Friday, July 24, 2015

Liberty Mutual approved to use drones to assess property damage

The Boston Business Journal reports here

My first thought was that the use of drones would allow insurers to make faster initial assessments of property damage after large- or largish-scale disasters.  Although insurers have in place the ability to mobilize adjusters from all over the country to descend on a region that has been hit by a hurricane, severe winter storm, or other event, it can still take weeks to get an adjuster to a particular property to assess damages. Sometimes after one look the adjusters realize they are from the wrong department and they need someone who can approve higher reserves to come out.

Unfortunately, though, the reality appears to be that, if anything, the use of drones will slow down initial assessments because they will require two people per drone -- an observer of the drone and a licensed pilot.  It's not clear whether the drone observer will also be an adjuster who can assess damages, including internal damage to a building; nor does the article say what type of specific training will be required for the drone-observer. 

Unless insurers team up to use a single drone team after a disaster, use of drones is unlikely to add much to efficiency, since in any neighborhood many homeowner's or general liability insurers provide coverage for the various properties located there. 

As the Boston Business Journal points out, however, use of drones will improve safety for adjusters and also allow photographs to be taken of otherwise inaccessible areas such as roofs shortly after the loss. 

As with any technological change, we'll see how it plays out in practice. 

Tuesday, July 21, 2015

Mass. Appeals Court holds insurer has 93A liability under doctrine of apparent authority

William Fiore worked as a bail bondsman as an agent for International Fidelity Insurance Company (IFIC).  Under the agreement between Fiore and IFIC, Fiore was to collect and deliver to IFIC collateral and to collect bond premiums.  Cash collateral received on behalf of IFIC was required to be held in a separate account and not comingled with other funds. 

The plaintiffs utilized Fiore's services as bail bondsman to obtain their own releases or the release of a third party on bail.  They each paid a premium and posted cash collateral. 

Fiore instructed the plaintiffs that ten percent of the total bond amount constituted a nonrefundable cash bail bond insurance premium payment.  According to the Massachusetts Appeal Court in Ramos v. International Fidelity Insurance Co.,  __ N.E.3d __, 2014 WL 10044905 (Mass. App. Ct. 2015)*, such practice violated rules governing professional bondsmen that prohibit charging fees in excess of five percent. 

When, at the end of their criminal cases most of the plaintiffs sought return of their collateral, they discovered that Fiore had died without having deposited their collateral in escrow. 

The plaintiffs sent 93A demand letters to IFIC.  IFIC responded that Fiore was a contractor and that it was not liable for his wrongdoing.  The plaintiffs sued for violation of ch. 93A and for breach of contract.

The trial court judge granted summary judgment to IFIC on the 93A claim, concluding that IFIC's response to the 93A demand letters, in which it asserted that Fiore was an independent businessman, did not cause the plaintiffs' harm. 

The Appeals Court noted that a jury could find that the response letters from IFIC falsely denying the agency relationship were sent when IFIC knew that it had an obligation because of that relationship to return the plaintiffs' collateral, and in an attempt to cause the plaintiffs to decline to enforce their rights, and that such conduct constituted an independent 93A violation.  But the trial court judge was correct that there was no evidence that such conduct injured the plaintiffs. They were not misled into failing to file suit before the expiration of the statute of limitations.

However, the court held, the overcharges themselves were violations of ch. 93A. 

IFIC argued in the alternative that vicarious liability under ch. 93A was unwarranted because Fiore's actions were not motivated by a desire to benefit it and it was wholly ignorant of Fiore's actions.  The court disagreed, holding that the doctrine of apparent authority applies to 93A claims. 

* Westlaw still hasn't corrected its error in 2015 Massachusetts case citations, making it appear that such cases are 2014 decisions.