Insureds who have suffered a loss face the certain consequences of physical and financial healing, but they may also have to contend with a little salt poured into the wound by their own insurer. A frequent source of irritation for insureds can be zealous adjusters asking for information that seems irrelevant and needlessly burdensome. Some of these requests are necessary to ensure that the insurer is paying only for what it promised. But some seem designed to kill an insured’s claim by a thousand cuts. Kachan v. Country Preferred Ins. Co. (July 7, 2016) looks very much like the latter.
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A federal judge in Arizona recently picked the insured to win a discovery battle familiar to coverage lawyers, ordering that the insurer must produce its training and claims-handling manuals. This is excellent news to insureds left trying to determine why the insurer’s answer to coverage is so often “no” or, only slightly better, “a lot less than you thought you were going to get.”

Arizona Wildfire
“Long after the buildings damaged by the Wallow Fire have been repaired, insurance battles continue over how much lost-income damage the fire caused to businesses during the time that residents were evacuated.” Photo by Marcio Jose Sanchez/Associated Press file photo.

In White Mountain Communities Hosp. Inc. v. Hartford Cas. Ins. Co. (Dec. 8, 2014), White Mountain operated a hospital in rural eastern Arizona and had purchased a property policy from Hartford. A very large forest fire, known as the Wallow Fire, burned about 841 square miles of forest in the area around the hospital, resulting in the evacuation of thousands of residents — and potential patients for the hospital.

That loss of business income comprised the great majority of the hospital’s covered losses. Hartford paid only $40,028 for property damage, but an additional $683,520 for the hospital’s lost income from the many missing patients. White Mountain estimated its business-interruption damages much more severely than Hartford because of the expected slow return of residents to the area, figuring that the fire would cost between $2.8 million and $3.2 million in lost income.

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A California appellate court recently handed an insurer a nasty defeat in a case involving some pretty sharp elbows by the insurer during the adjustment of a property-loss claim. In Stephens & Stephens XII, LLC v. Fireman’s Fund Ins. Co. (Nov. 24, 2014), the insured owned a warehouse that burglars had heavily damaged, including stripping wiring and electrical components from the building. For several years after the loss, the insured and insurer disputed the value of the covered “replacement cost” to fully repair the damages to the building (the insurer suspected that much of the damage occurred in the month before two burglars were caught in the act, which was only three days after the insurer’s coverage had started).

At trial, the jury found in the insured’s favor as to the timing of the loss, awarded a little over $2.1 million
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No Privacy Protections in Response to Insurer’s Demand for Information

Safeco isn’t the NSA, but it doesn’t think that insureds have the right to demand privacy protections in the context of the adjustment of a claim. And neither does the Oregon Court of Appeals. Last week, the Oregon Court of Appeals held in Safeco Insurance Co. v. Masood (July 2, 2014) that an insured cannot require the insurer to agree to keep “sensitive” financial information private as a condition to sharing this information with the insurer.

After Sohail Masood’s home burned down, his homeowner’s insurer, Safeco, provided security while the home was being cleaned up. Masood claimed that about $3.5 million in personal property was stolen while Safeco was providing security, and he filed a claim for this loss.
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