Thursday, February 25, 2010

Farmers seeks bond to cover discovery costs in Arkansas class action

TEXARKANA, Ark. -- Six years into a pending Arkansas class action litigation and still maintaining their innocence against the plaintiffs' allegations, defendant Farmers Insurance Co. wants to recoup the millions they have spent providing documents to the plaintiffs' attorneys.

Farmers, one of the few remaining defendants who is still refusing to pay a settlement, is asking Miller County Circuit Court Judge Kirk Johnson to enforce the Arkansas Cost Bond Statute and order the non-resident plaintiffs to pay a bond to cover the insurance company's out-of-pocket costs.

In response to the request, the plaintiff's are challenging the constitutionality of the statute with the Arkansas Attorney General.

The original class action, which was filed Sept 8, 2004, in the Circuit Court of Miller County, Ark., accuses hundreds of insurance companies of not paying the general contractors' overhead and profit or not accounting for the cost of a general contractor's services when estimating the repair costs under their homeowners' policies. Although the insurance companies paid previous their client's previous damages claims, the lawsuit argues that plaintiffs are entitled to additional payments.

The class action alleges claims of civil conspiracy, unjust enrichment, fraud, and constructive fraud
.

One of many insurance companies that believe this Arkansas case involves discovery abuse, Farmers has consistently asked Judge Johnson for protective orders against the plaintiff's extensive requests for production of documents.

Initially, the plaintiffs agreed to allow all the insurance companies to provide a 2,000 page-sampling of their case files, instead of producing all their claims files as previously requested.

Farmers filed numerous motions seeking protective orders and a court enforcement of the agreement to reduce the request of claim files. Many of the motions, some almost six years old, still remain undecided by Judge Johnson. The judge maintains he will not violate Arkansas law and delve into the issues of the litigation prior to class certification.

To some extent, Farmers has attempted to comply with the outrageous requests for documents, it has produced millions of pages of claim files and had the files converted to the requested format. In its most recent motion, Farmers states it has spent at least $6 million on this production and coupled with mounting defense fees and costs, it wants the plaintiffs to post that $6 million in a bond.

Farmers argues that the costs of its complying with the Court's discovery order is imposing an "undue burden and expense" and is depriving the company of its property pre-judgment in violation of the Fifth Amendment.

The plaintiffs are represented by Texarkana attorneys John Goodson and Matt Keil of the law firm Keil and Goodson; and attorneys Michael B. Angelovich, Cary Patterson, Brady Paddock and Christopher Johnson of the Texarkana law firm Nix, Patterson and Roach LLP.

Chivers v State Farm Case No 2004-294-3

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Thursday, January 28, 2010

STRAWN v. FARMERS INSURANCE COMPANY OF OREGON

STRAWN v. FARMERS INSURANCE COMPANY OF OREGON

MARK STRAWN, on his own behalf and as representative of a class of similarly situated persons, Plaintiff-Respondent,
v.
FARMERS INSURANCE COMPANY OF OREGON, an Oregon stock insurance company; MID-CENTURY INSURANCE COMPANY, a foreign corporation; and TRUCK INSURANCE EXCHANGE, a foreign corporation, Defendants-Appellants, and
FARMERS INSURANCE GROUP INC., a foreign corporation, Defendant.

990809080, A131605.

Court of Appeals of Oregon.

Filed: January 27, 2010.

Richard S. Yugler and Landye Bennett Blumstein LLP for petition and supplemental petition. With them on the reply was David N. Goulder.

James N. Westwood, P.K. Runkles-Pearson, and Stoel Rives LLP for response.

Before WOLLHEIM, Presiding Judge, and BREWER, Chief Judge,[ 1 ] and SERCOMBE, Judge.

SERCOMBE, J.

Petitions for attorney fees allowed in amount of $595,647.

SERCOMBE, J.

In Strawn v. Farmers Ins. Co., 228 Or App 454, 457, 209 P3d 357, rev allowed, 347 Or 258 (2009) (Strawn II), defendants Farmers Insurance Company of Oregon, Mid-Century Insurance Company, and Truck Insurance Exchange (collectively "Farmers") appealed a class action judgment awarding plaintiffs $898,323.80 in compensatory damages and prejudgment interest, $8 million in punitive damages, and more than $2.6 million in attorney fees, and a supplemental judgment awarding plaintiffs additional attorney fees. On appeal, we vacated both judgments with instructions to grant Farmers' motion for a new trial limited to punitive damages, unless plaintiffs agreed to remittitur of punitive damages to four times their compensatory damages and prejudgment interest. Otherwise, we affirmed. Id. at 488. Plaintiffs, who prevailed on appeal, now petition for attorney fees arising from and related to Strawn II and request that we make findings pursuant to ORAP 13.10(7) in support of our decision.

For the reasons explained below, we allow plaintiffs' petitions for attorney fees in part and order an attorney fee award of $542,469 for plaintiffs' "fee-shifting" claims under ORS 742.061(1), an attorney fee award of $41,136 for the common fund claims portion of the appeal, and an attorney fee award of $12,042 for plaintiffs' time litigating their initial attorney fee petition.[ 2 ] We deny plaintiffs' request for an additional incentive award to class representative Strawn.

Plaintiffs' class action claims arose out of Farmers' claims handling process with respect to the payment of personal injury protection benefits to its insureds. Plaintiffs brought claims for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, and declaratory relief. The first three of those claims were tried to a jury. The jury found in plaintiffs' favor and awarded $1.5 million in compensatory damages and prejudgment interest and $8 million in punitive damages on the fraud claim. The court granted declaratory relief. After a post-verdict claims administration process, the judgments noted above were entered. Strawn II, 228 Or App at 457.

On appeal, Farmers raised eight assignments of error "spanning nearly every stage of the case—from the court's order granting class certification, through trial and post-verdict proceedings, to the award of attorney fees." Id. at 461-62. We affirmed in all respects except for the amount of the punitive damages award. We concluded that" a punitive damages award that is four times plaintiffs' actual or potential harm is all that due process will bear." Id. at 485. Accordingly, we vacated the judgment for punitive damages with instructions to grant Farmers' motion for a new trial on punitive damages, unless plaintiffs were to agree to remittitur of punitive damages to four times their compensatory damages and prejudgment interest. Id.

Thus, plaintiffs successfully defended the parts of the judgments relating to their contractual claims, the fraud claim, and a portion of the punitive damages. As noted above, plaintiffs rely on two different bases for an allowance of attorney fees on appeal, depending on whether the fees were incurred to defend the judgment on the contractual claims or to defend the parts of the judgment that pertained to the fraud claim and the punitive damages award. Plaintiffs rely on ORS 742.061 for a fee-shifting award arising from their contractual claims against Farmers;[ 3 ] they rely on the equitable common fund doctrine for an award to compensate class counsel for defending the verdict on their fraud claim and punitive damages recovery on appeal; they also depend on the common fund doctrine in support of their request for an incentive award for Strawn, the class representative. Lastly, plaintiffs petition for supplemental attorney fees for the time and effort they have spent seeking their fees on appeal.[ 4 ]

"[W]hen an attorney fees petition comports with the requirements of ORAP 13.10(5), * * * our inquiry into the request generally will be limited to the objections that are filed by the party opposing the petition." Kahn v. Canfield, 330 Or 10, 13-14, 998 P2d 651 (2000); see also Dockins v. State Farm Ins. Co., 330 Or 1, 6, 997 P2d 859 (2000) (Dockins II). Here, Farmers objects to both petitions for attorney fees on various grounds. Although Farmers does not object to plaintiffs' entitlement to some award of attorney fees under ORS 742.061(1), it argues that the amount of fees that plaintiffs initially requested is unreasonable. Farmers likewise contends that the amount of fees requested in the supplemental petition is unreasonable. Lastly, Farmers asserts that plaintiffs are not entitled to any award of attorney fees as compensation for work done in defense of the verdict on plaintiffs' fraud claim and the punitive damages recovery or as an incentive award for the class representative.

I. FEE SHIFTING AWARD
In their initial petition for attorney fees, plaintiffs seek $1,065,560 for their fee shifting claims under ORS 742.061(1), itemized as $969,256.80 in fees and $96,303.38 in costs and expenses. Plaintiffs' itemized fee request results from (1) the determination of the total number hours spent on plaintiffs' appeal and the multiplication of those hours by class counsel's hourly rates, resulting in a" lodestar" amount of fees; (2) the allocation of hours to distinguish time spent on plaintiffs' fee-shifting claims from time spent defending plaintiffs' common-law fraud claim and punitive damages recovery, and a reduction of the lodestar based on that allocation; (3) the application of a fee enhancement or multiplier to that reduced lodestar; and (4) a request for costs and expenses not included in that reduced lodestar. We begin our analysis of plaintiffs' fee-shifting request by noting the standard that applies to such an award. We then address each of the four steps in plaintiffs' calculation method, taking into consideration Farmers' objections.

A. Standard
ORS 742.061(1) provides for an award of a "reasonable amount" of attorney fees for work done on appeal in an action" upon any policy of insurance." In determining a reasonable attorney fee award under ORS 742.061, we consider the factors enumerated in ORS 20.075. See also Dockins II, 330 Or at 5-6 (citing those same factors as stated in DR 2-106). ORS 20.075 provides:

"(1) A court shall consider the following factors in determining whether to award attorney fees in any case in which an award of attorney fees is authorized by statute and in which the court has discretion to decide whether to award attorney fees:
"(a) The conduct of the parties in the transactions or occurrences that gave rise to the litigation, including any conduct of a party that was reckless, willful, malicious, in bad faith or illegal.
"(b) The objective reasonableness of the claims and defenses asserted by the parties.
"(c) The extent to which an award of an attorney fee in the case would deter others from asserting good faith claims or defenses in similar cases.
"(d) The extent to which an award of an attorney fee in the case would deter others from asserting meritless claims and defenses.
"(e) The objective reasonableness of the parties and the diligence of the parties and their attorneys during the proceedings.
"(f) The objective reasonableness of the parties and the diligence of the parties in pursuing settlement of the dispute.
"(g) The amount that the court has awarded as a prevailing party fee under ORS 20.190.
"(h) Such other factors as the court may consider appropriate under the circumstances of the case.
"(2) A court shall consider the factors specified in subsection (1) of this section in determining the amount of an award of attorney fees in any case in which an award of attorney fees is authorized or required by statute. In addition, the court shall consider the following factors in determining the amount of an award of attorney fees in those cases:
"(a) The time and labor required in the proceeding, the novelty and difficulty of the questions involved in the proceeding and the skill needed to properly perform the legal services.
"(b) The likelihood, if apparent to the client, that the acceptance of the particular employment by the attorney would preclude the attorney from taking other cases.
"(c) The fee customarily charged in the locality for similar legal services.
"(d) The amount involved in the controversy and the results obtained.
"(e) The time limitations imposed by the client or by the circumstances of the case.
"(f) The nature and length of the attorney's professional relationship with the client.
"(g) The experience, reputation and ability of the attorney performing the services.
"(h) Whether the fee of the attorney is fixed or contingent."
We do not find that the factors set out in ORS 20.075(1) affect the amount of the fee-shifting award. The criteria in ORS 20.075(2), however, are material, and we now turn to the application of those factors.

B. Reasonableness of Total Hours
Plaintiffs assert that the time spent by class counsel on plaintiffs' appeal was reasonable, and plaintiffs have submitted declarations by class counsel and an outside expert in support of that assertion. Plaintiffs base their fee-shifting request on 1,537 hours of appellate time and 94.4 hours of class administration time. Included within plaintiffs' 1,537 hours of appellate time are 61.55 hours that arose from and relate to a prior appeal initiated by Farmers that occurred during the course of this litigation. See Strawn v. Farmers Ins. Co., 195 Or App 679, 98 P2d 1158 (2004) (Strawn I). The 94.4 hours of class administration time represent time that plaintiffs assert counsel spent working on certain post-judgment proceedings in the trial court, communications with class members after November 23, 2005, and expenses for claims administration after December 9, 2005, necessary to the pendency of the appeal.

Farmers objects to the total number of hours spent by class counsel on appeal as excessive because the appeal involved the preparation of only a single brief and oral argument and class counsel's hours included duplicative work.Farmers argues, based on the submitted declaration of an outside expert, that class counsel's total appellate hours should be reduced to, at most, 700 hours of appellate time. Furthermore, Farmers argues that, in any event, we should refuse plaintiffs' request for fees related to Strawn I, where Farmers was designated as the prevailing party and no costs were allowed.

Plaintiffs respond that their overall time is reasonable given (1) the procedural and substantive complexity of the underlying case and the appeal and (2) the approach undertaken by Farmers on appeal. Plaintiffs note that, on appeal, Farmers had advanced eight assignments of error spanning nearly every stage of the case, it combined assignments of error that should have been separately stated, and it raised issues that it had failed to preserve. See Strawn II, 228 Or App at 461-62, 466-69, 473-75. Finally, plaintiffs reassert that time related to Strawn I is properly part of their recovery.

We agree with Farmers that the overall amount of time plaintiffs seek for litigating the appeal is excessive. Farmers has made a sufficient showing that the amount of time plaintiffs expended in this case lies outside the reasonable range for an appeal, even for a complex class action of this magnitude. We conclude that some of the time spent on preparation of the appellate brief was excessive and reduce the fees in the amount of $64,500. We also reduce plaintiffs' appellate time to eliminate the 61.55 hours that plaintiffs spent on Strawn I. Plaintiffs may only recover the fees incurred in Strawn II, where they are the prevailing party and are entitled to costs; they may not now recover the fees incurred in Strawn I, where they were not the prevailing party and were not entitled to costs. In addition, we deny plaintiffs' request for fees attributable to the 94.4 hours of class administration time. The class must instead seek a supplemental judgment in the trial court for that time. We calculate the value of plaintiffs' attorney fees on the appeal to be $373,966.

C. Allocation of Hours to Fee-Shifting Claims
Plaintiffs have made an allocation to distinguish the hours that class counsel spent on an action "upon any policy of insurance" under ORS 742.061(1)—i.e., the hours spent on their fee-shifting claims—from the hours incurred solely in connection with their claim for common-law fraud and punitive damages recovery. Plaintiffs contend that roughly 11 percent of their time was spent defending their verdict on the fraud claim and their punitive damages recovery.

Farmers objects to the allocation as made by plaintiffs and argues that 20 percent of plaintiffs' appellate time should be allocated to the nonfee-shifting claims. One of Farmers' experts contends that the allocation made by plaintiffs was unreasonable, in part, because the work necessary to defend the verdict on the fraud claim and punitive damages recovery was substantial, as demonstrated by the amount of briefing provided on those matters by plaintiffs. Farmers also contends that, in addition to the hours devoted to the fraud claim and punitive damages recovery, the hours that class counsel spent on the assignment of error concerning the mootness of the declaratory judgment claim is also not compensable under ORS 742.061(1). With respect to the declaratory judgment claim, Farmers asserts that (1) the work class counsel "performed on appeal [was] essentially procedural and so far removed from the direct object of obtaining a money judgment," as required under McGraw v. Gwinner, 282 Or 393, 578 P2d 1250 (1978), and (2) the work was unique and not duplicative of any work that advanced the actual fee-shifting claims.

In response, plaintiffs contend that Farmers' expert inflated the amount of briefing time required on the fraud claim and punitive damages recovery. In addition, plaintiffs assert that the assignment of error regarding punitive damages was one of the most straightforward assignments to respond to because the principal cases were well known, the factors to be considered were established, and one of plaintiffs' attorneys was active in participating in many recent punitive damages cases in Oregon. Thus, plaintiffs argue that despite the magnitude of the punitive damages recovery, the 11 percent allocation is reasonable. As to Farmers' objection to the inclusion of time spent on the declaratory judgment claim, plaintiffs respond that Farmers made no such argument below and that the trial court's attorney fee award included time spent on the declaratory judgment claim. Plaintiffs also assert that McGraw is inapposite.

We agree with plaintiffs that an allocation of 11 percent of plaintiffs' attorneys' time to the fraud claim and punitive damages recovery is reasonable. We also conclude that the declaratory judgment claim was related to the contractual claim and that the attorney time incurred regarding that claim was compensable under ORS 742.061. Our conclusion on the allocation issue results from the broad range of complex legal issues presented in the appeal related to the class action and the contractual claim and the relatively narrow legal issues presented with respect to the fraud claim and punitive damages recovery. The size of the respective claims does not drive the amount of legal effort necessary for their defense on appeal. Accordingly, we will allocate 11 percent of plaintiffs' appellate time—a value of $41,136—to plaintiffs' nonfee-shifting claims. Thus, plaintiffs are entitled to recover $332,830 in fees under ORS 742.061.

D. Fee Enhancement
Plaintiffs seek a fee enhancement for the services rendered by class counsel on appeal by a factor of 2.25. Plaintiffs argue that a substantial fee enhancement is reasonable given (1) the high risk and contingent nature of the case; (2) the time and effort involved; (3) the novelty and difficulty of the questions involved and the magnitude, complexity, and uniqueness of the litigation; and (4) the results achieved. They note that a factor of 2.25 was used by the trial court to enhance their award of attorney fees for services rendered at trial—an award we affirmed in Strawn II.

Farmers objects to the use of a multiplier and argues that, pursuant ORS 742.061(1), plaintiffs are entitled on appeal only to a "reasonable" fee and not the "astronomical" fees that they have requested. Farmers asserts that Oregon courts have rejected the federal lodestar and multiplier approach requested by plaintiffs. One of Farmers' experts recognizes, however, that Oregon law does support compensating counsel who take on contingent fee cases at rates exceeding their standard billing rates. Farmers' expert nonetheless contends that Oregon courts have not used that proposition as a springboard to apply a "multiplier." Despite that contention, Farmers' expert also notes that in Strunk v. PERB, 343 Or 226, 169 P3d 1242 (2007) (Strunk III), the court did apply a multiplier to calculate the fee award. Farmers' expert distinguishes Strunk III on the ground that that case involved the common fund doctrine and not a fee-9shifting statute as the basis for an award of appellate fees. Farmers' expert states that an enhancement of plaintiffs' fees is not appropriate because (1) the need to incentivize plaintiffs' counsel on appeal was less; (2) the complexity of the case was compensated by the staffing choices and hours spent by class counsel on the appeal; and (3) the risk that class counsel faced on appeal was less than the risk that they faced initially at trial. Farmers suggests that if an enhancement is allowed on the appellate fee award, it should be less than the enhancement allowed on the fees at trial.

In response, plaintiffs assert that the term "reasonable" in ORS 742.061 does not preclude the use of a multiplier or other fee enhancement. They argue that enhanced fees are available, whether reached by application of a lodestar and multiplier approach or through the increase of standard hourly rates to "reasonable rates" based on market rates and an enhancement for contingent risks. They assert that the approval of multipliers in Strunk III is not restricted to common fund cases and refer us to the award of fees, which included a multiplier, in Dockins II. Further, they argue that enhancement remains appropriate here because the case remained a" no offer" case throughout the pendency of the appeal, and, therefore, the risks remained the same on appeal.

In light of the issues framed by the parties, we first determine whether we are precluded from using a multiplier or other fee enhancement in determining plaintiffs' fee-shifting award for appellate work. If we are not so precluded, we must then determine whether application of a multiplier or enhancement is appropriate in this case. Lastly, if use of a multiplier or enhancement is appropriate, we must determine what that multiplier or enhancement should be. We begin by examining the cases relied on by the parties.

In Wattenbarger v. Boise Cascade Corp., 301 Or 12, 16, 717 P2d 1175 (1986), the claimant argued that the court should recognize that the contingent nature of attorney fees in all workers compensation claims justified a "multiplier" in representing claimants generally, regardless of the circumstances in an individual case. The court disagreed and held:

"The statute does not support a general `multiplier' for the statistical risk, but it does not foreclose a court from allowing a fee exceeding the attorney's usual hourly rate when the court finds that, in the specific case, success is sufficiently in doubt and the risk that the services will go uncompensated is so high that a higher attorney fee is reasonable."
Id.

In Griffin v. Tri-Met, 112 Or App 575, 584-85, 831 P2d 42 (1992), rev'd on other grounds, 318 Or 500, 870 P2d 808 (1994), the trial court had awarded plaintiff attorney fees at twice counsel's standard rate. Tri-Met, the defendant, argued that that award was in error and relied on federal cases where use of a "multiplier" was at issue. On appeal, we stated: "Most of that reported litigation is unhelpful and the formulas used are unduly cumbersome. Instead, we continue to review the reasonableness of attorney fee awards by using the [traditional] factors * * *." We then examined the circumstances of the case: (1) there were a limited number of attorneys willing and able to take on complex, controversial, and high risk employment cases like the one at issue; (2) the evidence showed that the plaintiffs had experienced difficulty in obtaining qualified counsel; and (3) the evidence also showed that counsel who successfully undertook such cases for a contingency fee were generally compensated at rates greatly exceeding standard billing rates for general legal services. Thus, we concluded "that there was substantial evidence supporting the attorney fees award and [held] that, under the circumstances of [the] case, the court did not abuse its discretion in awarding fees at twice counsel's standard rate." Id.

In Dockins II, the petitioners requested an attorney fee award for appellate work done in Dockins v. State Farm Ins. Co., 329 Or 20, 985 P2d 796 (1999) (Dockins I). They explained that request as follows:

"For each lawyer and legal assistant who worked on petitioners' appeal, petitioners have multiplied the number of hours they billed by a `reasonable hourly rate,' which is based on the respective lawyer's or assistant's standard rate for the work at issue. When the total fees for each lawyer and legal assistant are added, the result is the amount requested."
330 Or at 4 (footnote omitted). The "reasonable hourly rate" represented the petitioners' attorneys' standard rates multiplied by a factor that they stated represented the increased risk inherent in taking a case on a contingent fee basis. Id. at 4 n 3. The use of that factor was not objected to by the respondent, although the respondent did object to the reasonableness of the petitioners' underlying standard rates. Id. at 8, 8 n 10. The court was not persuaded by the respondent's objection and the awarded the petitioners the fees as they had been requested. Id. at 8-9.

Most recently, in Strunk v. PERB, 341 Or 175, 179, 139 P3d 956 (2006) (Strunk II), attorneys for public employees who had successfully challenged various statutory enactments revising the terms of the employees' pension plans petitioned the Oregon Supreme Court for attorney fees and costs related to the litigation that had culminated in Strunk v. PERB, 338 Or 145, 108 P3d 1058 (2005) (Strunk I). Strunk I was before the Oregon Supreme Court on six original jurisdiction petitions; it was not a case that had come to the court on appeal. 338 Or at 150. The court in Strunk II held that the petitioners' attorneys were entitled to" an award of reasonable fees" under the equitable common fund doctrine and referred the matter to a special master for findings and recommendations with respect to the fees to be awarded. 341 Or at 184-85.

In Strunk III, the court reviewed the findings and recommendations of the special master, considered the objections and responses made by the parties, and ultimately determined the "reasonable attorney fees and costs" that should be awarded. 343 Or at 247. One of the issues considered by the court in Strunk III was the respondents' assertion that "the special master erred in awarding the fee multipliers requested by petitioners' lawyers in this case." Id. at 245. The petitioners' attorneys had requested respective multipliers of 1.5 and 2.0. Id. at 233. The respondents argued that, under the common fund doctrine, "such multipliers are generally appropriate only in the face of `exceptional success.'" Id. at 245. They contended that, because the petitioners failed to prevail on all of their claims in Strunk I, they had failed to achieve "exceptional success." Id.

The court disagreed and recognized that, in common fund cases, the preserved fund itself was a primary measure of success—the preserved fund at issue in the case exceeded $1 billion. In addition, the court noted that other factors—such as the difficulty and complexity in the case, the value of the interests at stake, and the skill and professional standing of the lawyers involved—also supported an enhancement of fees. The court therefore allowed the fee awards to be enhanced by applying the respective multipliers requested by the petitioners' lawyers. Id. at 246.

Based on the above case law, it is apparent that an award of "reasonable" attorney fees does not preclude the use of a multiplier or other fee enhancement for (1) work done at trial (Griffin); (2) work done before an appellate court sitting pursuant to its original jurisdiction (Strunk III); or (3) work done on appeal (Dockins II). Such an enhancement may be applied at the beginning of the calculation process by increasing counsel's standard or basic hourly rate to a "reasonable hourly rate" for the work done given the nature of the case, as occurred in Dockins II, or the enhancement may be applied later in the calculation process by increasing a lodestar amount of fees, as occurred in Strunk III.

Regardless of the arithmetic used, what remains constant are the factors that a court will consider in determining whether a fee enhancement should be applied in calculating a reasonable fee award. Those criteria are set out ORS 20.075(2). The factors relevant to this case are: (1) the novelty and difficulty of the questions involved in the proceeding and the skill needed to properly perform the legal service; (2) the amount involved in the controversy and the results obtained; (3) the experience, reputation, and ability of the attorney performing the service; and (4) whether the fee of the attorney is contingent. We construe the last of those circumstances to include consideration of the risks undertaken by the attorney in litigating the case.

Several circumstances support an enhanced award for plaintiffs' fee-shifting claims in this case. First, and primarily, because this case remained a "no offer" case throughout the pendency of the appeal—i.e., a case where Farmers did not attempt to settle the dispute and made no tender to the class—class counsel continued to face a very significant risk that they would be left uncompensated given the contingent nature of their right to attorney fees. Second, this case presented novel and difficult questions in the context of a complex and large class action litigation. That factor is of less importance in the enhanced fee analysis because the complexity of the case is already accounted for in the number of hours spent in defending the appeal. Third, class counsel on appeal preserved in whole plaintiffs' award of compensatory damages and interest. Thus, we hold that plaintiffs are entitled to an enhanced fee award on their fee-shifting claims.

We next determine what that enhanced fee award should be. Plaintiffs have argued that we should apply a multiplier of 2.25 because that multiplier was used to enhance their fees for work done at trial. Farmers, on the other hand, urges us to evaluate the overall reasonableness of the award and asserts that the use of the multiplier requested results in astronomically unreasonable fees.

We do not agree with plaintiffs that a multiplier of 2.25 is appropriate simply because that multiplier was used by the trial court in awarding fees for the work done at trial. Appellate work is not identical to trial work. As the prevailing party at trial and the respondent on appeal, plaintiffs were entitled to certain favorable standards of review. The prosecution of the case at trial was more risky than the defense of the judgments on appeal. In addition, plaintiffs' efforts in arguing from a closed record on appeal cannot be equated with their efforts in creating that record at trial.

In Strunk III, the court approved the use of multipliers of 1.5 and 2.0 for work done in the Strunk I litigation. 343 Or at 233, 246. As noted above, those enhancements resulted from consideration of the result achieved, the difficulty and complexity of the issues involved, the value of the interests at stake, and the skill and professional standing of the lawyers involved. Id. at 246. Because some of those same factors support an enhancement in this case, we conclude that a similar enhancement factor is appropriate. In choosing an enhancement factor, we are sensitive to the declarations of class counsel regarding their standard billing rates as compared to the rates of their peers. Plaintiffs' lead attorney notes that class counsel's standard billing rates in this case are below the rates of many attorneys of similar training, experience, and skill. Specifically, the rates for plaintiffs' attorneys range from $200 to $400 per hour. Plaintiffs' lead attorney notes that standard billing rates of his peers can range from $450 to $590 per hour.

The ORS 20.075(2) factors in this case, however, suggest a lower multiplier than the one allowed in Strunk III. Strunk III involved the recovery of a substantially greater sum of money for the plaintiffs, the creation of a new record before the special master, and issues that were somewhat more complex than this case. For those reasons, we hold that an enhancement factor of 1.6 is appropriate for the appellate work done in this case. Thus, plaintiffs' enhanced lodestar amounts to $532,528 in fees.

E. Costs and Expenses
Plaintiffs request additional costs and expenses that are not included in their hourly rates. Included in their cost and expense request were unpaid invoices for class action administration services since November 23, 2005, in the amount of $23,526.50, as well as future expenses for class administration services in the amount of $62,836. In Willamette Prod. Credit v. Borg-Warner Acceptance, 75 Or App 154, 159, 706 P2d 577 (1985), rev den, 300 Or 477 (1986), we stated:

"In setting a reasonable attorney fee for the prevailing party, it is appropriate for the court to take into consideration the actual billing practices of the party's attorney. Traditionally, courts simply have determined fees based on the hourly charge for the attorney working on the case with the assumption that the hourly rate was set to recoup overhead and realize a profit. Modern electric accounting methods allow a more specialized billing for attorney fees. Courts should recognize the reality of modern legal business practices and include expenses specially billed to the client in the attorney fees award when they are properly documented and are reasonable."
We therefore will partially allow plaintiffs' request for costs and expenses as part of their attorney fees award in the amount of $9,941. We deny plaintiffs' requested costs and expenses in the amount of $86,362, the extent to which they relate to class administration. As with the hours related to class administration, the class must seek a supplemental judgment in the trial court for those expenses.

II. COMMON FUND AWARD
Plaintiffs also request an increase in the amount of the allocation to class counsel from the punitive damages recovery under the equitable common fund doctrine. They assert that this common fund award would compensate class counsel for their efforts in defending on appeal the award on plaintiffs' fraud claim and the punitive damages recovery. Plaintiffs request that we enhance such a common fund award by a factor of 2.25, for the same reasons that support enhancement of their fee-shifting award.

Farmers objects to plaintiffs' request for a common fund award. Farmers argues that it should be denied because class counsel's effort on appeal did not preserve the punitive damages recovery in its entirety. Rather, the recovery was reduced on appeal by more than half.

Plaintiffs respond that they clearly "preserved" a common fund on appeal. They note that Farmers sought to eliminate the fund entirely or, in the alternative, to reduce the fund to an amount equal to the compensatory damages recovery. Instead, both challenges were rejected in Strawn II and a fund four times the amount of the compensatory damages was preserved.

Whether plaintiffs here are entitled to attorney fees on appeal under the equitable common fund doctrine where their class counsel partially preserved a fund after its creation at trial is a question of first impression. The common fund doctrine under Oregon law was discussed in State Farm Mut. Auto. Ins. v. Clinton, 267 Or 653, 657, 518 P2d 645 (1974), where the court recognized:" It is * * * a well-established rule in Oregon that an attorney whose efforts result in the recovery of a fund payable to various persons is entitled to payment of reasonable attorney fees from that fund." More recently, in Strunk II, the court concisely summarized the principles supporting the common fund doctrine. The court stated:

"Under the common fund doctrine, plaintiffs whose legal efforts create, discover, increase, or preserve a fund of money to which others also have a claim, may recover the costs of litigation, including their attorney fees, from the created or preserved fund. As commentators have noted, the doctrine is primarily `employed to realize the broadly defined purpose of recapturing unjust enrichment.' In other words, the doctrine is used to spread litigation expenses among all beneficiaries of a preserved fund so that litigant-beneficiaries are not required to bear the entire financial burden of the litigation while inactive beneficiaries receive the benefits at no cost."
341 Or at 181 (citation omitted).

Although Oregon courts have not spoken on the issue of when a party is entitled to attorney fees on appeal under the common fund doctrine where the fund is created below and preserved on appeal, other courts have addressed the issue. The Washington Supreme Court in Bowles v. Wash. Dept. of Ret. Systems, 121 Wash 2d 52, 75, 847 P2d 440 (1993), declined to award such fees. In that case, a class action, the plaintiffs' attorneys requested attorney fees for their work on appeal under the common fund doctrine. The court stated:

"Under the percentage of recovery approach, the attorneys are to be compensated according to the size of the judgment recovered, not the actual hours expended. The plaintiffs have not increased the size of their recovery on appeal, thus we have no basis to increase their fees."
Id. Similarly, in Okeson v. City of Seattle, 130 Wash App 814, 828, 125 P3d 172 (2005), the plaintiff asked for attorney fees on appeal under the common fund doctrine. There too, the court denied the request and relied on the reasoning in Bowles. The court declined to award additional fees from the common fund because the trial court had awarded attorney fees on a "percentage of recovery" basis and the plaintiff had not increased the size of the recovery on appeal. Id. We find that reasoning helpful, and it informs our analysis below.

At this point, it is worth noting that, in the context of fee awards made under the common fund doctrine, concerns arise that (1) class counsel may be acting in conflict with the interests of the class in requesting an award from the recovered or preserved fund and (2) the parties may lack adversity where the prevailing party's award comes from a fixed fund and is not separately taxed on the opposing party. The Alaska Supreme Court most recently recognized these dual concerns in State Dept. of Health v. Okuley, 214 P3d 247 (Alaska 2009). There, the court stated:

"We have recognized the `potential lack of adversity when class counsel asks the trial court to impose fees on the benefitted class members under the common fund doctrine.' Because of this potential lack of adversity, as well as the potential for conflicts of interest between the class and class counsel, we have explained that `[c]ourts should * * * closely scrutinize applications for attorney's fees from a fixed fund.'"
Id. at 252 (footnotes omitted). Because those same dual concerns are present here, we likewise closely scrutinize plaintiffs' request for additional fees from the punitive damages recovery.

We begin our scrutiny of plaintiffs' request by examining the award of attorney fees below. The initial opinion and order of the trial court regarding attorney fees indicates that the court initially awarded class counsel attorney fees for work done at trial on a percentage of recovery basis. Specifically, the court awarded class counsel 20 percent of the $8 million punitive damages recovery, amounting to $1.6 million, and 38 percent of the nonpunitive damages recovery, amounting to $1.575 million. The trial court, in explaining the total award of $3.175 million, also stated: "Viewed from another perspective, this award is essentially equivalent to the attorneys receiving the entire Fee-Shifting Award of $2,670,000 plus another $505,000 from the common fund for a total of $3,175,000."

Subsequently, the trial court entered an order regarding the reallocation of punitive damages. That subsequent order, in part, modified the initial opinion and order regarding attorney fees. First, the trial court vacated the last two pages of its initial opinion that had determined the specific percentages—20 percent and 38 percent—of the punitive damages and nonpunitive damages recoveries to be awarded as fees. Second, it ordered that class counsel was to receive the entire statutory fee award of $2,670,000. Third, it ordered that, from the $3,200,000 in punitive damages available to the prevailing party, class counsel was to receive $505,000 in addition to the statutory fee award.

Were we to construe the award of attorney fees made by the trial court as a fee award made on a percentage of recovery basis, we would decline to award plaintiffs an additional award from the punitive damages recovery because plaintiffs have not increased their punitive damages recovery on appeal. However, given the procedural history of the trial court's attorney fee award, we conclude that the trial court's award was not based on a percentage of the recovered punitive damages. We conclude that plaintiffs are entitled to attorney fees for preserving a significant portion of the punitive damages common fund. The amount of fees incurred, 11 percent of the fees calculated earlier for the fee-shifting award, is $41,136. Given the reduction in the amount of allowed punitive damages as a result of the appeal, and the lack of complexity of the legal issues involved, we decline to enhance those fees under ORS 20.075(2)(a) and (d).

III. INCENTIVE AWARD
Plaintiffs have also requested that an incentive award of $5,000 be made to the class representative, Strawn. Plaintiffs argue that an incentive award of this type is usually viewed as an extension of the common fund doctrine and has been described as a litigation expense.Plaintiffs propose that the award be made from the interest accrued on the compensatory damages portion of the underlying judgment. Plaintiffs argue that Strawn should receive such an incentive award because he (1) participated in numerous status conferences, meetings, and strategy sessions regarding the appeal over the four years the case has been pending on appeal; (2) attended the oral arguments on behalf of the class members; (3) was directly involved in making significant decisions affecting the interests of class members; and (4) remained exposed to substantial personal financial risk for Farmers' appellate costs and disbursements if the class had not prevailed on the appeal. Plaintiffs also contend that, although Strawn did not agree to serve as class representative for the purpose of receiving an incentive award, he is nonetheless entitled to such an award for his time, effort, and personal risk.

Farmers objects to plaintiffs' request for an incentive award on the ground that there is no authority in Oregon for providing Strawn with such an award. Further, Farmers argues that, even if there were a basis for such an award in the abstract, plaintiffs have failed to present sufficient evidence, such as a record of the amount of time that Strawn spent on the appeal, to support allowing an award in this case. Farmers contends that inferences drawn from class counsel's billing records show that class counsel communicated with Strawn only briefly about the appeal process and that there is no evidence that his participation was at all necessary to the appeal.

Plaintiffs respond that an incentive award was allowed at trial and that Farmers did not challenge that award in Strawn II. Plaintiffs state that incentive awards have been made in numerous class actions and that the lack of Oregon case law authorizing such awards is explained by the fact that no other class actions have been fully litigated in Oregon state court. Lastly, plaintiffs contend that Farmers "speciously denigrates risk of a judgment against * * * Strawn personally for Farmers' appellate costs, as well as Farmers' trial costs, had the judgment been reversed."

It is correct that Oregon case law has not addressed the circumstances in which an incentive award may be granted to a class representative. And, the issue presented here—whether an incentive award may be granted to the class representative following an appeal in which the class prevails, as opposed to following a trial or settlement in which the class prevails—is specifically an unanswered question. For helpful guidance on those issues, we turn to how other courts have addressed incentive awards.

The Ninth Circuit, in Rodriguez v. West Publishing Corp., 563 F3d 948, 958-59 (9th Cir 2009) (emphasis omitted), summed up the circumstances in support of granting an incentive award as follows:

"Incentive awards are fairly typical in class action cases. See 4 William B. Rubenstein et al., Newberg on Class Actions § 11:38 (4th ed. 2008); Theodore Eisenberg & Geoffrey P. Miller, Incentive Awards to Class Action Plaintiffs: An Empirical Study, 53 U.C.L.A. L. Rev. 1303 (2006) (finding twenty-eight percent of settled class actions between 1993 and 2002 included an incentive award to class representatives). Such awards are discretionary, see In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 463 (9th Cir. 2000), and are intended to compensate class representatives for work done on behalf of the class, to make up for financial or reputational risk undertaken in bringing the action, and, sometimes, to recognize their willingness to act as a private attorney general. Awards are generally sought after a settlement or verdict has been achieved."
In addition, the Seventh Circuit, in matter of Continental Illinois Securities Litigation, 962 F2d 566, 571 (7th Cir 1992), addressed the rationale behind incentive awards by stating that, "[s]ince without a named plaintiff there can be no class action, such compensation as may be necessary to induce him to participate in the suit could be thought the equivalent of the lawyers' nonlegal but essential case-specific expenses, such as long-distance phone calls, which are reimbursable."

Bearing in mind that understanding of the purposes of incentive awards, we now decline to grant such an incentive award to class representative Strawn in this case. First, as noted by the Ninth Circuit in Rodriguez, incentive awards are generally sought—and thus awarded—after a settlement or verdict has been achieved in the class's favor. We therefore question the propriety of granting plaintiffs' request for an incentive award following an appellate judgment in the class's favor. Second, even if we were to assume that the common fund doctrine would authorize such an incentive award in the abstract following an appellate judgment, we agree with Farmers that plaintiffs have failed to present sufficient evidence to support their requested award in this case. Besides the bare assertions in the fee petition regarding Strawn's participation in the appeal, class counsel's billing records indicate that, at most, only 23.8 hours of their efforts may have involved consultation with Strawn and his attendance at oral argument. Furthermore, it is far from evident that any degree of participation by Strawn was necessary to the appeal, unlike the responsibilities of the class representative during the trial phase of the litigation. For those reasons, we decline to award Strawn the requested incentive award.

IV. SUPPLEMENTAL FEES AWARD
Lastly, plaintiffs have submitted a supplemental petition for an additional award of $32,597.48, itemized as $32,332.50 in fees and $264.98 in costs and expenses. Plaintiffs contend that they are entitled to fees for the time and effort that they have spent litigating their initial fee petition—so called "fees on fees"—and they cite Crandon Capital Partners v. Shelk, 219 Or App 16, 42-43, 181 P3d 773, rev den, 345 Or 158 (2008), and Emerald PUD v. Pacificorp, 104 Or App 504, 507, 801 P2d 141 (1990), rev den, 311 Or 222 (1991) as precedent for such an award. Plaintiffs argue that they have amassed a combined lodestar amount of $14,370 in fees as part of the fee application and litigation process, $2,590.50 of which represents additional class administration time. Plaintiffs have requested that we enhance their supplemental fees by a factor of 2.25.

Farmers objects to the supplemental petition and argues that plaintiffs are not entitled to a multiplier of 2.25 for the reasons expressed in its objections to the fee-shifting award. Lastly, Farmers suggests that, when ruling on the supplemental petition, we should consider "the overstatement and duplication of fees" in plaintiffs' initial petition.

As an initial matter, we note that the cases cited by plaintiffs in support of their supplemental petition themselves rely on ORCP 68 as the authority for "fees on fees." In those cases, we reasoned that the process of recovering fees was properly considered part of the "prosecution of an action" for purposes of a fee petition under ORCP 68. Crandon Capital Partners, 219 Or App at 42-43 (quoting Johnson v. Jeppe, 77 Or App 685, 688, 713 P2d 1090 (1986)); Emerald PUD, 104 Or App at 507 (also quoting Johnson). Thus, the precedent cited by plaintiffs, which addresses "fees on fees" at the trial level, is not directly applicable in determining their supplemental fee request on appeal. Authority for such fees must be found elsewhere.

Here, plaintiffs' supplemental fee request is based on ORS 742.061(1), which provides that "a reasonable amount * * * as attorney fees shall be taxed as part of the costs of the action and any appeal thereon." The question we are therefore presented with is whether the process of recovering fees for appellate work may properly be considered part of the "appeal" for purpose of a fee petition authorized by ORS 742.061(1). We now hold that such "fees on fees" are available because the process of litigating the fee petition for appellate work is properly considered part of the appeal.

We therefore allow plaintiffs' supplemental petition for fees in part, in the amount of $11,777. We deny the request for fees attributable to class administration time; plaintiffs must instead seek a supplemental judgment in the trial court for that time. We also decline to enhance plaintiffs' fees for the relatively routine work of litigating a fee petition. Lastly, we allow plaintiffs' supplemental request for costs and expenses not included in their hourly rates in the amount of $265.

Petitions for attorney fees allowed in amount of $595,647.

Source: leagle.com

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Thursday, January 21, 2010

Class Action: We are looking for individuals who were wrongfully charged deductibles

Wrongful Application of Deductibles


My name is Joseph Watkins. I am an attorney specializing in bad faith in Tucson, Arizona. I am currently handling a class action lawsuit in federal district court titled Rodriquez vs, Farmers Insurance. The lawsuit involves cases where deductibles were charged wrongfully. Specifically, in any claim or any policy limit was exceeded by an amount greater than the total deductible, the deductible must be refunded. For instance, if you have a contents loss of $20,000 with $50,000 in total coverage, Farmers will normally charge your full deductible against the loss. However, if there was a sub limit of, for example, $2500 for furs and the loss involved $5000 in damage to fur coats, Farmers must absorb or refund the deductible up to $2500 even though the loss was under the total contents limit for coverage.

The deductible is usually charged on the first check issued. If any policy limit is exceeded after that point in time the deductible must be refunded. This is true of any limit not just the larger limits.

Please contact:
Joseph W. Watkins
6303 E. Tanque Verde, #210
Tucson, AZ 85715
520-882-9115
JoeWLaw@Cox.net

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Thursday, January 14, 2010

Has Farmers Insurance lost its integrity and ethics in claims handling and treatment of employees?

A now-former Farmers insurance adjuster who became increasingly agitated over a company mandate to specify aftermarket parts and require discounted body shop pricing in his estimates – eventually taking allegations of wrongdoing to the state’s insurance department – has been denied whistleblower status by a California appeals court, which ruled that his dismissal was justified and he is now liable for Farmers’ legal expenses.

After losing a wrongful termination lawsuit at the trial court level, Beau Yeakel argued his contentions before a Second Appellant District panel.

Testimony in the case centered around a series of escalating verbal confrontations that Yeakel had with his supervisors, culminating in a sexually graphic telephone message left on a manager’s voice mail. Yeakel said he made the remark thinking that his attempted call had been disconnected. It had not been, and the offending language was recorded and shared up the chain of command.

Farmers’ executives testified that Yeakel had been repeatedly “counseled” about his behavior, yet objectionable incidents continued.

Working in Ventura and Santa Barbara counties, Yeakel’s supervisors were Gabe Snyder Barbara Mann.

According to case transcripts, Yeakel objected to Farmers’ practices that he said involved using alternative or aftermarket parts in the repairs where possible, to include a discounted price for the use of original equipment manufacturer parts, and to include a discounted labor rate that was less than the prevailing rate charged by the local repair shops.

Neither Yeakel nor his lawyer was available for comment. A phone listing for Yeakel rings into a fax machine; his lawyer did not respond to repeated messages.

At various times between 2003 and 2005, according to the court documents, Yeakel complained to Snyder and Mann that none of the shops in his assigned territory would agree to the parts and labor discounts sought by Farmers. Yeakel believed that the inclusion of such discounts in his estimates eroded his credibility with the repair shops and created additional work for him when he had to rewrite the estimates to eliminate the discounts.

In his complaints to his supervisors, Yeakel also expressed frustration that Farmers’ discount practices were adversely affecting his performance evaluations. As described by Yeakel, the discounts were considered in Farmers’ “key performance indicators,” which was a compilation of the criteria against which a claims representative’s performance was measured and upon which performance reviews and pay raises were based.

Yeakel had several heated discussions with Snyder about his performance reviews because Yeakel felt that he was being unfairly rated based on discounts that no repair shop would accept. Yeakel also voiced his opinion that aftermarket parts did not fit properly in the repaired vehicles and that Farmers’ parts discount was “unethical.”

In response to Yeakel’s complaints, Snyder advised him that these were the company’s orders and that Yeakel was required to comply with them.

In late 2004 or early 2005, Yeakel also complained to Rosanna Ortiz, Farmers’ human resources operations specialist, about the parts and labor discounts as they related to his performance ratings. Among other issues, Yeakel indicated that the parts discount was making his workload insurmountable. In response, Ortiz told Yeakel that Farmers reserved the right to do business in any way it decided.

Yeakel raised additional concerns about Farmers’ business practices when he was counseled by his supervisors for various performance and behavioral issues, according to the court’s documentation.

For example, in July of 2004 Snyder issued a written warning to Yeakel for his poor performance in failing to timely process claims and his inappropriate behavior during a discussion with Snyder about performance concerns. Upon receiving the written warning, Yeakel remarked to Snyder that Farmers had “lost its integrity and ethics in claims handling and treatment of employees.”

In January of 2005, Mann held a unit meeting in the Ventura office during which she asked employees in attendance to provide referrals for an open position at Farmers. Yeakel replied that he would not refer anyone to the company because he had too much integrity and did not feel the workload was manageable.

Mann later met privately with Yeakel and counseled him that his comment at the meeting was not appropriate. Yeakel in turn voiced his frustration with Farmers, telling Mann “when you start affecting people’s performance reviews because they can’t get parts discounts in an area where they can’t get discounts offered, how can you improve on that?”

In addition to his internal complaints to management, Yeakel also contacted the Department of Insurance about Farmers’ business practices. Specifically, in 2001, Yeakel called the Department of Insurance to inquire about the process involved in investigating Farmers’ parts and labor discounts. During that call, Yeakel communicated his belief that Farmers was using an improper parts discount and a labor rate that was less than the prevailing rate.

However, Yeakel decided not to file a formal complaint with the agency because an agency representative advised him that his complaint could not be kept anonymous. Yeakel never told anyone at Farmers that he had contacted the Department of Insurance, and he has no knowledge that anyone at Farmers was aware of his call, according to testimony in the case.

Things came to head in February of 2005, when Yeakel left the ill-fated accidental voice mail message after attempting to reach Snyder three times. ABRN will not publish the content of the voice mail; suffice to say it was rude and crude.

When Snyder retrieved his messages, he heard Yeakel’s recorded insult. Snyder then shared the recording with Mann, who was offended by Yeakel’s words and believed them to have a sexual meaning.

A few days later, Mann met privately with Yeakel and played the voice mail message for him. Yeakel was shocked to discover that his statement had been recorded. He admitted to Mann that he inadvertently had left the message on Snyder’s voice mail system and apologized for doing so. He also offered to resign rather than have the matter written up in his file.

Mann, however, told Yeakel that resignation was not necessary. She indicated that she would have to report the matter to Farmers, but said to Yeakel, “‘give me some time, and I’ll see what we can do about it.’” Yeakel later apologized to Snyder for his actions in leaving the message. Snyder assured him that he was not offended.

Due to the nature of the voice mail message, Mann referred the matter to Farmers’ human resources department. Mann also directed Snyder to prepare a memo documenting Yeakel’s various performance and behavioral problems since 2004.

The subsequent memo from Snyder in March of 2005 included a reference to the written warning issued to Yeakel in July of 2004, and to Yeakel’s oral statement in response to that warning that the company had “lost its integrity and ethics in claims handling and treatment of employees.”

After reviewing a draft of Snyder’s memo, Mann approved it for distribution to the human resources department, where it was determined that the message had a sexual meaning in violation of the company’s harassment policy and code of business ethics.

The wheels of dismissal were thus set in motion.

In March of 2006, Yeakel filed the wrongful termination lawsuit. In an amended complaint, Yeakel alleged that Farmers had policies that prohibited him from disclosing perceived unlawful conduct by the company to government agencies. He also alleged that Farmers wrongfully terminated his employment in retaliation for his refusal to participate in Farmers’ estimating practices because he reasonably believed that such practices violated state law.

The trail court judge granted a summary judgment in favor of Farmers and against Yeakel, who appealed the ruling.

The appellate panel denied his claims. “We conclude that the trial court properly granted summary judgment because Yeakel could not identify any policy of Farmers that prohibited disclosures of perceived unlawful activity to government agencies, nor could Yeakel demonstrate that he had a reasonable belief that Farmers’ business practices were unlawful.”

Source abrn.search-autoparts.com

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Friday, April 10, 2009

Is Farmers Insurance Giving Large Campaign Donations for Favorable Rulings in Lawsuits?

In the Texas Supreme Court race, Rove helped Owen amass a war chest of over $926,000 in campaign contributions from Big Business and the ranks of the Texas GOP. Owen then obliged some of her biggest donors by ruling favorably on their lawsuits with amazing consistency. The watchdog group Texans For Public Justice reported "more than $500,000 (37 percent) of the $1.4 million that Owen raised for her two Supreme Court campaigns came from lawyers and litigants who had cases in her courtroom... Owen's 11 biggest litigant-donors (including Enron Corp., Farmers Insurance and Dow Chemical) appeared in her courtroom 26 times. While these big docket donors prevailed an enviable 77 percent of the time before the court as a whole, Owen was even kinder - favoring them 85 percent of the time."

Full Article: huffingtonpost.com

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Wednesday, February 18, 2009

Farmers Insurance sued over Hurricane Ike claim

A Jefferson County man has filed suit against Farmers Insurance Exchange, alleging he was not paid money to which he was entitled after Hurricane Ike destroyed sections of his home.

When Pete Zavala's property at 9336 FM 365 in Beaumont sustained dwelling and contents damages on Sept. 13 during Hurricane Ike, he submitted a claim to Farmers, which had insured his property, according to the complaint filed Feb. 10 in Jefferson County District Court.

Zavala requested Farmers cover the cost of repairs, the suit states.

However, Farmers improperly adjusted Zavala's claim for the repairs of his property, even though the policy provided coverage for losses, he claims.

Farmers told Zavala it would not pay the full proceeds of the policy, although demand was made for it, which constitutes a breach of the insurance contract
, the suit states.

"Defendant misrepresented to Plaintiff that the damage to the property was not in excess to the amount paid, even though the damage was caused by a covered occurrence," the suit states.

Farmers also failed to make an attempt to settle Zavala's claim in a fair manner, a violation of the Texas Insurance Code, unfair settlement practices, he claims.

The company failed to explain the reason for its offer of an inadequate settlement, another violation of the Texas Insurance Code
, according to the complaint.

Farmers failed to affirm or deny coverage of the claim within a reasonable time frame, the suit states.

It refused to fully compensate Zavala, even though it did not conduct a reasonable investigation, which constitutes another violation of the Texas Unfair Competition and Unfair Practices Act, he alleges.

Farmers breached its contract with Zavala by refusing to pay the policy, according to the suit.

Zavala is seeking three times his actual damages, plus 18 percent post-judgment interest per annum and exemplary damages.

Jason M. Byrd of Snider and Byrd in Beaumont will be representing him.

The case has been assigned to Judge Milton Shuffield, 136th District Court.

Case No. D183-249
Source: setexasrecord.com

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Saturday, February 14, 2009

Farmers Insurance is one of the 10 Worst Insurance Companies for Consumers

The American Association for Justice has recently released a report entitled The Ten Worst Insurance Companies in America. You can read it here (pdf). The Alabama Association for Justice has prepared a statement on the report, which appears below:

10 Worst Insurance Companies for Consumers Ranked; No. 1, 3, 4 and 7 Sell Policies in AL

Insurance Industry Employs "Deny, Delay, Defend" Strategy, Puts Profits Over Policyholders

MONTGOMERY - In recent years, Alabama homeowners have seen sharp increases in their insurance premiums. A new study put out by the American Association for Justice ranks the 10 worst insurance companies in the U.S. for consumers and explains the overall rise in premium costs to an industry-wide strategy of denying claims, delaying payments and defending those positions as long as possible in hopes that weary claimants will settle for less than their claim is worth.

"Nationally, we've seen insurance companies continue to put profits over the best interest of their policyholders," Gibson Vance, president of the Alabama Association for Justice (ALAJ), formerly the Alabama Trial Lawyers Association, said, adding that "in Alabama it's no different."

In Alabama, State Farm (#4 on the 10 Worst Insurance Companies List) is the leading insurer of property and casualty insurance, followed by Allstate, AIG and Farmers (#'s 1, 3 and 7 on the 10 Worst Insurance Companies List). Alabamians pay the ninth-highest average homeowners premiums in the nation, which insurers say is because of hurricane risk, but interestingly only 12 percent of the state is coastal. In addition, property and casualty insurers took in $6.6 billion in premiums from Alabama policyholders in 2006 but only paid out $3.5 billion in losses.


Thousands of court documents, materials uncovered from litigation and discovery, testimony, complaints filed with state insurance departments, SEC and FBI records, and news accounts were reviewed to compile the rankings and statistics of the study. Financial documents also revealed extravagant profits and executive compensation while policyholders' claims were routinely delayed and denied. Over the last 10 years, the property / casualty and life / health insurance industries have each enjoyed annual profits exceeding $30 billion. The insurance industry takes in over $1 trillion in premiums every year. It has $3.8 trillion in assets, more than the GDPs of all but two countries. The CEOs of the top 10 property / casualty firms earned an average of $8.9 million in 2007. The CEOs of the top 10 life / health insurance earned an average of $9.1 million. The median insurance CEO's cash compensation is $1.6 million per year, leading all industries.

"The 10 worst insurance companies that made the list did so because of their shameful treatment of policyholders. As the study shows, Allstate's Your in Good Hands' motto only applies if you don't make a claim," Vance said.

10 Worst Insurance Companies for Consumers

1. Allstate (NYSE: ALL) set the standard for insurance company greed and placing profits over policyholders. Allstate contracted with consulting giant McKinsey & Co. in the mid-1990s to systematically force consumers to accept lowball claims or face its "boxing gloves," an aggressive strategy designed to deny claims at any cost. One Allstate employee reported that supervisors told agents to lie and blame fires on arson, and in turn, were rewarded with portable fridges.

2. Unum (NYSE: UNM) - Unum's actions are even more shameful considering the type of insurance it sells: disability. Unum's behavior was epitomized when it denied the claim of a woman with multiple sclerosis for three years, stating her conditions were "self-reported," contrary to doctors' evaluations. In 2005, Unum agreed to a settlement with insurance commissioners from 48 states over their practices.

3. AIG (NYSE: AIG) - The world's biggest insurer, AIG's slogan was "we know money." AIG, described by commentators as "the new Enron," has engaged in massive corporate fraud and claims abuses. In 2006, the company paid $1.6 billion to settle a host of charges.

4. State Farm - State Farm is notorious for its deny and delay tactics, and like Allstate, hired McKinsey consultants. State Farm's true motives became apparent during Hurricane Katrina; for example, it employed multiple engineering firms until they could deny the claims of the Nguyen family of Mississippi. In April 2007, State Farm agreed to re-evaluate more than 3,000 Hurricane Katrina claims.

5. Conseco (NYSE: CNO) - Conseco sells long-term care policies, typically to the elderly. Amongst its egregious behavior, the insurer "made it so hard to make a claim that people either died or gave up," said a former Conseco-subsidiary agent. Former Conseco executives were fined when they admitted to filing misleading financial statements with regulators.

6. WellPoint (NYSE: WLP) - Health insurer WellPoint has a long history of putting profits ahead of policyholders. For instance, California fined a WellPoint subsidiary in March 2007 after an investigation revealed that the insurer routinely canceled policies of pregnant women and chronically ill patients.

7. Farmers - Swiss-owned Farmers Insurance Group consistently ranks at or near the bottom of homeowner satisfaction surveys, and for good reason. For example, Farmers had an incentive program called "Quest for Gold" that offered pizza parties to its adjusters that met low claims payments goals. Like Allstate, it also hired the McKinsey consultants.

8. UnitedHealth (NYSE: UNH) - The SEC opened an investigation into former UnitedHealth CEO William McGuire for stock backdating, which ultimately led to his ouster in 2006 and returning $620 million in stock gains and retirement compensation. Physicians have also reported that their reimbursements are so low and delayed by the company that patient health is being compromised.

9. Torchmark (NYSE: TMK) - According to Hoover's In-Depth Company Records, Torchmark's very origins were little more than a scam devised to enrich its founder, Frank Samford. Torchmark has preyed on low-income Southern residents and charged minority policyholders more than whites on burial policies.

10. Liberty Mutual - Like Allstate and State Farm, Liberty Mutual hired consulting giant McKinsey to adopt aggressive tactics. Liberty's tactics were highlighted when a New York couple's insurance was "nonrenewed" by Liberty, even though they lived 12 miles from the coast and never experienced weather-related flooding.

To see how consumers can hold the insurance industry accountable and view a full copy of the study, visit www.justice.org
Source: whnt.com

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Friday, February 13, 2009

Farmers Mutual Insurance Company Sued for Claim Denial

Montgomery County residents file hurricane insurance suit in Jefferson County
By Kelly Holleran

Two residents of The Woodlands have filed suit against Ranchers and Farmers Mutual Insurance Company and Southeast Surplus Underwriters General Agency, alleging they were not paid money to which they were entitled after Hurricane Ike destroyed sections of their home.

When Michelle Weishiemer's and David Aguilar's property at 19 Shimmer Pond Place in The Woodlands sustained roof and water damages on Sept. 13 during Hurricane Ike, they submitted a claim to Ranchers and Farmers, which had insured their property, according to the complaint filed Jan. 30 in Jefferson County District Court.

Weishiemer and Aguilar requested Ranchers and Farmers cover the cost of repairs, the suit states.

However, Ranchers and Farmers denied a portion of Weishiemer's and Aguilar's claim for the repairs of their property, even though the policy provided coverage for losses, she claims.

It denied the claim after assigning an adjuster from Southeast Surplus to adjust the claim, according to the complaint.

"Plaintiffs' claim(s) still remain unpaid and the Plaintiffs still have not been able to properly repair the Property," the suit states. "Plaintiffs cannot live in their house in its current condition. They have been forced to lease another house at their own expense because Defendants have not even properly paid Plaintiffs under their Loss of Use coverage under their policy."

Ranchers and Farmers told Reed it would not pay the full proceeds of the policy, although demand was made for it, which constitutes a breach of the insurance contract, the suit states.

"Defendants misrepresented to Plaintiffs that the damage to the Property was not covered under the Policy, even though the damage was caused by a covered occurrence," the suit states.

Ranchers and Farmers and Southeast Surplus also failed to make an attempt to settle Weishiemer's and Aguilar's claim in a fair manner, a violation of the Texas Insurance Code, unfair settlement practices, they claim.

The companies failed to explain the reason for their offer of an inadequate settlement, another violation of the Texas Insurance Code, according to the complaint.

Ranchers and Farmers and Southeast Surplus failed to affirm or deny coverage of the claim within a reasonable time frame, the suit states.

They refused to fully compensate Weishiemer and Aguilar, even though they did not conduct a reasonable investigation, which constitutes another violation of the Texas Unfair Competition and Unfair Practices Act, Weishiemer and Aguilar allege.

Ranchers and Farmers and Southeast Surplus breached their contract with Weishiemer and Aguilar by refusing to pay the policy, according to the complaint.

Ranchers and Farmers and Southeast Surplus violated the Deceptive Trade Practices Act by an unreasonable delay in the investigation, adjustment and resolution of the Weishiemer's and Aguilar's claim, by their failure to give Weishiemer and Aguilar the benefit of the doubt and by their failure to pay for the proper repair of Weishiemer's and Aguilar's home, the suit states.

Ranchers and Farmers and Southeast Surplus engaged in false, misleading and deceptive acts or practices in the business of insurance, according to the complaint.

The companies also engaged in unfair claims settlement practices, the suit states.

Weishiemer and Aguilar are seeking unspecified actual, consequential, treble, punitive and exemplary damages, plus attorney's fees, costs, pre- and post-judgment interest and other relief to which they may be entitled.

Jason D. Speights of Speights Law Firm in San Antonio will be representing them.

The case has been assigned to Judge Milton Shuffield, 136th District Court.

Case No. D183-165
Source: setexasrecord.com

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Thursday, January 29, 2009

Farmers Insurance, Claim Denied and Breach of Contract?

The lawsuits keep rolling in over the Oct. 8 landslide in Southwest Portland that destroyed two homes and damaged another.

On Wednesday, Yuan Chou and his wife, Siukee Tong Chou, filed two suits: one against their insurance company for breach of contract and intentional infliction of emotional distress; and another for liability against David and Kathleen Hendrickson, the couple whose home slid down the hillside, crashing into the Chou's home.

The Hendricksons' 1930 home at 6438 S.W. Burlingame Place damaged one home as it ripped the Chou's home off its foundation. The Chous have been living in a rented apartment since narrowly escaping the sliding debris of earth, cars and building materials.

The Chous' suit against Farmers Insurance seeks payment of unspecified damages to their home, its contents and attorney's fees. Farmers issued them a letter last month saying their policy does not cover landslides.

The city of Portland has issued permits for cleanup and some slope stabilization. That work is being paid for by Farmers, which also insured the Hendrickson home. The cleanup falls under the couple's liability policy, but they also are suing Farmers for breach of contract after Farmers denied their property claim.

The city has not found a definitive reason why the home slid, and an exact cause may never be known because the slide erased the evidence. But a preliminary investigation led officials to believe that a leak in the Hendricksons' backyard sprinklers may have saturated the soil.

The homeowners installed a sprinkler system on the property in March 2005, according to city records. Last September, they installed a new back-flow device and shut-off valve. Water use at the property was unusually high just before the slide, officials have said, suggesting a leak or a malfunction. But it's unclear whether the sprinklers were overused or a pipe broke.

The Hendricksons' suit against Farmers cites "an accidental discharge of water" that may have caused the damage. Farmers hired a consultant who concluded, among other things, that the slide was triggered by slope instability "due to the presence of water" and that the water was not likely from rain or natural seepage.

Lawyers in the case expect that homeowners and their insurance companies and the Hendricksons' contractors and their insurance companies likely will come together later this year for settlement talks.

Source: oregonlive.com

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Farmers New World Life Insurance and HIV

The Spokane Spokesman-Review on Wednesday examined a case in Washington state in which an HIV-positive man was denied life insurance by Farmers New World Life Insurance. Some advocates had hoped that the discrimination case would "open doors" for people living with the virus who are denied life insurance, the Spokesman-Review reports, adding that those hopes were "dashed" by a ruling that said Gerald Hebert -- an employee with the state's Human Rights Commission who issued a complaint with the insurance commissioner's office in 2006 -- was not illegally discriminated against because of his HIV-positive status.

Although the issue of HIV/AIDS-related discrimination is not new, advocates said this case illustrates that the insurance industry fails to recognize the increased life expectancies of HIV-positive people because of advances in antiretroviral therapy. Sid Wolinsky of the San Francisco not-for-profit legal center Disability Rights Advocates said that the "problem" with insurance companies is that they "routinely use grossly outdated statistical material," rarely keep their own data and rely on manuals reinsurance companies provide. Wolinsky said, "That is not to say there is not an increased mortality or morbidity risk for somebody with HIV than for somebody without it. But the risk is such that it can be covered."

According to the Spokesman-Review, insurance companies can deny coverage to a person only if there is sound statistical data that show the person is too risky to insure. Documents show that the Washington state Insurance Commissioner's Office, which led the investigation, had difficulty obtaining such information from Farmers. The Spokesman-Review reports that a Swiss study of people living with HIV found that "successfully treated HIV-positive and hepatitis C-negative patients have a short-term mortality as low as or lower than that of patients with cancer who have been successfully treated -- a group that is able to obtain life insurance."

Marc Brenman -- former executive director of the state's Human Rights Commission -- said that there is reason to believe Farmers routinely violated a state law by denying insurance to people living with HIV. Brenman said that there is "an entire class of people who are not able to purchase life insurance at any price, and it is entirely and absolutely wrong." Farmers denies the claim and said that it applies underwriting grants fairly and consistently (Graman, Spokane Spokesman-Review, 1/28).

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Wednesday, January 28, 2009

Farmers New World Life Insurance Co. denies policy because of HIV?

Fallout goes on after insurer denies policy because of HIV

(Spokesman-Review, The (Spokane, WA) Via Acquire Media NewsEdge) Jan. 28--Disability rights advocates had hoped a Washington state discrimination case would open doors to thousands of people with HIV who are denied what many others take for granted -- life insurance.

But their hopes have been dashed by a behind-the-scenes ruling in Olympia that a Washington life insurance company did not illegally discriminate against a 49-year-old Kitsap County man when it denied him a policy because he is HIV-positive.

Fallout from the case has led, in part, to the recent dismissal of the state's human rights director and a lawsuit against the office of state Insurance Commissioner Mike Kreidler.

Insurance regulators initially appeared ready to sanction Farmers New World Life Insurance Co., state documents show, but later backed off. The Human Rights Commission launched its own investigation, triggering a political showdown, an allegation of collusion and an unfavorable state audit of the commission's involvement in the case.

"There is an entire class of people who are not able to purchase life insurance at any price, and it is entirely and absolutely wrong," said Marc Brenman, the former executive director of the Human Rights Commission who lost his job this month, partly as a result of his role in this discrimination case.

Citing a pending court case and an open investigation, the offices of the insurance commissioner and the Human Rights Commission declined requests for interviews.

Advocates say the issue of discrimination against people with HIV is nothing new, but the Farmers case illustrates the insurance industry's failure to recognize that anti-retroviral treatment has greatly increased life expectancies of those who have the virus that causes AIDS.

"The problem with insurance companies," said disability rights activist Sid Wolinsky, is "they routinely use grossly outdated statistical material." Furthermore, they rarely keep their own data, relying instead on manuals provided by reinsurance companies. "That is not to say there is not an increased mortality or morbidity risk for somebody with HIV than for somebody without it," said Wolinsky, of Disability Rights Advocates, a nonprofit legal center in San Francisco. "But the risk is such that it can be covered."

In Washington, the potential test case grew out of a 2006 coverage denial.

That October, Brenman's office brought to the attention of the insurance commissioner's office a complaint filed by Gerald Hebert, of Poulsbo, Wash., who had been denied life insurance by Farmers New World Life Insurance, a subsidiary of Farmers Group.

Brenman said there was reason to believe Farmers routinely denied insurance to people with HIV in violation of state law.
Farmers has said that the company applied underwriting guidelines fairly and consistently and that the complaint was without merit.

Insurance Commissioner Mike Kreidler's office, instead of the Human Rights Commission, was asked to investigate the case to avoid the appearance of conflict of interest. At the time, Hebert, a gay rights advocate, was a member of the Human Rights Commission. He resigned in September 2008 after auditors concluded he had misused a state-issued credit card and rental cars.

By that time, though, the complaint over denied coverage already was under investigation.

From the beginning, the insurance commissioner's office had difficulty obtaining information from Farmers New World Life showing a statistical difference in the risk of insuring someone with HIV, documents show. An insurance company can only turn someone down for insurance if it has sound actuarial data to show that a person is too risky to insure.

However, in a Swiss study of people with HIV, researchers found that "successfully treated HIV-positive and hepatitis C-negative patients have a short-term mortality as low as or lower than that of patients with cancer who have been successfully treated -- a group that is able to obtain life insurance."

A December 2006 letter from Marcia Stickler, of the insurance commissioner's legal affairs division, to Brian Kreger, of Farmers, complained about the company's lack of response to repeated requests for the criteria used to refuse insurance to people with HIV.

Farmers "either has and uses such criteria or it does not," Stickler wrote. "It is clear that the company simply denies all HIV-positive individuals outright, without any true analysis of actuarial risk."

In May 2007, Brenman's staff, having kept close tabs on insurance regulators' progress in the case, believed the fact-finding stage of the investigation had concluded. Based on the lack of evidence Farmers had produced in its defense up to that point, the Human Rights Commission charged the company with illegal discrimination.

However, the insurance commissioner's office had reached no such conclusion.

"They were on the verge of making a finding of discrimination, and at the last minute they changed the finding to no discrimination," Brenman said in a recent interview.

In August 2007, Kreidler's office determined material eventually provided by Farmers "demonstrated that a bona fide statistical difference in risk or exposure had been substantiated" and therefore the denial of life insurance to Hebert was fair discrimination.

Brenman demanded to see what evidence Farmers had provided after his office had issued its finding, but received only heavily redacted documents from the insurance commissioner's office. In a December 2007 letter, Kreidler said his office would not turn over the redacted material Brenman's office sought because it contained Farmers' "trade secrets" that had to be protected.

Brenman appealed to the Attorney General's Office, which declined to intervene.

"Because we were not able to examine the data, we were forced to change our finding of discrimination to a finding of 'under investigation,' " Brenman said.

Hebert has since filed a lawsuit in Thurston County Superior Court, seeking the undisclosed portions of the documents under the state Public Disclosure Act.

His Seattle attorney, Jesse Wing, said documents that the insurance commissioner has turned over "strongly suggest" that Farmers did not do an individual determination of the validity of Hebert's application, or the application of any HIV-positive person, before denying them.

Only after Hebert's complaint did the company conduct an analysis, Wing said, and "in a collaborative fashion with the Office of Insurance Commissioner."

"The correspondence shows that rather than holding Farmers to its own analysis, (the insurance commissioner's office) actually worked with Farmers to determine what standards to use," Wing alleged. "This is not in my view consistent with the obligation of the insurance commissioner."

Although the insurance commissioner's office refused comment on the case, in general, a spokeswoman disputed Wing's assertion that it had worked with Farmers in establishing legally acceptable criteria.

"We do not believe the correspondence shows that the OIC worked with Farmers to determine what standards to use," Stephanie Marquis said. "We also do not agree that it was only after Mr. Hebert's complaint that the company conducted an analysis, and we specifically deny that the company conducted its analysis in a collaborative fashion with our agency."

In November 2007, a state auditor's investigation found that Brenman had used his position to expedite and facilitate the investigation into the complaint brought by a human rights commissioner, "contrary to normal agency procedures." Brenman denies the allegation, which has been referred to the state Ethics Board.

On Jan. 9, Brenman was fired by a unanimous vote of the Human Rights Commission, which cited the audit among other "administrative problems," according to commission Chairwoman Yvonne Lopez Morton, of Spokane.

Two complaints of HIV discrimination by insurance companies, including Hebert's, are currently on file with the Human Rights Commission.

Source: tmcnet.com

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Friday, January 02, 2009

Farmers Insurance Company of Oregon Accused of “calculatingly malicious” in its Refusal to Pay

Owners of landslide home are first to sue insurer
Hendricksons say they were told 'earth movement' would be covered
By Shasta Kearns Moore

The Southwest Community Connection, Jan 1, 2009

HILLSDALE — The owners of the four-level home that cascaded down a hill into two other houses on Oct. 8 are the first of seven affected households to file suit against their insurance company for denying coverage.

Dave and Kathei Hendrickson allege in the $2 million complaint filed Dec. 10 in Multnomah County Circuit Court that Farmers Insurance Company of Oregon had been, at times, “calculatingly malicious” in its refusal to pay for any damage resulting from the landslide — which demolished the Hendricksons’ house and nearly everything in it.

Kathei Hendrickson was home when the slide occurred in the early morning and barely escaped thanks to quick action by her neighbors. The house and several hundred tons of debris are still sitting at the bottom of the hill, where the road — a portion of Terwilliger Boulevard — has been closed indefinitely.

Many of the homeowners are still not allowed back in their houses and are living with friends or in rental units as they continue to make mortgage payments.

Landslides are generally not covered
According to insurance and landslide experts, “earth movement,” as it is called in the insurance industry, is typically not covered by homeowner’s insurance and requires an extra — and extremely rare — policy.

However, the Hendricksons claim in their suit that a Farmers Insurance agent told them when they bought a “Protector Plus Homeowners Package” in 2005 that it would cover all eventualities, including earth movement.

According to the Hendrickson’s attorney, Bob Bonaparte, the agent “essentially told them they would be covered for every risk … so they purchased the policy, and lo and behold they weren’t.”

A claim denial letter dated Dec. 2 from Farmers Insurance Company of Oregon to the Hendricksons points to language in the policy that they say specifically denies coverage of damage resulting from earth movement, and any of its possible causes.

“The policy repeatedly emphasizes that landslide is never covered under this policy, however caused — whether combined with water or the negligent acts or omissions of people,” states the letter signed by Michael D. Flynn of Farmers Insurance.

What caused the landslide?
Insurance company experts, city engineers and others have all cited an unnatural water saturation of the hillside as the most likely cause of the landslide — though, as most of the evidence was washed away in the slide, the true, specific cause will likely never be fully known.

Records from the city’s Water Bureau show an excessive use of water since the last meter reading on July 31 — about 20,000 extra gallons, according to Dr. Wesley Spang, an engineering expert hired by Farmers Insurance. However, Spang and others have not been able to determine over what period of time the water use occurred nor whether it was intentional or caused by a leak.

According to legal documents, the release of excess water could have been triggered by several contractors working on the property in recent years. Two days before the slide, Team Clean Windows and More, LLC, power-washed the house; 10 days before, Harrity Tree Specialists removed an 80-year-old cedar tree; and in recent years, an unnamed contractor broke up concrete in front of the house and another installed a sprinkler system.

Regardless, says Farmers Insurance, the Hendricksons would not be covered for any of those possible causes.

Settlement conference
In addition, the other six households affected by the catastrophe have all been denied claims against their own insurance companies and many are preparing claims against Farmers Insurance under the liability portion of the Hendricksons’ policy.

Though the Hendricksons’ complaint includes a request for a jury trial, their lawyer expects that in the middle of 2009 all of the parties to the various lawsuits — including the contractors — will sit down and negotiate who should pay what.

“Lawsuits should be flying any day,” Bonaparte said. “Ours was simply the first.”

Read the Lawsuit: Hendrickson vs Farmers Insurance Company of Oregon

Source: swcommconnection.com

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Thursday, December 11, 2008

Portland Couple Sue Farmers Insurance Company of Oregon

Portland owners of sliding house first to sue insurance company
by Aimee Green, The Oregonian
Thursday December 11, 2008, 5:33 PM
The owners of a Southwest Portland home that slid down hill, smashing into two others Oct. 8, are suing their insurance company for at least $2 million for failing to pay up.

The suit filed by Kathleen and David Hendrickson, who lived at 6438 S.W. Burlingame Place, contends that Farmers Insurance Company of Oregon won't pay for their losses even though their insurance agent promised that their policy would provide comprehensive protection. The suit states that long before the slide the agent visited and inspected the Hendricksons' property, and told them their policy covered "earth movement." A mistake, however, was made in the written text of the policy, which said it didn't cover earth movement, the suit states.

A city investigation into the slide's cause cited backyard sprinklers and high water use as leading suspects. The suit states that the slide was caused by a "sudden discharge of water" and/or a "shaking of the earth" that happened as a stump on the property was ground up.

The Hendricksons are the first among the affected homeowners to file a lawsuit, said their attorney, Robert Bonaparte.

Two homes, including the Hendricksons', were destroyed. Another was damaged. Two others are considered too dangerous to live in.

Some of the affected homeowners have filed claims against the Hendricksons, Bonaparte said last month. The Hendricksons' insurance company has agreed to defend against those claims, he said.

-- Aimee Green; aimeegreen@news.oregonian.com

Source: oregonlive.com

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