Recent Cases & Insights
Premium Paying Insured Incurs Fire Loss, Told His Policy Was Cancelled, Then Told He Was Covered; State Farm Resists Paying The Full Loss And Is Sued For Breach Of Contract
Raymond Rickey was in military service overseas when he learned the house he owned and leased to a tenant in Wisconsin suffered a kitchen fire. He contacted his insurer State Farm. He was surprised to learn that State Farm claimed it cancelled his policy just before the fire. Because he was in Guam at the time and because he did not have the money to repair the home, he sold the home that had been in his family at a loss to a business located next to his property. He lost $24,000 in the sale of the dwelling. Fast forward several months when Rickey received a letter from State Farm. The company admitted it had made a mistake, that he really was insured, and that it would pay for the cost of repairs to the property, about $14,000. The problem: the home was no longer owned by Rickey; he asked the company to pay for his losses incurred as result of State Farm’s breach. State Farm refused. Rickey then hired Greg Cook Law Offices, sued for breach of contract and all resulting consequential damages arising from the breach including the lost rents, lost value of the property and attorney fees for a total claim of $45,000. After some initial resistance, State Farm indicated a willingness to go to mediation; with the help of an excellent mediator, it finally paid Rickey’s full damages.
Rickey v. State Farm Mutual Fire Insurance, case venued in Milwaukee County
Insured Loses Home In Total Loss, Insurers Disagree On Share Of Payout, And In Doing So, Commit Bad Faith
The insured lost a home to a fire, which was destroyed. At the time of the fire, the insured was changing insurance carriers, and both the old and new policies were in force at the time of the loss. Because of the Valued Policy law in Wisconsin, the insured was entitled to the policy limits. Because there were two policies, they needed to be pro-rated. The carriers disagreed on the method of pro-rating the loss, eventually ended up paying the insured almost $200,000 less than they were entitled. Greg Cook Law Offices and Kevin Scott Law initiated suit alleging improper handling and bad faith
Despite Covid delays, following the depositions of the insurance adjusters, both companies paid the full amounts due, with interest, and contributed toward the insured’s attorney fees.
Terms of settlement confidential at the request of the insurance carriers
Insured Suffers Theft, Then Fire Loss. Insurer Unreasonably Delays Payment For Years Sued For Bad Faith
The Williams Family cares for disabled individuals, they operate two homes in Dane County for that purpose. Mrs. Williams reported a theft of jewelry from the property and provided the insurance company with full cooperation. American Family commenced investigation, demanded the Williams submit to examination under oath, provide all financial and other records, then failed to adjust the claim, simply ignoring it for two years. In the meantime, the Williams suffered a fire loss at the property. Before the fire, American Family had advised that it was cancelling the policy because of the theft claim. Mrs. Williams had extreme difficulty in obtaining insurance despite assurances from American Family’s agent that American Family would change its mind and provide coverage. The promise was an empty one. Mrs. Williams finally obtained a commitment from a new company out of state, but because the commitment came two days after the fire, she had to disclose the fire; naturally, the new company promptly withdrew its offer to issue a new policy that had not yet been put in place. The Williams faced an uninsured fire loss and an unresolved theft loss. With the help of Greg Cook Law Offices and Mayer, Graff and Wallace, the Williams sued American Family for breach of contract and bad faith. It took almost four years since the loss, but they finally recovered $900,000.
Williams v. American Family Insurance, case venued in Milwaukee/Dane County
Life Insurance Company Denies Death Benefit, Sued For Bad Faith
The mother received the call every parent fears. Her adult son had been killed. He had purchased life insurance naming his mother as sole beneficiary. The insurance company denied coverage claiming the son had failed to answer questions correctly on the life insurance application. The mother retained the services of Greg Cook Law Offices and Mayer, Graff and Wallace. Suit was commenced. When the underwriter for the company admitted the incorrect answers would not have affected the issuance of the policy, the matter went to mediation. The case settled for an undisclosed amount but substantially greater than the life insurance benefit.
Terms of settlement confidential at the request of the insurance carrier
Well Driller Ruins Neighbor’s Well, Admits Then Denies Responsibility
Robert Peardon purchased a property for his new wife and child. His home, built about 50 years before, had a private well which operated without difficulty until construction began on the lot next to him. The well contractor, Roschi Brothers, was drilling a new well. Within a day, Peardon had no water. The well driller came over and pulled the pump, and upon inspecting all the debris in the pump casing, admitted that he had caused the problem. He agreed to sink a used pump, that it would solve the problem. This did not help. Peardon told Roschi the replacement pump did not produce any water. Roschi then denied he was responsible, likely fearing he would be responsible for a new well (he told Peardon he was not going to drill him a new well for free). When Peardon brought in another well driller to inspect, it was suggested that Roschi had used an excessive watery mix of cement to seal the new well; that watery material migrated to Peardon’s well and closed off the veins supplying water. Peardon was forced to abandon his water source and drill a new well. He was without water for two months. He hired Greg Cook Law Offices to bring suit. Initially, West Bend Insurance Company denied all liability, claiming Roschi Brothers had no duty to protect other wells in the area. The defense was baseless. Peardon incurred the cost of a Geologist who Cook located. The expert provided a complete report which laid out the duty of West Bend’s insured and the negligent drilling that caused the damage. When West Bend changed its attorneys, newly appointed counsel circled back to Cook; the case settled for the full price of the well, nuisance damages, and partial payment toward Cook’s fees.
Peardon vs. West Bend Insurance, case venued in Waukesha County
Acuity Insurance Accepts Advice From Outside Counsel, Is Sued, And Eventaully Settles Bad Faith Claim
Property insurance companies pay losses based on a formula that involves a calculation using Replacement Cost Value [RCV], then subtracting depreciation, to arrive at Actual Cost Value [ACV]. When an insurer agrees to insure a property for RCV, the insured receives the cost to replace only if it replaces. If the insured decides not to replace, the insured is only paid ACV for the loss. If the insured decides to replace, it first receives ACV and then final payment upon completion. Acuity had such a policy with Mr. and Mrs. Niedziejko who suffered a complete loss due to fire. They wanted to replace the dwelling. However, Acuity’s attorneys recommended that the company not pay the loss based on the ACV formula. Acuity hired a real estate appraiser to determine the market value of the property. Because the property was in a depressed market, the amount was four times less than what Acuity owed under the formula it should have used. This type of appraisal normally prices homes on the “for sale” market and is not relevant to the insurance industry. The Niedziejkos were left in financial distress, especially considering Covid complications relating to their employment. Since the payment did not even cover their outstanding mortgage, they hired Greg Cook Law Offices and the Murdock Law Offices to sue for breach of contract and bad faith. After a ruling by the court that Acuity breached its contract, the bad faith portion of the case proceeded. Once Acuity’s file was turned over and following several depositions of Acuity employees and the insured, Acuity agreed to settle for a confidential amount. The settlement included bad faith damages for the delay, interest, attorney fees and other elements of the claim.
Niedziejko vs. Acuity Insurance, case venued in Sheboygan County
Auto Owners Insurance Found In Bad Faith, Hit With $500,000 In Punitive Damages
A major hailstorm in Madison Wisconsin in September 2016 resulted in damage to many properties. Auto Owners had insured Sun Valley Homeowners Association for many years. The association consists of just five units, most occupied by elderly residents. Following the storm, the property manager for Sun Valley presented a claim. Auto Owners hired one of its regular outside vendors to inspect, then paid a small amount. Sun Valley disagreed; it asked a local qualified roofing contractor to inspect the damages. The contractor also knew the Auto Owners adjuster and spoke with her before he inspected. The adjuster told him that Auto Owners was swamped and asked him to send her a report, not just an estimate. The contractor sent her a full report with over 80 pictures, a weather report which demonstrated hail of more than 1” in diameter, and an estimate for full replacement. He advised that damage was obvious, some of damage would produce leaks. Auto Owners instead hired an engineering company it normally uses and paid for a report asserting the hail damage was not that bad. Because there was a disagreement on the amount of the loss, Sun Valley exercised its rights under the policy to ask for appraisal. In that process, each side picks a qualified impartial appraiser, and they pick an umpire to decide the amount of loss. Instead of following this contract right, Auto Owners retained an outside attorney. It sued Sun Valley, its own insured, alleging that it did not owe coverage because some of the damage was caused by inadequate or defective maintenance. This allegation was never proven at trial. Sun Valley was forced to hire the firm of Greg Cook Law Offices, and Kevin Scott Law Offices, and counterclaimed for breach and bad faith. The court ruled that Auto Owners had breached the contract. The appraisal panel was convened. While it took four years, Sun Valley was awarded the cost of new roofs. The case proceeded to a bad faith trial in January of 2021. The jury found Auto Owners had committed bad faith and had done so with an intentional disregard of Sun Valley’s rights. Jurors awarded $500,000 for punitive damages. The matter will now go back to the court to assess the attorney fees Sun Valley incurred and add to that to the verdict.
Auto Owners v. Sun Valley Homeowners Association, case venued in Dane County
Business Fire Loss
A former employee burned down the owner’s business right after he was fired. The business was open 24 hours a day. The employee had been hired to watch over the establishment during the late evening and early morning hours to make sure undesirables did not cause problems. The employee was fired for poor job performance and threatened the owner. The owner called the police to alert them that the employee might try to cause harm. The same day the employee was fired, he bought incendiary materials. He returned to the business and started a fire around midnight. The building burned to the ground. The employee was questioned by police and readily admitted to the officer “I burned that f—-r down.” He was arrested and convicted.
The insurance company took the position that the arsonist was not an employee because he was not on the payroll. It further argued that under the policy, if the owner “entrusts” anyone with the property who later causes damage, there is no coverage. It denied the claim.
The owner hired the firm of Greg Cook Law Offices and sued for breach of contract and bad faith. Motions for summary judgment were brought. The court found that the company had breached the contract as a matter of law. The decision held that the arsonist was an employee, thus there was coverage in the first instance. Even if he wasn’t an employee, the court held as a matter of law under these facts that the entrustment ended when the owner obtained all keys from the arsonist and told him he could not return to the building.
Even after the court ruling, the insurance company failed to pay that amount due under the policy contract, reasoning it had a right to appeal. It let the appeal time run but then decided to go to trial and appeal after the verdict. It delayed going to mediation until ordered by the court. The matter did not settle at mediation. The case proceeded to a jury trial for bad faith and punitive damages. A day before the final pretrial was to be held, the insurer settled for a confidential amount.
Terms of the settlement confidential at the request of the insurance carrier
Homeowner Bad Faith and Punitive Damage Award Upheld
Sun Valley Homeowners Association won at trial in February of 2022. On Motions After Verdict, the court awarded $375,000 in attorney fees and costs. Together with interest and taxable costs, the judgment will be almost $950,000. The court ruled that there was sufficient evidence to support the jury finding and award. The court noted the case had been a contentious piece of litigation. Greg Cook Law Offices, with co-counsel Kevin Scott Law, feel optimistic the judgment will be upheld in the event the insurance company appeals.
Auto-Owners Insurance Company vs. Sun Valley Homeowners Association venued in Dane County
Federal Court Jury Finds Insurance Company Breached Life Insurance Contract
Joyce Williams lost her 22-year-old daughter to violence when the Mount Mary College student was shot to death the day after Christmas in 2016. The young woman’s grandmother had purchased a life insurance policy at the urging of a life insurance agent for Farmers New World Life. The young woman was subjected to a paramedical exam and submitted blood and urine samples. After her death, the contract provided that if a death occurs withing two years of issuance, the insurer has the right to investigate. For three months, the company spent money hiring an investigator and scoured criminal, driving, and medical records on the deceased. Over 1000 pages of medical records were obtained dating back to childhood. In just one record, the company latched on to a statement made by the student to her doctor that she smoked marijuana daily. The company rescinded the policy arguing that it would not have insured her if she had disclosed that fact, contending she was uninsurable as a chronic marijuana smoker.
The family hired the firm of Greg Cook Law Offices. Greg Cook tapped the services of an attorney he uses frequently, William Gleisner. They agreed to take the case and embarked on an epic battle with the insurance company. Suing in state court, Milwaukee County, the defendant first removed the case to federal court due to diversity of citizenship, since the company was not domiciled in Wisconsin. The company, represented by the national law firm of Gordon Rees Scully Mansukhani LLP, fought the case at every turn. It moved for Summary Judgment to defeat the case on motion practice, it filed a motion to dismiss right before trial, it filed a motion to dismiss during trial. Their motions were denied by the court.
An expert witness for the plaintiff testified that the statement in the medical records did not support a claim by the company that the deceased was a chronic user, that there were no clinical tests done on her and that subsequent records did not reveal anything at all about smoking pot. He further testified that the urine sample could have been tested by a standard ELISA test at a cost of about $17. The company did not test urine samples for THC routinely, and first asserted in its answer to discover that doing such a test was cost prohibitive. This was untrue since the tests it already did cost just as much and could have been included in the ELISA test for the same price.
To make matters worse for the company, there was an issue whether the deceased had falsely answered questions about using marijuana on the application. The facts revealed that the agent filed out the policy by himself at the home of the grandmother while the student was not there. Because the company uses an electronic application process, he placed her name to the electronic signature and sent the application to the company. While he denied doing this, the grandmother testified that her granddaughter was not present. Circumstantial evidence supported the grandmother’s testimony.
After a three-day trial, the jury ruled that the insurance company had no right to rescind the policy and awarded the mother of the deceased $100,000 for breach of contract. The court entered judgment for the mother.
Williams v. Farmers New World Life Insurance Company U.S. District Court for the Eastern District of Wisconsin