[vc_row][vc_column][vc_column_text]Dan
Welcome to Sound Business Insights. I’m Dan Watkins. This episode is about crazy things you never knew were covered by insurance. This podcast is not intended to provide legal advice.
Neil
Dan, in your opening, you talked about crazy things we never knew about insurance. What types of things are you talking about?
Dan
It’s the only way I could describe it. It’s just crazy. About 50 years ago, 60 years ago, a Supreme Court justice of California named Learned Hand decided that insurance was a main fabric of our society that everybody needed to have access to, some kind of insurance so that people don’t just get completely devastated and from then forward a long litany of cases and cases and cases describing different types of rights and different types of things that were passed by the legislature, interpreted by the courts. And it just seems to be growing in weird and bizarre ways. <laugh>. And so, as an older lawyer who’s seen it all almost, it’s crazy. Some of the things you get covered for like spitting on people <laugh> are insane.
Dan
But it’s true. And so it’s a bizarre fabric that runs through all the kinds of cases we get as civil lawyers and knowing them and pairing them with your client’s case or avoiding them with the other side’s case. And also knowing that most lawyers don’t know about these things. It’s crazy world when we do litigation for people. And I thought, how about a crazy segment on things you wouldn’t know? And some good old fashioned war stories of how things came about. And it’s a fine art between what really is possible and what they’ll tell you. Knowing what is covered is not enough. Knowing how to handle the fact that it may be covered, knowing that it might be covered. That’s the biggest one – might be covered – is a whole new Right created by the legislature and all these court decisions might be covered is powerful stuff.
Neil
How does might be covered work?
Dan
Well, you got a case, you present it to your insurance company, and they think, well, it’s probably not covered, but it might be. And when they say, when they have to say the words “might be” a whole new code section called Civil Code section 2860 comes to play. And you could end up with two different law firms representing you, paid for by the insurance company who doesn’t believe it’s covered. And they don’t know which causes of action are covered. So the courts say this insurance company’s got to defend you on all of these uncovered claims. Claims that are clearly uncovered, you get a free lawyer.
Neil
So let’s cover one basic precept that I think would surprise most people. The attorneys representing the insurance companies, if they’re defending your policy, they’re not representing you. Their obligation legally is to the policy itself.
Dan
That would be a sane statement, wouldn’t it? But it’s not true. They’re kind of representing you. They’re representing you in a bizarre, crazy fashion, but they, their motivations and their procedures and things like that could be, might be questionable. Even though not intended, even though they ethically owe you an oath of loyalty and they do great work for you still, you have these other rights that can dictate how the case is defended and sometimes push the case towards almost admitting your liable on a covered claim while denying your liable on a non-covered claim.
Neil
Interesting.
Dan
So it can’t be answered in one sentence.
Neil
Of course. And before we get into the specific examples, Dan, generally speaking, when should a normal person who’s insured who’s in the sauce think :”I need to call Dan Watkins?”
Dan
Again, a rational question, but the answer’s kind of crazy. People who are insured or people who aren’t insured, sometimes they don’t know whether they are or not insured. So anyone, this is our rule at our office, anyone involved in a litigation should be thinking about insurance. Number one, first thing, whether you’re getting sued or you’re going to sue somebody, you should have an attorney that can tell you, oh, watch out for this. And don’t do that. Because most people, when they sue people, they’re mad and they want an aggressive lawyer or they want a bulldog <laugh> and he’ll go out there and fire every cause of action at them.
And then the clients are happy and we’re going to get them for this and this and this. And then they just, they just played right into the defense’s hands and open the doors to insurance that otherwise they wouldn’t have been able to access. Or even worse by their aggression made statements that show that any countersuit would not be covered. Right. Oh, it gets more and more down the rabbit hole.
Neil
Yeah. We’ll get into it.
Dan
It gets more and more crazy as we go along in every field in which you think there’s no insurance. There could be.
Neil
It’s a fascinating concept. Let’s dive into it.
Dan
No, I’m not saying you can go out there and spit on anyone you want <laugh> and know that your insurance will cover you. It’s not that simple but it’s bizarre.
Neil
Dan, we often get into neighbor disputes here at the Watkins firm and you’ve told me some really somewhat wild stories. Talk to me a little bit about homeowner’s insurance and what might surprise some of our listeners.
Dan
Yeah. The CGL policy – for a long time people used to think that’s a fire policy. My house burns down, call my insurance company and I get covered. But over the years, like we talked about now when you get a homeowners policy, the legislature realized that if you have a home and you get sued for something not related to your home, you can still lose your home. Because you only get so much protection from creditors on your home. And it’s not enough, especially today. I mean you can file a homestead exemption, which was created 50 years ago and it’ll only cover $75,000 under $25,000 in equity on a million dollar home if you’re married.
Dan
And creditors go right through that. So you/ve got to have this homeowner’s policy that covers more and more and more things or so it may seem. So, let’s talk about your homeowner’s policy and crazy things it covers. One thing it covers is if you get in a fight, your kids get in a fight, your kids beat up the neighbor kid. Right?
Neil
Yes.
Dan
Now intentional acts are not covered, but unintentional acts are covered. And so there is a great litany of cases that describe what is an intentional act or what is an unintentional act and do you intend the consequences of your act or do you intend, there were no consequences. Like if you go to punch somebody and knock out all their teeth, you’re going to say, well I just thought it would just be a little love tap on the cheek. I didn’t know or have any intent that there would be all of that damage.
Dan
And so now we talk about foreseeability of the damage. So now we have an argument and we’re back to might be covered. So your kid knocked all the teeth out of the neighbor’s kid and you’re going to get sued as the guardian of your child. And your child, they’re going to try to sue. But you’ve got to go through all those statutes. Insurance company comes along and they say, no, you’re not covered. It was an intentional act. And you say, okay, and you agree and now you have nothing. Or you call a lawyer <laugh> who says, yeah, it might not be covered, but it might be. So we’re being sued, don’t pay the claim, pay for our lawyers and we’re taking it all the way to trial and we don’t care what you do. And now the insurance company has got to pay some law firm $200,000 to go to court to defend a case that you may never pay on depending on how the facts come out. Remember, in trial, 95% of cases settle.
Neil
Right.
Dan
So 95% of the time this insurance company is going to pay for all the teeth your son knocked out or your daughter knocked out of the neighbor’s kid. They’re going to pay it even though it’s not covered. Just because you went to some smarty pants lawyer that knows the insurance law and knows the strategy and we’ve seen it happen. Now what do we get out of it? We get to advise our client and we do this because we have relationships with our clients. We don’t get hired by the insurance company. Sometimes we get hired as Cumis counsel to make sure that the insurance defense counsel doesn’t try to defend only the covered claims really hard and leave the non-covered claims out there to succeed so that at the end of the day you’re not covered. And it helps them, we actually can direct them to go ahead and, and focus the other way around.
Dan
Let’s, let’s make sure that we don’t defend the covered claim so that if we lose, my client gets covered and we really fight the intentional acts causes of action and you end up settling on the covered claims and they pay out and the plaintiff’s counsel will defend, will dismiss the non-covered claims. And if they’re really good, they’ll usually plead right into your insurance policy if they’re experienced counsel. But in the long run, this homeowner’s insurance policy did what old justice Learned Hand wanted – it protected you, your family and your home from financial ruin and it made whole the victim and got them all new teeth. And everyone is made whole and no one is completely destroyed. So that’s, that’s the idea. But that’s just one small example and no, it wasn’t a case where someone all their teeth got knocked out.
Neil
So Dan, what happens when people aren’t experienced enough to know I’m going to call an attorney instead of just accepting what the insurance company puts on the table or writing to the insurance company or calling their insurance broker and saying, this happened, can you get me coverage?
Dan
Well, that happens a lot. Most people don’t just call their lawyer, they have their broker do it or they make a phone call to some adjuster and that adjuster decides to take down the claim in any way they want and describe the claim in any way they want. And then you get a letter from a claims adjuster and you either get coverage, you get denied or sometimes you get what lawyers call a reservation of rights letter. But it’s basically a letter saying that we’re going to defend you but only on this cause of action. And if we want we’ll never pay.
So it’s one of those “might” situations. And so, when you get those, you should call a lawyer because what it’s really telling you is if you had a lawyer, you’d know that you could ask for cumis counsel, which gives you all kinds of free rights, free lawyer, free representation and you’re protected.
Neil
We don’t give legal advice on this program, but generally speaking, I think most people
Dan
Oh, I give legal advice.
Neil
Yeah.
Dan
You don’t <laugh>.
Neil
I don’t, I think most people don’t understand how expertly trained insurance adjusters and even their reps are and that what they’re saying to them is actually going to come back to be used against them.
Dan
Are you a Matt Damon fan? Did you watch the movie Rainmaker?
Neil
Oh yeah, absolutely.
Dan
Great benefit insurance. Yep. And that is real life. They do send out automatic denial letters. There are hundreds or thousands of insurance companies and not all of them do this, but it does happen. There are a lot of attorneys and non-attorneys who get paid to look at claims files and say, denied, denied, denied, denied. It does happen. I like to think it doesn’t happen most of the time, but it does happen. And there’s different levels of how it happens. So if you have a lawyer write your letter for a claims, if it’s serious, if it’s not that serious, you should, you can probably write it. But if there’s real money on the table. But if it’s, if, if you’re really worried about it and you want to have a lawyer write the claims letter and if they know what they’re doing, they’re going to write it in such a way that it’s really hard for anyone to say that’s not possible. There’s no claim. Right?
Neil
Right.
Dan
I would write that the punch the kid in the face thing was, I understand that my clients was, his eyes were closed and was mostly swinging in fear and in pure emotion and was highly stressed and didn’t know what he was doing. So maybe it wasn’t intentional.
Neil
You mentioned C G L in passing. You’re talking about a Commercial General Liability policy.
Dan
That’s right.
Neil
How does that apply to business?
Dan
Businesses have it too. In fact, if you have a lease, you have to have one. $1 Million dollars usually, sometimes $3 million. And because things happen, people slip and fall at your business and they sue the landlord. All plaintiff’s lawyers sue the landlord, they sue everybody. Some of these plaintiff’s lawyers are famous for their license plate that says “Sue Em All” <laugh>. And so because somebody may have insurance, they may have to pay ..
Neil
and your license plate says “Defend Them All. “<laugh>.
Dan
Well it’s important when you do business litigation to know about insurance because you could be fighting somebody who’s got a whole insurance company behind them or your client could be fighting somebody. And I’ve got me and a whole insurance company behind me and I’m playing the game both sides.
Neil
Dan, how did they come up with the term CGL?
Dan
The legislature’s been changing this for years and years, but they got tired of insurance companies coming in here and just ignoring the department of insurance and just writing up policies that really don’t describe anything they could possibly be covered. So now they have to write up, policies that are somewhat universal. So that when you have the court rule on what these terminologies mean, what is and is not covered, there’s some case law that can be applied and we can have decisions made by trial courts based on interpretations by the Court of Appeals. So it’s more uniform. It’s not completely uniform. because I’m going to give you a good war story. And this has happened dozens of times, more than dozens. But over my career, it’s something that I think everyone has known somebody to whom this has happened: a water leak at your house.
Neil
Oh Yeah.
Dan
Now, how do you know if water leaks out of your pipes when it’s inside the wall?
Neil
Psychic phenomenon. <laugh>
Dan
Right? How do you know what it means for, the difference between a pipe leaking or bursting? How do you know? What if it’s a tiny little hole but it just bursts open? Right?
Neil
Right.
Dan
What if it’s a big old crack but it’s barely leaking?
Neil
Right.
Dan
And it’s behind the wall and by the time you get it, you’ve got to shut all the water off and you’ve been on vacation and your whole floor is leaked, it’s mold growing everywhere. All your furniture’s destroyed and
Neil
your ceiling is downstairs on the floor,
Dan
call your insurance adjuster. And you said, yeah, we had a pipe leak. Instead of calling your lawyer, who would’ve said, we had a pipe burst and you’re covered. But because you called them and said “leak” instead of “burst.” And we know that the court of appeals have all said bursting pipes are covered and leaky pipes are not.
Neil
Fascinating.
Dan
You could talk about the difference between a hundred thousand dollar repair and zippy because they say leaky pipes are the result of deferred maintenance and bursting pipes are just accidents. Make the call, make make the call <laugh>, I mean just make the call. I mean it – make the call to your lawyer or listen to this podcast. And when you get a leaky pipe, I’m sure you might think that it was bursting based on how much it leaked.
Neil
Of course <laugh>
Dan
That’s really true. By the way, leaky pipes take a long time to cause damage. A bursting pipe would not. And so if you have a lot of damage, that thing burst and you should get covered. And that’s why you paid your policy.
Neil
Dan, how in the world does insurance play into neighbor disputes and fights between neighbors?
Dan
Although those are some of the most vicious and hard fought ones, and can absolutely be really damaging because you could be living in your house for 30 years and all of a sudden a new neighbor comes in and buys the house next door and says, “oh you know that property line, I dispute it and I think that it should be 10 feet back and I want you to move your pool.” Right?
Neil
Right.
Dan
And we have to go back to meets and boundaries and markers and stones and all kinds of things, to have experts come out and fight about it. And knowing how to submit that as a claim to your insurance is really key. And when you submit it to your insurance, this is when you should call a lawyer right away.
Dan
Because in insurance law we have something called resulting damage. Nothing that goes wrong with your house is usually covered like that burst pipe. But what the burst pipe causes is resulting damage – like blowing rain. If your roof leaks, it’s your job to pay for all the resulting damage. But if it leaks because of blowing rain, then you’ve still got to fix your roof. But your $10,000 rug and all your furniture and everything else that was caused as a result of that, it’s covered, and they’ll replace it if you describe it properly. And so when we talk about resulting damage in the neighbors example, and you have a neighbor dispute and they talk about this and that and what happened, your lawyer, if he knows what he is doing, will be asking you questions about, well what did their actions do that resulted in damage to you? We go through the case law, we find out what’s covered, what’s not, and then we might pick on a minor item that you weren’t focused on and say, yep, that part’s covered.
Dan
So the rest of the case can now be covered under a reservation rights letter and now you just pay us to monitor your insurance company and also assist with the settlement discussions and try to resolve it.
Neil
Dan, what about that client that was marking up the trees?
Dan
Yeah, I had a client with a dispute, a boundary dispute, a property dispute between two neighbors and was over an easement, and he thought these big trees were in the way and they said no they weren’t. And then they all paid each other’s lawyers and were going to fight about whether the trees did or did not block the easement. And he said they’ve got to go. The other party said no. And one day out of frustration without me knowing, he goes and marks the trees for removal. But you could scrape off the bark, it would be okay. Right.
Dan
Their lawyer, not thinking, decided to do an amended complaint and change the lawsuit to resulting damage from marking the trees, which immediately meant that I was able to get insurance coverage and insurance defense.
Dan
I got a whole new law firm <laugh>, and then I got to be cumis counsel. So, they paid a lot of my bill and all of a sudden we had more power because all the other causes of action and the injunctive relief they saw and all these things we had, help with all the other issues we had storage units and this and that. There were like 10 different things they’re fighting over and he just pled us right into coverage. So I had a do it yourself kind of guy and he accidentally gave himself a whole bunch of $10,000 a year in attorney’s fees to help him out with this case and he ended up resolving it in his favor.
Neil
So life is crazy and in insurance, and is that part of our strategy going in? Are we trying to help trigger some of those events in some cases?
Dan
99% of the time? No. But if it’s possible, of course. If it’s an issue and it’s out there, yeah. And you know you can do it in the form of pleading, you can do it in the form of letters, you can do it in the form of discovery communication between the parties. There’s a lot of ways you can utilize framing the issues of a case to better fit insurance coverage or defense.
Neil
Dan, another interesting area of this topic is warranties. What’s the difference between warranties and insurance and how do they come into play?
Dan
They’re very similar and the reason I wanted to talk about it is because when you hire a lawyer, you have a relationship. Nobody’s really going to call their lawyer about a warranty. But if you run a business and you have a lawyer and you ask them questions from time to time, they’re going to keep you out of trouble and you’re going to develop a relationship with them.
Neil
Absolutely.
Dan
And they’re going to get to know you and your business. So when something comes up like a warranty claim, you give them a call because you know them and you know this old lawyer’s probably going to have the answer right off the top of their head and might not even charge you for the call.
Neil
Mm-hmm <affirmative>.
Dan
So, I had a client just like that about six months ago who brought a brand new Jeep Cherokee, and it got to the point where the warranty ran out and he went and brought it in. It was about two months late and they said the warranty ran out and you’ve got a blown engine, you’re out of luck. And it’s like $16,000 for a brand new engine. The engine blew. And he was like all distraught. I say, well look, tell me, tell me more. What did you do? What did you say?
Dan
You know, well the engine light came on and then, you know, and I ignored it and I asked, did you ignore it? (The client said) Well, I gave them a call and they said, well, you can come on in and then we, we can’t see you at this moment. We can come in in two weeks. And then he goes, then I forgot about it. I go, so did you call him? Yeah, I did. And he’d already contacted them and they said, no warranty claim to put it in writing. So I said, well check your phone data and your phone bill and see if their phone number shows up when you called them when the engine light came on. And I said “and if they wanted to, which they might not, they can tell when that engine light came on too.” So to make a long story short, he got a brand new engine!
Dan
He told them, I have proof I contacted you on this and I’m sure that if you check my car’s little computer, it’ll show the engine light came on during the warranty period. And they said, and he, and he also said, and I talked to my lawyer and boom, they just changed their mind and they went forward and gave him a brand new engine and everything’s all good.
Dan
So have a relationship with your lawyer. These little things come with experience and we learn them at other people’s expense years and years ago. And so you might as well just give us a call and, and benefit from that, especially when there’s tens of thousands of dollars on the table.
Neil
Brilliant. Thank you Dan.
Dan
You can learn more about the Watkins firm at https://watkinsfirm.com or call our office at (858) 535-1511.
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