Insurance (and litigation)

January 3, 2018

The hidden costs behind title insurance: How title companies used to pay “inducements” (kickbacks) to encourage lawyers and realtors to use them and the 2018 New York State regulations designed to stop them.

Title insurance is a must for all home buyers in New York. A title company searches the public record to identify potential issues with the title. Common problems include things like old liens, judgments, encroachments, survey overlaps, outstanding mortgages or unpaid taxes against the property being purchased. Title companies play an important role in real estate transactions because they act as a “risk mitigater” because they verify that the piece of property is unburdened by title issues and “indemnify” the owner and lender for such problems.

There are two types of title insurance; owner title insurance and lender title insurance, both of which you pay for at the closing if you are mortgaging your home. If a person emerged to claim that they were the rightful owner of the house, or had a judgment or lien against the house, then there might be title “claim” to the applicable insurer. Assuming the title insurance company agreed, and had not excepted coverage in the original policy, lender title insurance would reimburse the lender the amount they lent to purchase the home (or your title was damaged), or might hire title attorneys to repair the problem. If you had owner title insurance policy, you would be paid for the value of the loss, or the title insurance company would work to sort out the title claim (indemnify you for your losses, including attorneys fees to repair the title issue).

Either way, title companies are integral to the home buying process protecting consumers from purchasing a home that could present headaches down the road. But how do we choose a title company and how much will the buyer and seller pay at the time of closing?

October 31, 2016

Will a Defamation Action Lie if you Call your Neighbor a Witch?

by Peter Klose

That is the question posed in a wonderfully entertaining and historically interesting article written by Dave Kluft from Boston’s firm Foley Hoag.

As his article points out, accusations of being a “witch doctor” and the use of “witchcraft” have served as a basis for defamation and slander suits around the country, and still percolate through various courts. In New York, witchcraft is no longer considered a crime, so it is unlikely to be considered slander per se, however, you should still mind what you say.

In defamation per se cases, New York law doesn’t require a plaintiff to prove that they were “damaged” by the offending words, but a jury will decide how much or how little injury occurred. Damages are assumed only where the person defaming someone alleges that the injured person:

October 27, 2016

Condominium Insurance is Often Mis-Understood.

by Peter Klose

Over the years I have received various telephone calls from prospective purchasers, and handled many cases involving condominium insurance claims. Condo owners are often laboring under the misconception that the Condominium Owners Association insurance policy covers them in the case of disaster. This article from the Washington Post helps explain some of the differences between home owners coverage for the interior of the Condominium and the Home Owner’s Association coverage that covers damage to existing for already constructed portions of the unit.

Let’s take the example of a water valve break in an upstairs condominium unit. The water line breaks, flooding the upstairs apartment, and running down into, and ruining, interior walls, existing floors, and plaster ceilings of the unit below. In the case Klose & Associates handled, the water valve was originally installed by the condominium association when the unit was built, and there was a faulty water pressure regulator on the main water line coming into the stand alone building containing the five (5) units. The failure to regulate the pressure of the water caused the water filter to rupture many years later.

The condominium association had insurance coverage (but refused to pay) for the lines coming into the building (faulty regulator), and that insurance policy should have responded to the damage to the existing walls, floors and ceilings in the downstairs unit. The owner of the upstairs unit received payment from her insurance company of items damaged inside her apartment, and the owner of the downstairs unit received some coverage for items that she had installed in her unit, but the “master” insurance policy owned by Condominium Association should have paid for the damage caused by the failure of the pressure regulator to originally existing items in both Units. The condominium association refused to permit its insurance carrier to pay for any of the damage. [Whether that was appropriate or not should be the topic of another blog entry].

June 29, 2013

Insurance Tips For First Time Homebuyers In New York State

by Peter Klose

Let’s face it– the purchase of a home is a life altering, stressful and often expensive proposition with hidden fees, costs, and expenses. Many times, a Mortgage Commitment comes from the bank with the requirement that the new homeowner purchase home owner insurance. My clients often call the agent who issued their automobile policy and ask for insurance, but they don’t ask the right questions, or make assumptions that hamper them later– particularly when they need that policy to respond to some sort of loss. I took up this issue with my friend and compatriate in the real estate world– William C. Allen, William C. Allen Insurance Agency, 372 Willis Avenue Mineola, NY 11501. Here are some helpful insurance tips.

Although it is an intangible product, insurance is the safety net that fills the gap when things go terribly wrong so adequately protecting a home, usually one’s largest asset, is essential. Considering the high costs associated with buying a home, many new homeowners make the mistake of trying to save money by purchasing the most inexpensive insurance they can find. This does not mean they should overpay, but inexpensive policies often omit or limit coverage and may contain exclusions (things that aren’t covered) that could end up costing the homeowner more in the long run if a loss occurs.

First time home buyers should ask trusted friends, family members or their attorney for a referral to an experienced insurance agent who can explain the various nuances associated with homeowners insurance. Because an agent’s job is to manage risk, a good one will include in the discussion what the coverages are, what different insurance companies have to offer and, lastly, ways to limit the cost of the insurance.

September 7, 2012

Do You Have the Right Amount of Insurance– Think About it when you Buy a House in New York?

by Peter Klose

It can be difficult to strike a balance in finding adequate insurance coverage, while avoiding unnecessary coverage or being underinsured.

While states generally require a minimum amount of auto insurance coverage, and mortgage lenders also generally require you to maintain homeowner’s insurance for at least the value of the mortgage, these amounts may not represent the optimum amount of insurance for your circumstances. For example, in New York, motorists are required to carry $25,000 in liability insurance for bodily injury to a single person, $50,000 for bodily injury to all persons, and $10,000 for property damage in any accident. Minimum “no-fault” coverage of $50,000 is also required. However, given the price of auto repairs and the price of a replacement car if a car is totaled in an accident, damages could far exceed the $10,000 minimum. If you only carry the minimum amount of insurance, you will be personally liable for any property damage in excess of $10,000.

In addition, insurance policies, whether they are auto, homeowner’s, or life insurance, contain a seemingly endless list of exclusions from coverage – it can be hard to determine exactly what is covered. However, these exclusions and limits are very important in protecting your hard earned nest egg in the event of an accident or other unforeseeable event.

July 23, 2012

A Decision Heard ‘Round the Legal World—Fischer & Mandell LLP v. Citibank.’

by Peter Klose

In February 2011, the Court of Appeals for the Second Circuit (including New York) handed down a decision that should have every attorney dotting their “I’s” and crossing their “T’s.” In Fischer & Mandell LLP v. Citibank, 632 F.3d 793 (2d Cir. 2001), the court affirmed summary judgment against a law firm who deposited a client’s check into a bank, and disbursed the funds as requested by the client before the check cleared the account.

The facts were as follows: in January 2009, plaintiff-appellant, Fischer & Mandell LLP, received from a new client what appeared to be an official Wachovia Bank check. Id. at 795. The check was made payable to the firm, and the firm was advised that it represented partial payment of a debt owed by another entity to the client. The firm then deposited this check for $225,351 into its account at defendant-appellee, Citibank. In the usual case, if there is enough money in the account to cover the check, the bank will make the funds available immediately, before the check clears-that is what happened here. Id.

The client then requested two wire transfers of a portion of the funds-one to South Korea, and then next to Canada. After both transfers were complete, the Federal Reserve Bank returned the check as dishonored and unpaid. Id. at 796. A Citibank representative then telephoned the firm to advise them of the counterfeit check. Citibank then charged back to the trust account the amount of the check and a $10 returned check fee, resulting in an overdraft. Id. Next, Citibank debited an amount necessary to satisfy the overdraft from a money market account the firm had at Citibank.

June 23, 2012

Forced Place Insurance Forces Homeowners Closer to Foreclosure

by Peter Klose

Forced place insurance is an insurance policy taken out by a lender or creditor when a borrower does not carry insurance on an asset. For example, if homeowners with a mortgage do not carry property insurance, the bank servicing the mortgage will buy a policy on the homeowner’s behalf and send the bill to the homeowner. This is done to protect the bank that owns the loan.

Ironically, the reason why many homeowners do not get insurance in the first place is because they cannot afford to do so. Under the current system, companies providing forced place insurance pay commissions to banks for using their products. Many of the largest financial institutions, including Bank of America and JP Morgan Chase, also own forced-place insurance subsidiaries – generating them even larger profits. See HuffingtonPost. Clearly, banks have a financial incentive to choose the most expensive policy or to require excessive or duplicative levels of coverage: the higher the coverage, the bigger the commission. The American Banker found that the cost of bank-imposed policies could reach 10 times the normal market rates. Therefore, homeowners are not only forced to pay for unnecessary insurance that they cannot afford, but are also pushed closer to foreclosure by doing so.

In New York, hearings were recently conducted to investigate why the cost of this type of insurance has more than tripled since 2004, with premiums rising from $1.5 billion in 2004 to $5.5 billion in 2010. The status of two insurers, Assurant and QBE Insurance, who together control about 90 percent of the market for forced-place insurance, is also being scrutinized. See New York Times.

December 24, 2008

Long Term Disability Claimant Wins Against Unum Provident.

by Peter Klose

What can you do if your disability insurer disclaims coverage for your long term disability claim?

Well, as one policy holder found, you can sue, and win. In this case, the insured sued because the infamous Unum Provident disclaimed coverage for his long term disability claim. Unfortunately for the insurance company, the claimant happened to have read his policy (he was an attorney), and took issue with their disclaimer all the way to the Second Circuit (federal appeals court).

In a scathing decision, the appeals court reversed the lower court and found that the administrator of the Plan (Unum) had a conflict of interest because it had both the discretionary authority to determine the validity of the disability claim, and paid the benefits under the policy; found that a reasonable person would conclude that the insurer’s denial of long-term disability was arbitrary and capricious; and granted benefits and interest running from September 18, 1995, the date on which defendant-insurer rejected plaintiff’s appeal.