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Special Advertising Supplement TEXAS LAWYER ROUNDTABLE SERIES DAVID D. DISIERE CHRIS LEAVITT STEVE MOSTYN THOMAS W. PIRTLE MAY 11, 2009 • VOL. 25 • NO. 6 Special Advertising Supplement Insurance Law, Post-HurrIcane Ike insurance, Hurricane Ike claims, due to for a long time. Pirtle and I are trying to H urricane Ike arrived in Sep- the fact that we lost both our Galveston figure out who can sound more from East tember 2008 and became office and our Houston office as a result Texas. He’s from Henderson. I’m from the third most destructive of Hurricane Ike. And it was something Whitehouse. that really interested us. We wanted to DAVID D. DISIERE, founding part- hurricane ever to make landfall in help the people affected by the storm, and ner, Martin, Disiere, Jefferson & Wis- the United States. It has been blamed we think there are some interesting legal dom, L.L.P., Houston: We practice in the for 194 deaths in Cuba, Haiti and the issues involved in these cases, and we look area of insurance coverage litigation and United States. Damages have been forward to litigating those. defense, representing insurers. In talking estimated at more than $24 billion THOMAS W. PIRTLE, partner, Lami- about Texas, I’m a BOI Texan, born on in the United States alone. It made nack, Pirtle & Martines L.L.P., Houston: the island, Galveston, Texas. We started In 2006 we spun off from a large law firm our firm, Martin, Disiere, Jefferson and landfall in Galveston on Sept. 13 as called O’Quinn, Laminack & Pirtle. We Wisdom almost ten years ago, but our a Category 2 hurricane with winds of try probably some of the biggest cases out years of experience and expertise is much 110 mph and left in its path massive there, including pharmaceutical litigation, greater. We have offices in Houston, Dal- destruction. With all this destruction insurance bad faith, tobacco, you name it. las and Austin. Our firm has successfully comes the issue of insurance. If you And in 2006 we decided we were going to defended many insurers in first party bad want a spirited debate in Texas, all do our own thing. But before we did that, faith cases. And we have a long line of pub- when we were doing breast implants, we lished decisions we’ve obtained for insur- you have to do is get people talking also had an office in New Orleans. And we ers, essentially defining insurance cover- about insurance. That’s what Texas did breast implants and Fen-Phen down age under homeowners’ and commercial Lawyer’s business department did on Canal Street in New Orleans. I’ve tried policies under Texas law. For example, when it hosted a roundtable in Hous- quite a few cases down there. And, see, the our firm had the privilege of defending ton to discuss the insurance issues long and short of it is we lost our New State Farm in the Fiess matter in which the arising out of Hurricane Ike. What Orleans office lock, stock, and barrel. And Texas Supreme Court concluded that the that was in Katrina. So we have some Texas HOB policy form did not provide follows is the discussion, edited for friends down there. We got with them in a coverage for mold. Some say we wrote the length and style. consortium of law firms and started doing book on Texas insurance law, and we’re this type of work and through Katrina and still writing. MIKE ANDROVETT, moderator, through Rita now into Ike. We just kind ANDROVETT: Well, gentlemen, you’re attorney and owner of Androvett Legal of fell into it and thought that Ike would living it, many of the folks in this room are Media & Marketing, Dallas: Panelists, if be good work to do, too. Then we would living it, but for the record, to set the stage you would, please introduce yourself and talk see some of the same patterns develop in for our discussion, Hurricane Ike arrived in a little bit about the nature of your work. litigation. Those insurance companies — September of 2008 and eventually became CHRIS LEAVITT, Associate, The Buz- of course, I’m a plaintiff’s lawyer — tried the third most destructive hurricane to ever bee Law Firm, Houston: The Buzbee everything in the world to keep from pay- hit landfall in the U.S. On a personal note, Law Firm specializes in contingency fee ing in Katrina and Rita. do any of you have experiences with Ike that cases involving commercial litigation, J. STEVE MOSTYN, partner, Mostyn you want to share before we start getting into Jones Act and maritime matters, and Law Firm, Houston: Our practice has the weeds? catastrophic injury. Our firm is led by been for quite a while insurance litigation. MOSTYN: I was out of my house, I guess, Tony Buzbee, named one of the top five David Disiere, who is to my right, is a for 12 weeks. My wife wanted to know if commercial litigators in the state, and defense lawyer. He’s kind of like the coy- I knew the saying the shoemaker’s kids go one of the leading maritime attorneys in ote and the sheep dogs are sitting up here. without shoes. And can I bother to work the U.S. Under his leadership, our firm I plan to be the sheep dog. But we’ve been on our claim for a little while instead of has collected over $500 million in under doing cases against each other for about everybody else’s. I’ve told my clients that five years. We’ve gotten involved in the ten years. And this has been our bailiwick I’ve seen the play 2000 times, but this is With more than 25 years of Trial Consulting experience, HG Litigation Services Trial Web Repository introduces Trial Resource Trial Presentation and Graphics as your one-call source for all your trial support needs. The Resource for all your trial needs. www.trialresource.com 888.858.0234 2501 Oak Lawn Ave., Suite 600; Dallas, TX 75219 May 11, 2009 1 Special Advertising Supplement Insurance Law, Post-HurrIcane Ike the first time I’ve been in it. So it wasn’t a initial work in paying insureds for covered very pleasant experience. Our office and repairs. Some insureds and homeowners I know y’all’s offices were damaged. And are having trouble getting repairs done I know that gives us good perspective on and putting contractors in place. So it’s cases. taking time to get that done. Reinspec- PIRTLE: Yeah. And from my perspective, tions are talking place and supplemental we lost a roof on our house in Memorial, payments are being made. But we’re also believe it or not. And it rained down the getting to a point where insurers are mak- middle of it. So we lost some stuff that ing decisions on disputed claims. Every- we care about. And we lost part of the thing is being paid that is owed under the roof on our building over on Montrose. policy. But there may be some gray areas But, it was the personal stuff that mat- where compromises are being made. And ters. And I think that’s one of the things then there are some areas where there’s a that you can’t replace when you’re dealing coverage dispute, specific exclusions in the David D. Disiere, a partner with these people. You lose photographs policy, for example wind versus flood. And in Martin, Disiere, Jefferson & and stuff that you just can’t pay enough whether there’s coverage for the loss or the Wisdom, L.L.P., is a leading money. part of the loss. We’re getting into some LEAVITT: Absolutely. Both my firm and of the minutia of the claims under both practitioner in the area of com- my family had losses as a result of Hurri- the policy and in the facts. And we’re get- plex insurance coverage issues cane Ike. Watching storm damage on TV ting to the point to where demand letters and related litigation with over is one thing, but you gain a totally dif- are being sent, lawsuits are being filed, and ferent perspective when you are standing there’s a lot of work being done in between. 20 years experience. He is an in a FEMA line, waiting for bags of ice, That’s where I’m doing a lot of my work Adjunct Professor of Property and worrying about the damage to your right now, assisting carriers in evaluating and Casualty Insurance Law at home. It’s something we’re still dealing claims, trying to resolve the claims and the University of Houston Law with. Our offices are still being rebuilt. So looking at creative solutions rather than this is something we take very personally, jumping straight into litigation. I’ve heard Center. He holds an Associate in and something that is helping us better of claims counts in the range of 750,000 Claims (AIC) designation from represent our clients. to 900,000 or more claims. Even with a the American Institute for Char- DISIERE: We had very minor dam- small percentage of lawsuits arising from age at home. Our office was without air the storm, the numbers could prove tered Property Casualty Under- conditioning for a while, but many of overwhelming for the court system. And writers. In addition to receiving our partners, Dale Jefferson in particular, that’s being addressed by the courts. For an AV Rating from Martindale- took great pride in getting into the office, example, the Galveston County courts Hubbell, Disiere was voted a after church the Sunday after the storm, have a standing abatement and mediation to serve our clients. But we have experi- order in place. Perhaps we’ll talk about Texas Super Lawyer by Texas enced it. And certainly there’s a lot of blue that more. The Beaumont courts and Monthly Magazine for 2007 and tarps still around the City of Houston and Jefferson County have assigned specific 2008 and was also recognized throughout the state. I’ve had the oppor- insurance companies to specific judges for tunity to drive up north, and you can see discovery purposes. And in Houston they in H Texas Magazine as one of how widespread the damage is and repairs had a meeting on Monday for the Harris Houston’s Top Lawyers in Insur- are still on the way. No doubt, the storm County courts. We’re still trying to work ance Coverage and Litigation in has had a significant impact in Texas. out some of those issues. So I think we’re at 2007 and 2008. Lastly, he was ANDROVETT: Can you give us a state a point where creative solutions can come of things here at early April 2009? I would into play in resolving claims. I’m working recognized as one of the leading imagine that, for example, while there have with my clients in getting those settled lawyers in the U.S. in the ﬁeld been some lawsuits filed, maybe many more that need to be settled and those where of Insurance and Reinsurance – are on the horizon? I’ve read something that coverage is or may be afforded. Or if it’s Natural Disasters by The Legal says there have been over a half million clearly a claim where coverage is excluded, claims filed. The everyday work that you do, a dispute as to damages, the appropriate or 500 US: Volume III (Litigation) 2007 what are you seeing in terms of response to reasonable and necessary repairs etc. then and was selected by his peers for Ike? those may be claims that simply need to inclusion in the 2009 edition of DISIERE: What we are seeing is that be litigated, if we can’t get them resolved. initial inspections have been done. Insur- MOSTYN: This is where David and The Best Lawyers in America® in the ance carriers have been out. And most of I begin to disagree, as I checked in as a specialty of Insurance Law. them have seen the houses and done the sheep dog. People begin to realize that the 2 May 11, 2009 Special Advertising Supplement Insurance Law, Post-HurrIcane Ike little piece of payments that they receive of the claim supervisors from TWIA, who from the insurance companies don’t cover was terminated, in my office for three days the damage to their house as the contrac- explaining the design process on how they tor actually shows up to do the repairs. were told not to do the right thing. Now, They’re tired of dealing with their sixth the commercial claims like Tom and them or seventh adjuster. They’re tired of wait- are working through, those processes do ing. They’re tired of losing tenants under work a little better. So try to get with your their lease agreements that allow the ten- adjusters and so forth. But on the residen- ants to get out if after six months they’re tial side and on the ones where there’s been not able to get back in. And they’re now denials, it’s clearly been underpaid or they beginning to contact attorneys. David’s haven’t paid you yet. They pay because position, the carrier’s position, will always they have to in a lawsuit, is my opinion. be that it’s gray areas or concerns. I’ve got And so they don’t pay you because they people that testified Monday in the Sen- like you, and that’s unfortunate. And that ate who were still homeless because the is the situation we are in. We have the Chris Leavitt received his un- insurance company refuses to pay them highest homeowner rates in the country dergraduate degree with Honors from Rita. And so the house is gone. I in this state. Florida is lower than us. And should have brought some pictures. That’s they look like a jigsaw map puzzle when from the University of Texas in not a gray area. But it’s just the insurance you look at the hurricanes. We have the companies. loosest regulation on insurance companies 2002 and is a 2005 graduate of ANDROVETT: Tom, Chris, what are you on the writing side. This is a predatory seeing? market for insurance companies. the University of Houston Law PIRTLE: Well, right now, if you want to ANDROVETT: Steve, I sense some frustra- Center. During his time in law talk about the way claims are progressing, tion from you. we’re dealing with adjusters. And, in fact, MOSTYN: I’m tired. I was at the legis- school, Chris completed clerk- we’re dealing with adjusters right now on lature until 1:30 last night. Came in, did one of the bigger commercial claims we’ve an interview on CNN. Our firm mediates ships for the Harris County Dis- got, because I looked over there and one 50 of these cases a month from Rita that trict Attorney, The Buzbee Law of my guys is not here. So I know where we’re still trying to get through. And you he’s is. It’s this process of trying to get the hear the same story over and over again. Firm, and the Honorable Lynn H. claims adjusted and trying to get their And after a while when the 200th person adjusters, which they switch off over and tells you the same conduct, you begin to Hughes, United States District over. Again, I’m sure it’s for good reason. think that might be bad. And to see eye to eye with your adjuster. ANDROVETT: Now, 750,000 claims? Judge, Southern District of Texas. So we’re in that process right now. And Is it unreasonable to believe that this is an After graduating from law school, we’re not to a point where we’re in full- extraordinary event and maybe the process- blown litigation, although Harris County ing of claims goes a little slower and that Leavitt went to work for one of is fixing to consolidate. there’s not any hidden agenda on the part of LEAVITT: I agree with Tom. The sense the insurance companies? the largest commercial real estate that I get from the people we’re dealing DISIERE: As the lone defense attorney ﬁrms in the nation, where he ne- with — and I was at a town hall meet- up here, let me address a couple of things ing last night in Texas City speaking with and that question as well. Seven-hundred- gotiated agreements for more than homeowners — is that there is a lot of and-fifty-thousand or more claims. If you confusion out there. And people don’t can imagine the magnitude and the claim $2 billion in commercial real es- understand exactly what their options force that had to be put in force on short tate transactions. After deciding are. People are still waiting to see if TWIA notice, the catastrophe adjusters. They’re and the other insurers are going to do the on 24-hour notice. They’re called to leave he wanted to pursue plaintiffs’ right thing and come up with adequate their homes and families wherever they sums of money to fix their homes. And I are in the country, and you have an army work in 2008, Leavitt joined The think we’re still waiting for the onslaught of adjusters flooding into an area within of cases. days after the storm. In fact, they’re en Buzbee Law Firm, where he had MOSTYN: After 12- to 1500 of these route even before the storm is occurring, been a Law Clerk in 2003. He was cases in Rita, my experience was telling heading this way toward the storm to start me that after seven months, if they have adjusting claims, trying to get claims paid brought in to head the ﬁrm’s Hur- not done the right thing, they are not and handled. So one of the things about a going to do the right thing. I’ve had one house totally destroyed — we’ve all seen, I ricane Ike Claims division. May 11, 2009 3 Special Advertising Supplement Insurance Law, Post-HurrIcane Ike think it was on Boliver Peninsula, the one ratios of any state, which means profit for house sitting alone. Why? Because it was the insurance companies in Texas is one of elevated above the rest of the homes on the highest. the peninsula. And when the surge came PIRTLE: I agree with that. There are through, the flood waters came through, 750,000 claims. But they are collecting it wiped the rest of the houses off the pen- 750,000 policy payments, too. And that insula. So what you’ve got left in that one was no problem processing. And I under- area is a house that withstood the wind, stand that it’s easier to count money than but the rest of them couldn’t withstand the it is to hand it out. But, you brought up surge or the flood. And in that instance Boliver. And I was talking to a lot of you you have a coverage issue. Homeowners’ this morning about some people we’ve got policies exclude damage caused by flood down on Boliver. And the insurance com- waters, essentially, the surge. And it’s a pany comes in, and they offer 11.2 percent tough decision for those adjusters coming of the face of the policy. The lady we’ve The Mostyn Law Firm has set itself in short notice. I was an adjuster, by the got that was one of the homeowners in the apart in the ﬁeld of Plaintiff’s First way. I handled claims by day and went to homeowners association, she knows all Party Bad Faith Insurance litiga- law school by night at the University of the people that own the slabs left around Houston back in the late ‘80s. But it is the here. And we started asking around, and tion. Its founder, Steve Mostyn, easiest thing that an adjuster can do is to sit they offered everybody within about a is from small-town Texas: grow- down with the homeowner and write that 3-square-mile radius 11.2 percent of the ing up in Whitehouse, near Tyler. check. They are happy, they smile, they face value of the policy. Boy, that don’t After attending the University of thank you and they bless you and your take a lot of adjusting, does it? children and your children’s children. But DISIERE: Was that the flood policy? Texas for his undergraduate degree, it is a tough decision whenever you have MOSTYN: It’s the TWIA policy. And we Mostyn graduated cum laude in to look at the facts of the loss and apply it can account for eyewitness testimony. Just 1996 from South Texas College of to the coverage afforded by the policy and to give you an example of TWIA and Boli- Law. He immediately went to work tell that insured, “I’m sorry. There’s just ver and the exempted home insurers, right no coverage for your flood damage. I can down on the coast they make TWIA do it, at a Houston plaintiff’s law ﬁrm, pay for this, but I can’t pay for the flood so they don’t have to write risk coverage. but left in 1999 to start his own damage.” That’s a tough position for both Let’s talk about TWIA and Boliver. ﬁrm. The Mostyn Law Firm’s mis- the insured and the adjuster to be in. The ANDROVETT: And tell everyone what sion is to level the playing ﬁeld for people that I’ve worked with are trying to TWIA is. do the right thing. And that’s why we’re MOSTYN: Texas Windstorm Insurance individuals and businesses against always looking to these creative solutions. Association. multi-national corporations and in- Litigation, I think, if it’s premature, is ANDROVETT: And they basically are surers. Mostyn has handled literally counter-productive because there are still insurer of last resort? thousands of ﬁrst party insurance things to be done and new adjusters com- MOSTYN: Insurer of last resort on ing in. Why do you have five adjusters? the coast. This year, the only possibility claims. The vast majority of these Because those people that came in on the becoming very quickly, because if you’re cases resulted in extra-contractual surge had to get back home to their fami- an insurance company, why write what’s damages for his clients, going far lies. Claims are returned to the normal risky when you can just write the stuff beyond expectations. The Mostyn claim units. And you get different, spe- that’s not. So let the state association pick Law Firm represents families, cialized people assigned to the remaining that up. But if you’re with TWIA and tasks. Believe it or not there’s still an ongo- you have lifted or torn shingles and you churches and businesses through- ing effort by the carriers, at least those my got your claim processed before Decem- out the State of Texas in ﬁrst party firm works with, to try to pay what they ber the 18th, you got paid. If you’re with insurance litigation, a variety of owe, nothing more, nothing less, because TWIA and you were after December 18th commercial litigation disputes and there is a duty to the other policyholders, and you had lifted or torn shingles, you like Steve said. Premiums in Texas in this did not. Why? Because they changed complex, serious personal injury area are some of the highest in the coun- the policy. Not your policy, “the” policy. cases. The Mostyn Law Firm has try. And do we want to be paying claims Why? Because it costs too much money. handled or is handling thousands where no coverage is afforded and all of That’s not a difference. That’s what’s going of Hurricane Rita claims and has those other policyholders ultimately being to come out in this litigation. So State responsible for higher premiums because Farm, one of David’s clients, advertises already been retained on hundreds uncovered claims are being paid? in their television commercials that they of Hurricane Ike claims. MOSTYN: We also have the lowest loss have 5,000 cat adjusters. Remember on 4 May 11, 2009 Special Advertising Supplement Insurance Law, Post-HurrIcane Ike Sunday while we’re all watching football; for how Hurricane Ike will play out? we had to watch State Farm advertise PIRTLE: Well, if you look at what hap- every game. And they’re telling you 5,000 pened, of course, obviously a devastating cat adjusters. Come on. Trust me, if State event for the City of New Orleans and Farm had 200,000 claims, that is 40 each. the whole south area down there. You’re Seven months. Your insurance company hearing some of the same stuff. The les- owes you a duty before you make the son we’ve got to work on whether or not it claim to be adequately staffed and pre- was wind or whether or not it was water. pared to meet a disaster. They are in the Now, that’s a pretty standard trick. And hurricane business. It’s kind of like if we in Katrina and Rita, that’s already been, I got invaded and the military says, “Did think, won. And you’ve got to watch what anybody see those rifles? Because I didn’t you’re doing or they’ll say it’s water when know we were going to get invaded.” You it’s really wind or rain coming in from get prepared in case, and then they say shingles on the roof. like Tom said, “Oh, we didn’t know this ANDROVETT: And explain — and I Thomas W. Pirtle, a partner was coming.” Well, of course you knew. know we’re going to talk a lot about this in Laminack Pirtle & Martines, That’s what you advertise. That’s the secu- — but for someone perhaps reading Texas L.L.P., is a nationally recognized rity you sold these people. TWIA told Lawyer newspaper that is not conversant in me that the other day in the mediation. insurance law and this issue, what’s the big trial lawyer who has won a num- I said your symbol is a hurricane behind deal about the difference between wind and ber of ground-breaking verdicts in the state of Texas. You didn’t know there water? cases involving defective medical was a hurricane going to come? Come on PIRTLE: It’s coverage. In most policies, if guys. So we have very different views on the water comes in your house because of devices and pharmaceutical prod- that. Don’t get me wrong, some claims the flood, it’s not covered. But if the water ucts. From 1990-2006 Pirtle was a get paid. You’re going to have neighbors comes in your house because your roof senior litigator with the law ﬁrm and friends who got paid fine. But what is bad or from another defect up there, we have seen is if your case got off in the then it is covered. And so the pressure is, of O’Quinn, Laminack & Pirtle. ditch right at the start, if the first guy came with the folks and what they tried to get During his tenure at the O’Quinn through who didn’t have the ladder and he these adjusters to say, is that there’s a water ﬁrm he worked in the ﬁrm’s mass was supposed to get on your roof and he’s intrusion, not wind driven water or water standing on a bucket outside your house driven by wind. So that’s one of the big tort division which encompassed looking up at the roof, and once it got in ones. And we’ve got to determine whether a number of medical device and the ditch, there’s no process to get it out. they’re covered. pharmaceutical dockets where he LEAVITT: Steve brought up a good AUDIENCE MEMBER: What’s the rela- point. There’s actually an internal memo tionship between the state of Texas and the became a recognized leader in es- circulated by TWIA that after a certain Texas Windstorm Association? It’s my under- tablishing corporate liability in date they’re not replacing roofs unless it standing it’s not really a private thing; it’s a complex cases. Pirtle has served has physical loss. And I’ve heard this fig- governmental insurance entity. I don’t know as trial counsel in a number of ure of 750,000 claims. And I do think how much of these claim adjustment issues TWIA has been totally overwhelmed. are driven by government problems or pri- ground-breaking cases includ- And the adjusters they are sending out, vate insurance company problems? ing some of the ﬁrst jury verdicts I’m sure like anything you have good and MOSTYN: It’s not a government entity. awarding damages to women in- bad adjusters. But, we’re finding that there It may become one, but it was set up as are adjusters going out to look at damaged an insurance of last resort for windstorm. jured by silicone breast implants homes that have very little experience, The TWIA system has funds. And then and a record setting historical who six months ago were selling home after they go out of their funds, they tap verdict awarded to the family of a mortgages or in the car business. So, it is a into a secondary group, which is a drop problem with the homeowner not getting on the other carriers, and then they go woman who died as a result of her a fair adjustment. And this is not because to reinsurance, and then they come back ingestion of the “Fen-Phen” diet the homeowner did anything wrong or to the other carriers, who then get a tax drug combination. Pirtle received wasn’t thorough enough, but because they premium credit. TWIA can be sued. And got a bad adjuster. my position — and we haven’t lost it — a Bachelor of Science degree from ANDROVETT: Tom, earlier you had is that they’re under the same laws as the Stephen F. Austin University and mentioned Katrina and Rita. The response other carriers. The interesting thing about graduated from South Texas Col- among insurance companies, claimants, the TWIA is that they drop on the other carri- legislature and the courts, any lessons there ers. Take Texas Farm Bureau, for instance, lege of Law. May 11, 2009 5 Special Advertising Supplement Insurance Law, Post-HurrIcane Ike Texas Farm Bureau has a 15-million- coast. Then you have also the exclusion dollar retention policy. Before the wind for flood because while these are risks that quit blowing, they were through their insurers take, as a private entity, they are 15-million-dollar retention. They went not well suited to absorb that magnitude to reinsurance. These are local insurance of a loss, the potential of these losses. companies. They’re at 161 million into So that risk has to be underwritten and a billion dollar retention of reinsurance shared by insurers rather than isolated policy. The very good news for those car- homeowners getting that type of cover- riers is when they talk about losses, it’s age through private insurers. The same really not their money. They went into thing with the flood insurance under reinsurance. And when TWIA does a the FEMA program. If you have a flood draw on them to pay for the other claims claim under the flood policy, that is actu- that is part of the deal is you don’t have ally handled by “write your own” insurers, to write the cost but you’re going to have insuring entities like State Farm or Farm- Mike Androvett is in business to pay for it if we get above everything. ers, are handling and paying claims. But to make sure that his lawyer clients So when we do a draw up on these guys, the actual money is coming from FEMA, get positive news coverage and their it’s really coming from the reinsurers, but through the national flood program. Any law ﬁrms are marketed effectively they’re getting tax refunds from the state they have limited immunity in relation to through advertising and public re- of Texas. So it’s a pretty sweet deal. I’d like extra-contractual claim handling related lations. Androvett is the founder of to add I’ve thought maybe I should switch claims. So there’s immunity for FEMA sides and I was going to call my company and claim handling activities. You can’t Androvett Legal Media & Market- something like “horrific insurance.” Do sue for state law tort claims, such as bad ing, the largest public relations and some honesty in marketing. faith for FEMA for the handling or mis- advertising ﬁrm in the Southwest LEAVITT: I think the TWIA v. Poole case handling of a claim. And by the way, the exclusively devoted to lawyers and which came out of the Amarillo appeals FEMA guidelines, proof of loss, and those the legal profession. Established in court in May of last year addresses what types of things are very strict. So if you’re 1995, Androvett Legal Media serves you’re talking about. In that case it states helping homeowners with that, be sure the specialized needs of law ﬁrms in that TWIA is a government agency for that you know what the policy requires private insurers. The private insurance and make sure that the insureds comply, communications with outside audi- companies pick the officers, however, they because you’re dealing with the federal ences, including news media cov- are under the supervision of the Texas government and a well established body erage, brochures and Web sites, Department of Insurance. And basically of law. There is a recent case, Campos v. and sophisticated advertising of all that’s a private insurance business oper- Allstate, which talks about an exception to kinds. Androvett’s ﬁrm assists law- ating under a government cloak. Under the tort immunity for negligent procure- yers in virtually all areas of practice Chapter 2210 of the insurance code it ment claims; that is the agent knew that while observing the highest ethical states if you’re an aggrieved person you can he was supposed to get the coverage or either go through their appeals process or the carrier was supposed to get the flood standards. Lawyers and their clients a private action. And this case confirmed coverage, and they failed to do it. That who receive media training from that and said you do not have to exhaust falls outside. So there are a few exceptions Androvett Legal Media are much all your administrative remedies to bring to that immunity. And I’m assuming the better prepared to deal with report- an action against TWIA, even though same thing exists with TWIA. I haven’t ers and TV camera crews. And, as a it’s not your standard private insurance done a lot of work with that, but certainly former chairman of the State Bar of company with a registered agent, etc. It is be aware of that flood coverage. Texas Advertising Review Commit- available to be sued. MOSTYN: David brings a very good ANDROVETT: So TWIA is available to point for the practitioners in the room. tee, his expertise and experience is be sued? The flood policies, which are paid by essential to ﬁrms seeking to comply MOSTYN: Sue them. FEMA, have some extremely strict dead- with the state rules governing law- DISIERE: Typically, what you have is lines in them. And so those of us who are yer advertising. Androvett and his TWIA and the National Flood Insurance used to filing lawsuits within two years team take the mystery out of public Program. They’re kind of similar. TWIA have got to be very careful on submitting relations and advertising by recog- on the state basis, the enabling legisla- proof of loss, because the deadline has nizing law ﬁrms’ true goals and pro- ture, as Chris mentioned, is in Chapter been moved to June 8th. So the difference 2210 of the Texas Insurance Code. And is with TWIA, TWIA wants to be the fed- viding the know-how to make them that addresses windstorm. Windstorm is eral program, but they’re not. So they can happen. He can be reached at 214- excluded under certain policies, typically be sued. What difference does it make? 559-4630 or email@example.com. standard homeowners policies along the Well, they are subject to the common law 6 May 11, 2009 Special Advertising Supplement Insurance Law, Post-HurrIcane Ike tort of bad faith. They’re also subject to members of the panel may agree with it, but so they know you’ve got to buy the prod- the statutory requirements underneath the I feel it’s relevant. And that is in the current uct. And so I don’t see the customer aspect article insurance codes 541, 542. What economic climate — AIG immediately comes so much sometimes. difference does that make? It means you to mind — it’s reasonable to conclude that DISIERE: Can I just respond real quickly? get attorneys’ fees, penalties and interest, many insurance companies are struggling We’ve got TWIA and we’ve got FEMA, and possibly travel. That’s the big differ- due to their outside investments and the tie which illustrates the fact private insurers ence. They want to be. Believe me, they up of credit. Does that have an impact on are the preferred entities to protect our talked to me all the time, but we’ve done an insurance company’s desire to do what is interests with limited protection from quite a few cases against TWIA through right by the premium payer or to slow things FEMA and TWIA where risk from cata- resolution, and they just don’t have those down? How do you reconcile that? strophic losses arise. And if we can keep protections. And I’m working with the DISIERE: I just don’t think it does. And private insurance available, it does relate legislature right now making sure they here’s why: Insurance companies are a to a customer, but I’ve got to tell you, I don’t get them. business. Policyholders are customers. And worked catastrophe duty as an adjuster ANDROVETT: Can any of you describe you can’t stay in business very long if you when Hurricane Andrew hit Homestead, how successful the process is to file a claim cheat, lie, and steal from your customers. Florida. It just missed Miami by a few through TWIA, as opposed to through pri- You have to pay claims that you owe, but miles. Multiple insurers went into bank- vate insurance companies? Any quicker? Any you have to be prudent in that process. We ruptcy. And I understand that for many slower? Any particular nuance? have to look at the facts of the loss and other carriers, any profit that had been MOSTYN: Pirtle and I are like, you’re the coverage afforded. It’s a contract with earned from 20 years before up to the day going to hire attack dogs. We’re not going your insurance company called an insur- that Hurricane Andrew hit Homestead, to go through the administrative process. ance policy. And if the facts of your loss fit Florida, was wiped out. So anything that I haven’t done the administrative process within the policy, you should be afforded was made over the past 20 years suddenly with them. We generally go to private coverage. They should take care of the became zero or a loss. That’s a scary prop- causes of action. customers. They should provide prompt, osition whenever you’ve got homeowners LEAVITT: There’s no question the admin- fair claims service. I sound like I’m preach- relying on their insurance carriers to pay istrative process is a lot quicker. As soon as ing, but I’ve done this myself. And I know many other types of claims. You want car- you receive notice, it’s generally scheduled that that’s truly the goal, at least from my riers to charge adequate premiums, not within 30 days. So absolutely it’s faster. If perspective, and the carriers that I work excessive but reasonable, to be able to pay it’s more beneficial to a homeowner, that’s with. those claims. And because of solvency, a different story. We advise our clients to MOSTYN: I would like to address the there is a lot of money flowing into the not elect the administrative process. very good news that AIG and companies area. There’s a lot of work being done. MOSTYN: The reason I don’t do admin- like that were never allowed to get their There are some claims and I know there are istrative process is if anybody wanted to property insurance companies and so disputes. But for the most part, efforts are come to me, I can settle my entire docket forth outside of state regulations. So the being made and billions are being paid to tomorrow for $500. Speed is not what my state regulators kept these guys properly people to restore the insured, to pay them people are looking for. They’re looking to reserved. American General, for example, the amounts owed under the policies. get their businesses and homes paid for, which is owned by AIG is in very good AUDIENCE MEMBER: I’m just curious. and get back. So while I have not been shape. It’s AIG, the parent on top, that I heard on the news sometime not too long through the TWIA administrative pro- got in trouble. I think State Farm has got ago that State Farm is actually no longer cess, I have been through other adminis- 48 billion in assets last time I looked. For writing homeowner policies in Florida, and trative processes, which have not been full example, when we got ready to try the first that it was a business decision. Would you recovery. I don’t believe the administrative State Farm case after Katrina, Rita, and all give your take? process allows for penalties, interest and the hurricanes that had hit the coast, State DISIERE: I’m sorry. I just don’t know. attorneys’ fees, to start with. So if you Farm had still recorded a profit of 3.7 bil- MOSTYN: I heard the threat. The dif- need a hundred dollars to get your house lion dollars. Now they like to go around ference is the argument on our side has fixed and you’ve got to pay me $25 of it, saying they lost 1.3 billion, because they gotten a lot better, particularly in the way you’re still $25 short on your house. projected five. But it’s still a very profit- insurance companies deal with their prof- PIRTLE: If you go through the process able business. As for their customers, the its, particularly AIG. In 2005 State Farm and you can’t get a resolution, which you problem with insurance and the reason has the worst hurricane season we’ve seen probably won’t get a resolution because that it’s regulated is that it’s a mandatory in 40 years and the CEO gets 11 million they won’t be fair, you end up right back purchase for most people. It’s like you reg- dollars in profit. There’s no money left the same place where you started, just a ulate industries that’s a required purchase, in the company. So that’s why you’ve got little bit later. So I don’t like it either in such as electrical. Most any homeowner to regulate the hell out of them because any way, shape or form. that has a mortgage is going to be required they’re going to go and take it. The free ANDROVETT: David, you might take to have insurance. And we have to have market without any regulation has proven issue with this question, and the other insurance in case of fires and so forth. And that those in charge will take the money May 11, 2009 7 Special Advertising Supplement Insurance Law, Post-HurrIcane Ike and go do something else with it. So that’s so great insurance companies were leaving the most part, and that is if there’s wind much easier, from the litigation side, to Texas, they were finally allowed to write damage, they’ll pay for the wind damage. stand in front of a jury and say that the their own policies. It’s called file and use If flood comes in, for example, you can see insurance carriers didn’t do what they’re and very few still use the HOB policy a three foot waterline through the house, supposed to do. And it’s a much more form. So you have to understand that if that flood damage is excluded or needs to receptive audience than we used to have. you’re reading the case law, there will be be paid by the flood policy if the insured PIRTLE: With the current national feel- issues with different types of policies that has one. Based on wind speed measure- ings about corporate irresponsibility, have different wording. You’ve got large ments, the winds weren’t too severe. The you’re going to see some massive jury body case law interpreting the HOB pol- surge or flood damage was much more verdicts and awards come out. And if it’s icy form, but now you have different poli- devastating. Wind damage is usually against these insurance companies that are cies and they have different language. You minor in this storm, with exceptions for not doing what they’re supposed to do, so mentioned the issue about wind versus some tornadic activity and isolated gusts be it. But as a whole trend, I think you’re flood. Well, there’s a clear exclusion about because the winds overall weren’t that going to see juries more critical of corpo- flood. But there is also, you’ll find in some severe. rate America because they see we’re losing policies, something that you didn’t see in MOSTYN: Did you go down there? money. We’re losing money or we can’t homeowners’ policies before, anti-concur- PIRTLE: They were a hundred miles or make ends meet. But now we pull back rent cause clauses. There’s a doctrine of more. They blew the whole roof off my the curtain and look back there at what’s concurrent causes in Texas. Let’s say it’s house, and it was thrown. going on. They’re all back there having an all-risk insurance policy. Everything DISIERE: I will say there are certain areas a drunken orgy rolling all over money. is covered except what’s excluded. Then where, yes, there was some severe winds And that’s what the people believe. And you have a flood exclusion, and then you and those claims should be paid under the so these days when folks are talking about have exceptions to the exclusion. And if coverage afforded through TWIA or pri- going to trial, I say, “Well, let’s go.” I want a loss is caused by more than one cause, vate insurance as applicable. to put it in front of 12 people any and e.g. wind and flood, that presents concur- PIRTLE: Did y’all hear that, all this exclu- every chance I can, because I believe that rent cause issues. Two events may have sion to the exclusion and exception to the American is tired of this corporate greed, caused the same damage. And it’s the exclusion that he just talked about? How this corporate irresponsibility and it bleeds insurer’s duty to pay what’s covered and in the world can the average homeowner over into the insurance companies. What deny what’s excluded. But what the poli- stand a chance to try and get money out we saw with Katrina and what we saw with cies have in them now, are anti-concur- of that? You’ve got to go help these people, Rita, at least in the city of New Orleans rent cause clauses that you have not seen and I feel passionate about this. I didn’t and Louisiana, was the judiciary in my in homeowners’ policies before. And they understand half the stuff. However, I’ve view became friendlier to our causes, too, typically provide a lead-in to the exclusion had to get it going inside my head. It was because they understand. These people are that says, “We do not cover regardless of going too fast. hurting, and they’re getting mistreated in whether before or after the loss or in any DISIERE: So do we have insurers a lot of regards. And they want to see the sequence to the loss, the following causes throw out the contract and simply pay people compensated. And I believe you’re of loss.” It doesn’t matter if there were two everything? going to see that in Texas, and I hope we causes or events. If the excluded cause or PIRTLE: No. But we get one that’s rea- see it going up the appellate line. event was an actual cause of the loss, the sonable for folks to read that’s not negoti- ANDROVETT: And what are going to be entire loss is excluded — there’s a case, ated on just one side. those issues? We talked about wind versus Wong v. Monticello, which talks about it MOSTYN: Yes. The reason that the pol- flood. What are the coverage issues that are and upheld the exclusion under an anti- icy is written the way it is — and it’s not likely to take up the time and trouble in the concurrent cause provision. But issues quite that complicated — it is extremely courts in the next few years? may still arise regarding coverage for the complicated. But you have main perils. DISIERE: I’ll start with that, but I want loss even where you have an anti-concur- And one of them is windstorm. So put it to just respond by stating that the insur- rent cause clause because the excluded underneath windstorm. If you can’t find ance industry in the state of Texas is one event must actually be a cause of the loss. an expert to put it under windstorm, I’ll of the most tightly regulated industries in So there’s a lot of coverage issues that are send you one. But anyway, that’s a joke. Texas. Insurance and perhaps banking. But going to be coming out of these policies The time we get to this particular policy in terms of the coverage issues, I’d like to and the courts will need to address them. was deregulation in 2003 by the insurance address some in the homeowners’ context. ANDROVETT: David, in practice, does market. They needed to exclude mold, but Because for 20 years or more, in Texas, up that mean if the wind comes in and blows they excluded everything else, too. They until this most recent decade, the hom- off your roof then subsequent down the road took a hatchet where a scalpel should have eowners’ policy form was an HOB policy there’s some water into the house, coverage is been done. I’ve heard this low wind story form, a state mandated policy form. And excluded? before. When we went to try that case after the problems with the mold cover- DISIERE: Well, in that event I under- against State Farm, and one of David’s age or mold claims, where the losses were stand what carriers are typically doing for clients, they actually flew an old boy 8 May 11, 2009 Special Advertising Supplement Insurance Law, Post-HurrIcane Ike down from Lubbock who wrote a report, after the hurricane and those things were closely is the case that’s currently before charged them $26,000 to write a report there, the adjusters don’t want to take that the Supreme Court, Johnson v. State Farm. and say there was no hurricane. Finally into account. Right? They said, “Well, And it’s going to decide whether if your they said there was no hurricane in Hur- that must have been foundation settling.” claim gets pulled into appraisal, what the ricane Rita. I’ve got the local weatherman Well, it wasn’t there before the hurricane. appraisers, and essentially the umpire, from CBS. He came out and said, “Yeah. The house was fine. Then there’s a hurri- might be able to decide. It is going to There was a hurricane.” It just so hap- cane, and then it’s damaged. And unless determine whether the meaning of the pens that the jury panel had actually been they want to come in and call your client term amount of loss includes the extent through the hurricane. So it was a little a fraud — in the first case we started was a of loss. The original case is saying that the easier to explain to them there was a hur- doctor — and say they’re lying, then have extent of damage is a part of the amount ricane. Kind of like trying a bus rollover at it. But if not, the best evidence that we of loss. And so that is going to have a case and all the jurors are from the first six know that our engineers can go off of is pretty big impact upon a lot of these cases rows of the bus. It wasn’t that bad. It only a lot of times what our clients, who are because most of these claims are going to flipped four times. So they went down the only eyewitnesses before and after this have issues such as one adjuster claiminga and they tried to de-designate the expert. claim. wall that has a water stain on it can be fixed They de-designated him because they DISIERE: I want to go back to this by paint and assign it a value for a paint were scared I was going to say they hired thought that I said “it wasn’t bad.” I hope I job, and another adjuster might look at it an expert that says that there wasn’t a hur- didn’t say that. There were bad winds. But and assign it a value to replace the sheet- ricane. They tried to exclude me talking they weren’t of the severity of winds that rock. The extent of the damage could and about them having an expert in the first you had with Hurricane Andrew that hit probably will have an enormous influence place that said there wasn’t a hurricane. Homestead. There were areas where winds on the amount of loss. Also, you’re going The problem was all their other experts were very severe. There’s damage in those to have, like David mentions, concurrent and the lawyers relied on the one expert’s areas. So it’s up to some experts or the causes where part of it might be flood, part report, so you can’t exclude them. So we data, the information is there, to analyze of it might be wind, and you’re going to were going to beat the hell out of them the claims on a case by case basis. Because have an appraiser making coverage issues on a no hurricane expert from Lubbock, you can’t paint it with a broad brush. I live when that’s something the courts have tra- Texas, who had himself a very fancy com- in Friendswood, which is right along the ditionally done. puter program. So that case settled. But bay. I boarded up three sides of my house ANDROVETT: Is that a good thing or a that’s what we see. And God bless David thinking I was looking at swirling winds bad thing if the appraiser is making decisions for being the only one up here from the and the direction of the storm. It’s not that courts used to make? defense side. They do not believe the winds scientific. I’m not an expert here. And I MOSTYN: We have to see the outcome. weren’t that bad. They were bad for those thought it would hit the back side or a cer- LEAVITT: I don’t feel comfortable with of you that got damage. Folks, on the cov- tain side. And what happened is the wind an appraiser and the umpire, who are reg- erage side, the biggest thing that I see — whipped around and came from the front ularly retained by an insurance company, and there are differences in the policies. of the house and the other part of my making decisions on whether my house is And it’s one thing you have to know these home I didn’t have boarded up. I didn’t going to get fixed. policies — is wind driven rain. Some poli- lose a window. I had some small trees that MOSTYN: I’m not going to go to cies will cover it. Some policies will cover were blown over. I lost pieces of fence. appraisal, but sometimes if the outcome wind driven rain without what they call There were large trees in the neighbor- is good, we might be happy with it. But an opening, and some won’t. The question hood knocked down. But my home was David and I actually agree with this. I agree often becomes for me, if I set this sealed fine. I bought a generator and was back with the insurance company on the posi- bottle of water here and I come back in in my house the afternoon of the storm. tion in the Johnson v. State Farm, which four hours and it’s empty, does it have an I was one of the fortunate ones. I know is you’re not supposed to appraise cover- opening? The adjusters take the approach that there are people out there that had a age issues. I don’t like appraisal. Appraisal, they’ve got to see it with their eyes. My lot of damage. And I know that there are first of all, for the attorneys in the room, position is if the shingles pulled back dur- a lot of insurance companies and adjust- it’s not arbitration. And that’s been kind ing the storm and caused an opening but ers out trying to do the right thing, pay of the deal. It’s supposed to deal with the then laid back down when the wind quits the claims that they owe, take care of their actual cost of a piece of sheet rock, not blowing, there was an opening. That’s customers, and provide the benefits the whether it was damaged by the hurricane. how the water got in. For your clients the insureds secured or purchased through the And so that’s been unfortunately in the one thing that the insurance companies insurance policy. But it is a contract. We Johnson v. State Farm case, the plaintiff is don’t want to deal with, is if you left your can’t throw that contract out. As confusing pushing the issue. I have seen appraisal home, like I did, and you looked around as some people may think it is, it’s not. It’s used most often by the insurance compa- your house and the ceiling hadn’t fallen in a contract. And that’s what this country is nies to try to block litigation. And so my right before you left and the cracks and founded upon, keeping your agreements. position on those has been that most of the water wasn’t there and you come back LEAVITT: Another issue we’re watching the time by the time they get to me, the May 11, 2009 9 Special Advertising Supplement Insurance Law, Post-HurrIcane Ike contract has been breached or I wouldn’t to keep things moving so we can focus and then an insurance company has got to take the case. to getting the claims paid that need to be be able to protect itself against somebody that DISIERE: The appraisal provision, inter- paid, and litigating those where there’s a says, “Okay. The damage is really this, but estingly enough, there’s a well established true dispute over coverage or causation. I’m going to make it look like this?” body of law going back to 1888 that talks ANDROVETT: We hear the extremes. MOSTYN: If I had to deal with Pirtle to about the appropriate use of the appraisal Let’s see if we can find some middle ground. cover my house in a hurricane, what is clause and what’s not appropriate. The Couple of just quick questions: Tom, you hard about that? clause itself provides that you can use the made a very eloquent, persuasive argument DISIERE: Caused by the hurricane or provision whenever there is a dispute as that the customer out there needs protection. wasn’t caused by the hurricane? to the amount of loss. As stated in the These policies are obscurely written. They’re PIRTLE: Did you see where Mostyn Wells v. American States and other deci- very hard to comprehend. But at some point just wrote in an exclusion to this one- sions, it’s not appropriate to use appraisal that makes me a little uncomfortable that line policy? It is not unreasonable and whenever you’re dealing with causation or I need a protector because I can’t read the certainly not morally unreasonable for a coverage issues. But here’s an interesting policy myself and make decisions. David, homeowner to understand the terms of twist. In the Johnson decision that Chris do you think that it’s reasonable that a cus- the insurance policy. And what we just mentioned, there was a dispute as to tomer should be able to look at their policy heard over here is, well, the law of the what the cost to repair the roof would be. and say, “I understand what’s covered and state of Texas is, because it’s so biased for State Farm estimated the cost would be what’s not?” the insurance companies, oh, the insured $499.50 because it could be repaired. The DISIERE: Well, interestingly, the law in doesn’t have to understand. Well, that’s homeowner says it’s going to cost $6,400 Texas is that a homeowner, once they have not an argument they make in front of a to replace my roof. Well, that’s if the roof secured coverage, they’re deemed to know jury. That’s an argument they make out- is damaged and needs to be replaced. And and are bound by the terms of their con- side the presence of the jury in summary following Ike we’ve seen minor damage tract, whether they understand them or judgment, which is wrong. I have business where roofs can be easily repaired. And not. The state of Texas, the Texas Depart- owners that I represent that own business we’ve seen areas where roofs need to be ment of Insurance, regulates the policies. interruption insurance. They needed help. replaced. And there are efforts to submit They approve or disapprove the policy A lot of them don’t know what products some of these disputes to appraisal. And forms. They mandate language. And there they’re getting. And the reason why the when there are coverage issues, appraisal are certainly insurance policies that are things are 80 pages long is they have to is inappropriate. Did other portions of a challenging to read. But the law in Texas write not what they will cover, but what partially damaged roof sustain physical is that a homeowner, once they have a they won’t cover. damage? Direct physical loss to covered policy, they’re deemed to understand and ANDROVETT: Well, what about the property? And if there’s no damage, then know the terms of the policy, and they’re agent, should the agent be saying more to the it’s not appropriate for appraisal. But let bound by the terms of their contract. customer about: “Now, I want you to look at me go back. I mentioned creative solu- MOSTYN: I think the question was more this. Here’s the eight things that you need to tions. The appraisal clause, if both sides on a moral right or wrong. The question know about this policy?” are reserving the right to dispute cover- becomes — and this is where we diverge. MOSTYN: They should and not only age to dispute causation, but want to find And, at some point, the jury is going to say that, they have an obligation to under the out the costs of repair, appraisal may be I’m going to go with the plaintiff. What DTPA. If you’re in a position of superior appropriate. I don’t think it’s appropri- question do I need to answer? This state knowledge and that information that you ate in the Johnson case, but there may be is the prime example of a state that’s been have would affect the consumer’s decision, instances where appraisal can at least limit hijacked by insurance companies, mort- you must inform them. The agents came to those areas where there’s an “amount of gage companies and bankers. So we’ve got the legislature in 2005 and asked for pro- loss” in dispute. Let’s say both agree the the worst coverages, the worst policies, tection, because the policies had gotten so roof needs replacement. One says it is the highest premiums, and a team of law- crazy in 2003, they didn’t know what they $5,000, the other says it’s $7,000. Well, yers that defend these guys. And so abso- were writing. Let me give you an example: they disagree. They hire an umpire. They lutely it doesn’t take 80 pages to say, “I’ll I went to switch my homeowner’s coverage. determine it is $6,000. There will be a cover your house for a hurricane.” And it And I called my independent agent. I said, $6,000-dollar check that will be issued shouldn’t take a contract. “Hey, I’d like to price this stuff out. Does for the cost of repairs. That’s provided PIRTLE: That won’t work with insurance the policy you’re pricing cover wind driven by the contract, the appraisal provision. companies. rain?” She said, “I don’t know.” I said, There may be other areas and coverages MOSTYN: We’ve got a deal? Tom, I’ll pay “Well, send me the policy. This is what I disputed, and certainly that might be bet- you X dollars per year to cover my house do.” She called me back and she said, “They ter suited for litigation or mediation, dis- unless it gets hit by a hurricane. won’t send you the policy unless I write it. cussion, however you want to try to get ANDROVETT: Isn’t that a little unrealis- We had standard forms.” We had an A, a it resolved. There are creative solutions. tic? Isn’t it also that there are folks out there B, and a C until 2003. Now, we’ve got 200 There are ways to get these things done, who kind of know how to work the system forms. File and use used to be preapproval, 10 May 11, 2009 Special Advertising Supplement Insurance Law, Post-HurrIcane Ike approve it. Now it’s file and use it. And case controls, the duties are twofold; one so many in various aspects of my practice they’re writing ridiculous things in these to write, with few exceptions, to write the going back to the days when you had policies. One example: I had the commis- requested coverage and let the insured asbestosis and breast implants. So I think sioner of insurance sitting in front of me at know if they can’t. It’s that simple. it helps the process and certainly keeps us the table in front of the senate committee. MOSTYN: The biggest problem is the from having getting beat to death with And all of a sudden I realized that this guy agent probably doesn’t know what’s in the discovery. And on the other side, it also is going to answer my questions when I ask policy. My agent didn’t know. She was talk- helps the insurance companies from being them right in front of the senators. And ing to a lawyer so she said, “I don’t know.” beat to death in discovery, too. I under- so I began to question the commissioner But if she says to the person, “Yeah, there’s stand it’s being considered right now in of insurance. And it became pretty clear coverage” because she wants to make the Harris County. that some of these issues like: “How many sale, she just made a misrepresentation MOSTYN: My position — and I think rate cases have you brought against com- to the person. When there are 900,000 it came out of the Rita litigation — has panies?” “Four.” “How have they gone?” claims all of a sudden, these issues get been pretty tied with the defense bar on “Not so good.” So they’re allowed to set flushed out, because there are suddenly a this, actually, who have decided that we their own rates, they’re allowed to write severe number of these. There are also a should consolidate for efficiency. Galves- their own policies. And so a consumer has lot of cases where the agent didn’t bother ton has already consolidated. That order no chance of knowing what’s in their policy to forward the money and the check on, was entered. Jefferson County has a con- anymore. And if you’re a lawyer, you have and the policy didn’t get written. Those solidation order. Harris is going to have no right telling somebody until you get situations happen. And they’re highlighted one. The consolidation I don’t appreciate the policy what’s in there anymore. And when we have this many claims. is the one multi-district litigation that was so no one knows what they’ve got cover- ANDROVETT: Chris, some lawsuits have shifted to a judge in San Antonio. But age for. We’ve got to go back to a standard been filed. Is it fair to say that many more that was a process that was done to, in my form. We have a bill, by the way, by rep- lawsuits are probably on the horizon? opinion, to forum shop by the insurance resentative Trey Martinez Fischer, who is LEAVITT: I think a bunch are coming. companies. Hopefully things like that will the vice chair of insurance, who is also of And an area where we can find common be resolved. But consolidation inside the counsel to our law firm, that says you must ground is that some people, or a lot of county, I’m for. go back to a standard form. You can then these people, have been put in impossible DISIERE: The statutes, 541 under the in clear language disclaim coverages you situations. An example would be people Texas Insurance Code, the unfair claims don’t want to write and show them what with TWIA claims who are being told by practices act provide for tools and prompt the discount is for that, and then in clear the TWIA underwriting department that mediation. Either party can compel medi- language you have to offer them other cov- they’re not going to get renewed for wind- ation within the first 90 days after a suit erage up front on the front of the sheet. storm insurance until they get their certi- is filed. There’s also the notice required to And so what you’ve got here is if you’re fication on the roof. And, the underwrit- the insurance carrier, specific notice of the an independent agent, you’re in trouble ing department is saying we’re not going nature of your complaint and the attorney because a lot of times you told people they to give you the TWIA certification unless fees that you seek, that you’ve incurred had windstorm coverage and they didn’t. you get your roof replaced, just repairing up to that date. Probably not a hundred And the person thought they had it, and is not enough. The TWIA claims depart- thousand dollars, since you only wrote now they’ve had a damaged home. There ment is saying that you don’t need your the letter, but if you send a demand let- is a cause of action for that. They should roof replaced. You can have it repaired, ter, there’s a way to work through it. And have disclosed that it’s not there. But we and we’re not going to give you enough I like the approach by Judge Criss in the shouldn’t have to shift this burden to the money to have the roof replaced. So Galveston courts. But I have a few con- agent. We should go back to some com- they’re stuck in this position where it’s lose cerns, and I perceive there may be some mon sense. This isn’t reform. This is just a little or lose big. And it’s really a problem, traps in there that are going to have to common sense solution to this. and it’s something that I think we’re going be litigated in the future. For example, DISIERE: I hate to keep referring back to be dealing with a lot more, especially the Court talks about within a hundred to case law, but there is a case that deter- with hurricane season on the horizon. days you can do something to mediate mines if an agent is sued. That’s the May ANDROVETT: Now, the courts in these the case, abatement of the case. But the case. It says an agent’s duties in Texas are affected counties — Galveston, Harris, order specifically says that the statutory essentially twofold, to place the requested Jefferson — they’ve put into place some deadlines and other items are not abated. coverage if they can, and if they can’t, streamlined measures to move the litiga- So what happens if you fail to seek your to let the insured know. Those are their tion along. What’s your take on those mea- abatement to get proper notice under duties. Now some agents may take on sures to streamline the litigation and what the DTPA or insurance code that you’re more than that. They may try to figure substantive impact is it likely to have in the entitled to under those statutes, proper it out and make some representations or litigation? specific notice of the claims being made? something to that extent. That can hap- PIRTLE: Well, I’m a guy that likes con- Do you waive the abatement? I’m not pen. But, again, under Texas law, the May solidation because I’ve been involved with sure. You’re abated technically. Can you May 11, 2009 11 Special Advertising Supplement Insurance Law, Post-HurrIcane Ike file a motion for abatement? Well, per- reason it’s been entered is I think it pro- have FEMA. I share the view that insur- haps, but the order itself says that those vides a fair process to get it to mediation. ance companies are trying to abide by the statutory deadlines continue to run. So I We have some good news here. We came terms of the contract and take care of their would advise any defense attorneys, insur- out of Rita, and we weren’t done with the customers to keep them satisfied and pro- ance carriers and others out there to read Rita litigation. And so all the litigation vide the coverages they have purchased. those provisions carefully and be cautious teams were still together on those carriers. And they’ll continue to do that regardless as you proceed. And still if you intend to And so when Rita started, we thought the of whether it’s a state mandated policy or use the statutory defenses and solutions war was on. For the first case we took 36 if they’re able to write their own. They just you should make sure you preserve them. depositions with State Farm. So that peace need to be able to charge a fair premium Again, these are creative solutions. Bring process, it seems to have kind of carried on for the coverage afforded. these cases to mediation and get resolved into Ike. And we will see, I’m sure. I don’t PIRTLE: Well, maybe they ought to just what can be resolved and litigate what know how long the peaceful marriage will nationalize them all, and everybody have needs to be litigated. be. But right now the courts are trying to universal coverage. That seems to be the MOSTYN: I don’t suppose to speak for set up ways to deal with these cases in an trend these days. Judge Criss, but here’s what would be an expedited manner. Judge Criss is particu- MOSTYN: The issue is always going to appropriate response, David. All carriers’ larly interested in it because she managed be: What is a fair premium? There was a counsel were invited to several meetings all the BP litigation, and she’s proud of the lot of pressure on the insurance companies in Galveston where this was hashed out. record that she has on that. in the 2000s and in the ‘90s. They took I didn’t see you at the meetings. I did see LEAVITT: Anything that can bring our the money they put in reserves and they representatives from the clients that you clients’ claims to a resolution the quickest put it in bonds and they made money on represent at the meetings. I specifically and for the highest value is something we it. It did well. The loss ratio is now in the asked each attorney that represented each approve of. Tony Buzbee was on the steer- high 40s. So loss ratio is what they pay carrier to state their name and the carrier ing committee for the consolidation of the out for every premium dollar taken in. they represented on the record and say BP Refinery Explosion cases in Texas City You’ve got to understand they take also whether or not they agreed to the order. in Judge Criss’ court, and The Buzbee Law the reserves and invest it in market and So if one of the clients would like to go Firm achieved very strong results for our bonds. The market has gone down, but back now and litigate a provision of Judge clients in that process. they’re about 80 percent in bonds. They’re Criss’s order, that is probably not a court ANDROVETT: Now, Steve, you mentioned making that money on the side. And their you’d like to see again. this before, but by no means do I expect you loss rate is 46 percent of their reinsuring PIRTLE: I am familiar with Judge Criss, to be the only one that answers this question. moneys they lost. And that’s fine. You’re in and she runs a pretty tight ship. And you But looking forward in the legislative process, it for profit. I’m for profit. But it’s out of necessarily have to give up some things can we reasonably expect any tinkering with control. This state wants to go the oppo- on both sides, by the way, when litigation the insurance laws as they relate to hurricane site direction from the rest of the coun- is consolidated for expediency. You don’t and disaster coverage, coming out of Ike. try for some reason. But this is one of the give up due process, you don’t give up MOSTYN: You’re going to see some tin- issues. And until we decide to address it, your rights, but you’ve got to give up some kering with TWIA depending on funding. we’re going to suffer in this state. We’re things and statutory notice may be one of The coverages aren’t going to get changed. going to suffer because our insurance on the things. I know that in other consolida- And the way the policies are being done the coast is going to become so expensive tions that hadn’t been really a problem. probably will not get changed this time. people are going to not come here when MOSTYN: My point is that all of the The public isn’t angry enough about it they retire from up north. They’re going to major carriers were there with counsel, yet. There are too many damn lobbyists go to Mississippi and Alabama and Flor- and they all agreed to the order. So I think in Austin. ida. I’ve got a buddy of mine who is the you’re going to have a hard time undoing DISIERE: Insurance carriers are in the biggest developer on the coast down there, the effort. risk business. There are contracts. There and he’s about to leave. And so you’ve got DISIERE: There’s not an effort to undo are rules of law that help them understand to decide are we going with insurance it. It’s simply advice that if you want to be what those risks are. Company under- companies and banks and mortgage lend- sure that you’ve protected statutory rights writers assess a proper premium for that ers or everybody else. And that’s what the and defenses, you probably need to file risk. If the insuring public in Texas wants decision is going to have to be made. But something to be sure that you’ve done so. to cover everything — flood, hurricane, those boys dug in. You go over there to the MOSTYN: The only reason I’m touchy natural, nuclear explosion, whatever it legislature, and I swear to God, if you had on it is that my firm spent probably a may be — if we were to cover it, that’s to shake the pockets of the lobbyists there hundred hours preparing the agreement fine. Insurance companies will do that. All would be 4 million dollars right there on and every time we’d get it scheduled for they ask is that they’re able to charge a fair the ground. They go eat dinner with these Friday, somebody would object on Thurs- premium for the coverage afforded by the legislators every night, and they go and day, and we’d all have to go back down contract. And I think there’s a reason why give them lots of money, and they forget there and go around and around. And the we have TWIA. There are reasons why we the people they represent. They forgot 12 May 11, 2009 Special Advertising Supplement Insurance Law, Post-HurrIcane Ike about the business owners and they for- estimates are just that, they’re estimates. got to have the right people looking at it. got about the people. Until we get mad as Supplements can be written. And some- And that’s still going on right now. I’ll give hell and take it back, they’re going to keep times there are things missed or there’s you a great example. You’ve got a building doing it. The sad thing is other states have hidden damage or additional damage that loses electricity. Maybe the business is figured this out already. that comes up. It goes back to basic good a laboratory. Their policy doesn’t cover the PIRTLE: We let them, or at least the peo- communication between a customer and damage to the laboratory if the power loss ple who are supposed to be watching the the company that they’re dealing with. is because of damage to the building. And gate let this happen to some extent. And Sometimes there’s a breakdown in the so there’s a lot of things you’ve got to sort we’re obligated, I believe, to change it. communication. Sometimes you have out, and you’ve just got to stay on top of it. And it’s going to take time, and it’s going to work to make sure that the insureds’ The other thing is for the individual hom- to take money. points are getting across. The demand let- eowners and stuff, documentation — in ANDROVETT: With the knowledge that ter that gives proper notice that you failed addition to the experts — and if possible maybe 15 years ago people would look at to pay for the roof. This is an area where pictures will help these guys pay. It may Texas and their spin was the state has really we think coverage should be provided. be a little bit late for that, but if you’ve got let the trial lawyers just take control and cor- Please pay this within the next 60 days, pictures of your loss of your contents, it porations are not going to come to Texas. My otherwise, we’ll have to file suit. That’s all helps. And it also helps your adjusters. point is these arguments are very compelling part of that. And there’s that window of LEAVITT: My advice to the insureds, and persuasive, but I think I’ve heard them opportunity provided by the statutes and as he mentioned earlier, is if the insur- before on the other side. appraisal provisions where appropriate. ers haven’t done something in six, seven MOSTYN: Sure. And what happens is All of these things that are available before months, the odds are, it’s not going to the rubber band snaps too far the other we get these things locked up in the Court happen. And looking at Katrina as an way. system and the battle lines are drawn. example, State Farm turned potentially ANDROVETT: In the last couple of min- They may be drawn some day. And we’re a 40-billion-dollar exposure into 12 bil- utes we have, what I’m really striving for going to have disagreements and those lion dollars by delaying people for three is an understanding and perhaps you’ll tell things will have to be resolved by a jury of years and causing people to have to settle. me that the horse has already run out of the 12 people. And I respect that. I trust our People couldn’t hold out forever when barn, but for the insured, be it a homeowner court system and our firm is very comfort- they’re dealing with their homes. And they — and we haven’t had a chance really to talk able in the courtroom. But before we get earned 8 billion dollars in interest on the about this much — or the business that is there, there’s open communication and reserves in the process. So if the insurer insured, is there some advice to help them get good discussions that can bring things to hasn’t done the right thing, you need to their claim paid or get their coverage accepted an amicable conclusion. start speaking with somebody. to move these claims speedily? David, maybe MOSTYN: My advice would be: You ANDROVETT: Well, David, I told Chris it’s unfair to start with you, but I’m wonder- need to get someone who is knowledge- he could have the last word, but as our sole ing if maybe as a defense you’ve talked with able to help these guys to the extent that defense representative, we’ll suspend the rules your insurer about: “Look, when they come they can help you with your carrier. Get and give you the last, last word. to us this way, that is a no-brainer. We can someone who is an expert that can get a DISIERE: It would be the same advice I pay this. It’s when they come to us this way proper estimate written and to bundle it give my clients. Let’s do what makes sense. that we can’t.” I’m trying to figure out what up in a way that’s understandable. The dif- If it’s something that can be resolved, let’s that looks like. ference is that I’ve never seen them be very work together to get it resolved. If it’s DISIERE: Well, I’m already involved in a willing to pay my fees and other expenses something that needs to be litigated, let’s lot of matters working with insureds and and interest unless I had them in a lawsuit. work together and litigate it. But it’s going their counsel. I’m working with Steve’s And so we go from talking about resolv- to be interesting going down the road. office on a matter. We’re working on some ing the claim to resolving the lawsuit. And creative solutions. Before we get too far I’ve never sent David a notice letter that down the road, before suit is filed, my rec- I didn’t get one back saying it wasn’t suf- ommendation is to get someone out there ficient. And so where is George? George For more information on to re-inspect the property. We’ll walk just started and he said, “Do we respond to with your contractors, their contractors these?” I said, “No, George. Don’t worry upcoming events and and figure out where the differences lie about that. I’ve never written one right in before we get too far down the road and ten years. I’ve done a couple of thousand sponsorship opportunities, the claim gets locked up in litigation, the of them, and I can’t figure it out.” adjusters are pulled off the file because it’s PIRTLE: I guess it’s twofold. I’m going to reassigned to someone else. Let’s — and start with the business owner, which I deal contact Deni Ruddy at I like Judge Criss’s approach — get out with. There’s a great deal to do and there’s there and figure out where the differences a little difference in the business policies 800-456-5484, ext. 766. are and see if it can be resolved. Initial for business interruption insurance. You’ve May 11, 2009 13
"TEXAS LAWYER ROUNDTABLE SERIES"