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Coverage Opinions
Effective Date: June 9, 2015
Vol. 4, Iss.6

Randy Spencer’s Open Mic
Exclusive Interview With American Pharoah
Randy Spencer was the only one to get an interview with American Pharoah to discuss his historic Triple Crown win. And despite what you might expect, Pharoah is one ticked pony.

General Liability Insurance Coverage – Key Issues in Every State
The Amazon Price Mystery And Discount Code
Amazon has – mysteriously -- stopped discounting Key Issues. But there’s no way I want to see anyone pay full price. Here’s a discount code to take 30% off.

Congratulations Nelson DeMille
Author Nelson DeMille was recently interviewed in Coverage Opinions. His new book just debuted at #1 on The New York Times Best Seller List. Definitely a connection!

Did This Supreme Court Just Change The Bad Faith Landscape?
Is The Decision Poised To Have A National Impact?

A Supreme Court holds that an insurer may not be relived of liability for an excess verdict simply because there was no demand to settle within limits.

Back Issues:

One Ticked Pony: Exclusive Interview With American Pharoah

It’s Sunday morning, Belmont is under a blinding sun and the place is as quiet as it was clamorous just twelve hours earlier. I’m being escorted through a maze of stables and walk past a row of stalls holding anonymous horses. I’d never been this close to a thoroughbred and I’m struck by their gargantuan size. These guys aren’t giving rides to kids at birthday parties. My minder has been quiet. He finally speaks up to tell me we’ve arrived. But I’d figured it out for myself - having spotted the faint star on America Pharoah’s head that I’d seen so many time in pictures. I can feel my heart beating. I was coming face to face with the most famous horse on the planet. Not sure how to introduce myself I instinctively placed my hand under his nose as if he were a Golden Retriever. He didn’t react. I turned on my tape recorder.

Randy Spencer: Congratulations. You must be feeling pretty good this morning?

American Pharoah: I’d be feeling even better if they gave me some oats. Do you have any?

RS: I’m sorry. I don’t. If I had known….

AP: Don’t worry. I’m used to it by now.

RS: What do you mean? I would have expected that they’d be slobbering all over you like Steve Wynn did to Sinatra.

AP: Yeah, you would think. But it just doesn’t work that way. Look at this cramped stall I’m in. I’m sure Ahmed isn’t staying at Motel 6 [Ahmed Zayat -- American Pharoah’s owner]. And they have me sleeping on straw. How ‘bout some sheets? Egyptian cotton seems appropriate.

RS: You’re right. It does look pretty confining in there.

AP: Look, it’s New York. I know that real estate is expensive. But they could have at least given me a TV to watch the Cavs-Warriors series. I need LeBron to go down. He’s the only thing standing between me and Sports Ill. “Sportsman of the Year.” And look at that woman from NBC. She rides right next to me after every race and asks Victor how it went [Victor Espinoza -- American Pharoah’s jockey]. Would it kill her to stick the mic in front of me once in a while? I think I know a little something about how the race went down too.

RS: Well I appreciate you taking the time for me.

AP: You’re the only one who asked. Last night reporters would have given their, well, you know what, to get an interview with Ahmed. Am I missing something here? Was he the one who ran a mile and a half? The last time Ahmed ran it was to a buffet that was getting ready to close.

RS: Really? I’m the only person who put in a request to speak to you? But they gave out hundreds of media credentials for the race.

AP: Just you Spencer. Once the race is over we’re out of sight, out of mind. Even the dog that wins “Best in Show” at Westminster makes the rounds on the morning talk shows the next day.

RS: Is anything else bothering you?

AP: How much tape do you have in that thing? Do you know how much dough Ahmed is making from me? He could buy the friggin’ Sphinx. Me? I got some extra carrots last night.

RS: Yeah, you sure are going to make a lot of money for a lot of people.

AP: You have no idea. Millions. And the prize money is nothing. Wait until they start selling the juice to make little American Pharoahs.

RS: And all you got is extra carrots?

AP: Yep. That’s it. They’d better get me a red silk robe and some slippers like Hef after I get to work back in Kentucky.

RS: Well that doesn’t seem like such a bad life – you know, what’s waiting for you back home.

AP: Sure, there are worse jobs. But I can do more than just charm the ladies. I’m not just some one trick pony. I expect that it won’t be long before Dancing With the Stars comes knocking on the barn door. I suggested getting the Bangles to record “Run Like an Egyptian.” I could be in the video and pull down 20 percent. It was dismissed out of hand.

RS: That does sound like a great idea.

AP: That’s what I thought. But that’s small potatoes for Ahmed. He’s working on a shoe deal that would make Jordan’s look like the proceeds from a kid’s lemonade stand.

RS: This all seems really unfair.

AP: Let me tell you something. Not since Steve Martin made a mint on that moronic King Tut song has an Egyptian been exploited so badly. The NCAA gives student athletes a better deal than they give me here.

[American Pharoah starts looking around. He is looking past me – moving his head in every direction.]

This is unreal. The guy with the oats is still nowhere to be seen. I could order them on Amazon and they’d get here faster.

RS: Is there anything you can do about this situation?

AP: I had a lawyer look into it. He told me it didn’t look good. Then I told him it looked the same about him getting paid.

RS: That’s too bad.

AP: I talked to PETA but they weren’t interested. Sure they love animals – but trying to make them rich isn’t really their thing. And I’ve had some discussions with the AFL-CIO. But unions aren’t what they used to be.

RS: Let’s turn to something less unpleasant. I bet you find it funny – that whole story behind the misspelling of Pharaoh.

AP: Yeah, it’s a cute story. And I did find it funny. But then I suggested getting America to record “A Horse With No Correctly Spelled Name.” I could be in the video and pull down 20 percent. They thought this idea was worse than the Bangles. After that I stopped thinking that the misspelling thing was funny.

RS: I’m sure it’ll feel good to see yourself compared to such horses as Secretariat, Seattle Slew and Seabiscuit.

AP: Well not so fast comparing me to Seabiscuit. He got a movie deal. I heard he made enough from that to buy a lot of commercial real estate in Lexington.

RS: Thanks for taking the time to speak with me. It was a real thrill.

AP: I appreciate you stopping by. Take two lefts and a right to get out of here. And if you see the friggin’ guy with the oats…

That’s my time. I’m Randy Spencer. Contact Randy Spencer at





Vol. 4, Iss. 6
June 9, 2015

General Liability Insurance Coverage – Key Issues in Every State

The Amazon Price Mystery And Discount Code

Sales of General Liability Insurance Coverage – Key Issues in Every State remain brisk. Thank you to all who have purchased – one or a bunch of copies.

For a very long time Amazon was heavily discounting Key Issues. The list price is $249 and Amazon was selling it for $185 or in that neighborhood. I was thrilled to see Amazon offering the book for 25% off. Making Amazon rich is certainly not on my to-do list.

In any event, for reasons that are a complete mystery to me (perhaps because the book is selling well), Amazon has stopped discounting Key Issues. Done. Kaput. No discount for you. Amazon is only selling it for full retail. That’s like paying the hotel room rate on the back of the door. Nobody does that.

I do not want to see anyone pay full price for Key Issues. The book can be purchased at “Create Space.” I have arranged for a 30% off Discount Code so that the book can be purchased at the lowest price yet. Use Discount Code 2WY94T8V at the following Create Space site to get this reduced price: http://www.createspace.com/5242805.

While Create Space is, get this, an “Amazon company,” there’s only so much I can do to keep them out of the mix.

More information about the 3rd Edition of General Liability Insurance Coverage – Key Issues in Every State here: http://www.InsuranceKeyIssues.com

See for yourself why so many find it useful to have, at their fingertips, a nearly 800-page book with just one single objective -- Proving the rule of law, clearly and in detail, in every state (and D.C.), on the liability coverage issues that matter most.


Vol. 4, Iss. 6
June 9, 2015

Congratulations Nelson DeMille

Coverage Opinions Interviewee’s Book Debuts At #1 on The New York Times Best Seller List

I had the fun and privilege of interviewing acclaimed author Nelson DeMille for the April 8, 2015 issue of Coverage Opinions. DeMille’s new thriller, Radiant Angel, was released on May 26th. It debuted at #1 on The New York Times and USA Today Best Seller Lists. Look what happens when someone gives an interview to Coverage Opinions! Congratulations Nelson!

Coming in the next issue of Coverage Opinions: An interview with another #1 New York Times best selling author.




Vol. 4, Iss. 6
June 9, 2015

Did This Supreme Court Just Change The Bad Faith Landscape?

Is The Decision Poised To Have A National Impact?

It is unquestionably one of the most challenging issues to confront an insurer – the demand to settle a claim within the insured’s limits of liability. We all know the drill. An insurer has been defending its insured for a while. The case is coming down to the end and trial is on the horizon. The insurer is at the point where it knows as much about the liability and damages issues as it ever will. And with that information, the possibility of a verdict in excess of the limits of liability is known to be a real one. A demand to settle within the insured’s limit of liability, thereby relieving the insured of the risk of personal liability, is made by the plaintiff. All things considered, the applicable state standard, for whether the insurer should accept the limits demand, has been met. In other words, not accepting the demand will saddle the insurer with liability for an excess verdict. [Of course, when there are also coverage issues, the degree of difficulty here goes from a double lutz to a triple axel. But that’s not the issue today.]

But there is another version of this story. Change one fact -- a demand to settle within the insured’s limit of liability is never made. In this situation, insurers generally see themselves as relieved of any risk of exposure for an excess verdict. After all, even though the insured has a legitimate risk of personal liability for a verdict above its policy limit, the insurer’s hands are tied. Right? Without a demand to settle within the insured’s limit of liability, what’s it to do? No matter how much it makes sense to settle the case, the opportunity to do so just isn’t there.

This is the fundamental issue at the core of the Louisiana Supreme Court’s decision in Kelly v. State Farm Fire & Casualty Co., No. 2014-CQ-1921 (May 5, 2015).

Kelly involves an automobile accident, a low limits auto policy and an excess verdict. But the particular facts of Kelly are not necessary to address the issues and overarching lessons from the case. So I’ll skip all that and get right to big picture. The Louisiana Supreme Court, at the request of the Fifth Circuit, had this question before it: Can an insurer be found liable for a bad-faith failure-to-settle claim, i.e., an excess verdict, when the insurer never received a firm settlement offer?

To be more specific, the issue was whether an insurer’s liability, for such excess verdict, could be based on its obligations under La. R.S. Section 22:1973(A), which provides as follows:

"An insurer, including but not limited to a foreign line and surplus line insurer, owes to his insured a duty of good faith and fair dealing. The insurer has an affirmative duty to adjust claims fairly and promptly and to make a reasonable effort to settle claims with the insured or the claimant, or both. Any insurer who breaches these duties shall be liable for any damages sustained as a result of the breach."

The court’s first task was to determine whether an insured possesses a cause of action, under La. R.S. Section 22:1973(A), for bad faith failure to settle. The court held that it did. Among other reasons, the Louisiana high court pointed to the “long lineage” of the state’s case law that has provided insureds with a cause of action to recover a judgment in excess of policy limits. The court referred to Section 22:1973(A) as the legislature’s “essential[] codification” of the “jurisprudentially-recognized cause of action in favor of insureds for an insurer’s bad faith failure to settle.”

The court put its conclusion, that an insured possesses a cause of action, under La. R.S. Section 22:1973(A) for bad faith failure to settle, this way: “[I]t is presumed the Legislature enacts each statute with deliberation and with full knowledge of all existing laws on the same subject. It therefore stands to reason that the legislature did not intend its remedial measures to take away any rights, but to add rights.”

Having determined that Section 22:1973(A) supports a cause of action for bad faith failure to settle, the court turned to the next question: must an insurer receive “a firm settlement offer” as a condition for an insured to recover for the insurer’s bad-faith failure-to-settle?

The court answered this question in the negative. First, the court was persuaded by the statute’s use of the phrase “affirmative duty,” which it noted means “to take positive action(s) to comply with a legal standard.” Then, the court noted that two positive steps listed in the statute, to meet this duty, are: “adjust claims fairly and promptly” and “make a reasonable effort to settle claims with the insured or the claimant, or both.”

Following these observations, the court explained its conclusion, that an insurer need not receive “a firm settlement offer,” as a condition for an insured to recover for the insurer’s bad-faith failure-to-settle, as follows (lengthy quote follows (citations omitted), but it’s worth setting out the court’s explanation in full):

“The clearest indicator is that a firm settlement offer is not listed anywhere in the statute. To impose the requirement of a firm settlement offer would essentially amount to adding words not included in the statute. As we understand State Farm’s brief, not only would we have to essentially add wording requiring a ‘firm’ or ‘actual’ offer to settle, but State Farm would have us further qualify that an offer must be ‘within the available policy limits.’ The wording proposed by State Farm amounts not to statutory interpretation, but to a wholesale rewriting of La. R.S. 22:1973(A). Such rewriting is not, however, the role of this or other Louisiana courts.

Practical considerations also support our interpretation of La. R.S. 22:1973(A) as not requiring a firm offer as a condition for finding the insurer has acted in bad faith. The insured has no control over whether a firm offer will be submitted. For that matter, neither does the insurer. Yet, the insurer has undertaken the obligation to protect the insured. [I]n every case, the insurance company is held to a high fiduciary duty to discharge its policy obligations to its insured in good faith-including the duty to defend the insured against covered claims and to consider the interests of the insured in every settlement. Therefore, we see no practical reason why the insurer’s obligation to act in good faith should be made subject to the tenuous possibility that an insurer will receive a firm settlement offer. Instead, the insurer’s obligation to act in good faith is triggered by knowledge of the particular situation, which knowledge [t]he insurer has an affirmative duty to gather during the claims process. See La. R.S. 22:1973(A). See also Smith, 95–2057 at 9–10, 679 So.2d at 377 (finding that an insurer has a duty to conduct ‘a thorough investigation’ and to consider ‘the evidence developed in the investigation’ when determining whether to litigate or settle).”

Held: “[A]n insurer can be found liable for a bad-faith failure-to-settle claim under La. R.S. 22:1973(A), notwithstanding that the insurer never received a firm settlement offer.”

There is much that can be said about Kelly v. State Farm.

On one hand, it is a Louisiana case interpreting a Louisiana statute. And Louisiana’s jurisprudence holds statutes in high regard (you know that whole French influence thing that they have going on down there). So the case can be dismissed as having no applicability beyond the Pelican State.

On the other hand, the statute at issue is part of Louisiana’s version of the National Association of Insurance Commissioner’s Unfair Claims Settlement Practices Act. And just about every state in the country has adopted some version of the NAIC’s Act. But the NAIC Act does not contain the “affirmative duty” language that was an important consideration in the Kelly court’s analysis. Rather, many states’ Unfair Claims Settlement Practices Acts instead likely provide that it is an unfair claims practice for an insurer to “not attempt[] in good faith to effectuate prompt, fair and equitable settlement of claims submitted in which liability has become reasonably clear.” But could this provision be considered as having the same purpose of the Louisiana provision? And could the Kelly court’s reasoning (this is why I used that long quote) be persuasive, even if the statutory language is different?

Here’s what Kelly v. State Farm is all about. Is Kelly “Louisiana-enough” such that the decision does not have reach outside of Louisiana? Or has the Louisiana Supreme Court handed a playbook to policyholders and courts to change the bad faith landscape? Will insurers still be able to consider themselves without risk of exposure for an excess verdict because a demand to settle within the insured’s limit of liability was never made?