“When Insurers Hide Behind their Experts in Texas” – Merlin’s blog report case involving State Farm and HAAG Engineering

With Larry and his brothers Darryl following the three qui tam cases, I found this Sergio Leal post on Merlin’s blog relevant to the Rigsby qui tam case against defendants State Farm and HAAG Engineering. Read it here and then visit the Property Insurance Coverage Law Blog.  Chip has it loaded with interesting information.

One strategy insurance companies use to avoid bad faith liability is claiming that they reasonably relied on their experts’ reports to deny a claim. Texas law on bad faith states that an insurer breaches its duty of good faith when: (1) denies or delays payment of a claim for which liability is reasonably clear, and (2) the insurer knew or should have known that liability was reasonably clear. Therefore, insurance companies often argue that because their retained experts concluded that there was no valid insurance claim, liability was not reasonably clear and they should not be found liable for bad faith. Courts typically side with insurance companies on this issue, but sometimes the facts of a case require courts to doubt this argument, just as the Texas Supreme Court did in State Farm Lloyds v. Nicolau, 951 S.W.2d 444 (Tex. 1997).

In Nicolau, a homeowner filed a lawsuit against its insurer for foundation and other structural damage that resulted from a plumbing leak that introduced water into the clay subsoil. The insurer retained an expert, HAAG Engineering¸ to conduct a study on the homeowner’s claim. It was established in Nicolau that the insurer hired HAAG Engineering with the belief that HAAG Engineering generally believed that leaks beneath a house would not cause foundation movement. Continue reading ““When Insurers Hide Behind their Experts in Texas” – Merlin’s blog report case involving State Farm and HAAG Engineering”

Merlin’s “Breaking News Story: Florida Insurers Hide Profits While Claiming Losses To Get Rates Raised”

Chip Merlin has done such an excellent job summarizing the key points of How Insurers Made Millions on the Side that I’ve reproduced the post on his Property Insurance Coverage Law Blog in total with this h/t and big “thank you”.

The Sarasota Herald-Tribune conducted a year long investigation into the manner Florida insurance companies diverted premiums and monies as expenses and losses to hide actual profits. This revelation is probably shocking to many who have been told repeatedly that the Florida insurance industry is losing money as a result of “unfair” rates and for other claims related reasons.

Investigative journalist Paige St. John reported in How Insurers Made Millions on the Side, that:

Investors and executives in 2008 moved $1.9 billion in policyholder money out of heavily regulated insurers, where profits are capped and dividends are restricted, to separate companies that are owned by the same people, housed at the same address and sometimes use the same employees.

Meanwhile, insurance executives complained about losses and state-mandated discounts, and pressured state regulators for permission to charge homeowners more — even to end rate regulation altogether.

I wonder what the response is going to be from those who supported unregulated insurance rate laws. It is human nature to have a hard time admitting mistakes. If anything, this story demonstrates that laws need to be changed to allow much greater oversight by regulators because some insurance executives cannot be trusted to be honest stewards of monies set aside for the payment of claims.

Some insurance lobbyists defend these activities and even provide a justification: Continue reading “Merlin’s “Breaking News Story: Florida Insurers Hide Profits While Claiming Losses To Get Rates Raised””