Host Sean Harris talks with Cleveland attorney and OAJ member, Bobby Rutter, about insurance law and hot button issues happening in the industry.
Sean: Hello and welcome to Civilly Speaking, OAJ’s monthly podcast on practical and timely legal issues, I’m your host Sean Harris. Our guest today is Bobby Rutter from Cleveland. Bobby good afternoon to you, thanks for joining us here on Civilly Speaking.
Bobby: Thank you. Happy to be here.
Sean: Most OAJ members know you as a quote insurance lawyer, but tell us what that means.
Bobby: I’m a little different in terms of my practice area from a lot of people in the organization in that I deal with property and it related insurance issues that people have as opposed to you know injuries that directly affect the body. So for instance, if your home burns down, if your business suffers a catastrophic water loss or we’ll talk about some technology losses that I’m involved in. When something bad happens to you and you have an asset like insurance, because that is what insurance is, it’s an asset, and then that asset doesn’t perform for you, it doesn’t, they don’t want to pay, you retain me and I fight insurance companies and our motto is we sue insurance companies and we do it well and so that’s who walks through my door and it’s everybody from big major tech companies to John Doe home owner to mid-cap companies, you know insurance problems don’t really discriminate.
Sean: I know a lot of my clients will ask me if there’s such thing as a good insurance company. I usually say there’s ones that are less bad than others, but who do you see or which companies do you deal with that tend to be on either side of the spectrum.
Bobby: So I get asked that a lot and I can tell you I use Grange as my insurance company. We put out a blog very year of the ten worst insurance companies in our opinion, but I generally think Grange, Chubb does a good job, USAA if you’re eligible is always a great alternative and something that if it’s in your blood line you don’t, you don’t give up, you stick around, stick with them and so those are kind of the companies that I see that adjust claims properly, treat people as advertised as opposed to a lot of the other companies that are throwing marketing ploys at you to get your business, but boy if you have a loss you are in a bad place.
Sean: Talk to us about those who do PI are used to you know negotiating and a lot of the kind of grey area comes into non-economics, right the pain and suffering, which doesn’t necessarily apply in a property loss situation. What kinds of issues are you generally facing in your kinds of cases?
Bobby: People come to me with kind of two categories of problems. There first problem is they have a claim that’s covered, like there is a fire loss or there’s a wind loss or hail storm, but for some reason, for some defense that insurance companies asserting they are not paying the claim. So maybe they think you had something to do with the fire or they think you’re lying about the hail or they’re saying the winds weren’t high enough to cause you know scientifically weren’t high enough to cause the damage you’re saying happened. That’s a category where they’re asserting a defense. The insurance company is saying we just don’t have to cover you despite what’s called a covered cause of loss. The alternative to that is there is just not coverage for something or the insurance company just believes it’s not covered. Maybe it’s a mechanical breakdown for a company and you don’t have an endorsement. That’s a different type of situation, that’s a coverage decision that ultimately will likely be determined by a judge, by a court because the facts are probably going to be stipulated too. So we’ve had, some common examples of cases that we have going on right now in Columbus, we’ve represented a company by the name of Blue Mile, one of the fastest growing tech companies in the country that suffered a major power outage at a monster data center. It was caused by an electrician sticking an uninsulated screw driver into basically a server causing the disruption of 70,000 square feet of servers. It was a major, major incident, one of the bigger tech incidents in the country and it’s an example of when the claim was submitted the insurance company did believe there was damage to a bus bar, but did not believe that the business was affected and we disagreed with that and it was affected and we have millions of dollars of verdicts and we’re in the court of appeals still kind of fighting over some pretty unique coverage issues right now, but that’s the kind of thing that you just never know, it’s impossible to predict all the factual sceneries out there so you never know kind of what insurance company is going to try and latch on to, to deny their claim, but don’t mistake you know an insurance company businesses is to take your money and not pay it out, period. That’s they’re business model, they’re public companies you can see it. They are not going to pay you, they’re really not going to pay you what you deserve. Let alone really go above and beyond to take care of you.
Sean: Now am I right to assume that since an insured is making a claim against its own insurance company that bad faith goes hand in hand on these cases?
Bobby: We do selectively assert bad faith claims when they’re warranted. I guess I’m lucky in a lot of aspects in my life, but one of the professional reasons that I’m lucky is my dad has the seminal Ohio Supreme Court case which established bad faith in Ohio. So when we do assert it, I mean I think these insurance companies know that we know what we are talking about so it’s not something we throw around, it’s something that a lot of people come to us saying hey I think this is bad faith, that’s bad faith. It’s not that simple. There are some definite examples of it that we are working on now, but what insurance bad faith is, is when a claim is either wrongfully denied or wrongfully delayed, it’s what damage does that cause to that person or business and people don’t realize until they’re my client or until they go through this, you don’t realize how much insurance can affect you as a person or you as a business. If you lose your house, for the most part and you don’t have insurance, an insurance company is not going to pay you, your family is going to suffer. You have to hire me, which is going to take a couple years. You are going to suffer immense physical issues from the stress and the pressure and whether you have children or you have employees or whatever, it can be very, very trying and that’s where the bad faith standard tries to compensate people for that aspect, which an insurance policy obviously doesn’t.
Sean: It’s interesting to me I kind of assumed that bad faith would be included in a lot of these cases. Talk to us about what examples perhaps of behavior that does warrant it versus other behavior where people believe it should be bad faith, but isn’t probably legally.
Bobby: Well, Ohio has this standard called reasonable justification, you know, was there a reasonable justification for an action. Let me give you some examples. Let’s go back to the technology case that we had talked about. When an insurance company relies or takes a position that has no legal support and has no intercompany sort of precedent or intercompany thought pattern and then they assert a position that’s counter to coverage, they are going to find themselves in a bad faith case because you can’t go out on a limb if you are taking away coverage, you know in Ohio the rule is this if something is ambiguous or the deference goes to the insured because we as policy holders, you and I and everybody else, we’re not writing these contracts, we’re get them in the mail, we don’t know what they mean and we’re aquessing to them so when it’s a close call the insured gets the benefit of the doubt. When you don’t give them the benefit of the doubt as an insurance company you’re going to find yourself in a bad place. Now the second problem is when you don’t do your job as an insurance company adjusting claims in a timely fashion. You hear about this in mass you know weather, hurricanes, tornados, that’s when maybe these insurance companies don’t have boots on the ground or they’re trying to undercut everybody by two or three percent. If you have hundreds of claims and you undercut everybody by one percent, you’ve made a tremendous amount of money and so there are preying on the weak and preying on people at a time where they have nothing is a recipe to get large, large verdicts against you for insurance companies.
Sean: Are there different tactics you use or different issues you encounter if it’s a residential versus a commercial client?
Bobby: I don’t think the tactics are different. Sometimes I use bad faith experts, sometimes I don’t. I don’t have to. You don’t have to have an expert to prove up a case, but sometimes it’s warranted because of the complexity of it. I tend to think if I’m representing individuals I kind of let them tell the story because I think jurors can very commonsensically put themselves in that position and say, boy this insurance company did do something wrong or okay they had a reason for doing what they did. When you get into technical corporate, high level coverage disputes over stuff that really nobody’s going to understand, experts become a little bit more necessary because they can teach a jury hey, here’s the industry, here’s why this was such an unreasonable position or baseless position so the way that the information is disseminated to a jury can be different in those circumstances.
Sean: Based on the complexity of the arrangements and…
Bobby: Yes, it’s like a lot of other cases. The question we ask ourselves is how do we best teach this? Is it just taught through the average joe or is it best taught by somebody with a credential that, that a jury can look at and say wow this guy really knows what he’s talking about he’s right. So it varies from case to case. It’s again we don’t throw it around, we don’t throw the claim around because when we bring it, we want it to be serious. If you just start making a million bad faith claims and screaming from the high heavens, nobody is going to take you seriously.
Sean: I have noticed in my PI practice that from time to time when you throw in a bad faith claim it gets their attention.
Bobby: Yes it does, certain companies treat it differently. I mean listen, for some of these horrible companies that get sued for bad faith every single day, I don’t even think they care because it’s just so run of the mill for them…
Sean: They’re used to it.
Bobby: Yes, good insurance companies that have good lawyers that have good back end staff that digest a complaint and say oh hey we really have a problem here, they take it a little more seriously.
Sean: What kinds of trends have you noticed over the years and going forward in the insurance industry things that we should be on the lookout for?
Bobby: There’s a couple areas kind of I guess we’ll call it hot topic areas and here’s how the industry works. Insurance companies grant you a lot of coverage. They cover everything in kind of the first paragraph of your policy and then they yank things out for pages and pages until you’re left with like not very much and what that’s a response to is what happens in the world. So after 9/11 terrorism exclusions exist. Okay, so that now is just a boiler plate endorsement that goes on everything. We’re not going to cover terrorism. Unfortunately, that’s probably at some point in time going to get tested. I mean, listen we’re egging on countries to do something. If somebody launches a terrorist attack against Los Angeles and there’s hundreds and hundreds of buildings, millions of square feet destroyed and that’s deemed a terrorist act who’s going to pay for that? What’s going to happen? Everything is reactionary in this industry so when something bad happens they react to it and they exclude it. So with your home owners policies now, you’ve got a lot of different kind of weird roofing rules, you’re not just going to get a new roof every time something happens even if it’s catastrophic to you. You might not get new siding. If a water loss happens in your house I bet it’s probably not covered now. So you know your home owner’s policy has really been reduced to does my whole house burn down? That’s about all it’s worth. I mean you’ve got some hail and a little bit of wind, but other than that that’s what it’s there for, real catastrophe like that. People don’t kind of realize that you’ve got a lot of things going on in the cyber world and then on the disability end of things there’s a big Kanye West case going on right now in California over disability and what constitutes full disability, partial disability and there’s really some narrow policies being drafted…
Sean: I thought Kanye was disabled, but I…
Bobby: His insurance company says he is not disabled…
Sean: That was just listening to his music…
Bobby: It’s a ten million dollar policy that he had for the end of his concert and he wasn’t able to finish his concert and made a claim for disability. His wife had been robbed at gun point in Paris and he had some, according to the pleadings, some mental issues that just rendered him unable to perform quite a few shows actually and that’s pending now in California. That’s a big disability case so stuff like that you know will have trickle down affects to doctors or lawyers or to technology people or to whoever. So, a lot of hot button issues in insurance right now with a constant struggle of people trying to get what they pay for versus insurance companies doing everything they can to limit exposure.
Sean: Bobby Rutter thanks very much for joining us here on Civilly Speaking.
Bobby: Thank you very much, I appreciate it.