The Basics of Insurance

This fall I am taking a course that clearly does not get the respect that it deserves. I say this, because Insurance is something that everyone deals with, and most attorneys work with. I mean, if you’re a patent attorney or a family attorney you might not, but the “bread and butter” attorneys work in insurance, whether for defense, plaintiff’s work, or even in a non-litigation facility. I think something like 18% of the United States GDP is from insurance holdings. However, this course is only offered for 2 credits. What a shame. Maybe my opinion is skewed because insurance companies essentially pay my pay check. 80% or more of our office comprises of auto accident cases or other serious injury claims, all to be paid by insurance companies. We handle criminal defense cases, but those clients rarely pay, and it represents an ever dwindling percentage of our overall caseload, especially with the new marketing that we’ve done since April.

That being said, I look forward to the rest of this course. Even at 2 credits, I’ll probably get as much if not more out of this course than any of the others that I am taking this fall.

 

Week 1’s Cases:

GAF Corp. v. County School Board

(hey, i think that linked to the case. Whee!) This is a case of what is insurance? GAF is a company out of Delaware that manufactures, distributes and installs(unclear as to whether this is part of what they do or not) roofs and roofing shingles. They contract with a school in Virginia for roofing work. Among the work was a guarantee as follows:

“The contracts contained a guarantee in which GAF agreed to repair damage to the roofing membrane and base flashing resulting from leaks caused by natural deterioration of the roofing membrane or base flashing, blisters, bare spots, fish mouths, ridges, splits not caused by structural failure, buckles and wrinkles, thermal shock, gravel stop breaks, plastic pans, workmanship in applying the membrane and base flashing, and slippage of the GAF products. The guarantee excluded leaks caused by natural disasters, structural defects, damage to the building and certain other events unrelated to any defect in GAF’s products.”

The case is on appeal for a decision to quash service on GAF. In Virginia there is a procedural method of effecting service on an insurance company that is not authorized as an insurer in Virginia. This action also allows for additional damages, including attorney’s fees, which would not be applicable in a simple breach of contract/breach of warranty issue.

The issue is whether or not the guarantee provided by GAF constitutes insurance, or a mere guarantee. This case is somewhat unique, as the wording and terms of the guarantee, as above, appear to go “beyond the normal scope” of a quality of product warranty but the court finds that it does not rise to the level of insurance. The case was remanded back to the district court with instructions to quash service.

Rawlings v. Apodaca

Bad faith! This case represents the evil swinging hammer that is lurking in some jurisdictions behind insurance companies, in an effort to make sure that they do what is right to protect their insureds. In this case, there is a farm owned by Rawlings that has insurance on some or all of the buildings. There is a fire, that is suspected to have been caused by the neighbor, Apodaca, which spreads to the Rawlings farm and destroys a building. The building is insured through Farmer’s insurance for $10,000, however the damage is much more extensive. Farmer’s orders a fire investigation, and Rawlings asks whether or not they will have access to the report, or if they should order one of their own. Farmer’s states that they will share the report.

The report reveals that Apodaca is the cause of the fire, and that they, too are insured with Farmer’s, except for $100,000.00. Too late to hire a fire investigator, Rawlings is denied the report from Farmer’s. They sue both Apodaca and Farmer’s both in tort(Apodaca) and Bad faith(Farmer’s). An insurance company has a duty to protect its insured, and can not “screw over” their insured to protect their own interest. Rawlings wins the claim, both against Apodaca, and against Farmer’s, for punitive damages. Moral of the story, which doesn’t see to really be learned, is that insurance companies cannot(shouldnt) screw people over, especially their insureds. However, my experience tells me that they will push this issue as long and far as they can, just to save a buck. In jurisdictions with bad faith and punitive damages, not paying claims is dime smart, and dollar foolish.

Deschler v. Fireman’s Fund American Life Insurance

This case delves into the intricate language of insurance policies, specifically when they pertain to exclusions in a policy. This is a case in which party Deschler has a life insurance policy, and dies in an accident involving a water ski kite. The case goes into the technical details of how the water ski kite operates, and how he came to pass. There is an exclusion in the policy, negating payout if death arises as a result of use of a  “device for aerial navigation”. The question the court tackles is more of a semantic definition of the wording, and what the water ski kite is. The decision states that the water ski kite is a device for aerial navigation, and the dissent disagrees with an interesting argument. Its the battle of engineers, when most of the judges probably are not engineers. The majority defines the aerial navigation devices by 2 broad criteria: (1) the aerodynamic principles which affect its ability to become and remain airborne, and (2) the degree of control which the operator has over its direction, speed, and the timing and place of landing.

The dissent interestingly concludes that by this theory that an amusement park ride would be a device for aerial navigation, which is clearly untrue:

“The question presented by this appeal is restricted to whether a device which is tethered to the earth is a device for aerial navigation. Like many amusement park rides which remain tethered to the ground by cables and other mechanical means, a water ski kite depends for its operation upon its tether to the boat which it trails. Clearly amusement park rides are not devices for aerial navigation. Similarly, water ski kites cannot be so considered. There is no legitimate distinction between them.”

 

 

 

Modification of contracts as a result of duress

Get excited, its bully time. Tonight we’re talking about contracts, or at least one contract, that is basically held hostage for more money from one of the parties, because the delivering company must have realized how important their deliveries are.

In Austin Instrument, Inc. v. Loral Corp., 29 N.Y.2d 124 (1971) the original plaintiff, Loral, wins a $6,000,000 contract with the Navy to build and delivery of various radar sets. They bid out to subcontractors for component pieces, and Austin is the winner of one of the bids, the enter into a contract. While in the midst of this contract, Loral was awarded yet another bid for more radar sets from the Navy, and put out the same type of subcontract bids. At which point the facts become a little fuzzy, but essentially Austin holds out on delivery of their widgets in exchange for a vast increase in price. Loral, seeing that they have few other options(which is debated in the dissenting opinion of this decision) respond stating that despite the unethical behavior, they needs the parts, and will pay. They do, and Austin delivers. Immediately upon the completion of all deliveries and subsequent manufactures, Loral contacts Austin to notify them of their intent to sue and recover for the excess charges.

Their contention in this matter is that they were induced to modify their contract under economic duress, and this court finds that to be the case, with a dissenting opinion.

I suppose that Justice Bergan would have preferred that Loral hire one of the alternative suppliers to complete the job under duty to the Navy, and then sue Austin in breach and collect expectation damages after the fact. While this may have been the best option logistically, the court found that what they did was also recoverable.

Moral of the story, contracts are modifiable, if there is mutual assent from both parties to do so, in cases like this, holding the other party hostage is not acceptable. I’m wondering how this type of action, at least on the part of Austin, is similar to the concepts of Anticipatory Repudiation, which we’ll cover in later chapters…

Contracts 2- Unjust enrichment

This spring semester I have Contracts 2, Civil Procedure 2 and Torts.

Contracts 2 should be somewhat interesting, as I have the same professor as Contracts 1, and we’re basically picking up where we left off last semester. To note: of my grades last semester, my biggest success of the three classes was in Contracts 1, so I certainly am looking to pick up where I left off.

 

Today’s discussion: Unjust enrichment.

Today we’re looking at unjust enrichment, and a discussion on a number of situations that draw the line between those who are doing work in a contract without due compensation, and those parties who choose to be “officious intermedlers” such as the guy who unilaterally decides to mow your lawn, then and only then upon completion without your acknowledgement that there would be any compensation, to ask for payment for his services.

We’ve discussed a number of cases in the chapter here:

Martin v Little, Brown & Co., 304 Pa. Super. 424, 450 A.2d 984 (1981).

This is a case where James Martin uncovers that a book that was published by Little, Brown & Co. was supposedly plagiarized in another title. After turning in the info to Little, Brown & Co., and without any discussion of such a finder’s fee, extends his hand hoping to receive 1/3 of the fee that they win against the plagiarizer. This is a fairly straight forward case in which the court finds that since there was no explicit conversation and agreement as to how, if at all, Martin would be compensated, that he was not entitled to such compensation. Therefore Little, Brown & Co. was not unjustly enriched through the voluntary work of Martin.

Feingold v. Pucello, 439 Pa. Super. 509, 654 A.2d 1093 (1995).

This is another case that Blum & Bushaw use to illustrate some sort of connection between tort lawyers(personal injury lawyers) and issues of professional responsibility. In this case Pucello was the victim of an automobile accident, and Feingold, a lawyer, discussed helping him out in recovering for his injuries and other damages. There is no specific discussion as to his fee, and at first he does not have Pucello sign any fee agreement. After doing some work on the case, including helping Pucello get a doctor’s appointment, getting the defendant insurance company to admit liability, and other “early stage” sorts of things that a lawyer would do in a case like this, Feingold sends the fee agreement to Pucello, with a 50% contingency. As most clients in his situation would likely do, Pucello balks at such a hefty fee and says “no thanks, I’ll find someone else to help” and refuses any of the work product from Feingold. Feingold sues seeking some portion of the fee that he feels that he is entitled to for the work he has done thus far. The court finds that since there is no contract, and the reason behind Pucello rejecting the fee agreement is the absurd level of the contingency, that Feingold is not entitled to a fee or a portion of the fee in this case.

In Estate of Cleveland v. Gorden, 837 S.W.2d 68 (1992) we look at the only case this chapter where the one who feels another is unjustly enriched actually wins the case. Here, the niece of a decedent is attempting to be reimbursed by the estate for monies that she  output through the course of her aunt’s lifetime, and the time approaching death. These expenses included medical expenses, and other related expenses. The court in this case found that Ms. Gorden was acting out of a sense of family or moral obligation, and that the decedent knew that she expected to be reimbursed for her expenses that she made on Ms. Cleveland’s behalf. Normally, however, one who voluntarily and officiously pays another’s debts is not entitled to reimbursement unless the payment is made under  the compulsion of moral obligation. The court seems to specifically draw such a line between the scenarios of moral obligation and generosity.

Good times in contracts 2, and off to a good start.