protective Order submitted by Plaintiffs shall be entered. Defendants’ Motion to Quash Excess Discovery [#111] taken under advisement; separate Order shall be entered. Signed by Magistrate Judge Linda R. Anderson on 7/2/09. (ACF) (Entered: 07/02/2009).

O’Keefe also filed a Response in Opposition to the Motion for Summary Judgment by defendant Marshall Eleuterius, the agent selling the O’Keefes’ State Farm policies that are in dispute in the litigation:

Defendant, Mr. Marshall J. Eleuterius is an agent for State Farm… At all times associated with this Complaint, Mr. Eleuterius was responsible for providing advice and assistance regarding applicable and necessary coverages, and renewing coverage, based on the particular needs of Mr. and Mrs. O’Keefe and Dancel. Mr. and Mrs. O’Keefe and/or Dancel relied on Mr. Eleuterius to provide competent, professional, and accurate advice regarding coverage and to procure appropriate and adequate insurance coverage for their particular needs.

Mr. Eleuterius was consulted regarding coverage on Mr. and Mrs. O’Keefe’s principal dwelling. Mr. Eleuterius instructed Mr. and Mrs. O’Keefe to purchase a State Farm Homeowners’ policy, but advised against purchasing a federal flood insurance policy, insisting that the O’Keefes’ dwelling was not located in a flood zone.

Mr. Eleuterius further indicated to Mrs. O’Keefe that, to the extent the O’Keefes elected to purchase Federal flood insurance, the State Farm homeowner’s policy would be supplemental to the Federal flood coverage, and the State Farm Homeowner’s policy would pick up where the Federal flood coverage ended, and provide coverage for any damage to the O’Keefes’ dwelling
above and beyond the limits of the federal flood coverage in the event of a catastrophic Hurricane loss involving both wind and storm surge.

Mr. Eleuterius further advised the Plaintiffs that it was not possible to obtain excess flood insurance, from any source, beyond the limits available through the federal government. Under his agency agreement with State Farm Fire, Mr. Eleuterius was prohibited from offering excess flood insurance to State Farm insureds through the private market. At the time Mr. Eleuterius advised the Plaintiffs no “excess” flood insurance was available, he knew or should have known that this representation was not true. Mr. Eleuterius expected the Plaintiffs to believe this false representation, and to rely on it, however, with the intended result that Plaintiffs would not seek quotes on excess flood insurance from other agents and insurance companies, which contacts may lead Plaintiffs to place all of their substantial insurance business with an agent other than Eleuterius, and with an insurance company other than State Farm.  (emphasis added [in the Response])

Eleuterius seeks Summary Judgment on the following basis:

(1) He alleges Plaintiffs’ claims for negligence and misrepresentation are time barred; and (2) He alleges Plaintiffs’ claim for misrepresentation fails, as a matter of law, for alleged lack of detrimental reliance on Eleuterius’ misrepresentations.

The O’Keefes contend the claims are not time barred, contest the claim there is a lack of detrimental reliance, and allege Eleuterius failed to address all of their claims.

Eleuterius also lost his home to Katrina and his suit against Nationwide settled – bt not without raising some interesting questions for discussion another day.

9 thoughts on “keeping score – one settlement, one compromise, and one heel-digging response”

  1. If the O’Keefes’ allegations against Eleuterius are true, then Eleuterius belongs in jail, rather than defending a mere civil proceeding against him. What County did this “fraud” and “misrepresentation” occur in, and does anyone know the Police of District Attorney? Does anyone know the identity of Eleuterius’ errors and omissions insurer? Wouldn’t it be ironic if it was State Farm?

  2. Eleuterius is definitely at risk – much more than other agents named as defendants – but I’ve wondered when State Farm and Nationwide agents are going to file suit against those companies (those two seem to have the most complaints that include agent as named defendant although most are dropped).

  3. I find the information in the post very interesting concerning the agent and advice. First, as someone who deals in this I cannot imagine a coastal professional insurance agent advising a client not to purchase Flood insurance. In my view, that is an E&O claim “slam dunk”.

    Then for the agent to advise there is no such thing as “excess Flood coverage” is either misrepresentation or lack of knowledge. Another E&O nightmare.

    I am commenting based on Nowdy’s post whcih obviously does not include the entire transcript of testimony. I do not know the experience of the SF agent, but there appears to be some serious issues here.

    This brings us back to the question of who one chooses to do business with and that is the consumer’s responsibilty. A direct agent probably represents an company with more resources than most insurers. An Independent Agent offers more choices, but some of the carriers they represent may not have the necessary financial resources to handle a major event, especially if they are non-admitted and not covered by the Guaranty Fund. Direct access carriers should always be a “no, no” for coastal Homeowner coverage. If they will sell it, they probably don’t know what or where they are selling the coverage. With these carriers there is no recourse as when you BUY you acknowledge you fully understand about everything you just bought.

    The moral is, “Find a local agent you are comfortable with regardless of the companies they represent”.

  4. Don’t know if I agree completely with your story moral Sup and Excess Flood is the reason. EAs (exclusive agents) don’t generally rep companies that sell excess flood so State Farm customers would be far less likely to know about the product than those who use (IA) independent agents.

    Why? Because the State Farm agent would have to send his customer to an IA to purchase the product and that is against the SF agents perceived moentary self interest to send thier customer to a competitor.

    I too was told we did not “need flood insurance” when we bought our house in West Gulfport that we lost so I believe the O’Keefes. I also believe they were discouraged from buying excess flood for the reason I gave.

    At the bottom of the problem was bad flood maps because at 17 feet above sea level people in plain sight of the sound were out of the flood zone thus they did not truly “need” flood insurance as a condition for getting a mortgage.

    I personally know two agents whose E&O policies got good workout after Katrina and deservedly so. That said the public needs to understand their agent is not a risk manager but instead a sales person. (Just like their stock broker is a sales person not an investment guru). If people took the same attitiude and level of homework in buying their financial services products they bring to an auto dealership you’d see a lot less of this type stuff.

    sop

  5. A few points: A year or so ago, I was chastisng my brother, who lives on Scenic Drive in the Pass about re-building in such a dangerous locale, which the “rest of us taxpayers” shouldn’t have to subsidize with our tax dollars, which defrays the cost of flood insurance. To my surprise, my brother told me that his property is 28 feet above Mean Sea Level, and that the “front” house, overlooking the beach, still got 7 feet of water in KATRINA. My house in New Orleans, on St. Charles Ave., “the sliver by the river” is only 6 feet above MSL, and we got NO water in KATRINA. I’ll flood only if the Mississippi River levees fail. However, MSL elevations mean nothing if one lives in a locale subject to storm surge. Whether an agent was an “independent” or a “company” agent, he owed the prospective insured and honest answer to the naive question: “Do I need flood insurance?” Obviously, many people, the O’Keefe’s included, did not get an honest answer to that question, which could have been “motivated” by ignorance, breach of fiduciary duty, negligence, fraud or misrepresentation. Sue the BASTARDS and let the legal system sort it all out!

  6. Sop, I think you are giving the “direct agents” too much of a pass and you know my background. These carriers appeal to the masses. NFIP coverage levels are satisfactory for the great majority of policyholders. Those folks are the “target markets” for ALL and SF. The agents have a professional responsibility to recognize their carriers’s limitations and explain those to potential clients.

    Independent Agents are usually better suited for the clients that need Excess Flood. They are the agents that have access to those markets. Once again, this takes professional advice.

    I am grateful for the opportunity to have worked in the insurance industry for many years and I cherish the integrity most people have within the industry. I have seen agents who put commission above “doing the right thing”. Usually the system washes these out eventually.

    I certainly agree with Ashton the responsibility is very simple. Any agency owes a client an “honest answer”. I learned a long time ago at the Sears store, as an agent you just can’t write insurance for every inquiry.

  7. Ashton your Bro needs to get a survey. The storm surge in that area was 25 feet or so. Several houses on the highest parts of Scenic Drive did not flood at all. If he had 7 feet of water his elevation is around 18 feet, which is still higher than most of the beach front elevations along the entire Gulf of Mexico.

    Here in Mississippi taxpayers are subsidizing wind coverage for people that live well north of I-10, some of whom suffered no damage at all to their homes from Katrina. Why? Because if the wind pool passed along the total cost of that expensive reinsurance from Bermuda the populace here would be reduced drastically from its current size.

    I think you’ll find when you peek under the hood of the industry talking points about people not wanting to subsidize each other you’ll find the reasoning behind that entire argument doesn’t hold up well when it is scrutinized but that doesn’t stop the non-thinking knee jerk reaction.

    Finally the only thing that stopped NOLA from getting 25′ of water was around 30-50 miles and slightly different storm path in. While NOLA gets the pub as the definition of risky development, if a Hurricane hits Tampa dead on what happened on 8/29/05 in NOLA will seem like childs play.

    I don’t think the answers to any of these problems lie in doing business with unregulated reinsurers based in tax havens.

    Sup your points are well taken.

    sop

  8. OK, SOP. I’ll re-visit this issue with my Brother. Perhaps I misunderstood him, or my memory of precisely what he told me is faulty. I also am amazed at your and nowdoucit’s knowledge of the insurance market, and the factual and legal issues inherent in the KATRINA insurance litigation. I can count on one hand how many times in my pre-KATRINA legal career (I am now disbarred, and was recently told by a Federal Judge: “You’re not a lawyer!”, to which I replied: “I am by education, you @#&%*&@, &%$#@&-&%$#@* SOB.”) a “layman” demonstrated knowledge of the term “re-insurance”, which is a whole new kettle of fish when one is talking about the insurance market.

  9. Ashton in 1776 the only thing the unwashed masses could do when they felt they were being shafted was to take up arms. Today anyone who is motivated and bright enought can arm themselves with knowledge.

    This fact was an endnote to a recent Anita Lee story I’ll be profiling soon but Team Obama has decided it is better to listen than knee jerk when it comes to the NFIP reauthorization and coastal insurance in general. His plate literally overflows however and this is going to take more time and effort.

    Several years ago I met and was privleged to get to know a yahoo poster who went by the handle Facts-r-ur-friend. They are indeed and IMHO are the 21st century internet version of the musket and bayonet.

    sop

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