Read the story and then we’ll look at one of the stories behind the story.
A.M. Best Co. has revised the outlook of Nationwide Group to negative from stable due in part to the historical impact of storm losses on the group coupled with reduced investment income.
The Oldwick, N.J.-based rating agency said it concurrently has revised the outlook to negative from stable and affirmed the debt ratings of “a” of the $1.5 billion in existing surplus notes of Nationwide Mutual Insurance Company.
Best said it considered the historical impact of storm losses on Nationwide Group’s underwriting performance as part of the outlook adjustment.
“A.M. Best expects management may be challenged to rebuild surplus based upon historical underwriting performance and reduced investment income given the current volatility in the financial markets,” Best said.
The rating agency also cited as a reason for the revised outlook the “precipitous decline in risk-adjusted capitalization associated with the early 2009 privatization of Nationwide Financial Services Inc. (NFS).” NFS is now a wholly-owned subsidiary of Nationwide Mutual after Nationwide Mutual completed its acquisition of all of the outstanding publicly held Class A shares of common stock of NFS following shareholder approval on Dec. 31, 2008…(all emphasis added)
One of the stories behind the story of Nationwide’s negative outlook is recorded on the docket of Mississippi’s Southern District Federal Court.
With the two states of ambiguity, whose side is Nationwide on? is a post I wrote last August just days before the SOL on damage claims from Hurricane Katrina. Two newly filed cases with Nationwide as a defendant were cited in the post. In both cases, the complaint stated:
Ultimately, Nationwide denied the Plaintiffs’ claim not because it determined Plaintiffs’ home and property were completely destroyed by an allegedly excluded peril, but because Nationwide determined it could not find evidence of wind damage…
A similar, if not identical, complaint was filed in Fairley v Nationwide one of the three randomly selected active cases I pulled from the docket for this post.
In the 3.5 years Nationwide has been unable to find evidence of wind damage on this coastal property, they’ve ignored evidence of wind damage to a policyholder’s property 150 miles north in Hinds County. In Murphey v Nationwide, Nationwide denied the policyholder’s damage claiming the cause of damage was an excluded peril – OMG – water!
The third I selected turned out not to be a Katrina claim; however, Sams v Nationwide is worth noting because it provides an example of Nationwide’s claims handling without an associated hurricane.
On July 23, 2007, within the subject policy period. the insured boat and the personal contents therein were destroyed and the boat was subsequently sunk and proximately and/or efficiently destroyed. It is undisputed that the subject property was stolen, damaged,recovered, and returned to Mr. Sams; however, at the time the boat was recovered, it wasunknown the insured boat had been damaged. The subject property subsequently sunk and was
completely destroyed and it and its contents damaged in excess of the limits of the subject policy while it was in the boat slip behind Mr. Sams’s house. The boat has since been raised from the water and stored at the Mr. Sams’s residence.Almost immediately thereafter, and in accordance with the subject policy provisions. Bradley Sams notified Nationwide of the covered loss…
On October 25,2007, Nationwide sent a letter to Mr. Sams telling him they were denying coverage…
On February 6, 2008, Mr. Sams’s attorney, Douglas 1. Tynes, Jr., sent Nationwide a good faith letter again requesting payment on his loss…
On February 18, 2008, Nationwide sent another letter to Mr. Sarns’s attorney,Douglas L. Tynell, Jr., telling him that all damage not paid for was the result of “gradual deterioration, including but not limited to, wet or dry rot, rust, weathering, fading, galvanic corrosion or electrolysis” or “caused because your watercraft was not seaworthy”. This letter represented Nationwide’s denial to pay any funds whatsoever for Mr, Sams’s covered loss…
Nationwide’s position in this directly contradicts Mississippi insurance law, in existence for the last forty years, which mandates full insurance coverage if theft was the efficient proximate cause of the loss. It is uncontroverted that loss caused by no fault of the Plaintiff and is covered under the subject policy.
Additionally, as the policy at issue is an “all risk” policy, all risks of accidental direct physical loss are covered by the subject policy unless specifically excluded by the terms of the subject policy. In such policies, insured such as Bradley Sams only have the burden of showing the existence of a covered loss, at which point the burden of proof shifts to the insurer, Nationwide, to establish the applicability of a named exclusion under the facts of the case and the terms of the policy.
The loss, regardless of its cause, is an accidental loss. Nationwide has not met this burden of proof and cannot meet it.
An insurance contract is a contract of adhesion, and should be construed in the light most favorable to the insured.
lnherent in any insurance contract, and in the policy at issue, is that payment must be made promptly so that the Insured may be put back into the position he or she was in prior to the loss. and as quickly as possible…
It would be interesting to know if insurers are denying non-Katrina claims that would have been paid with little or no question prior to the storm on the basis of proximate cause.