insurance law

Earlier this year, I wrote about how many homeowners still waiting for insurance payouts after Superstorm Sandy will soon run out of time to take their cases to court if that is necessary. In Connecticut, it is industry practice to include in homeowners' insurance policies a time limitation on lawsuits. The law lets insurers limit lawsuits by property owners to 18 months after a disaster hits.

Now the Connecticut General Assembly has taken up a bill that would extend the time period to sue to two years after a disaster hits. Another bill would allow property owners to recoup attorney fees and court costs after a disaster.

An excerpt on my piece about the legislation for the Connecticut Law Tribune: 

Lawmakers are considering several pieces of legislation that would change state laws governing homeowners' insurance policies, including a bill that would award reasonable attorney fees and lawsuit costs to plaintiffs who win their cases against insurers.

The legislation is supported by trial attorneys, but opposed by the insurance industry.

State Rep. Robert W. Megna, D-New Haven, and co-chair of the Insurance and Real Estate Committee, said there's merit in authorizing plaintiffs who win their cases to be able to obtain attorney fees and lawsuits costs.

When policyholders report damage claims to their insurers and when those claims have been denied to some extent, the policyholders have the burden of hiring an attorney and paying for that attorney out of any recovery they obtain, Megna said. The proposed legislation would remove that burden.

As it stands, attorney fees are "going to come off the property damage settlement," Megna said. "Even if the homeowner prevails, they're at a disadvantage when it comes to fixing their home."

The committee will decide this week whether the bills, including the attorney fees measure, will be voted out of committee, Megna said.

Ryan Suerth, a Hartford-based solo practitioner who represents policyholders in insurance disputes, testified in support of the legislation. "The intent of it is to ensure that the policyholder gets the benefit of the policy they purchased… You get taken care of 100 percent," Suerth said in an interview.

If the legislation is passed, there may be a decrease in litigation alleging bad faith by insurers or alleging that insurers violated the Connecticut Unfair Trade Practices Act and the Connecticut Unfair Insurance Practices Act, Suerth said. Attorney fees can be obtained in those types of lawsuits but not in breach of contract actions prosecuted against insurers.

The Insurance Association of Connecticut said in submitted testimony that, at times, it can be unclear when policyholders "prevail" in legal action against an insurer, and thus it would be confusing just who is entitled to attorney fees and costs.

"The proposal is contrary to the traditions of the American judicial system," the association said in its prepared testimony. "Insurers should be able to challenge questionable claims when there is a good-faith basis for such a challenge … Examining the validity of claims helps insurers maintain rates for all policyholders by weeding out the frivolous or meritless claims."

If the policy behind the legislation is to deter insurers from unnecessarily denying or delaying claims, the threat of bad-faith claims or penalties from the Insurance Department already does that, the association said.

Connecticut homeowners who still haven't been paid by their insurers over damage from Superstorm Sandy are running out of time to sue their insurers, I reported for the Connecticut Post and the Stamford Advocate.

Here's the full story:

Homeowners whose insurance companies still have not paid them for Superstorm Sandy damage and may need to sue their insurers will soon run out of time to do so.

Even though Connecticut law provides for six years for lawsuits to be filed over broken contracts, the state has a law on the books that lets insurers limit the time in which disputes about homeowner policies can be taken to court.

And it is industry practice to include in standard homeowners' insurance policies a time limitation on lawsuits, according to several Connecticut attorneys.

Ryan Suerth, a Hartford-based solo practitioner who represents policyholders in insurance disputes, said going to court is a "last-ditch effort" because no one wants to hire a lawyer after already going through a long process to try to get paid by one's insurer after a disaster.

But Suerth said "the only person who is going to look out for the policyholder" is the policyholder.

The law used to let insurers limit homeowners bringing lawsuits to within a year of disasters, but it was changed in 2009 to 18 months. Now homeowners' insurance disputes can't go to court unless they are started within "eighteen months next after inception of the loss," according to the statute.

"The moral of the story," says Leonard Isaac, an insurance litigator with law offices in Waterbury and West Hartford, is that "if your policy has a limit that's the minimum provided by Connecticut law, the lawsuit has to be served on the insurance company within 18 months of when your loss took place. That means it has to be delivered by the marshal to the insurance company by that time."

Policyholders thinking about taking their insurance company to court can't show up on a lawyer's doorstep a week before the deadline, Isaac said, because time has to be allowed for the lawsuit to be served on time to meet legal deadlines.

Isaac said he has had people consult him after major storms, particularly winter storms, when they've run out of time to sue. After major storms, many people think the "insurance company is moving slowly but they're moving," but then it can be too late to seek legal recourse, he says.

The National Flood Insurance Program, which is administered by the Federal Emergency Management Agency, only allows for lawsuits to be filed within a year of a policyholder's loss, Suerth added.

Gerard O'Sullivan, program manager of the Insurance Department's consumer affairs unit, recommends that consumers who are having problems with their insurance claims call the department. It will see if they can mediate the claim and bring it to a conclusion without the need for litigation, O'Sullivan said.

Gregory Podolak, an attorney representing policyholders with Saxe Doernberger & Vita in Hamden, suggests policyholders crack open their policies and see if they have a limitation-of-suit provision in there.

If they are running up against a deadline, policyholders can see if their insurers will agree to "toll" that part of the contract, Podolak said. An agreement to temporarily put on hiatus the requirement that policyholders only can go to court within 18 months of when Sandy struck would allow insurers to avoid premature lawsuits, he said. That's especially the case if "you are adjusting your agreement in good faith and cooperation," Podolak said.

Isaac suggests that policyholders can use public adjusters to help negotiate with their insurance companies.

Michael McCormack, who represents policyholders as well as insurance industry clients in regulatory proceedings with Hinckley Allen & Snyder in Hartford, said that insurance companies limit the time in which lawsuits can be brought because they "don't want to be subject to a claim six years down the road. They want to have notice and resolve claims."

Not all claims against insurance companies are limited, but in these situations, things get more difficult quickly. Policyholders can still sue over truly wrongful behavior by insurance companies like acting in bad faith, McCormack said, but such behavior is rare and is harder to prove.

Suerth said he finds it unfair to allow contractual limitations on the six-year statute of limitations because it "doesn't help the policyholders and there are other insurance policies out there that don't have any limitations at all."

There are other insurance issues arising out of Superstorm Sandy that people may not be aware of, attorneys said.

Many policyholders are not aware that, without going to court, they can invoke a clause in their polices if they're in a dispute over the value of their loss, McCormack said. Connecticut law requires that disputes over the amount of loss in standard homeowners' police go to an outside neutral process called appraisal.

Insurance companies don't always advise their insureds that a dispute over the value of loss can be taken to this form of arbitration, Isaac said.

"Instead they say this is all we're going to pay. They say take it or leave it," Isaac said.

The appraisal process is more consumer-friendly because it's less expensive than litigation, McCormack said.

Isaac estimates that half of the disputes he sees are over the value of the loss.

Both the policyholders and the insurance company get an appraiser, and there is a neutral umpire to make a final determination on the claim's value.

Both parties pay for their own appraiser, and a neutral umpire is paid by both sides to decide the dispute over the value of the claim, O'Sullivan said.

Natural disasters like Sandy are a reminder to make sure people have the insurance coverage they want, insurance experts say.

"One of the important things of any catastrophe like this" is for people to determine if they are comfortable with their deductibles and to understand that flood insurance is separate from a homeowner's policy and must be obtained separately, O'Sullivan said.

Michael E. DiGiacomo, a forensic accountant with BlumShapiro in Shelton who often is called in to evaluate claims, said that his impression of Sandy is that many businesses did not have the proper insurance coverage in place to recover for their losses.

For example, businesses wanted to keep their insurance costs down and forewent coverage of the interruption of their businesses, DiGiacomo said.

"Sandy just brought that to light because of how devastating it was," DiGiacomo said.

In light of Sandy it might be a good idea for businesses to go over their policies with their brokers to make sure they have the coverage they want, DiGiacomo said.

An excerpt of my piece for the Connecticut Law Tribune about the legal impacts of Superstorm Sandy:

 Superstorm Sandy struck a less-devastating blow to Connecticut than it did to New Jersey and New York. Still, the Oct. 29, 2012, hurricane cut a wide swath in terms of affecting the state's legal community.

There are expectations of litigation over insurance coverage. Attorneys working for governmental agencies have helped to put into place better disaster planning. And there have been pro bono efforts to assist storm victims.

As of May 2013, 47,002 residential-property claims were reported in Connecticut as a result of the storm. There were also 4,460 commercial-property claims, 2,772 flood claims, and 1,212 business interruption claims, according to the Connecticut Department of Banking & Insurance.

Disaster Litigation

While it's been nearly 14 months since the storm hit, Sandy-inspired litigation will take a while to fully develop, said Ryan Suerth, of Ryan Suerth LLC in Hartford, who represents policyholders. He explained that it often takes more than a year for policyholders to learn that their insurance claims have been denied or that they will get less money than they had hoped.

"Any major weather is going to lead to litigation, just for the reason there is a lot of damage and not all of it gets covered by insurance," Suerth said.

Michael McCormack, a Hinckley Allen attorney who chairs the Connecticut Bar Association's Insurance Law Section, said he has seen few Sandy-related claims being filed in court so far. One reason, he said, is "the insurance companies responded quickly. They worked with policyholders as best as they could." Secondly, he said, many consumers lack flood insurance, meaning that instead of making a claim on their homeowner's policy they must apply to Federal Emergency Management Agency's National Flood Insurance Program.

But Regen O'Malley, an insurance defense lawyer with O'Connell, Attmore & Morris in Hartford, predicted that Sandy will ultimately result in more legal activity than did 2011's Tropical Storm Irene. One insurance issue that often prompts legal disputes is the question of whether property damage was caused by rain or flooding.

"It really depends upon what the policy says [is covered] for those types of claims," O'Malley said. "And with [Hurricane] Katrina and now Sandy, there might be multiple causes. There might be wind, flood, storm surge and something else."

For some policies, coverage is denied if multiple factors caused damage and some of those factors are not listed in the policy.

 Gregory Podolak, of Saxe Doernberger & Vita in Hamden, explained that some homeowner polices cover only "named perils." The most common of these include lightning, fire, rain, windstorms and theft. But exactly how these terms are defined in a specific policy can have a dramatic impact on a consumer's "coverage position," Podolak said. Many policies have specific deductibles and coverage limits related to specific named perils, he added. And Legal issues arise when there are multiple perils that could have caused property damage, he agreed.

Another insurance issue arising from Sandy is business interruptions caused by the loss of electric power. Some parts of the state lost power for a week or more, and businesses filed claims seeking lost revenues for days they could not operate.

"What Sandy and Irene have done is highlight some of the issues that don't come to the forefront as often," Podolak said.

Cases that do go into litigation may involve claims of bad faith by insurers and violations of the Connecticut Unfair Trade Practices Act and the Connecticut Unfair Insurance Practices Act. There also may be litigation against insurance brokers and agents for allegedly not recommending sufficient coverage, attorneys said.