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Trial Strategy: Using an Insurer's Consent Order Against the Insurer in a Coverage Case

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When an insurance company settles a dispute with a regulator, the settlement can have ramifications in insurance coverage cases. That’s what People’s Trust Insurance Company learned in a recent case in Florida – in which an appellate court upheld a judgment against People’s Trust for $766,258.06 after deciding that testimony relating to a settlement the insurance carrier had reached with the Florida Department of Financial Services was relevant to the coverage dispute.

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Trial Strategy: Using an Insurer's Consent Order Against the Insurer in a Coverage Case

  1. 1. The following article is from National Underwriter’s latest online resource, FC&S Legal: The Insurance Coverage Law Information Center. The Insurance Coverage Law Information Center TRIAL STRATEGY: USING AN INSURER’S CONSENT ORDER AGAINST THE INSURER IN A COVERAGE CASE December 3, 2013 Steven A. Meyerowitz, Esq., Director, FC&S Legal When an insurance company settles a dispute with a regulator, the settlement can have ramifications in insurance coverage cases. That’s what People’s Trust Insurance Company learned in a recent case in Florida – in which an appellate court upheld a judgment against People’s Trust for $766,258.06 after deciding that testimony relating to a settlement the insurance carrier had reached with the Florida Department of Financial Services was relevant to the coverage dispute. The Case After his home was destroyed by a fire, Raymond Roddy filed a claim with his insurer, People’s Trust. People’s Trust denied coverage for numerous reasons, one being its contention that Mr. Roddy had made material misrepresentations on his application for insurance. Evidence at trial indicated that there was no signed, written insurance application; that Mr. Roddy had never received a copy of the policy in the mail; and that Mr. Roddy had applied for insurance over the phone. A People’s Trust’s telephone representative did not remember speaking with Mr. Roddy, but she testified to her usual practice in processing applications and said that she checked boxes on her computer based on Mr. Roddy’s answers to her questions. One such box indicated that Mr. Roddy’s home had a burglar alarm, a fact that was not true. Mr. Roddy, however, denied saying that his home had a burglar alarm, and there was no recording of the phone conversation between Mr. Roddy and the People’s Trust’s telephone representative. After People’s Trust entered into a consent order with the Florida Department of Financial Services (“DFS”), a witness from the DFS testified in the coverage case between Mr. Roddy and the insurance company about the conduct that led to the consent order, including the DFS assertion that People’s Trust was “advertising rates that were much too low” so that “there was no way that they could support them.” In addition, according to the witness, unlicensed agents were giving quotes “based on every available discount” and People’s software auto-populated the discounts whether or not an applicant claimed to have a device that would warrant a discount. The case was submitted to a jury, which awarded Mr. Roddy $766,258.06 in damages. People’s Trust appealed, attacking the admission of the consent order and the testimony of the DFS witness as being unduly prejudicial. The Appellate Court’s Decision The appellate court affirmed. The appellate court found that the evidence was relevant to the issue of whether Mr. Roddy had made a misrepresentation in applying for insurance. The appellate court observed that, to prove how the application was made, People’s Trust relied on its usual business practice, where telephone agents always checked application boxes to reflect information provided by an applicant. The appellate court then ruled that, to counter this evidence, Mr. Roddy was entitled to present evidence of a contrary business practice embedded in the company’s software. It explained that, under Florida law, “[e]vidence of the routine practice of an organization ... is admissible to prove that the conduct of the organization on a particular occasion was in conformity with the routine practice.” This evidence “went to the heart of the case” and was not “unduly prejudicial,” the appellate court ruled. The case is People’s Trust Ins. Co. v. Roddy, No. 4D12–4456 (Fla.D.Ct.App. Nov. 20, 2013). Attorneys involved include: Alan S. Feldman, Anthony J. Tinelli, Alex Tirado–Lunciano and Michelle Diverio of Lydecker Diaz, LLC, Miami, for appellant; Michael J. Mortell of Michael J. Mortell, P.A., Stuart, for appellee. Call 1-800-543-0874 | Email customerservice@SummitProNets.com | www.fcandslegal.com
  2. 2. For more information, or to begin your free trial: • Call: 1-800-543-0874 • Email: customerservice@SummitProNets.com • Online: www.fcandslegal.com FC&S Legal guarantees you instant access to the most authoritative and comprehensive insurance coverage law information available today. This powerful, up-to-the-minute online resource enables you to stay apprised of the latest developments through your desktop, laptop, tablet, or smart phone —whenever and wherever you need it. NOTE: The content posted to this account from FC&S Legal: The Insurance Coverage Law Information Center is current to the date of its initial publication. There may have been further developments of the issues discussed since the original publication. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice is required, the services of a competent professional person should be sought. Copyright ©The National Underwriter Company. All Rights Reserved. Call 1-800-543-0874 | Email customerservice@SummitProNets.com | www.fcandslegal.com

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