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Q: Foreign insurance company refuses to pay a legitimate claim ( Answered,   1 Comment )
Question  
Subject: Foreign insurance company refuses to pay a legitimate claim
Category: Business and Money > Consulting
Asked by: rand556-ga
List Price: $50.00
Posted: 16 Sep 2002 16:03 PDT
Expires: 16 Oct 2002 16:03 PDT
Question ID: 65740
How can I go about receiving my rightful insurance claim money due me
from an England-based insurance company for the loss of a sailboat
when the insurance company refuses to acknowledge letters from my
attorney asking when they will pay the claim, which is over a year old
as of this date?

Request for Question Clarification by clouseau-ga on 16 Sep 2002 17:00 PDT
Hello rand556,

What state are you in? 

Have you contacted the broker that sold you the policy for assistance
in collecting the claim?

Please let me know more details and I will try to assist you.

-=clouseau-ga=-
Answer  
Subject: Re: Foreign insurance company refuses to pay a legitimate claim
Answered By: weisstho-ga on 16 Sep 2002 20:55 PDT
 
Dear rand556-ga,

What a wonderful and complex question. 

LEGAL CHALLENGE:

A resident of the U.S. can bring an action against a British insurance
company assuming that certain minimum contacts between the insurance
company and U.S. interests can be shown.  A lawsuit on this basis can
be brought in the United States District Court under a concept
referred to as “diversity jurisdiction.”  One major concern:  the
amount in controversy must exceed $75,000 although the calculation of
the amount may include any punitive or exemplary damages that your
state might permit in an action against an insurance company.  An
excellent survey of the federal jurisdiction question can be found at
http://www.uscourts.gov/understand02/content_4_0.html


Actions can also be brought against a foreign insurance company in
state court. Check the material on your state here:
http://www.law.cornell.edu/opinions.html


Establishing the venue and jurisdictional arguments in a matter such
as this can be tricky. The advice of legal counsel familiar with the
workings of the federal courts and particularly attuned to the
establishment of jurisdiction is the key to success here; one would
typically expect (and be awfully surprised if the British company
didn’t) bring an immediate motion to dismiss for lack of jurisdiction.


Another concern is the period of limitation (also known as a “statute
of limitation”) – which is to say the limitation in the period of time
between the making of the initial claim (or perhaps the incident that
resulted in the loss) and the date of filing the lawsuit. This is a
very, very complex area in its own right and is probably totally
dependent on the laws of the state the law suit is filed in. The rule,
however, will be the same in either federal or state court since the
federal district court will follow the state law.


Another consideration will be where you are domiciled. An important
consideration here will be where the boat was registered and where the
insurance was purchased. Another consideration will be where your
“residence is” which is generally where you vote, maintain your
principle residence, have your drivers license issued, and pay taxes.
In those situations where the boat is based in State X and the owner
lives in State A, this analysis can be a bit tricky, but is not nearly
so sensitive as the jurisdictional issue discussed above.


TO SUMMARIZE THE LEGAL CHALLENGE:  You can probably sue in either
state court or in federal court, but an action in federal court will
be subject to a minimum amount in controversy of more than $75,000. 
Establishing jurisdiction is critical and requires complex analysis on
the front-end, regardless of what court you sue in. The clock is
running, so don’t forget to check the applicable period of limitation.


REGULATORY ISSUES:

Of course each state regulates insurance companies differently, and
registration procedures vary widely. But check with your state’s
insurance commissioner to see if the British insurer is registered,
and regardless of registration, whether you can file a complaint
against them.


In many states an insurance company has to register with the Insurance
Commissioner so as to be able to sell policies in that state. If
registration is required, then the State can bring substantial
pressure to bear. If the British company was required to register and
didn’t, then the Insurance Commissioner would like to meet them, in
person, I am sure.


CLARIFICATION

I would like to clarify the above with specific information for you. 
If you would like amplifying info, please let me know the following:

Insurance Company:
Amount of Claim:
Your home state:
State of boat registration:
Location of loss:


Thanks for using Google Answers!

Weisstho-ga


Search Strategy:

Federal jurisdiction: 
://www.google.com/search?sourceid=navclient&q=federal+jurisdiction

British Insurance:
://www.google.com/search?as_q=Britain+British&num=20&hl=en&ie=UTF-8&oe=UTF-8&btnG=Google+Search&as_epq=%22insurance+company%22&as_oq=&as_eq=&lr=lang_en&as_ft=i&as_filetype=&as_qdr=all&as_occt=any&as_dt=i&as_sitesearch=&safe=active

Admiralty and Insurance
://www.google.com/search?num=20&hl=en&lr=lang_en&ie=UTF-8&oe=UTF-8&safe=active&as_qdr=all&q=admiralty+insurance

Request for Answer Clarification by rand556-ga on 17 Sep 2002 09:13 PDT
I live in California.  I will inquire as to whether we contacted the
broker who sold the insurance policy.

Request for Answer Clarification by rand556-ga on 17 Sep 2002 09:20 PDT
I will provide the information you request tomorrow.

Clarification of Answer by weisstho-ga on 17 Sep 2002 10:32 PDT
I will await the details. I understand now that you live in
California. Was (is?) the boat registered in California?

Thanks,

weisstho-ga

Request for Answer Clarification by rand556-ga on 19 Sep 2002 05:27 PDT
The insurance policy was issued by Blue Water Insurance through an
office in San Diego, CA.  Their corporate headquarters is in Florida. 
Blue Water Insurance refuses to accept any responsibility and refers
us, the secured lenders, to the "excess" underwriters, Lloyds,  based
in the U.K.... who refuse to honor requests status of claim and/or 
reimbursement.  The primary insurance company, Hamburger
Versicherungs, is German and has not been contacted, to my knowledge. 
We have begun to do this as of yesterday.  The claim is for
$550,000.00, plus some interest and personal effects' losses when the
boat sank in the Caribbean near the Virgin Islands on Oct. 16, 2001. 
An investigation was begun by Nautilus Investigations, in Florida, and
we have not learned from them what they decided.  They, too, refuse to
answer queries put to them.

Request for Answer Clarification by rand556-ga on 19 Sep 2002 05:36 PDT
Sorry, I forgot, the boat is registered in Gibraltar.  I have a
mortgage on the boat for $250,000.00 and am a secured lender, along
with several others.  The owner of the boat is a corporation in
California owned by a close friend of mine.  He had a successful
charter business in the Caribbean until he was caught in a freak storm
and , with his wife, watched his boat sink.  The Coast Guard rescued
both of them.  They have become devastated by this, both financially
and emotionally.  It is, it seems to me, incredibly wicked that an
insurance consortium can willfully disregard a legitimate claim.  The
owner's attorney says that it will take several hundreds of thousands
of dollars to litigate this, which, to us, seems preposterous.  But,
not being attorneys and having no expertise in these matters, we
thought we'd try you.  Other plans we have are to contact/write our
state and federal representatives hoping that they might bring some
pressure to bear, to contact the CA commissioner of insurance, suing
Blue Water insurance, writing letters/articles to sailing/yachting
publications, hiring some folks from Chicago to .....
Thanks

Clarification of Answer by weisstho-ga on 19 Sep 2002 10:36 PDT
Dear Rand556-ga,

Thank you for providing the amplifying information. Let me try to
provide you with as much illumination as I can.  Specifically, I would
like to address the jurisdictional question of suing in California,
the question of insurance contracts, and the ability to sue for
punitive damages.

MOST IMPORTANT ADVICE:  THE CLOCK IS TICKING – make sure you are not
going to have a statute of limitation problem (discussed in the main
answer).

It is, indeed, unfortunate that insurance companies seem to generate
their reserves by NOT paying claims when submitted. The reality seems
to be that an aggressive legal action is necessary to protect your
rights and force the insurance company, who accepted your premiums, to
pay out under the contract that they entered into with you and your
borrower.

First of all – you should find some solace that you and the boat
“owner” (the corporation) are all domiciled in California. I have had
some experience litigating in the federal courts out there, and it is
an experience that an out-of-state attorney does not, and will not,
relish. This is very much in your favor. The California rules of civil
procedure will create leverage for your side – necessity for parties
to appear there (sometimes for even the most puny of reasons, for
example, scheduling conferences), and the strong interests of the
courts to generally maintain jurisdiction and venue.

Litigation is expensive, but the price mentioned by the attorney seems
high, very high. It is unlikely that a case like this would go to
trial – though it probably would require some discovery and a
declaratory action to sort out the rights of the parties – from that
point it should be pretty straight forward.  The discovery on your
part may be limited to written requests, interrogatories, requests for
production, etc. I can’t imagine that you would have to go to London
and Germany to take depositions.  Had someone walked into my office
with these facts, I would have estimated $50,000, tops.

To protect yourself on fees, you may want to establish certain tasks
and place a cap on the fees for that particular task. For example:

Draft complaint, file with court, and serve defendants:  $__________,
max
Defend against defendants’ motion to dismiss for lack of jurisdiction:
 $__________
Review defendants’ answer: $_________
Draft first level plaintiff’s discovery: $___
Respond to defendants’ discovery:  hourly
Draft and file motion for summary judgment: $_____
Etc. 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

DIVERSITY JURISDICTION IN FEDERAL COURT

If you are to bring suit against only the insurers, Lloyd’s and
Hamburger Versicherungs-Aktiengesellschaft, both foreign entities, you
should be able to bring that suit in federal court under the diversity
jurisdiction as discussed in the main body of my answer. Of course,
you could bring suit against them in state court as well, which
tactically might be interesting as they may CHOOSE and prefer to have
the matter transferred to federal court – costing them money and
inconvenience.

If you were to sue the insurance broker (Blue Water) as well, the
federal court is probably not an option, since diversity is destroyed
by naming a California defendant. Blue Water Insurance Services, Inc.
is a California corporation whose agent is Bruce Evans, 1440 M.
Harbor, Ste. 900, Fullerton, CA 92835. 
http://kepler.ss.ca.gov/corpdata/ShowAllList?QueryCorpNumber=C2233652

 Blue Water is also registered in Florida.  
http://www.sunbiz.org/scripts/cordet.exe?a1=DETFIL&n1=P94000066573&n2=NAMFWD&n3=0000&n4=N&r1=&r2=&r3=&r4=BLUEWATERINSURANCE&r5=
Its registered agent is WHITE, CHARLES R, 725 NORTH A1ASUITE E-201,
JUPITER FL 33477.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

INSURANCE CONTRACTS

The California Supreme Court has stated that “while insurance
contracts may have special features, they are still contracts to which
ordinary rules of contractual interpretation apply. By applying these
ordinary rules of contractual interpretation, one "give[s] effect to
the mutual intention of the parties. (Civ.Code,  1636.)" (Bank of the
West v. Superior Court, supra, 2 Cal. 4th at p. 1264, 10 Cal.Rptr.2d
538, 833 P.2d 545.)

Where the contractual language of the policy is clear and explicit,
the Supreme Court observed, it will govern.  On the other hand, '[i]f
the terms of a promise are in any respect ambiguous or uncertain, it
must be interpreted in the sense in which the promisor believed, at
the time of making it, that the promisee understood it.' This rule, as
applied to a promise of coverage in an insurance policy, protects not
the subjective beliefs of the insurer, but, rather, 'the objectively
reasonable expectations of the insured.' "  See West, supra at
1264-1265.

Although reading insurance policies has to be pretty low on any
person’s list of entertaining things to do, may I suggest that you fly
speck the policy language. In particular, identify any conditions that
must have been met, escape clauses, duties of the parties that are
identified, scope of the coverage, etc.   These law suits are not
brain surgery – insurance company says “we are not responsible for
paying because insured did not comply with XYZ.”  Once identified, the
plaintiff (you) are in a position to work on the defenses to the
contract claim.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

INSURER’S DUTY OF GOOD FAITH

I am including some California rules pertaining to this important
Insurer’s Duty of Good Faith –  This is a difficult area, but can open
the door for awards for punitive damages.

To the extent that bad faith is exhibited, an action in Tort (as
opposed to Contract) may be possible, which may open the way for
punitive (exemplary) damages. (The general rule in law is that you may
only collect your direct loss in an action for breach of contract.)


“It has long been recognized in California that "[t]here is an implied
covenant of good faith and fair dealing in every contract that neither
party will do anything which will injure the right of the other to
receive the benefits of the agreement." (Comunale v. Traders & General
Ins. Co. (1958) 50 Cal. 2d 654, 658, 328 P.2d 198.) This principle
applies equally to insurance policies, which are a category of
contracts. Because the covenant is a contract term, in most cases
compensation for its breach is limited to contract rather than tort
remedies. (Foley v. Interactive Data Corp. (1988) 47 Cal. 3d 654, 684,
254 Cal.Rptr. 211, 765 P.2d 373 (Foley ).)   But "[a]n exception to
this general rule has developed in the context of insurance contracts
where, for a variety of policy reasons, courts have held that [an
insurer's] breach of the implied covenant will provide the basis for
an action in tort."  The availability of tort remedies in the limited
context of an insurer's breach of the covenant advances the social
policy of safeguarding an insured in an inferior bargaining position
who contracts for calamity protection, not commercial advantage.”
(Foley, supra, 47 Cal. 3d at pp. 684-685, 254 Cal.Rptr. 211, 765 P.2d
373; see also Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal. 3d 809,
819-820, 169 Cal.Rptr. 691, 620 P.2d 141.)

“The scope of the duty of good faith and fair dealing depends upon the
purposes of the particular contract because the covenant "is aimed at
making effective the agreement's promises." (Foley, supra,   at p.
683, 254 Cal.Rptr. 211, 765 P.2d 373; In the context of an insurance
policy, "[t]he terms and conditions of the policy define the duties
and performance to which the insured is entitled." (Western Polymer
Technology, Inc. v. Reliance Ins. Co. (1995) 32 Cal.App.4th 14, 24, 38
Cal.Rptr.2d 78.) "One of the most important benefits of a maximum
limit insurance policy is the assurance that the company will provide
the insured with defense and indemnification for the purpose of
protecting him from liability. Accordingly, the insured has the
legitimate right to expect that the method of settlement within policy
limits will be employed in order to give him such protection."
(Commercial Union Assurance Companies v. Safeway Stores, Inc. (1980)
26 Cal. 3d 912, 918, 164 Cal.Rptr. 709, 610 P.2d 1038.)

BUT THIS IS A TOUGH STANDARD:  The clear-and-convincing evidence
standard [read this as proving with, say, 70% certainty, as opposed to
the 51% preponderance of the evidence standard of normal civil
litigation] applied to evidence submitted in opposition to motion for
summary adjudication on claim for punitive damages; punitive damages
were recoverable only if malice, oppression, or fraud was shown by
clear and convincing evidence. Basich v. Allstate Ins. Co., 105
Cal.Rptr.2d 153, Cal.App. 2 Dist. (2001).


xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

SUMMARY – 

You can sue foreign insurance companies in federal or state court in
California, and the courts should be able to establish jurisdiction
over these defendants without too much trouble. Certainly, the
question of jurisdiction is KEY, and paying a bright lawyer to
research this question might be a great place to start. Retain him/her
for the one and limited purpose of addressing jurisdiction over
Lloyd’s and Hamburger.

Study the insurance policy. Become familiar with it. Look for the
loopholes that the insurance company will depend on (did the pilot
need to be licenses for that size boat in those waters, was the boat
insured for those waters, was there an inspection required, etc.) 
THIS ACTION IS JUST A SIMPLE MATTER OF WHAT THE CONTRACT SAYS.  You
can’t study that policy closely enough or too often.

Take copious notes as to what was said to whom, when. Has the insurer
exhibited bad faith?  If so, that may open the vault door to something
more than contractual damages.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Good luck!!

One final thought – filing a law suit on this matter puts you in
charge. Momentum is a good thing.

weisstho-ga
Comments  
Subject: Re: Foreign insurance company refuses to pay a legitimate claim
From: alistair-ga on 14 Oct 2002 11:04 PDT
 
You could issue proceedings directly against the English Insurance
Company using a new service from the Court Service here in England
called "MoneyClaim Online"
http://www.courtservice.gov.uk/mcol/

Provided your claim is less than 100,000 and you have a valid Credit
Card this should be OK. I used the MCOL service myself a few days ago
to sue a local Electrical supply company - they paid up with the full
amount within days.

I am not sure if you can only issue proceedings using MCOL if you have
a UK address for service but the initial guidance in the Manual does
not appear to give this as a restriction.

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