Farmers Insurance Loses $400K Arbitration Case

Minnesota Court Upholds $400,000 Arbitration Settlement in Alpine Glass vs. Farmers Suit


The U.S. District Court for the District of Minnesota issued an order on Friday upholding an arbitration settlement of more than $400,000 from Farmers Insurance and Mid-Century Insurance Company for more than 1,100 "short-pay" claims filed by Alpine Glass. The original suit by Alpine asked the court to rule that it be allowed to engage in arbitration with the insurers to settle the short-pay disputes; though Farmers had filed a counterclaim alleging that it was not liable to Alpine, the court had ordered that the companies should arbitrate the short-pay claims "in a single consolidated proceeding," according to the most recent opinion issued in the case. Farmers then motioned for the court "to vacate that award," according to court documents—and that motion also was denied with the most recent ruling.

Farmers had made several claims in its motion to have the award vacated. Among these claims, the insurer alleged that Alpine had violated Minnesota's anti-incentive statute, arguing that by promising customers "that if an insurer did not pay Alpine's bill in full, the customer would not be responsible for the difference." Farmers had argued that this was a form of an incentive to encourage the customer to purchase auto glass services, according to court documents. The court ruled against this claim as well.

In addition, Farmers had argued that no assignments of proceeds were made to Alpine Glass. (This is not the first time the assignment of proceeds issue has come up. However, previously an insurer had claimed that the assignment of proceeds clause could not apply to a glass shop. Last summer, the Minnesota Supreme Court ruled that it could.) (CLICK HERE for related story.)

However, the court dismissed this claim as well, as part of its denial of the motion, noting that it had reviewed the arbitration records in the case.

"Having reviewed that record, the Court finds that Alpine has established, by a preponderance of the evidence, that the 91 insureds did, in fact, assign their claims to Alpine. In every one of the 1,120 short-pay claims that were arbitrated-including every one of the 91 challenged claims-Farmers made a partial payment directly to Alpine," writes the judge.

The judge goes on to point out that Farmers national claims manager Michelle Keller testified that while an assignment specifically is not required, a work order must be signed by the policyholder before the invoice can be processed, and that Safelite Solutions, Farmers' claims administrator, must "look for a signed payment authorization … before it will send any payment directly to an auto glass shop."

Farmers also had argued against the arbitrator's ruling that "Farmers was paying a rate not based upon competitive pricing in the auto glass replacement industry in Minnesota" in its motion for the court to vacate the award.

However, the court ruled that under Minnesota's No-Fault Act, "an arbitrator's findings of fact are 'conclusive.'"

Farmers went on to argue that the arbitrator should have looked at each of the short-pay claims presented separately, but the judge writes that one reason for arbitration in the state is to "decrease the cost and complexity of litigation."

"The efficiencies inherent in the ability to present and consider generalized evidence are the primary reason why the Minnesota Supreme Court permits consolidation of no-fault claims in appropriate cases," writes Schiltz.

Alpine is represented by Chuck Lloyd of Livgard & Lloyd LLP in Minneapolis, along with Joshua P. Brotemarkle of Rabuse Law Firm P.A. Steven Kluz of Stoel Rives LLP and Diane B. Bratvold of Briggs and Morgan represented Farmers in the case.

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

Do you have to contact the media before Farmers Insurance will pay your claim?

Molly McClure came home to find her heavy metal patio cover collapsed under the weight of ice and snow. The attached awning brought the backside of her roof soffitt down with it.

Molly said, “From corner to corner it’s along the whole backside of the house that’s damaged.” The real split was between Molly and Farmers Insurance after the adjustor denied her claim.

Molly said, “I’m shocked it’s not covered. I can’t believe they wouldn’t cover that because it’s obvious there is damage to the house.” The denial letter implied the awning doesn’t have walls so is not considered a structure.

Faced with $6,600 in repair costs, Molly and her father Dale have argued with Farmers Insurance representatives for three weeks. Six On Your Side contacted the media Vice President for Farmers in Los Angeles Jerry Davies, and e-mailed photos of the damage to him.

Within 12 hours Dale McClure received a call from his local agent. Dale said, “Our agent said we won which is a good thing. Its what we wanted to hear.”

Molly has been told Farmers will replace her awning, repair the soffitt and even compensate her neighbor who spent three hours helping her raise the roof soffitt.

In a statement Jerry Davies of Farmers Insurance said, “Farmers claims executives visited with the agent and went to the customer’s home for a review of the claim. After further review farmers has decided the claim will be covered. We are pleased that she is fully covered.”

However the McClures say this should be a lesson to any homeowner with a covered patio or carport. Molly said they should check their homeowner’s policy regardless of the insurance company to see if those attachments to their homes are covered.

Watch the Video

Source: wowt.com

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

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

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

Farmers Insurance Fined $10,000

Farmers Insurance fined for rerating policies using credit scores
By Brent Hunsberger, The Oregonian
December 03, 2009, 1:51PM
The Oregon Insurance Division has fined Farmers Insurance Co. of Oregon $10,000 for altering consumers' insurance premiums based on their credit scores.

The penalty, handed down late last month, stems from Farmers' three-year practice of using a consumer's credit history to re-rate their auto and homeowners' insurance policies when they renewed. In more than 1,000 cases, the re-ratings resulted in higher premiums, the state's final order says.

Oregon law allows insurers to use credit scores as part of its criteria for refusing initial coverage or determine your rate. But it bars insurers from using credit history or an insurance score at renewal to re-rate a personal insurance policy, unless the consumer asks.

Farmers' spokesman Jerry Davies said via e-mail that a programming change in early 2006 "caused an undetected system issue. Unfortunately, the system issue caused our
mechanical system to stop working correctly.

The case stems from a consumer complaint the division received in July 2008 about poor service. In the process of investigating, state officials discovered Farmers' practice, said Ron Fredrickson, manager of the division's consumer advocacy team.

The improper reratings took place between January 2006 and Feb. 13, 2009 on 8,385 instances, state officials said. In 1,050 of those cases, the re-rating resulted in an increase in premiums.

Farmers has refunded consumers a total of $64,840, division spokeswoman Cheryl Martinis said. Customers with policies still in force were issued credits, Davies said. Farmers also is making changes to its computer system, state officials say.

To see other actions taken this year against insurers in Oregon, visit the insurance division's Web site.

-- Brent Hunsberger

Farmers Insurance Company of Oregon Final Order

Source: oregonlive.com

Farmers Insurance Clients' Info Hacked

NASHVILLE, Tenn. -- A big insurance company has a problem with its computers. Federal agents searched two middle Tennessee homes after someone hacked into Farmers Insurance customers' records.

Farmers Insurance is trying to get word out to policy holders, and the Secret Service is trying to figure out how it happened.

According to a statement sent to the Channel 4 I-Team from Farmers Insurance, someone obtained unauthorized computer access to some of their customers' information in Nashville.

Given that the information is so sensitive, Farmers became concerned and contacted the Secret Service, which investigates cyber crime along with protecting the president and other heads of state.

In the statement to the I-Team, Farmers Insurance said a former insurance agent of theirs may have accessed the information, and it is in the process of notifying potentially affected customers.

The I-Team has learned investigators want to know if an insurance agent shared that information.

On Nov. 18, Channel 4 received an e-mail from a man named Michael Brown, who runs Endless Sphere Technology, an Internet provider.

In the e-mail, Brown said a few months ago he discovered a flaw in the agent page for Farmers Insurance that allows someone to extract all the information from its database, such as insurance policies, names, addresses and Social Security numbers.

He said he tried to warn Farmers about the glitch but was ignored.

"I warned them many times that I would go to the media with this if they continued to ignore me," Brown said in the e-mail.

This week, Secret Service agents showed up at Brown's house, serving a search warrant.

Brown said he was hired by the insurance agent to extract people's personal information from the Web site. He said that when he realized it was people's Social Security numbers, he contacted Farmers but was vague with it and the Secret Service about how he obtained the information.

"I think the outcome would've been the same," said Brown when asked if he regretted not being more open from the beginning.

No one has been arrested or charged.

Along with the search warrant at Brown's house, Secret Service agents also served a warrant Tuesday at the new office of their former insurance agent.

The Secret Service would not say where that agent now works or what his name is.

Source: wsmv.com

Appeals court upholds certification of class-action suit against Farmers Insurance

OKLAHOMA CITY – The Oklahoma Court of Civil Appeals has upheld certification of a class-action lawsuit against Farmers Insurance Company Inc. and related companies over the way Farmers processed, reviewed and denied medical-pay claims for some policyholders.

According to the court’s opinion, in late 2000 Farmers started having such claims reviewed by Zurich Services Corp., a claims management company owned by Farmers that maintains a large database of charges billed by medical providers.“ZSC compares each incoming Farmers’ policyholder’s medical bill against the database, and ‘flags’ a charge as potentially unreasonable whenever it exceeds the 80th percentile of all charges in the database for the relevant PSRO (Professional Standards Review Organization) service,” the court said.
Farmers contended that Zurich individually reviews flagged charges, finding some unreasonable and notifying the provider or policyholder it is reducing or denying payment.
In their lawsuit, the plaintiffs allege that Farmers systemically uses the 80th percentile audit/review process to wrongfully deny payment or reimbursement of policyholders’ medical expenses in a predetermined way, regardless of whether a particular expense is unreasonable, mainly to reduce Farmers’ costs.
The plaintiffs sought class certification only on a breach of contract claim, although they have alleged causes of action for bad faith, unjust enrichment, fraud, deceit and conspiracy to commit a tortuous act.
The trial court’s order, which granted class certification, stated that Farmers writes the policy in 14 states, including Oklahoma. The trial judge found that, in Oklahoma alone, thousands of claims were adjusted annually using the 80th-percentile method.
That court also found that each claim was small and costly to litigate individually and that such litigation would be burdensome to the courts.
Writing for the court, Presiding Judge Doug Gabbard said the record supports that finding.
“Having considered all the facts and circumstances, we find that the core issues of the case present common factual and legal questions, and also find that a class action is superior to other forms of adjudication,” the appeals court concluded.
A Farmers attorney declined to discuss the court’s opinion.
Farmers could seek a rehearing before the civil appeals court or ask the Oklahoma Supreme Court to hear the case. The certification order could also be modified by the district court.
A plaintiff’s attorney did not return a phone call seeking comment.

Source: journalrecord.com

Consumer Reports Survey: Most Problems with Claims were with Farmer’s Insurance and Others

Many people don’t have reliable insurance for their home. That’s the finding of a Consumer Reports National Research Center survey on insuring your home. The problems included delayed payments, payouts that were smaller-than expected, and some claims that were denied entirely.

Those who reported the most problems with claims were with—Farmer’s Insurance, Allstate, and Traveler’s—all major insurance carriers.

And Consumer Reports finds many insurance companies are cutting back coverage. Some are imposing high deductibles for windstorm damage. You might not be covered any longer for mold or dog bites.

Most important is checking what coverage you’ll have if your house is destroyed. Consumer Reports says Insurers are cutting back here, too. “Guaranteed replacement cost coverage,“ which pays the total bill to rebuild regardless of the price, is very hard to get, and where it’s available it’s very expensive.

Consumer Reports recommends comparison shopping for insurance every five years. Some good sites—netquote.com and insweb.com.

And to be sure you’re protected in the future, check that the policy includes adjustments for inflation.

Consumer Reports says be aware that flood damage is never covered by private homeowners insurance. But you can get flood coverage through the federal government. For details, go to http://www.floodsmart.gov.

Source: tricities.com

Republican Mike Duvall, the legislator caught boasting about his sexual escapades with his lobbyist mistresses is a Farmers Insurance Agent

SACRAMENTO, Calif. — A scandal involving a family-values legislator caught boasting about his sexual escapades with his lobbyist mistresses created an embarrassing distraction for lawmakers Thursday, further diverting attention from California's major policy issues in the crucial final days of their session.

Republican Mike Duvall resigned Wednesday after a videotape surfaced in which he described to a colleague in lurid detail his sexual conquests, including a spanking fetish, the skimpy underwear of one mistress and his carrying on two affairs simultaneously. He sought to deny the affairs on Thursday.

The fallout from the scandal began to emerge, with calls for an outside investigation in addition to the internal ethics probe to determine whether the alleged affairs might have influenced his votes.

California lawmakers, who face growing public distrust and few accomplishments for the year, were hoping for a flourish of activity on major issues such as water and prison reform as their regular session drew to a close this week.

But the scandal filled the Capitol with gossip and distracted many legislative staffers from the more important business at hand, while further tarnishing the image of an institution that is seen as increasingly ineffective.

"This is a real black eye," said Derek Cressman, regional director for the government watchdog group Common Cause. "I think it's imperative that the leadership of both parties take this very seriously and address it in a fast and strong way."

The videotape shows Duvall during a break from a July 8 committee hearing detailing his extramarital exploits to fellow Republican Assemblyman Jeff Miller of Corona. He is overheard on an open microphone bragging that he slept with an energy industry lobbyist who wore "eye-patch underwear" and that he enjoyed spanking her when they hooked up. He told Miller, a longtime friend, that he also was sleeping with another lobbyist.

"Oh, she is hot!" Duvall said about the second woman.

The 54-year-old married father of two issued a statement denying he had affairs and saying his only offense "was engaging in inappropriate storytelling."

The lobbyist Duvall refers to in his comments reportedly works for Sempra Energy, a San Diego-based energy services company. The allegation that Duvall slept with a lobbyist who does business before his chief committee prompted calls for an outside investigation and tougher rules of conduct for lobbyists.

Duvall was the vice chairman and ranking Republican member of the Assembly Utilities Committee. Duvall, a Farmers Insurance agent in Yorba Linda, also was a member of the Assembly Rules Committee, whose responsibilities include overseeing lawmaker ethics and ensuring sexual harassment laws are followed within the Legislature.

Assembly Speaker Karen Bass, D-Los Angeles, has ordered her chamber's ethics committee to investigate. On Thursday, she removed Miller from his seat on the ethics committee, saying it posed an obvious conflict for him to have a role in investigating the scandal.

Campaign finance records show only relatively small donations to Duvall from Sempra, including $1,500 to his re-election campaign in March and $1,300 to his officeholder account in 2007 and 2008. He appears to have authored only one bill on electricity rates, which never received a committee hearing.

California law requires lobbyists to register with the state, complete an ethics course and report the money and time they spend lobbying lawmakers. It does not require that they disclose how much they are paid or prohibit personal relationships with the people they are lobbying.

The liberal watchdog group Courage Campaign called on Attorney General Jerry Brown to investigate Duvall's behavior, saying an examination of a lawmaker's conduct should not be left to other lawmakers. Brown's spokesman, Scott Gerber, said the attorney general will wait for the ethics committee's conclusions before deciding whether to get involved.

While the videotape and subsequent resignation remained the talk of the Capitol, longtime observers of California's political culture were not surprised about the allegation of an affair between a lawmaker and a lobbyist. But rarely do affairs emerge in such public — and juicy — fashion and become broadcast to the world on YouTube.

"I hate to be the one to break the news, but relationships between lawmakers and lobbyists are neither uncommon nor unknown," Bill Cavala, a Democrat who worked in the Assembly speaker's office for more than 30 years, wrote in a blog Thursday. "The capitol community is like, in many ways, a combat fraternity. It is not surprising that the men and women involved in the political trenches together should be attracted on another level as well."

The scandal comes at a time of the year when politicians hop from fundraiser to fundraiser at restaurants and bars around the state Capitol, partying with lobbyists, staffers and other lawmakers. The timing of the fundraisers has raised questions in the past because it is at the end of the legislative session when lawmakers are voting on the most important bills, raising the specter of pay-to-play politics — or worse.

The public perception of a Legislature that operates like an insider's club and produces little in the way of meaningful change for California's 38 million residents has prompted several proposals for reform-oriented ballot initiatives for 2010.

Among them are measures to make the Legislature a part-time body, require that lawmakers actually understand the legislation they vote on and force lawmakers to undergo periodic drug and alcohol testing. Another movement seeks to call a constitutional convention to rewrite California's governing document.

With just one day to go in this year's session, lawmakers have left the most important parts of their agenda unfinished — on issues such as water, prisons and alternative energy.

Bass, the Assembly Speaker, tried to temper the scandal-fueled gossip and put a positive spin on the Legislature's final days in regular session.

"The Assembly has some very important policy work to complete in the next couple of days and we will not allow this situation to become a distraction," she said.

Copyright © 2009 The Associated Press. All rights reserved.

Source: google.com

Farmers Insurance and others may be shorting Texas homeowners

HOUSTON --Three new proposed class action lawsuits in Texas allege insurance companies are shorting their consumers. The lawsuits say as much as 20 percent is often missing from what their homeowners insurance should provide in a pay out.

The allegations center around the alleged non-payment of something the insurance industry refers to as “overhead and profit” to consumers, which is money insurance companies pay so consumers can afford to hire a professional general contractor when needed to oversee repairs. The money is supposed to provide enough funds to pay for a general contractor’s overhead expenses such as licensing and bonding fees, and also enough to allow the general contractor to make a living.

The Texas Department of Insurance has issued two separate bulletins informing insurance companies that not paying overhead and profit where a general contractor is needed would be “unfair to the insureds,” and could subject the insurance company to possible disciplinary action.

Cheryl Guerra says she’s one of the homeowners who got shorted on her Hurricane Ike claim by Travelers Insurance.

“It makes me very angry,” she asked. “Why aren’t we getting what we deserved?”

Guerra is suing Travelers now as a representative of the proposed class of consumers.

She alleges Ike caused roof damage, a downed fence, moisture damage in her walls, and other problems that needed repairs. She says Travelers Insurance did not pay her overhead and profit, leaving her without enough money to hire a general contractor.

“There really wasn't enough money to get everything done,” she said. “Trying to make up the difference to fix the damage is really impossible.”

Guerra says her family had no choice but to repair the roof over her family’s home on their own.

As a result, she says, her family of amateurs was forced to take on what she felt were dangerous repairs they were untrained to do, such as repairing their roof.

“We went and bought the material and did it ourselves,” she said. “My husband got up there.”

Guerra says she was petrified about the possible impact on her family, both physically and financially.

“What if my husband got hurt? He’d lose work.”

Alex Winslow of Texas Watch, a consumer and insurance watchdog group based in Austin, says insurance companies leave overhead and profit off claims far too often.

“Most customers don't even know their policy should be paying it,” he said. “It could be hundreds, (or even) thousands of dollars.”

Winslow says most consumers don’t know they are being shorted when it happens, which is why he says the number of complaints the Texas Department of Insurance has received on the issue should raise red flags.

KHOU discovered at least 60 overhead and profit related complaints made to the Department of Insurance, some dating back to 1997. However, after Ike struck, the number of complaints suddenly accelerated, with 26 of those 60 complaints coming during 2009 alone.

The Texas Department of Insurance felt the issue was important enough to issue a new bulletin in late 2008 about, reminding insurance companies to pay overhead and profit or face penalties. However, to date, department spokesman Jerry Hagins says they have yet to take any enforcement action on the issue.

“Unless an insurance company gets their cage rattled, they're going to continue to try to take advantage of consumers,” said Winslow.

State spokesman Hagins says the Department of Insurance has an open inquiry into many of the ways various insurance companies have been handling Ike-related claims. He says the overhead and profit issue is something they are examining as part of that wider inquiry.

Attorney Javier Delgado, who is filing suit in Texas against five insurance companies on this issue, says many Texans have been taken advantage of and probably have no idea.

“It's so systemic. It's so rampant,” he said. Delgado says insurance companies have good reason to leave overhead and profit off of many of their estimates to consumers.

“If you’re saving 2-thousand dollars on average per claim, that turns out to be a lot of money.”

He points to how a jury in Oklahoma issued a $130 million verdict against Farmers insurance for not paying overhead and profit to consumers in that state. The case was called Burgess Vs. Farmers and does not affect Texas consumers. Many Oklahoma homeowners will now be eligible to receive up to 20 percent more money than they had previously been paid on their claims. Delgado says his review of Farmers cases in Texas reveals what he alleges are some of the same problems here.

“Over 90 percent of the cases the clients we have that came to us, on the initial estimate Farmers did not pay overhead and profit.”

Delgado says Farmers has since paid the overhead and profit to many of those consumers, but only after he got involved as an attorney. Delgado says you shouldn’t have to hire an attorney to be treated fairly.

He also believes the problem with nonpayment of overhead and profit has accelerated in Texas after Ike struck, which is one of the costliest storms to insurance companies in American history.

“I was missing the overhead and profit, which comes to about two grand,” said homeowner Mike Barrera, who is suing Texas Windstorm for nonpayment of overhead and profit.

Barrera says he too was forced to fix his Ike-damaged house by himself, along with help from non-professionals he knew.

“Basically I had to solicit friends, family, we did the majority of it ourselves,” he said.

Barrera says he would have preferred to not put his friends and family at risk on the job, but says he could not hire a general contractor after Texas Windstorm didn’t include overhead and profit on his estimate.

“It's a rip off. Bottom line,” said Barrera. “I’m probably one of thousands of people.

We asked the top executive at Texas Windstorm, Jim Oliver, if and when Texas Windstorm pays overhead and profit to its consumers.

“We’re perfectly willing to pay profit and overhead if it's incurred, but we can't put it in the estimate,” he said.

KHOU showed Oliver dozens of examples where Texas Windstorm appears to have never included overhead and profit in estimates to consumers. Oliver says there is a way for those consumers, or others, to get paid overhead and profit from Texas Windstorm: they have to go out and hire a general contractor first, and then come back to Texas Windstorm and ask for the money later.

KHOU: I need to have the work completed and get a bill from my general contractor before I get overhead and profit from you?

Jim Oliver: Correct.

Texas Windstorm’s policy may have been affecting consumers for quite some time. Why? Nearly ten years ago, Texas Windstorm executive Reggie Warren wrote a memo describing similar policies as to what Oliver told KHOU about, saying: "Overhead and profit is considered if and when a contractor does the work and the expense is incurred."

KHOU showed Oliver that memo and asked him about it and its impact on current Texas Windstorm policy. “We're not gonna pay it, unless we understand a general contractor was used, as Mr. Warren has indicated here,” Oliver said.

The problem? A year before that memo, in 1998, the Texas Department of Insurance’s Commissioner issued an industry-wide bulletin specifically telling insurance companies that making consumers “incur” expenses first, is not proper and "would be contrary to purposes of the subject insurance policy."

The current insurance commissioner in Texas, Mike Geeslin, reinforced the point in December of 2008 by saying in a new bulletin "The Department's position has not changed."

The 2008 bulletin from Commissioner Geeslin concludes the Department of Insurance “will take appropriate enforcement action when evidence of unfair claim settlement practices is apparent.”

Oliver also told KHOU during the interview that if consumers hire a general contractor, it must be one who is “licensed” by the State of Texas. He also said a consumer could not be paid overhead and profit, if he or she acted as their own general contractor.

“A contractor needs to have a license to be paid overhead and profit,” he said.

Jim Oliver: The law says you have to have a license as a general contractor.

KHOU: To get overhead and profit?

Jim Oliver: Yes, because otherwise you’re not entitled to it.

KHOU informed Oliver we could locate no such law. We did find a federal court decision from Texas, Ghoman Vs. New Hampshire Insurance, which found under Texas insurance code a consumer who rebuilt his own house was still entitled to overhead and profit. The decision reads in part, in a decision not related to a Texas Windstorm claim:

“(The insurance company) points out that plaintiff did not actually incur some of these costs because he completed some of the repairs himself. While this may be true, it is legally irrelevant. See Gilderman, 649 A.2d at 945 (“All repair and replacement costs are, in theory, ‘contingent’ prior to being incurred.”) …His recovery is not tied to the repair or replacement of his property.”

Soon after KHOU’s on camera interview, we received the following note from Oliver:

“I checked on issues related to profit and overhead and found the following:

1. Reconfirmed that our claims people pay profit and overhead for all contractors whether licensed or not.

2. If a policyholder wants to be his/her own contractor TWIA will pay profit and overhead

3. When an independent adjusting firm fails to include the profit and overhead on an estimate, a sample of our files reviews that we pay profit and overhead.”

Homeowner Cheryl Guerra says it is important regulators protect consumers.

“Somebody has to take care of the people here,” she said, citing her fence that is still down, along with water spots inside her home, that she says are there because her insurance company never gave her enough money to pay for all her repairs.

“If they’re not going to take care of me, what am I paying my premiums for?”

Travelers Insurance did not make a statement on Guerra’s lawsuit after multiple attempts to reach a public relations representative.

We asked Farmers Insurance spokesman Jerry Davies about the jury verdict against Farmer’s in Oklahoma, as well as the new proposed class action lawsuit in Texas, spearheaded by a homeowner named Manuel Quezada.

"We are aware of the Quezada lawsuit which was recently filed, and we have filed an answer to the plaintiffs' complaint. Our general practice is not to comment publicly about pending litigation."

After our interview with Jim Oliver, he sent a follow-up written statement that seems to reverse at least one of his comments made during that meeting. In the written statement he says:

“Profit and Overhead is not shown as a line item on these estimates because we have included it in the "unit pricing" for each item to be repaired to be sure that adjusters did not omit it as part of the claim. By taking this approach, the policyholder can get Profit and Overhead or he/she can hire someone to supervise the repair work. As stated previously, we pay Profit and Overhead for the policyholder and both licensed and unlicensed contractors. We have had very few complaints about our unit pricing so we believe that our methodology is working as expected.”

Oliver also wrote a separate a note to KHOU management about a story we aired last week involving Texas Windstorm's alleged non-payment of claims related to wind-lifted shingles. Oliver called the story “unfair, inaccurate, incomplete, and deceptive” and gave a list of 17 “facts” he felt should have been included in the story. To read his points and the full letter, click here.

Recent lawsuit settlements in other states for non payment of overhead and profit by companies such as Nationwide Insurance have resulted in the agreement to pay consumers that money on claims where three or more “trades” were necessary for a general contractor to oversee. The settlement documents in that case describe a trade as “an occupation of a skilled craftsman, e.g., electrician, drywall installer, carpenter, etc.” A notice to Nationwide homeowners in that state says eligible consumers can now receive up to 20 percent of the amount previously paid to them to complete repairs.

Consumers in Texas who want to know if their claim included this money can look on their “proof of loss” statements and their estimates to see if there is a line included for overhead and profit. If you do not see it, and believe you had enough repair work to need a general contractor, you may file a complaint by contacting the Texas Department of Insurance here: http://www.tdi.state.tx.us/consumer/complfrm.html.

KHOU is collecting stories from consumers on this issue. If you have one to share you can email investigative reporter Mark Greenblatt at mgreenblatt@khou.com.

Source: khou.com

Zurich Net Income Drops 53% As Recession Takes Toll

NU Online News Service, Sept. 2, 3:30 p.m. EDT

Zurich Financial Services Group reported a net income drop of 53 percent for the first half of the year as the recession continued to take a toll on the company’s earnings.

Despite the drop, James J. Schiro, Zurich’s chief executive officer, emphasized that the company still managed a profit even with the challenges it faced.

“We are effectively managing our way through this crisis,” Mr. Schiro said during an analyst’s discussion of the results today.

The Zurich-based insurer of property and casualty and life products reported net income dropped $1.43 billion to $1.24 billion for the first half of the year.

General insurance reported an operating profit of $1.7 billion, compared to $2.24 billion for the same period last year, a drop of 23 percent. The combined ratio for the segment remained flat at 96.2.

Mr. Schiro called the company’s results “outstanding” and said Zurich is in a position of strength to take advantage of the economic turnaround that lies ahead.

Such a turnaround, he noted, would not happen quickly, and the improvement in the investment markets has only brought the company’s investment portfolios back to “pre-crisis” levels.

He said many companies are struggling with the current recession, declaring it the “greatest economic dislocation in a generation.”

He said the insurer is taking a disciplined approach to risk, refusing to chase volume and pushing for increased rates, which have risen by 4 percent in the past quarter.

The company continues to push efficiency, he said, with $900 million in improvement under its Zurich Way plan and an additional $400 million in expense reductions.

He said Farmers’ Insurance, the insurance exchange the company does not own but manages, is well on its way to growth as it integrates its purchase of American International Group’s Personal Auto Group into its operations.

Zurich plans to make acquisitions, he said, so long as they make economic sense.

Zurich Chief Financial Officer Dieter Wemmer noted that despite the economic downturn, the company’s solvency was never threatened. During the conference, he displayed a graph illustrating the sharp downturn in profitability the company took between the second- and third quarter of 2008 and the steady increase in profitability it has seen since. Net income has increased from $154 million in the third quarter of 2008 to $892 million for the second quarter of this year.

“We stayed the course,” Mr. Schiro told analysts. “Let’s not lose site of the fact that we reported a profit when others reported losses.”

NU Online News Service, Sept. 2, 3:30 p.m. EDT

Zurich Financial Services Group reported a net income drop of 53 percent for the first half of the year as the recession continued to take a toll on the company’s earnings.

Despite the drop, James J. Schiro, Zurich’s chief executive officer, emphasized that the company still managed a profit even with the challenges it faced.

“We are effectively managing our way through this crisis,” Mr. Schiro said during an analyst’s discussion of the results today.

The Zurich-based insurer of property and casualty and life products reported net income dropped $1.43 billion to $1.24 billion for the first half of the year.

General insurance reported an operating profit of $1.7 billion, compared to $2.24 billion for the same period last year, a drop of 23 percent. The combined ratio for the segment remained flat at 96.2.

Mr. Schiro called the company’s results “outstanding” and said Zurich is in a position of strength to take advantage of the economic turnaround that lies ahead.

Such a turnaround, he noted, would not happen quickly, and the improvement in the investment markets has only brought the company’s investment portfolios back to “pre-crisis” levels.

He said many companies are struggling with the current recession, declaring it the “greatest economic dislocation in a generation.”

He said the insurer is taking a disciplined approach to risk, refusing to chase volume and pushing for increased rates, which have risen by 4 percent in the past quarter.

The company continues to push efficiency, he said, with $900 million in improvement under its Zurich Way plan and an additional $400 million in expense reductions.

He said Farmers’ Insurance, the insurance exchange the company does not own but manages, is well on its way to growth as it integrates its purchase of American International Group’s Personal Auto Group into its operations.

Zurich plans to make acquisitions, he said, so long as they make economic sense.

Zurich Chief Financial Officer Dieter Wemmer noted that despite the economic downturn, the company’s solvency was never threatened. During the conference, he displayed a graph illustrating the sharp downturn in profitability the company took between the second- and third quarter of 2008 and the steady increase in profitability it has seen since. Net income has increased from $154 million in the third quarter of 2008 to $892 million for the second quarter of this year.

“We stayed the course,” Mr. Schiro told analysts. “Let’s not lose site of the fact that we reported a profit when others reported losses.”

Source: property-casualty.com